On Monday, February 6, 2012, the SEC and DOJ resolved their respective investigations with a medical device company and its subsidiary by entering into settlements stemming from alleged bribes paid to doctors in Greece for more than a decade. The U.S. subsidiary, Smith & Nephew Inc., agreed to pay a $16.8 million fine as part of a deferred prosecution agreement with the DOJ, while the English parent company, Smith & Nephew plc, agreed to settle the SEC’s charges by paying more than $5.4 million in disgorgement and prejudgment interest.
The agencies alleged a scheme that lasted over ten years during which the U.S. subsidiary (acting through certain executives, employees and affiliates) would make payments to a "slush fund" which would be used to make payments to doctors in Greece. Because Greece has a national health care system (most hospitals are publicly-owned and operated), the doctors at those hospitals are government employees and "foreign officials" as defined in the FCPA, according to both regulators. The money in the fund, which was controlled by a Greek distributor of medical devices, was then used to pay cash incentives and other things of value to the Greek doctors to induce them to purchase of Smith & Nephew products. Between 1998 and 2008, approximately $9.4 million was paid into the slush fund.
The U.S. subsidiary entered into a deferred prosecution agreement with DOJ, under which it acknowledged responsibility for the actions of its affiliates, subsidiaries, employees and agents who made various improper payments. It will pay a $16.8 million penalty, implement rigorous internal controls, cooperate fully with prosecutors and retain a compliance monitor for 18 months. The deferred prosecution agreement recognizes Smith & Nephew’s cooperation with the investigation, along with the fact that it conducted a thorough self-investigation, and undertook remedial efforts and made compliance improvements.
The SEC filed a complaint and entered into a settlement agreement with the English parent company, Smith & Nephew PLC, who consented without admitting or denying the SEC’s allegations, to the entry of an order permanently enjoining it from future violations of the relevant provisions of the FCPA and securities laws. The company will also retain an independent compliance monitor for 18 months and pay more than $5.4 million in disgorgement and prejudgment interest.