Biomet to Pay $23M Settlement in Overseas Bribery Case
July 28, 2016 at 4:25 p.m.
By Daniel [email protected]
According to the SEC, the charges came as a result of Biomet’s subsidiaries and agents bribing doctors in Argentina, Brazil and China for almost 10 years to earn business.
In a complaint filed in federal court, the SEC stated that employees of Biomet Argentina SA gave out payments to publicly employed doctors as high as 20 percent of each sale.
Fake invoices were then created as a paper trail for the payments and they were falsely recorded as consulting fees or commissions in the company’s books.
The SEC stated that executives and internal auditors in Warsaw were aware of the payments as early as 2000 but failed to stop it.
Another allegation is that Biomet International, a U.S. subsidiary of Biomet, used a distributor to bribe publicly employed doctors in Brazil up to 20 percent of the value of their medical device purchases.
The SEC said that payments were openly discussed between Biomet International employees, the distributor and Biomet executives and internal auditors.
In February 2002, an internal Biomet memorandum about a limited audit of the distributor’s books stated:
“Brazilian Distributor makes payments to surgeons that may be considered as a kickback. These payments are made in cash that allows the surgeon to receive income tax free. … The accounting entry is to increase a prepaid expense account. In the consolidated financials sent to Biomet, these payments were reclassified to expense in the income statement.”
Biomet’s settlement of $22.9 million is for both the SEC’s charges as well as criminal charges announced by the U.S. Department of Justice Monday.
In a statement released Monday, the SEC describes that the bribery going on was known at all levels of Biomet and that it took place from 2000 until August 2008.
“Biomet’s misconduct came to light because of the government’s proactive investigation of bribery within the medical device industry,” said Kara Novaco Brockmeyer, chief of the enforcement division’s Foreign Corrupt Practices Act Unit. “A company’s compliance and internal audit should be the first line of defense against corruption, not part of the problem.”
Similar bribes are alleged to have taken place through Biomet subsidiaries Biomet China and Scandimed AB.
Publicly employed doctors were said to have received money and travel in exchange for purchasing Biomet products.
Beginning as early as 2001, the distributor exchanged e-mails with Biomet employees that explicitly described the bribes he was arranging on the company’s behalf:
“[Doctor] is the department head of [public hospital]. [Doctor] uses about 10 hips and knees a month and it’s on an uptrend, as he told us over dinner a week ago. … Many key surgeons in Shanghai are buddies of his. A kind word on Biomet from him goes a long way for us. Dinner has been set for the evening of the 24th. It will be nice. But dinner aside, I’ve got to send him to Switzerland to visit his daughter,” said one e-mail.
According to the SEC, some e-mails described the way vendors would deliver cash to surgeons and others discussed the amount of payments.
Biomet sponsored travel for 20 Chinese surgeons in 2007 to Spain, where a substantial part of the trip was devoted to sightseeing and other entertainment.
Biomet agreed to pay:
$4,432,998 in profits
$1,142,733 in prejudgment interest
$17.28 million in fines to settle the criminal charges.
As a part of the order, Biomet is also required to retain an independent compliance consultant for 18 months.
Biomet released the following statement regarding the SEC charges:
“Biomet is glad to have reached a resolution on this matter.
“Biomet takes its global compliance program very seriously, and fully cooperated with the U.S. DOJ and U.S. SEC throughout the investigation. In addition, Biomet has conducted its own extensive internal investigations, compliance assessments, and audits.
“Biomet is proud of the significant improvements we have made in our program over the past several years, including the rollout of a Global Anti-Corruption Policy, Global Operating Procedures, and the expansion of best practices developed in the United States to Biomet affiliates outside of the United States. We have significantly enhanced our global compliance procedures and financial controls, and we fully intend to work with the independent monitor and the Department of Justice and Securities and Exchange Commission to bolster our FCPA compliance practices and procedures.
“Biomet has long been committed to upholding the highest standards of ethical and legal conduct both in the United States and abroad. Moving forward, we intend to continue to adhere to our enhanced global compliance procedures, and to promote the company’s commitment to the highest ethical standards in all the markets that we serve.”[[In-content Ad]]
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According to the SEC, the charges came as a result of Biomet’s subsidiaries and agents bribing doctors in Argentina, Brazil and China for almost 10 years to earn business.
In a complaint filed in federal court, the SEC stated that employees of Biomet Argentina SA gave out payments to publicly employed doctors as high as 20 percent of each sale.
Fake invoices were then created as a paper trail for the payments and they were falsely recorded as consulting fees or commissions in the company’s books.
The SEC stated that executives and internal auditors in Warsaw were aware of the payments as early as 2000 but failed to stop it.
Another allegation is that Biomet International, a U.S. subsidiary of Biomet, used a distributor to bribe publicly employed doctors in Brazil up to 20 percent of the value of their medical device purchases.
The SEC said that payments were openly discussed between Biomet International employees, the distributor and Biomet executives and internal auditors.
In February 2002, an internal Biomet memorandum about a limited audit of the distributor’s books stated:
“Brazilian Distributor makes payments to surgeons that may be considered as a kickback. These payments are made in cash that allows the surgeon to receive income tax free. … The accounting entry is to increase a prepaid expense account. In the consolidated financials sent to Biomet, these payments were reclassified to expense in the income statement.”
Biomet’s settlement of $22.9 million is for both the SEC’s charges as well as criminal charges announced by the U.S. Department of Justice Monday.
In a statement released Monday, the SEC describes that the bribery going on was known at all levels of Biomet and that it took place from 2000 until August 2008.
“Biomet’s misconduct came to light because of the government’s proactive investigation of bribery within the medical device industry,” said Kara Novaco Brockmeyer, chief of the enforcement division’s Foreign Corrupt Practices Act Unit. “A company’s compliance and internal audit should be the first line of defense against corruption, not part of the problem.”
Similar bribes are alleged to have taken place through Biomet subsidiaries Biomet China and Scandimed AB.
Publicly employed doctors were said to have received money and travel in exchange for purchasing Biomet products.
Beginning as early as 2001, the distributor exchanged e-mails with Biomet employees that explicitly described the bribes he was arranging on the company’s behalf:
“[Doctor] is the department head of [public hospital]. [Doctor] uses about 10 hips and knees a month and it’s on an uptrend, as he told us over dinner a week ago. … Many key surgeons in Shanghai are buddies of his. A kind word on Biomet from him goes a long way for us. Dinner has been set for the evening of the 24th. It will be nice. But dinner aside, I’ve got to send him to Switzerland to visit his daughter,” said one e-mail.
According to the SEC, some e-mails described the way vendors would deliver cash to surgeons and others discussed the amount of payments.
Biomet sponsored travel for 20 Chinese surgeons in 2007 to Spain, where a substantial part of the trip was devoted to sightseeing and other entertainment.
Biomet agreed to pay:
$4,432,998 in profits
$1,142,733 in prejudgment interest
$17.28 million in fines to settle the criminal charges.
As a part of the order, Biomet is also required to retain an independent compliance consultant for 18 months.
Biomet released the following statement regarding the SEC charges:
“Biomet is glad to have reached a resolution on this matter.
“Biomet takes its global compliance program very seriously, and fully cooperated with the U.S. DOJ and U.S. SEC throughout the investigation. In addition, Biomet has conducted its own extensive internal investigations, compliance assessments, and audits.
“Biomet is proud of the significant improvements we have made in our program over the past several years, including the rollout of a Global Anti-Corruption Policy, Global Operating Procedures, and the expansion of best practices developed in the United States to Biomet affiliates outside of the United States. We have significantly enhanced our global compliance procedures and financial controls, and we fully intend to work with the independent monitor and the Department of Justice and Securities and Exchange Commission to bolster our FCPA compliance practices and procedures.
“Biomet has long been committed to upholding the highest standards of ethical and legal conduct both in the United States and abroad. Moving forward, we intend to continue to adhere to our enhanced global compliance procedures, and to promote the company’s commitment to the highest ethical standards in all the markets that we serve.”[[In-content Ad]]
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