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$55 Million Fine to Settle Bribery Charges Against California Company

Thursday, November 06, 2014
Sandler, Travis & Rosenberg Trade Report

A clinical diagnostic and life science research company based in California will pay a total of $55 million to settle charges that its subsidiaries made improper payments to foreign officials in Russia, Vietnam and Thailand in violation of the Foreign Corrupt Practices Act. This amount includes $40.7 million in disgorgement and prejudgment interest to the Securities and Exchange Commission and a $14.35 million criminal fine to the Department of Justice. The company also agreed to continue to cooperate with the DOJ, to report periodically for a two-year period concerning its compliance efforts, and to continue to implement an enhanced compliance program and internal controls designed to prevent and detect FCPA violations.

According to the SEC, the company made excessive payments disguised as commissions to Russian agents while company managers repeatedly ignored various red flags indicating that the agents were likely bribing government officials and also condoned an atmosphere of secrecy. Company employees also used local intermediaries in Vietnam and Thailand to funnel bribes to foreign officials in exchange for business. For example, the company’s Singapore subsidiary sold products at a deep discount to Vietnamese distributors, who passed through a portion of it as bribes. The company also acquired a firm in Thailand and failed to uncover a pre-existing bribery scheme in which Thai agents received inflated commissions that were partially used for improper payments. All told, the illicit payments enabled the company to earn $35 million in profits.

The DOJ states that it entered into a non-prosecution agreement with the company due in large part to its self-disclosure of the misconduct and full cooperation with the department’s investigation. The company has also engaged in “significant remedial actions,” the DOJ states, including enhancing its anti-corruption policies globally, improving its internal controls and compliance functions, developing and implementing additional due diligence and contracting procedures for intermediaries, and conducting extensive anti-corruption training throughout the organization.

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