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$15 Million Penalty for FCPA Violations

Thursday, June 23, 2016
Sandler, Travis & Rosenberg Trade Report

A U.S. medical device manufacturer and its wholly-owned foreign subsidiary have agreed to pay a total of nearly $15 million to settle criminal and civil charges concerning hundreds of improper payments made over the course of a decade in violation of the Foreign Corrupt Practices Act. This amount includes a $3.4 million criminal penalty, $7.7 million in disgorgement and $3.8 million in prejudgment interest.

According to information from the Department of Justice and the Securities and Exchange Commission, the subsidiary engaged in a scheme with distributors in Russia to make improper payments to third parties using fictitious invoices and to falsely book those payments, at least some of which ultimately went to doctors employed by Russian state-owned entities. The subsidiary also engaged in similar schemes with distributors in Ghana, Israel, Kazakhstan, Ukraine and Vietnam. This conduct caused the parent company to falsify its books, records and accounts in violation of the FCPA.  

As part of a non-prosecution agreement with the DOJ the subsidiary has agreed to pay the criminal penalty, continue to cooperate with the DOJ and foreign authorities in any ongoing investigations and prosecutions relating to the conduct (including of individuals), enhance its compliance program and periodically report on the implementation of those enhancements. The DOJ notes that the subsidiary received credit for its self-disclosure and remediation, including terminating the officers and employees responsible for the corrupt payments. It received only partial credit for cooperation because it did not initially disclose certain relevant facts that it learned in the course of its internal investigation.

The SEC adds that the subsidiary’s former chief financial officer has agreed to pay a $20,000 penalty to settle charges that he knowingly circumvented the internal controls the subsidiary had in place and falsified its books and records.

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