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$30 Million in Penalties for Repeat FCPA Violations

Friday, January 13, 2017
Sandler, Travis & Rosenberg Trade Report

A U.S. medical device manufacturer has agreed to pay more than $30 million to resolve charges by the Department of Justice and the Securities and Exchange Commission that it committed repeat violations of the Foreign Corrupt Practices Act. This amount includes a $17.4 million criminal penalty, a $6.5 million criminal penalty, and $6.5 million in disgorgement, including pre-judgment interest.

A DOJ press release states that following a 2012 deferred prosecution agreement resolving an earlier investigation into FCPA violations committed by a predecessor in Argentina, Brazil, and China, the company breached the DPA by knowingly and willfully continuing to use a third-party distributor in Brazil known to have paid bribes to government officials on the company’s behalf. The company also failed to implement an adequate system of internal accounting controls at its subsidiary in Mexico despite employees and executives having been made aware of red flags suggesting that bribes were being paid. By failing to require appropriate due diligence and documentation and contracts for payments to third parties, the DOJ states, the company allowed its Mexican subsidiary to pay bribes to Mexican customs officials through customs brokers and sub-agents so the subsidiary could import products that violated Mexican law because they lacked proper registration or labeling.

Under a new DPA the company will be required to pay the criminal penalty as well as retain an independent corporate compliance monitor for three years because it failed to implement an effective compliance program and committed additional crimes while under the previous DPA and monitorship. The DOJ notes that the company did fully cooperate with the current investigation and provided all relevant facts known to it, including information about individuals involved in the misconduct.

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