Texas-based medical device company Orthofix International N.V. settled FCPA charges today relating to bribes in Mexico.
The company agreed to pay the SEC $5.2 million, including $4.98 million in disgorgement and $242,000 in prejudgment interest.
In its resolution with the DOJ, Orthofix will pay a $2.22 million penalty. It was given a three-year deferred prosecution agreement that didn't require appointment of a compliance monitor.
Orthofix’s Mexican subsidiary Promeca S.A. de C.V. bribed officials at Mexico’s government-owned health care and social services provider Instituto Mexicano del Seguro Social. Cash, laptop computers, televisions, and appliances 'were provided directly to Mexican government officials or indirectly through front companies that the officials owned,' the SEC said.
The bribery yielded nearly $5 million in illegal profits for the Orthofix subsidiary.
The SEC’s complaint was filed in U.S. District Court for the Eastern District of Texas. It charged that the bribes began in 2003 and continued until 2010. Promeca falsely recorded the bribes as cash advances and falsified its invoices. When the bribes got much larger, the SEC said, Promeca falsely recorded them as promotional and training costs.
Orthofix asked about the charges but didn't take immediate action or launch an investigation, the SEC said. Eventually Orthofix learned of the brbery and self-reported it to the SEC. The company also took corrective action including firing the Promeca executives who orchestrated the bribery scheme.
Last month, Orthofix Inc. paid more than $34 million to settle allegations under the civil False Claims Act relating to the company’s sale of bone growth stimulator devices. The company also agreed to plead guilty to a felony of obstruction of a federal audit, and paid a $7.8 million criminal fine.
The SEC's Litigation Release No. 22412 /July 11, 2012 is here.
The SEC's civil complaint in SEC v. Orthofix International N.V. can be downloaded here.
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Here's the complete disclosure about today's settlement from Orthofix's 8-K filing with the SEC:
On July 10, 2012, Orthofix International N.V. (the “Company”) entered into definitive agreements memorializing the previously disclosed agreement in principle previously reached with the Department of Justice (the “DOJ”) and Securities and Exchange Commission (the “SEC”) regarding the Company’s self-initiated and self-reported internal investigation of its Mexican subsidiary, Promeca S.A. de C.V. (“Promeca”), into allegations of non-compliance by Promeca with the Foreign Corrupt Practices Act (“FCPA”). As part of the settlement of this matter, the Company has entered into (i) a consent to final judgment (the “SEC Consent”) with the SEC and (ii) a deferred prosecution agreement (the “DPA”) with the DOJ.
Under the terms of the SEC Consent, the Company will settle civil claims related to this matter by voluntarily disgorging profits to the United States government in an amount of $5,225,701, inclusive of pre-judgment interest. The Company has also agreed to pay a fine of $2,220,000 to the United States government pursuant to the terms of the DPA. The Company previously recorded charges of $3.0 million during the first quarter of 2011 and $4.5 million during the fourth quarter of 2011 to establish an accrual in anticipation of a future final resolution of these matters with both the DOJ and the SEC. The Company expects to make these settlement payments in the third fiscal quarter of 2012.
As part of the DPA, which has a term of 3 years, the DOJ has agreed not to pursue any criminal charges against the Company in connection with this matter if the Company complies with the terms of the DPA. The DPA takes note of the Company’s self-reporting of this matter to the DOJ and the SEC, and of remedial measures, including the implementation of an enhanced compliance program, previously undertaken by the Company. The DPA provides that the Company shall continue to cooperate fully with the DOJ in any future matters related to corrupt payments, false books and records or inadequate internal controls. In that regard, the Company has represented that it has implemented and will continue to implement a compliance and ethics program designed to prevent and detect violations of the FCPA and other applicable anti-corruption laws. The Company will periodically report to the DOJ during the term of the DPA regarding such remediation and implementation of compliance measures.
In addition, under the terms of the SEC Consent, the Company will periodically report to the SEC during a 2-year term regarding the status of such remediation and implementation of compliance measures.
The SEC Consent and the DPA do not provide for the appointment of any independent external monitor by the DOJ or the SEC.