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Richard L. Cassin Publisher and Editor

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FCPA Blog Daily News

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Tuesday
Jul282015

Mead Johnson pays $12 million to settle SEC FCPA charges

Mead Johnson Nutrition Co. agreed to pay $12.03 million Tuesday to settle civil charges that it violated the Foreign Corrupt Practices Act.

The SEC said a China unit paid $2 million in bribes to healthcare professionals at state-owned hospitals.

The agency settled the case with an administrative order and didn't go to court.

Mead Johnson violated the FCPA's books and records provisions by failing to properly record the illegal payments.

The company also didn't have an adequate system of internal accounting controls, the SEC said.

Mead Johnson resolved the charges without admitting or denying liability.

The infant-formula maker disclosed the FCPA investigation in an SEC filing early last year

It said the SEC had asked for documents about its China unit and "certain expenditures" for product promotions that may have violated the FCPA.

The company agreed to pay $7.77 million in disgorgement, $1.26 million in prejudgment interest, and a $3 million penalty.

Illinois-based Mead Johnson was part of Bristol-Myers Squibb until it was spun off in 2009.

Its flagship product is Enfamil.

The SEC investigation found that employees used “distributor allowances” to fund the bribes. The practice was stopped in 2013.

"Although the funds contractually belonged to the distributors, employees exercised some control over how the money was spent and provided specific guidance to distributors on how to use the funds," the SEC. 

Cash and other incentives were subsequently paid to health care professionals in China hospitals to recommend Mead Johnson Nutrition products and provide the company with contact information for patients who were new or expectant mothers so it could market its infant formula to them directly. 

The company didn't accurately account for more than $2 million in improper payments during a five-year period, the SEC said.

On Tuesday, Kasper Jakobsen, Mead Johnson’s CEO, said: "We are pleased to have reached this final resolution with the SEC."

"Integrity and compliance with laws and regulations are central to the success of our operations around the world. We will continue to reinforce these operating principles in all our interactions with customers and business partners,” he said.

The SEC's Securities Exchange Act of 1934 Release No. 75532 and Administrative Proceeding File No. 3-16704 (both dated July 28, 2015) are here (pdf).

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.