Johnson & Johnson In $77 Million Global Settlement

Johnson & Johnson will pay a $21.4 million penalty to resolve criminal FCPA charges with the DOJ and $48.6 million in disgorgement and prejudgment interest to settle the SEC’s civil charges.

A criminal information filed by the DOJ in federal court in the District of Columbia today charged J&J subsidiary DePuy Inc. with conspiracy and violations of the FCPA through payments to public-sector doctors in Greece.

The SEC charged the company in a civil complaint with antibribery, books and records, and internal controls violations of the FCPA.

In the United Kingdom, DePuy International Limited settled corruption charges brought by the Serious Fraud Office. The company was ordered by the High Court to pay £4.8 million in a civil recovery action.

According to the DOJ, Johnson & Johnson "cooperated extensively with the government and, as a result, has played an important role in identifying improper practices in the life sciences industry."

Medical-device makers Biomet Inc., Stryker Corp., Zimmer Holdings Inc., Smith & Nephew plc and Medtronic Inc. disclosed FCPA investigations during 2007; Wright Medical reported a similar investigation in June 2008.

The DOJ and SEC both said they reduced Johnson & Johnson's financial penalties in light of the company's civil penalties in the U.K. In its release, the SFO referred to the "global" settlement and also said Greek authorities "have frozen the assets of the company DePuy Hellas worth €5.785 million."

In its deferred prosecution agreement with the DOJ, Johnson & Johnson admitted violations in Greece, Poland, and Romania. The plea deal also resolved kickbacks paid to the former government of Iraq under the United Nations Oil for Food Program.

In April 2010, a former DePuy executive pleaded guilty in court in London to making £4.5 million in corrupt payments to Greek medical professionals within the state-controlled healthcare system. He was sentenced to 12 months in prison.

Robert John Dougall, 45, was DePuy's marketing director. The company, acquired by Johnson & Johnson in 1999, makes and sells orthopedic devices. The U.K. Serious Fraud Office said from 2002 to 2005, Dougall arranged the payment of commissions to surgeons as an inducement to use DePuy's products. The payments were made through agents and offshore accounts.

The SFO said its investigation began "following a referral by the U.S. Department of Justice in October 2007." Dougall, it said, is the first "co-operating defendant" in a major SFO corruption investigation.

In February 2007, Johnson & Johnson said it "voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission that subsidiaries outside the United States are believed to have made improper payments in connection with the sale of medical devices in two small-market countries."

At the same time, the company said Michael J. Dormer, Worldwide Chairman of its Medical Devices & Diagnostics group, had retired. "In a letter to Johnson & Johnson," the company said, "Mr. Dormer cited the internal review of these matters and noted he had 'ultimate responsibility by virtue of my position' for those subsidiaries that were the subject of the disclosure."

J&J is headquartered in New Jersey and trades on the New York Stock Exchange under the symbol JNJ. It manufactures and sells medical devices, pharmaceuticals, and consumer health care products.

View the DOJ's April 8, 2011 release here.

View the SEC's Litigation Release No. 21922 and Accounting and Auditing Enforcement Release No. 3261 (both dated April 8, 2011) in Securities and Exchange Commission v. Johnson & Johnson, Civil Action No. 1: 11-CV-00686 (D.D.C.) (E.F.H.) (filed April 8, 2011) here.

Download the SEC's civil complaint against Johnson & Johnson here.

View the SFO's April 8, 2011 release here.

Trouble For BAE's U.K. Plea Deal

A judge in London today adjourned sentencing of BAE under its plea deal with the Serious Fraud Office until tomorrow -- "after hearing submissions and argument about the nature" of certain payments by BAE in Africa, according to an updated report in thebriberyact.com.

A report from the Financial Times is here.

BAE first announced the settlement with the U.K.'s Serious Fraud Office in February this year. In March, Britain's biggest arms maker pleaded guilty in the U.S. to conspiring to defraud the United States by impairing and impeding its lawful functions, to make false statements about its Foreign Corrupt Practices Act compliance program, and to violate the Arms Export Control Act and International Traffic in Arms Regulations. It was sentenced to pay a $400 million criminal fine.

In the U.K. plea, BAE is admitting accounting errors related to overseas sales but not to actual bribery.

According to an earlier report in today's Guardian newspaper, the judge in London "said he could not sentence the company without hearing more evidence." He said he wants to call witnesses to determine "whether some of the payments had been channelled corruptly to decision makers in Tanzania."

Other British courts have questioned settlement deals agreed by the SFO, throwing into doubt the U.K.'s participation in global anti-corruption enforcement actions.

In May this year, a U.K. appellate court approved the SFO's plea deal with a former employee of DePuy who admitted bribing Greek doctors. But the appellate court also called the SFO's U.S.-style plea bargaining unconstitutional.

A few months earlier, at a hearing in London to consider the SFO's plea deal with Innospec, Lord Justice Thomas, the deputy head of criminal justice in the U.K. courts, said: “I have concluded that the director of the SFO had no power to enter into the arrangements made and no such arrangements should be made again.” Although the judge confirmed the U.K. part of the fine agreed by the SFO, he called the amount "wholly inadequate."

British civil groups, the Guardian said, have criticized BAE's deal as too lenient.

SFO Facing Uncertain Future

For the second time in recent months, U.K. judges have warned the Serious Fraud Office not to make plea deals in overseas bribery cases, throwing into doubt the agency's whistleblower program and its partnership with the U.S. Justice Department in resolving global corruption cases.

This week a U.K. appeals court affirmed the suspended sentence agreed between the SFO and a former sales executive who helped bribe Greek doctors and then turned whistleblower. But at the same time, the court said the SFO's U.S.-style approach was unconstitutional.

Robert John Dougall, 45, formerly marketing director of DePuy, pleaded guilty in April to making £4.5 million in corrupt payments to Greek medical professionals within the state-controlled healthcare system. DePuy, acquired by Johnson & Johnson in 1999, makes and sells orthopedic devices. 

The SFO said Dougall was the first "co-operating defendant" in a major SFO corruption investigation. It had recommended leniency in exchange for his guilty plea and help in the case, as typically happens in U.S. white-collar prosecutions. The SFO asked for a suspended sentence; the trial court instead sent Dougall to prison for a year.

The appeals court reversed the sentence but hammered the SFO. It said "agreements between the prosecution and the defense about the sentences to be imposed in fraud and corruption cases were constitutionally forbidden" and solely under the purview of judges, according to reports.

In March, Britain's second-ranking criminal judge said the $12.7 million fine the SFO agreed with a U.K. division of Innospec Inc. went beyond the SFO's authority. Delaware-based Innospec had reached what it believed was a $40 million global settlement with U.S. prosecutors and the SFO.

At Innospec's hearing, Lord Justice Thomas, the deputy head of criminal justice in the U.K. courts, said: “I have concluded that the director of the SFO had no power to enter into the arrangements made and no such arrangements should be made again.” Although he confirmed the U.K. part of the fine agreed by the SFO, he called the amount "wholly inadequate." See our post here.

The SFO first charged Dougall in November 2009 after a "referral" from the U.S. Justice Department. Two months earlier, DePuy and four other orthopedic device makers -- Biomet, Zimmer, Smith & Nephew and Stryker -- had agreed to pay $310 million to settle charges they paid kickbacks to induce U.S. doctors to buy their products. Since the U.S. settlement, the four companies, along with Medtronic Inc. and Wright Medical Group, have disclosed DOJ and SEC Foreign Corrupt Practices Act investigations. See our post here.

DePuy Exec Jailed

The U.K.'s Serious Fraud Office said this week that a former DePuy executive pleaded guilty to making £4.5 million in corrupt payments to Greek medical professionals within the state-controlled healthcare system. He was sentenced to 12 months in prison.

Robert John Dougall, 45, was DePuy's marketing director. The company, acquired by Johnson & Johnson in 1999, makes and sells orthodpedic devices. The SFO said from 2002 to 2005, Dougall arranged the payment of commissions to surgeons as an inducement to use DePuy's products. The payments were made through agents and offshore accounts.

The SFO said its investigation began "following a referral by the U.S. Department of Justice in October 2007."  Dougall, it said, is the first "co-operating defendant" in a major SFO corruption investigation, which is ongoing.

Dougall was first charged by the SFO in November 2009. In September 2007, DePuy and four other orthopedic device makers -- Biomet, Zimmer, Smith & Nephew and Stryker -- agreed to pay $310 million to settle charges they paid kickbacks to induce U.S. doctors to buy their products. Since the U.S. settlement, the four companies, along with Medtronic Inc. and Wright Medical Group, have disclosed DOJ and SEC Foreign Corrupt Practices Act investigations. See our post here.

A copy of the SFO's April 14, 2010 release can be viewed here.

Ex-Johnson & Johnson Exec Charged In U.K.

Britain's Serious Fraud Office charged a former executive of a Johnson & Johnson subsidiary with overseas corruption. Robert John Dougall, 44, an ex-vice president of DePuy International Limited of Leeds, appeared Tuesday in the City of Westminster Magistrates' Court. He's accused of making corrupt payments to medical professionals in the Greek public healthcare system in order to sell orthopaedic products. The conduct allegedly occurred between February 2002 and December 2005.

The summons charged Dougall with conspiracy to corrupt in violation of the Criminal Law Act 1977. He was released on unconditional bail. A copy of the SFO's December 1 announcement is here.

The SFO said it began working on the case in March 2008. In February 2007, Johnson & Johnson said it had "voluntarily disclosed to the U.S. Department of Justice and the U.S. Securities and Exchange Commission that subsidiaries outside the United States are believed to have made improper payments in connection with the sale of medical devices in two small-market countries. " The company said then that Michael J. Dormer, the officer responsible for the overseas medical device business, had accepted responsibility and retired.

In September 2007, DePuy and four other orthopedic device makers -- Biomet, Zimmer, Smith & Nephew and Stryker -- agreed to pay $310 million to settle charges they paid kickbacks to induce U.S. doctors to buy their products. Since the U.S. settlement, the four companies, along with Medtronic Inc. and Wright Medical Group, have disclosed DOJ and SEC Foreign Corrupt Practices Act investigations. 

The Serious Fraud Office -- which has a new-look website and says it now has 88 ongoing cases -- didn't say if DePuy or others will also face charges.