The U.S. Securities and Exchange Commission (SEC) announced on Monday a settlement with London-based medical device company Smith & Nephew PLC to resolve charges that the company violated the US Foreign Corrupt Practices Act (FCPA) when its US and German subsidiaries bribed public doctors in Greece. Putting the Smith & Nephew settlement in context, Nathalie Tadena of the Wall Street Journal explains:
The settlement came as US authorities have stepped up enforcement of the [FCPA], which bars US companies from bribing foreign officials. Smith & Nephew and other medical-device companies were asked by the SEC and the Justice Department [DOJ] in late 2007 to look into possible improper payments to government-employed doctors and to voluntarily report any issues.
Indeed, according to the SEC, ‘[t]he charges stem from the SEC’s and DOJ’s ongoing proactive global investigation of bribery of publicly-employed physicians by medical devise companies.’ This global initiative to crack down on instances of bribery in the medical services industry is, perhaps, typified by the $70 million settlement the SEC and DOJ reached with Johnson & Johnson last April, resolving charges that the company paid bribes to public doctors in Greece and other European countries. The $48 million collected by the SEC in that matter was the largest FCPA settlement the SEC attained in 2011.
Although the SEC alleges that Smith & Nephew “failed to act on numerous red flags of bribery as employees at the company and its subsidiaries became aware of the payments,” the company was permitted to settle the matter without admitting or denying guilt in exchange for its consent: (i) to pay the SEC $5.4 million; (ii) for the entry of a court order permanently enjoining it from future violations; and (iii) to obtain an independent corporate monitor for eighteen months to review its FCPA compliance. Smith & Nephew also negotiated a deferred prosecution agreement with the DOJ, pursuant to which the company will pay a $16.8 million fine.
At $22 million, the Smith & Nephew settlement is unlikely to be the largest FCPA settlement in 2012. It demonstrates, however, the US regulators’ continued focus on FCPA enforcement. The SEC and DOJ continue to investigate the matter. It is unclear whether the Serious Fraud Office assisted in the US authorities’ investigation or if it is conducting a parallel inquiry.
The McGuireWoods Guest Bloggers are Robert Plotkin, a partner based in McGuireWoods LLP’s Washington and New York offices and head of the firm’s SEC Enforcement Defense group, and Kurt E. Wolfe, an associate based in McGuireWoods LLP’s Washington office and a member of the firm’s Government, Regulatory and Criminal Investigations department.