British orthopedics maker Smith & Nephew has agreed to pay $22.2 million to settle U.S. criminal and civil allegations that it bribed doctors employed by the Greek government for more than a decade to win business, U.S. authorities said Monday.
Smith & Nephew's agreements with the Justice Department and the Securities and Exchange Commission are the government's latest action stemming from its investigation into bribery by medical device companies of doctors employed by governments overseas.
In a similar case last April, health care giant Johnson & Johnson agreed to pay $70 million to settle civil and criminal charges of bribing doctors in Europe and paying kickbacks to the Iraqi government to obtain business.
Under the new agreements, parent company Smith & Nephew PLC is paying $5.4 million in restitution and interest to settle the SEC's civil charges. Its U.S. subsidiary Smith & Nephew Inc., based in Memphis, Tennessee, is paying a $16.8 million criminal fine in an agreement with the Justice Department.
Smith & Nephew, which operates in 32 countries, won't be prosecuted by the Justice Department if it institutes strict internal controls to prevent bribery and hires an expert to monitor its compliance for 18 months.
The government accused the company of violations of the Foreign Corrupt Practices Act in Greece between 1997 and 2008. The law prohibits bribery of foreign government officials or company executives to secure or retain business.
In Greece, which has a national health care system in which most hospitals are public, doctors working in the hospitals are government employees. That makes them foreign officials under the U.S. anti-bribery law.
Smith & Nephew's U.S. and German subsidiaries carried out the scheme by selling orthopedic products at full price to a Greek distributor, then channeling the amount of the distributor's discount to an offshore shell company controlled by the distributor, the U.S. government said. The distributor used the offshore funds to pay bribes to Greek doctors to get them to buy the company's products, according to the government.
Smith & Nephew Inc., acknowledged responsibility for the actions that its subsidiaries and employees took to make the payments to Greek doctors, the Justice Department said.
The SEC had filed a civil lawsuit in federal court in Washington against London-based Smith & Nephew PLC.
"Smith & Nephew's subsidiaries chose a path of corruption rather than fair and honest competition," Kara Brockmeyer, the head of the SEC enforcement division's unit that deals with foreign bribery cases, said in a statement. "The SEC will continue to hold companies liable as we investigate the medical device industry for this type of illegal behavior."
Smith & Nephew said the SEC and the Justice Department asked it and other medical device companies in late 2007 to investigate possible improper payments to government-employed doctors and to report problems to the government. In a statement, the company said it found and reported evidence of improper payments by the Greek distributor, and terminated its relationship with the distributor in 2008.The individuals involved in the scheme no longer work for Smith & Nephew, the company said.
The issues "do not reflect Smith & Nephew today," said company CEO Olivier Bohuon. "But they underscore that we must remain vigilant every place we do business and let nothing compromise our commitment to integrity."
Smith & Nephew shares rose 22 cents to $50.92 by early afternoon Monday. The company made a provision for the $22.2 million in settlement payments in its earnings for the fourth quarter of 2011.