Recent FCPA prosecutions an ominous trend for med-tech? | Legal News

February 22, 2012 by MassDevice staff

Medical device makers with overseas operations may have to tread more carefully in light of a recent Justice Dept. decision to ding British orthopedic titan Smith & Nephew (NYSE:SNN) for $22 million to settle bribery charges.

Beyond the stiff penalty, the decision may also represent a shift in the way the SEC and DOJ view government entities in foreign countries, according to the American Health Lawyers Assn.

The case hinged, in part, on the government's conclusion that entities owned by foreign governments are themselves government bodies, meaning that improper payments made to a doctor at a publicly owned hospital can constitute bribery of a foreign official, according to the legal group.

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"This enforcement posture poses special risks for medical device companies because many of the individuals involved in the purchase of medical devices may appear to be private citizens, yet could be deemed foreign officials by the SEC and DOJ," John Kelly and Taylor Philips of the Tennesee-based law firm Bass, Berry & Sims PLC wrote for the AHLA.

Smith & Nephew paid $22 million to settle allegations that Smith & Nephew subsidiaries used a distributor that created a "slush fund" to bribe doctors working at government hospitals in Greece.

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