Biomet pays $22 million to settle bribery beef

March 27, 2012 By MassDevice staff

Biomet Inc. settled a case of illegal overseas kickback for more than $22 million in fines and penalties, making it the latest in a string of device makers hit with heavy fines for alleged violations of the Foreign Corrupt Practices Act.

The Warsaw, Ind.-based orthopedic and sports device maker will pay nearly $17.3 million to resolve charged brought by the U.S. Justice Dept., plus a "consent agreement" to settle civil claims with the SEC for another $5.6 million.

The settlement was part of a larger industry probe in which the DoJ asked medical device makers to comb through their overseas practices for signs of bribery.

The Justice Dept. dinged British orthopedic titan Smith & Nephew (NYSE:SNN) for $22 million earlier this year in a similar case, settling a years-long investigation that uncovered more than a decade’s worth of alleged bribery in Greece.

Beyond the stiff penalties, 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.

"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 Tennessee-based law firm Bass, Berry & Sims PLC wrote for the AHLA.

The FCPA probe has already rounded up more than $90 million, according to the Wall Street Journal.

In the latest case, the DoJ alleged that Biomet and its subsidiaries paid out more than $1.5 million in illegal kickbacks to employees of state-owned health services in Brazil and China, according to the Journal.

In addition to the monetary penalties, Biomet agreed to set up an independent external compliance monitor to keep an eye on the company’s international sales practices, according to a press release.

"Over the past several years, we have significantly enhanced our global compliance procedures and financial controls, and we fully intend to work with the independent monitor and the Department of Justice and Securities and Exchange Commission to bolster our FCPA compliance practices and procedures," Biomet president & CEO Jeffrey Binder said in prepared remarks. "Moving forward, we intend to continue to adhere to our enhanced global compliance procedures, and to promote the company’s commitment to the highest ethical standards in all the markets that we serve."

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