Security giant Tyco International (NYSE:TYC), father of medical device company Covidien (NYSE:COV), agreed to pay a $26 million settlement to close the books on an international bribery scandal that involved health officials in Saudi Arabia, China and Poland.
The conglomerate spun out its healthcare products division in 2007 to form Tyco Healthcare, which was later renamed Covidien, but between 2000 and 2008 3 overseas business units made illegal payments and mistated records to cover them up.
Covidien was not named in the settlement, but the 3 international divisions of Tyco Healthcare were slotted under Covidien after the spin-out, according to the court report.
Between December 2000 and June 2006 Tyco Healthcare made illicit payments to doctors and hospital officials in Saudi Arabia, which the company was recording as "promotional expenses" and "sales development" costs, according to legal records.
Between September 2004 and January 2007 THC employees also submitted about 33 expenses claims for "entertainment" of public healthcare officials in the People’s Republic of China, some of which were filed under fake receipts and referenced a fake company, according to the SEC legal complaint.
"Employees forged receipts because the actual expenditures were prohibited under Taco’s s internal guidelines," according to court documents.
THC China employees also filed false travel itineraries and improper travel expense sheets related to medical conferences.
From January 2005 to December 2007 the erstwhile medical device company’s Poland division filed about 5 fake "service contracts" and 26 incomplete or inaccurate contracts, including some which were paid to family members of Polish healthcare professionals.
The SEC estimated that Tyco reaped about $1.9 million in financial gain from illegal activities in Saudi Arabia, $354,000 from China and $15,000 from Poland, according to court filings.
Much of the SEC’s charges were based on a Tyco internal investigation and information voluntarily provided by the company, the federal agency noted. Tyco’s cooperation was taken into consideration in arriving at the $26 million settlement, according to an SEC press release.