Stryker (NYSE:SYK) will pay $13.2 million to settle charges by the U.S. Securities & Exchange Commission that it broke the Foreign Corrupt Practices Act in 5 countries, the SEC said today.
Kalamazoo, Mich.-based Stryker’s subsidiaries in Argentina, Greece, Mexico, Poland, and Romania "made illicit payments totaling approximately $2.2 million that were incorrectly described as legitimate expenses in the company’s books and records," according to the SEC, resulting in $7.5 million in illicit profits.
"Descriptions varied from a charitable donation to consulting and service contracts, travel expenses, and commissions," according to the securities watchdog. Stryker admitted no wrongdoing in the settlement but promised "to cease and desist from committing or causing any violations" of the FCPA.
"Stryker’s misconduct involved 100s of improper payments over a number of years during which the company’s internal controls were fatally flawed," New York regional director Andrew Calamari said in prepared remarks. "Companies that allow corruption to occur by failing to implement robust compliance programs will not be allowed to profit from their misconduct."
The violations date back to 2003, the SEC said, and involved the use of 3rd parties to make payments to win or keep contracts. In 1 instance cited by the agency, Stryker’s Mexican subsidiary in January 2006 "directed a law firm to pay approximately $46,000 to a Mexican government employee in order to secure the winning bid on a contract."
"The result was $1.1 million in profits for Stryker. The subsidiary reimbursed the Mexico-based law firm for the bribe and booked the payment as a legitimate legal expense. However, no legal services were actually provided and the law firm simply acted as a funnel to pay the bribe," according to the SEC.
In another case a nearly $200,000 bribe to a Greek university for a lab run by a public hospital doctor prompted the doc to steer business Stryker’s way, the SEC said.
The SEC also found that Stryker used payments for travel and other expenses as bribes, citing a case in Poland.
Stryker will disgorge more than $7.5 million in profits plus $2.3 million in interest and a penalty of $3.5 million, according to the SEC.
