Charged by both the SEC and DOJ with violating the FCPA, Indiana-based medical device company Biomet, Inc. (“Biomet”) agreed to pay more than $22 million to settle the charges.  The charges arose from SEC and DOJ’s ongoing global investigation into medical device companies bribing publicly-employed physicians.  Although the company’s common stock is no longer publicly traded, its stock did trade on the NASDAQ during most of the conduct alleged in the complaints.

Conduct:

  • Biomet is a global medical device company with operations around the world.  Biomet and its four subsidiaries allegedly paid bribes from 2000 to August 2008 to public doctors employed by public hospitals in Argentina, Brazil, and China in exchange for sales of Biomet’s products.
  • Doctors in Argentina were paid approximately 15-20 percent of each sale.  In order to conceal these payments, a subsidiary of Biomet obtained phony invoices from doctors stating that the payments were for professional services or consulting.  As early as 2000, executives and auditors at Biomet’s headquarters were allegedly aware of the payments to doctors, yet the payment of commissions continued.  Internal auditors took no steps to determine why royalties were paid to doctors purchasing Biomet devices, and did not obtain any evidence of services provided for the payments.
  • Brazilian doctors were paid 10-20 percent of the value of the medical devices purchased.  As early as 2001, Biomet employees were aware of that Biomet’s Brazilian distributor was paying doctors in exchange for purchasing Biomet products.
  • Biomet’s distributor in China provided doctors with money and travel in exchange for their purchases of Biomet products.  From at least 2001, the distributor exchanged emails with Biomet employees that explicitly described the bribes the distributor was paying.

Penalties:

  • Biomet entered into a deferred prosecution agreement with the DOJ.  As part of the agreement Biomet will pay a $17.8 million criminal penalty and is required to implement rigorous internal controls, cooperate with the department, and retain a compliance monitor for 18 months.  Biomet received a reduction in its penalty as a result of its cooperation in the ongoing investigation of other companies and individuals.
  • Biomet reached a settlement with the SEC, under which it agreed to pay $5.4 million in disgorgement of profits and prejudgment interest.