BIOMET: THE LATEST FCPA SETTLEMENT IN THE MEDICAL DEVICE INDUSTRY

One of the hallmarks of the New Era of FCPA enforcement is the increasing use of industry wide sweeps and investigations. The DOJ and the SEC have been conducting such an inquiry into the medical device industry. The actions against Johnson & Johnson and Smith & Nephew Inc. are part of that effort.

Biomet Inc. became the latest company to settle with the DOJ and the SEC as part of that investigation. Biomet is a global medical device company headquartered in Warsaw, Indiana whose shares are listed on NASDAQ. The company, along with its subsidiaries, made more than $1.5 million in payments in violation of the FCPA from 2000 to 2008 to publicly-employed health care providers in Argentina, Brazil and China. Specifically, illegal payments were made:

• In Argentina by employees of Biomet Argentina SA, with the knowledge of officials at the headquarters, to publically-employed doctors which were as high as 15 to 20% of each sale.

• To publicly-employed doctors in Brazil by Biomet International, again with the knowledge of officials at headquarters, through a distributor, which represented up to 10 to 20% of the value of the medical devices purchased.

• By Biomet China and Scandimed AB through a distributor in China who provided publicly-employed doctors with money and travel in exchange for purchases with the knowledge of Biomet employees.

The payments were falsely recorded in the books and records of the company.

The company resolved charges with the DOJ by entering into a deferred prosecution agreement. Under the agreement the company will pay a criminal fine of $17.28 million, implement rigorous internal controls, cooperate with the Department and retain a compliance monitor for 18 months. The DOJ acknowledged the extensive cooperation of the company which consisted of “wide-reaching self-investigation . . .remedial efforts and compliance improvements.” As a result the company received a reduced penalty.

Biomet also settled with the SEC, consenting to the entry of a permanent injunction without admitting or denying the allegations in the complaint, which prohibits future violations of Exchange Act Sections 30A, 13(b)(2)(A) and 13(b)(2)(B). The company also agreed to pay disgorgement of $4,432,998 along with prejudgment interest and retain an independent compliance consultant for 18 months to review its FCPA compliance program.

The inquiry into the medical device field is continuing.