In the Matter of Analogic Corporation and Lars Frost (2016)

• Case Name
• In the Matter of Analogic Corporation and Lars Frost (2016)

• Date Filed
• 06/21/2016

• Enforcement Agency
• SEC

• Countries
• Russia, Ghana, Israel, Kazakhstan, Ukraine, Vietnam

• Foreign Official
• Unnamed foreign officials

• Date of Conduct
• 2001 to 2011

• Nature of Business
• Analogic Corporation, incorporated and headquartered in Massachusetts, designs and manufactures medical imaging, ultrasound, and security technology systems.  The company maintains a class of common stock on the NASDAQ exchange.  Analogic operates through a series of subsidiaries, including its Danish subsidiary, BK Medical ApS, which focuses on the manufacture and sale of ultrasound systems.  Lars Frost, a citizen of Denmark, served as BK Medical’s CFO from 2008 until 2011.

• Influence to be Obtained
• According to the SEC’s cease-and-desist order, between 2001 and 2011, BK Medical engaged in an improper payment scheme related to the sale of Analogic’s ultrasound products that caused the company to distribute approximately $20 million in funds without knowing how the funds were used.  The SEC claims that the scheme primarily involved BK Medical’s operations in Russia, and, to a lesser extent, Ghana, Israel, Kazakhstan, Ukraine, and Vietnam.
  
  According to the SEC, at the direction of a Russian distributor, BK Medical created fictitious invoices reflecting an inflated purchase price for Analogic products sold to the Russian distributor.  The Russian distributor would pay the inflated price for the products and, at a later point in time, direct BK Medical to wire the excess funds—the difference between the inflated invoice and the actual retail value of the products—to unknown third parties in various locations around the world.  As stated by the SEC, BK Medical complied with the Russian distributor’s instructions despite not knowing how the funds it sent to the third parties were being used.

• Enforcement
• On June 21, 2016, the SEC announced that it had resolved an enforcement action against Frost for violations of the books-and-records and internal controls provisions of the FCPA.  As part of the enforcement action, Frost agreed to pay a civil monetary penalty of $20,000 and Analogic agreed to pay $11,482,962 in disgorgement.  The DOJ and SEC separately settled enforcement actions against Analogic and BK Medical, causing the companies to pay approximately $15 million in sanctions total.

• Amount of the Value
• Approximately $20 million.

• Amount of Business Related to Payment
• Not Stated

• Intermediary
• Distributors

• Citizenship of Parent Entity
• United States

• Total Sanction
• $ 11,502,962

• Compliance Monitor
• No

• Reporting Requirements
• No

• Case is Pending?
• No

• Total Combined Monetary Sanction
• $ 14,904,962

• Related Enforcement Actions
• United States v. BK Medical ApS (2016) 
  

Analogic Corporation

• Citation
• In the Matter of Analogic Corporation and Lars Frost, Admin. Proc. File No. 3-17305 (June 21, 2016).

• Date Filed
• 06/21/2016

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records
  • Internal Controls

• Other Statutory Provision
• None

• Disposition
• Cease-and-Desist Order

• Defendant Jurisdictional Basis
• Issuer

• Defendant's Citizenship
• United States

Lars Fronst

• Citation
• In the Matter of Analogic Corporation and Lars Frost, Admin. Proc. File No. 3-17305 (June 21, 2016).

• Date Filed
• 06/21/2016

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records
  • Internal Controls

• Disposition
• Cease-and-Desist Order, Cease-and-Desist Order

• Defendant Jurisdictional Basis
• Agent of Issuer

• Defendant's Citizenship
• Denmark

• Individual Sanction
• $20,000