In the Matter of Mead Johnson Nutrition Company (2015)

• Case Name
• In the Matter of Mead Johnson Nutrition Company (2015)

• Date Filed
• 07/28/2015

• Enforcement Agency
• SEC

• Countries
• China

• Foreign Official
• Health care professionals at state-owned hospitals in China.

• Date of Conduct
• 2008 to 2013

• Nature of Business
• Mead Johnson Nutrition Company is an infant formula and child nutrition product manufacturer and marketer based in Glenview, Illinois and incorporated in Delaware.  The company maintains stock that has been registered with the SEC under Section 12(b) of the Exchange Act and is listed on the New York Stock Exchange.  Mead Johnson Nutrition has subsidiaries throughout the world, including China, and the financial results of its subsidiaries are consolidated into the financial statement of the company.

• Influence to be Obtained
• According to the SEC, Mead Johnson Nutrition relies on third-party distributors to market, sell, and distribute the company’s products in China.  Pursuant to contracts between Mead Johnson and its third-party distributors, Mead Johnson Nutrition agreed to sell its products to the third-party distributors for resale at discounted prices (referred to as a “Distributor Allowance”).  The SEC claims that the funds generated by the discounted Mead Johnson Nutrition products were used by the third-party distributors as illicit payments to healthcare professionals for recommending Mead Johnson Nutrition products and improperly providing the contact information for expecting mothers.
  
  Though the funds belonged to these third-party distributors, Mead Johnson Nutrition employees are alleged to have maintained certain control over the use of the funds and kept records related to the Distributor Allowance.  Upon examination, the SEC claims that the records relating to the use of the Distributor Allowance were incomplete and did not indicate that a portion of the Distributor Allowance was used in a manner that was contrary to internal company policies (which prohibited conduct that might violate the FCPA).  The SEC alleges that Mead Johnson Nutrition failed to devise and maintain an adequate system of internal controls at Mead Johnson Nutrition’s subsidiary in China to ensure that the marketing and sales expenditures were not used for improper purposes in violation of Mead Johnson Nutrition’s internal policies.

• Enforcement
• On July 28, 2015, the SEC settled its enforcement action against Mead Johnson Nutrition for violations of the FCPA’s books-and-records and internal controls provisions.  According to the cease-and-desist order, Mead Johnson Nutrition was required to pay $7,770,000 in disgorgement; $1,260,000 in prejudgment interest; and a $3,000,000 civil penalty—totaling $12,030,000 in sanctions.

• Amount of the Value
• $2,070,000.

• Amount of Business Related to Payment
• Approximately $7,770,000.

• Intermediary
• Subsidiary

• Citizenship of Parent Entity
• United States

• Total Sanction
• $ 12,030,000

• Compliance Monitor
• No

• Reporting Requirements
• No

• Case is Pending?
• No

• Total Combined Monetary Sanction
• $ 12,030,000

Mead Johnson Nutrition Company 

• Citation
• In the Matter of Mead Johnson Nutrition Co., Admin. Proc. File No. 3-16704 (Jul. 28, 2015).

• Date Filed
• 07/28/2015

• 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