SEC v. Biomet, Inc. (D.D.C. 2012)
Case Details
- Case Name
- SEC v. Biomet, Inc. (D.D.C. 2012)
- Countries
- Argentina, Brazil, China
- Foreign Official
- Health care providers employed by publicly owned and operated hospitals in Argentina, Brazil, and China.
- Date of Conduct
-
2006 to 2013
- Nature of Business
- Biomet, Inc. is a manufacturer of orthopedic medical devices. Biomet is an issuer in the United States, is incorporated in Indiana, and has its principal place of business in Warsaw, Indiana. Until 2007, Biomet’s shares were registered with the SEC pursuant to Section 12(b) of the Exchange Act. After 2007, it was subject to the reporting requirements of Section 15(d).
- Influence to be Obtained
- The SEC alleges that Biomet and its four wholly owned subsidiaries (Biomet Argentina SA, Biomet International Corporation, Biomet China, and Scandimed AB) paid bribes to doctors employed at public hospitals in Argentina, Brazil, and China. Between 2000 and August 2008, bribes were allegedly paid directly by Biomet subsidiaries or through the distributors who sold Biomet’s products. Even though Biomet’s compliance and internal audit functions were made aware of the payments as early as 2000, they failed to take any action to stop the payments.
According to the SEC’s complaint, employees of Biomet Argentina SA paid kickbacks ranging from 15 to 20 percent of each sale to doctors in Argentina. Invoices were created to justify the payments, which were improperly recorded as “consulting fees” or “commissions” in Biomet’s books and records.
The SEC alleges that Biomet’s subsidiary Biomet International used a distributor to bribe doctors in Brazil by paying them between 10 and 20 percent of the value of their medical device purchases. The distributor, Biomet International employees, and Biomet’s executives and internal auditors in the United States openly discussed the payments in communications.
The SEC also alleges that two other subsidiaries, Biomet China and Scandimed AB, acting through a Chinese distributor, provided doctors with money and travel in exchange for their purchases of Biomet products. These allegations include payments of “consulting fees” of between 10 and 15 percent of sales, providing a cash payment of 25 percent to one surgeon upon completion of a surgery, and providing a dinner for another doctor followed by a possible trip to Switzerland to visit his daughter. Additionally, Biomet organized a trip for 20 surgeons to Spain for training, where a substantial portion of the trip was devoted to sightseeing and entertainment at Biomet’s expense.
The SEC alleged that the payments were improperly recorded in Biomet’s books and records and that Biomet failed to maintain adequate internal controls.
- Enforcement
- On March 26, 2012, the SEC filed a civil complaint against Biomet. On March 27, 2012, Biomet consented to the entry of a court order permanently enjoining it from any future FCPA violations and agreed to pay approximately $5.57 million in disgorgement and prejudgment interest. The SEC ordered Biomet to retain an independent corporate compliance monitor for a period of eighteen months.
In a related criminal proceeding, Biomet entered into a three-year deferred prosecution agreement with the DOJ, under which Biomet agreed to pay a monetary penalty of $17.28 million and to retain an independent corporate compliance monitor for a minimum period of eighteen months, self-monitoring and reporting for the remainder of the DPA period.
- Amount of the Value
- $1.536 million.
- Amount of Business Related to Payment
- Not Stated
- Intermediary
- Subsidiaries, Third-party distributors.
- Citizenship of Parent Entity
- United States
- Total Sanction
- $ 5,575,731
- Reporting Requirements
- Yes (3 Years)
- Total Combined Monetary Sanction
- $ 22,855,731
Defendants
Biomet, Inc.
- Citation
- SEC v. Biomet, Inc., No. 1:12-cv-00454 (D.D.C. Mar. 27, 2012).
- Other Statutory Provision
- None
- Disposition
- Complaint and Consent Order
- Defendant Jurisdictional Basis
- Issuer
- Defendant's Citizenship
- United States
