A&O Shearman FCPA Digest | SEC v. Orthofix International N.V. (E.D. Tex. 2012)

Source Documents

Foreign Official
Employees of state-owned hospitals; officials from the Mexican state social services agency, the Instituto Mexicano del Seguro Social (“IMSS”).

Nature of Business
Orthofix International N.V. is a multinational corporation involved in the design, development, manufacture, marketing, and distribution of medical devices. Although incorporated in Curaçao, Netherlands Antilles, the company is based in Lewisville, Texas, and operates in multiple countries around the world including the United States, the United Kingdom, Italy, and Mexico. Orthofix’s common stock is registered pursuant to Section 12(b) of the Exchange Act and is publicly traded on the NASDAQ stock exchange.

Influence to be Obtained
Between 2003 and 2010, Orthofix and its Mexican subsidiary, Promeca, S.A de C.V., allegedly sought to secure agreements from Mexican officials employed by state-owned hospitals as well as Mexico’s government-owned medical care and social services provides, the IMSS, that guaranteed the sale of Orthofix products. In return for the agreements, the Mexican officials would receive a percentage of the collected revenue generated as a result of the sales in addition to various other gifts which Orthofix officials commonly referred to as “chocolates.” Promeca allegedly falsely recorded the bribes as cash advances and falsified invoices to disguise these payments.

Enforcement
On July 10, 2012, the SEC filed a complaint against Orthofix, alleging violations of the books-and-records and internal controls provisions of the FCPA. On September 4, 2012, a final judgment was entered against Orthofix, under which Orthofix was ordered to pay disgorgement and prejudgment interest of approximately $5.2 million.

In a related criminal action, Orthofix entered into a deferred prosecution agreement with the DOJ under which it agreed to pay a monetary penalty of $2,220,000 and to report to the DOJ for a period of three years.