Depuy pays $7.9 million to end UK bribe case

Johnson & Johnson's DePuy International unit has agreed to pay about $7.9 million to end a UK probe into whether it paid bribes to Greek officials to win contracts to supply orthopedic products. The news comes as the medical devices and pharma giant also agreed to pay $70 million in a settlement in related Foreign Corrupt Practices Act (FCPA) and oil-for-food investigations by the Department of Justice and the SEC. 

Between 1998 and 2006, DePuy authorized the payment of about $16.4 million in cash incentives to publicly employed Greek healthcare providers so they would buy DePuy products, according to government documents, the Wall Street Journal reports. To conceal the payments, DePuy units "falsely recorded the payments in their books and records as 'commissions'" paid to a Greek distributor who acted as the company's sales agent. The Greek government paid DePuy International Limited's intermediaries approximately £33.5 million ($54.7 million) for orthopedic products between 1998 and 2007, according to a Serious Fraud Office statement.

Following an internal complaint in 2006, Johnson & Johnson began an internal investigation in connection with the sale of orthopedic products in Greece. The company reported its findings to the DoJ and the SEC, and the Serious Fraud Office launched an investigation of DePuy International in October 2007 following a referral from the DoJ, according to an SFO statement.

The SFO notes that criminal sanction of the Greek conduct has been achieved through the conclusion of a deferred prosecution agreement with J&J and the DoJ.  The SFO director has concluded that a prosecution was therefore prevented in the UK by the principles of double jeopardy.

Robert Dougall, a former marketing director at DePuy, admitted last year that he played a role in paying about $7.4 million in bribes to Greek doctors. He was sentenced to a year in prison after agreeing to cooperate with the SFO and the DoJ. His sentence was later overturned by an appeals court, Bloomberg notes.

The DoJ and SEC's investigation also included bribes paid to Greek doctors. They also looked into whether employees of J&J affiliates paid healthcare officials in Poland and Romania to induce the purchase of medical devices and pharmaceuticals. J&J also acknowledged that kickbacks were paid on behalf of subsidiaries to the former government of Iraq under the U.N. Oil for Food Program in order to secure contracts to provide humanitarian supplies, according to a DoJ statement.

In a statement, Robert Khuzami, director of the SEC's Division of Enforcement, says the message in J&J's and FCPA similar cases is "any competitive advantage gained through corruption is a mirage." He adds, that the company "chose profit margins over compliance with the law by acquiring a private company for the purpose of paying bribes, and using sham contracts, off-shore companies and slush funds to cover its tracks."

J&J's will pay $48.6 million to the SEC in disgorgement and prejudgment interest and a $21.4 million criminal penalty to the DoJ.

- check out the J&J statement
- read the SFO statement
- see the SEC's statement
- check out the DoJ's release
- get more from Bloomberg
- see the WSJ story