Zimmer Biomet broke deferred prosecution agreement with DOJ: Reuters

Zimmer Biomet ($ZBH) could be facing criminal prosecution for breaching a deal Biomet made with the Department of Justice in 2012 to resolve a foreign corruption investigation.

Biomet reached the deferred prosecution agreement before its acquisition by Zimmer. It did so to settle allegations that it bribed publicly employed healthcare providers in Argentina, Brazil and China to get business with hospitals. The company misrepresented those payments in its financial reports as "commissions" and "scientific incentives" among others.

At the time, Biomet agreed to a $17.3 million criminal penalty plus $5.4 million in disgorgement of profits. It also pledged to implement internal controls and to retain a compliance monitor for 18 months. However, the DOJ said in a June 6 court filing that the company violated the agreement by failing to maintain a compliance program and through activity in Brazil and Mexico, Reuters reported.

While criminal prosecution is on the table, the company is cooperating with the DOJ in "discussions to resolve the matter which would obviate the need for a trial," Reuters reported.

Zimmer closed its $13 billion acquisition of Biomet in June last year, following the divestiture of its Unicompartmental High Flex Knee to competitor Smith & Nephew ($SNN). The buy landed Zimmer Biomet with $4.7 billion in cash to spend on M&A over the next few years. It bought Ortho Transmission in March to obtain technology for anchoring artificial limbs, and followed up in April with an acquisition of Cayenne Medical to boost its sports medicine offerings. And last week, it dropped $1 billion to purchase spinal surgery player LDR Holding ($LDRH), signaling that the company is ready to move on from integrating Biomet.

- here's the Reuters story

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