Company Pays $7.4 Million to Settle Bribery Case

When subsidiary companies bribe foreign officials, their parent companies may have to pay millions of dollars in penalties and fines to the Justice Department (DOJ) and the Securities and Exchange Commission (SEC), even if the parent companies didn’t know about the bribery at the time it was taking place. That’s what happened recently to Orthofix, a Texas-based orthopedic medical device company. The DOJ and the SEC alleged that Promeca, a Mexico City-based wholly owned subsidiary of Orthofix, paid more than $300,000 in bribes, which it code-named “chocolates,” to Mexican officials. Orthofix was charged with violating the Foreign Corrupt Practices Act (FCPA) and the Exchange Act. It agreed to pay $2.2 million to the DOJ to defer prosecution and $5.2 million to the SEC in penalties and interest.

The bribes, according to the complaint, took place over seven years. Promeca first recorded the bribes as cash advances, and later as promotional and training expenses. The complaint alleged that when Orthofix noticed that these expenses were over budget, it “did very little to investigate or diminish the excessive spending.” The complaint also alleged that before Orthofix discovered the bribery scheme, it did not have an effective FCPA compliance policy or FCPA-related training.

When Orthofix found out about the bribery scheme from a Promeca executive, it reported the matter to the SEC, conducted an internal investigation and implemented significant remedial measures. In the end, though, in its deferred prosecution agreement with the DOJ, Orthofix agreed that it was responsible for the actions of its subsidiaries – and it’s now more than $7 million poorer.

WeComply’s 35-minute online FCPA training course presents an overview of real-world issues related to the Foreign Corrupt Practices Act, including standards, “red flags,” defenses and penalties.

Categories: International Compliance
Tags: fcpa