Orthopedic device maker Biomet Inc. said in an SEC filing that the DOJ has extended for another year its 2012 deferred prosecution agreement that was part of a 2012 FCPA enforcement action.
The three-year DPA was set to expire on March 26. But after the company self reported more possible FCPA violations in Brazil and Mexico that pre-dated the 2012 settlement, the DOJ extended the DPA.
The DOJ also extended the appointment of the independent compliance monitor Biomet was required to retain under the DPA.
In March 2012, Biomet agreed to pay $22.7 million to settle FCPA-related offenses. The Warsaw, Indiana company paid a criminal fine of $17.3 million to the DOJ and $5.5 million in disgorgement and pre-judgment interest to the SEC.
According to the DOJ and SEC, Biomet bribed doctors at government hospitals in Argentina, Brazil, and China from 2000 to 2008. It paid more than $1.5 million and disguised the payments as commissions, royalties, consulting fees, and scientific incentives.
In July last year, Biomet said it was subpoenaed by the SEC for a new investigation. The subpoena required production of documents relating to “certain alleged improprieties” in the company’s Brazilian and Mexican operations.
Biomet said it learned of the possible violations in October 2013. After an internal investigation it disclosed them to the compliance monitor and to the SEC and DOJ in April 2014.
Rival Zimmer Holdings is in the process of acquiring Biomet in a $13 billion deal.
In the latest disclosure, Biomet said it has “terminated, suspended or otherwise disciplined certain of the employees and executives” involved in the questionable sales practices in Mexico and Brazil.
The DOJ has “sole discretion” under the DPA to determine whether conduct by Biomet constitutes a violation or breach of the DPA, Biomet said.
The DOJ “could, among other things, revoke the DPA or prosecute Biomet and/or the involved employees and executives,” the company said.
Biomet said it continues to cooperate with the SEC and DOJ and expects discussions with them to continue.
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Here’s Biomet Inc.’s full FCPA disclosure from its Form 8-K filed with the SEC on March 13, 2015:
As previously disclosed, on March 26, 2012, Biomet, Inc., or Biomet, entered into a Deferred Prosecution Agreement, or DPA, with the Department of Justice, or DOJ, and a Consent to Final Judgment, or Consent, with the Securities and Exchange Commission, or SEC, regarding an investigation regarding possible violations of the Foreign Corrupt Practices Act. Pursuant to the DPA, the DOJ agreed to defer prosecution of Biomet in connection with those matters, provided that Biomet satisfies its obligations under the DPA over the term of the DPA. The DPA had a three-year term and provided that it could be extended in the sole discretion of the DOJ for an additional year. Pursuant to the Consent, Biomet consented to the entry of a Final Judgment which, among other things, permanently enjoined Biomet from violating the provisions of the Foreign Corrupt Practices Act. In addition, pursuant to the terms of the DPA, an independent external compliance monitor was appointed to review Biomet’s compliance with the DPA, particularly in relation to Biomet’s international sales practices. The Consent Biomet entered into with the SEC mirrors the DPA’s provisions with respect to the compliance monitor.
As further disclosed, in October 2013, Biomet became aware of certain alleged improprieties regarding its operations in Brazil and Mexico, including alleged improprieties that predated the entry of the DPA. Biomet retained counsel and other experts to investigate both matters. Based on the results of the ongoing investigations, Biomet has terminated, suspended or otherwise disciplined certain of the employees and executives involved in these matters, and has taken certain other remedial measures. Additionally, pursuant to the terms of the DPA, in April 2014 and thereafter, Biomet disclosed these matters to and discussed these matters with the independent compliance monitor and the DOJ and SEC. On July 2, 2014, the SEC issued a subpoena to Biomet requiring that Biomet produce certain documents relating to such matters. These matters remain under investigation by the DOJ.
On March 13, 2015, the DOJ informed Biomet that the DPA and the independent compliance monitor’s appointment have been extended for an additional year.
Pursuant to the DPA, the DOJ has sole discretion to determine whether conduct by Biomet constitutes a violation or breach of the DPA. The DOJ has informed Biomet that it retains its rights under the DPA to bring further action against Biomet relating to the conduct in Brazil and Mexico disclosed in 2014 or the violations set forth in the DPA. The DOJ could, among other things, revoke the DPA or prosecute Biomet and/or the involved employees and executives. Biomet continues to cooperate with the SEC and DOJ and expects that discussions with the SEC and the DOJ will continue.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.