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Eric Carlson
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Analogic: DOJ and SEC want $15 million for FCPA settlement

Image courtesy of Analogic Corp.Analogic Corporation said in a securities filing Wednesday the SEC and DOJ made separate settlement proposals to end an ongoing FCPA investigation that would include total payments of about $15 million.

In September, Massachusetts-based Analogic said it offered the Securities and Exchange Commission $1.6 million to settle the bribery probe.

In this week’s disclosure, the company said the SEC rejected the offer and made a counter proposal. The DOJ made a separate proposal.

Analogic makes airport security scanners, ultrasound, and other imaging equipment.

The company first disclosed the investigation involving Danish subsidiary BK Medical ApS and some of its foreign distributors in 2011.

Analogic said distributors paid BK Medical amounts “in excess of amounts owed and BK Medical transferred the excess amounts, at the direction of the distributors, to third parties identified by the distributors.”

“We have terminated the employment of certain BK Medical employees and also terminated our relationships with the BK Medical distributors that were involved in the transactions,” Analogic said Wednesday.

In the SEC filing, Analogic said it believed all payments involving BK Medical were properly accounted for in “all material respects.”

“However, we have been unable to ascertain with certainty the ultimate beneficiaries or the purpose of these transfers,” it said.

The company said it believes the U.S. and Danish investigations are “substantially completed.”

Under Danish law, the company said, amounts paid to the SEC or the DOJ for a settlement would be taken into account in determining penalties imposed by the Danish government.

*     *     *

Here’s the full FCPA disclosure from Analogic Corporation’s Form 10-Q filed with the SEC on December 9, 2015:

As initially disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2011, we identified certain transactions involving our Danish subsidiary BK Medical ApS, or BK Medical, and certain of its foreign distributors, with respect to which we have raised questions concerning compliance with law, including Danish law and the U.S. Foreign Corrupt Practices Act, and our business policies.

These have included transactions in which the distributors paid BK Medical amounts in excess of amounts owed and BK Medical transferred the excess amounts, at the direction of the distributors, to third parties identified by the distributors. We have terminated the employment of certain BK Medical employees and also terminated our relationships with the BK Medical distributors that were involved in the transactions.

We have concluded that the transactions identified to date have been properly accounted for in our reported financial statements in all material respects. However, we have been unable to ascertain with certainty the ultimate beneficiaries or the purpose of these transfers.

We have voluntarily disclosed this matter to the Danish Government, the U.S. Department of Justice, or DOJ, and the SEC, and are cooperating with inquiries by the Danish Government, the DOJ and the SEC. We believe that the SEC, DOJ and Danish Government have substantially completed their investigation into the transactions at issue.

We are continuing our discussions with the SEC and have commenced discussions with the DOJ and the Danish Government concerning a possible resolution of these matters.

During the three months ended July 31, 2015, we accrued a $1.6 million charge in connection with a settlement proposal that we made to the SEC, which proposal was rejected by the SEC.

In the first quarter of fiscal 2016, the SEC and DOJ made separate settlement proposals that would include payments in the aggregate amount of approximately $15 million.

We are uncertain whether the Danish Government will seek to impose sanctions or penalties against us. We further believe that, under Danish law, amounts paid to the SEC and/or the DOJ would be taken into account in determining penalties that may be sought by the Danish Government.

There can be no assurance that we will enter into any settlement with the SEC, the DOJ or the Danish Government, and the cost of any settlements or other resolutions of these matters could materially exceed our accruals.

During the three months ended October 31, 2015 and 2014, we incurred inquiry-related costs of approximately $0.03 million and $0.8 million, respectively, in connection with this matter.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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