Massachusetts-based medical technology company Analogic Corporation and a foreign subsidiary and that unit’s former CFO settled FCPA violations related to $20 million in improper payments in Russia and other countries.
Analogic’s Danish subsidiary, BK Medical ApS, entered into a non-prosecution agreement with the DOJ Tuesday. It agreed to pay a $3.4 million criminal penalty to resolve a government investigation into improper payments that violated the Foreign Corrupt Practices Act.
In a settlement with the SEC, Analogic agreed to pay $7.7 million in disgorgement and $3.8 million in prejudgment interest.
The SEC resolved the case with an internal administrative order and didn’t go to court.
BK Medical ApS engaged in hundreds of sham transactions with distributors. It funneled about $20 million to third parties, including individuals in Russia and apparent shell companies in Belize, the British Virgin Islands, Cyprus, and Seychelles.
At least some of the payments ultimately went to doctors employed by Russian state-owned entities, the DOJ said.
Doctors at state-owned hospitals are usually foreign officials under the FCPA. Paying them to obtain or retain business can violate the FCPA.
Also settling Tuesday with the SEC was Lars Frost. He was BK Medical’s CFO from 2008 to 2011.
Frost, 50, is a citizen of Denmark and lives there.
The SEC said Frost “personally authorized approximately 150 conduit payments to unknown third parties during his tenure at BK Medical despite knowing that the payments violated BK Medical’s internal accounting controls.”
“As a result of his conduct, Frost was a cause of Analogic’s violations,” the SEC said.
Frost agreed to pay a civil penalty to the SEC of $20,000 to settle the offenses.
BK Medical makes ultrasound equipment.
It falsely booked fictitious invoices for the third-party payments and caused Analogic to falsify its books and records, the SEC said.
Although the scheme involving its Russian distributor was the most extensive, BK Medical also admitted that it engaged in similar schemes with distributors in five other countries.
In its non-prosecution deal with the DOJ, BK Medical agreed to pay the criminal penalty and cooperate with U.S. and foreign authorities in any ongoing investigations and prosecutions. It also agreed to enhance its compliance program and report periodically to the DOJ.
The company received only partial credit for cooperation. It didn’t initially disclose all relevant facts it learned during an internal investigation.
By the end of the investigation, the DOJ said, BK Medical had disclosed all relevant facts known to it, including information about individuals involved in the FCPA misconduct.
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BK Medical’s June 21, 2016 non-prosecution agreement with the DOJ is here (pdf).
The SEC’s Securities Exchange Act of 1934 Release No. 78113, Accounting and Auditing Enforcement Release No. 3784, and Administrative Proceeding File No. 3-17305 (all dated June 21, 2016) are here (pdf).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He’ll be the keynote speaker at the FCPA Blog NYC Conference 2016.