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Harry Cassin
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Richard L. Cassin
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Thomas Fox
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Bill Waite
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Russell A. Stamets
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SEC charges Orthofix with FCPA violations in Brazil

The SEC Wednesday charged Texas-based medical device maker Orthofix International with violating the Foreign Corrupt Practices Act when its subsidiary in Brazil made improper payments to doctors at government-owned hospitals to increase sales.

Orthofix paid more than $6 million in disgorgement and penalties to settle the FCPA charges. It also agreed to retain an independent compliance consultant for one year to review and test its FCPA compliance program.

Orthofix won’t face criminal enforcement. It said in a statement Wednesday that the DOJ “has decided to take no further action with respect to this matter.”

The SEC said Orthofix used high discounts and improper payments through commercial representatives and distributors “to induce doctors under government employment to use Orthofix’s products.”

“Fake invoices were used for purported services,” the SEC said.

The company disclosed allegations of improper payments in Brazil in March 2014. It self reported the allegations to the DOJ and SEC.

Orthofix was involved in another FCPA enforcement action in 2012. A Mexican subsidiary bribed officials at government hospitals with cash, laptops, televisions, and other appliances. Orthofix paid $7.4 million to the DOJ and SEC to resolve those FCPA offenses. It entered into a three-year deferred prosecution agreement with the DOJ as part of the resolution.

The SEC settled Wednesday’s case with an internal administrative order (pdf) and didn’t go to court. Under the order, Orthofix paid disgorgement and interest of $3.2 million and a civil penalty of $2.9 million.

Kara Brockmeyer, chief of the SEC Enforcement Division’s FCPA Unit, said in a statement: “Orthofix did not have adequate internal controls across all its subsidiaries and failed to detect and prevent the improper payments in Brazil that were intended to boost sales.”

But the SEC said it “noted Orthofix’s cooperation and remedial acts.”

Orthofix said it “instituted extensive remediation measures” including firing employees and ending relationships with third-party representatives and distributors. It expanded its compliance department and began “enhanced anti-corruption compliance training for employees and certain third parties.”

In a separate action Wednesday, the SEC charged Orthofix and four then-executives with improperly booking revenue and other accounting failures. Orthofix agreed to pay an $8.25 million penalty to resolve the accounting violations.


Richard L. Cassin is the publisher and editor of the FCPA Blog.

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