Medical device maker Stryker Corp. agreed Friday to pay the SEC a $7.8 million penalty to resolve FCPA books and records and internal accounting controls offenses in India, China, and Kuwait.
It’s the second time the SEC has brought an FCPA action against the Michigan-based company.
The SEC settled the new case with an internal administrative order (pdf) and didn’t go to court.
Stryker agreed to the settlement without admitting or denying the SEC’s findings.
The SEC said Stryker’s internal accounting controls weren’t sufficient “to detect the risk of improper payments in sales of Stryker products” in the three countries.
In India, for example, some of Stryker’s dealers regularly issued inflated invoices “upon the request of certain private hospitals,” the SEC said.
The private hospitals passed the inflated invoices on to their patients or their patients’ insurers, “even as the hospitals paid the lower prices previously negotiated with Stryker India to Stryker India’s dealers.”
In China, Stryker’s wholly-owned subsidiary had “at least 21 sub-distributors of Stryker’s Sonopet product” that weren’t “vetted, approved, or trained, as required by Stryker’s policies,” the SEC said.
In Kuwait, Stryker had one primary distributor that sold Stryker orthopedic products to the Kuwait Ministry of Health.
“From 2015 through 2017, the Kuwait Distributor made over $32,000 in improper ‘per diem’ payments to Kuwaiti [health-care professionals] to attend Stryker events, when Stryker had directly paid the costs for lodging, meals, and local transportation for these individuals.”
In an SEC enforcement action in October 2013, Stryker paid $13.2 million to resolve FCPA violations in Argentina, Greece, Mexico, Poland, and Romania, where it bribed doctors and administrators at government-controlled hospitals.
The SEC also settled that case through an administrative order and didn’t file a civil complaint in court. Stryker wasn’t required to make any admission of guilt regarding the SEC’s findings.
In Friday’s action, the SEC ordered Stryker to retain an independent compliance consultant.
The consultant’s role is to review and evaluate Stryker’s internal controls, record-keeping, and anti-corruption policies and procedures “relating to its use of dealers, agents, distributors, sub-distributors, and other intermediaries” that sell on its behalf.
Marc Berger, director of the SEC’s New York regional office, said in a release Friday that the penalty and monitor are “appropriate and necessary.”
“Stryker’s failures to implement sufficient internal accounting controls and keep accurate books and records are unacceptable, especially as this is not the first time the company has been charged for these types of violations,” Berger said.
Richard L. Cassin is the publisher and editor of the FCPA Blog.