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Recidivist Philips pays SEC $62 million to resolve China FCPA violations

Netherlands-based medical device company Koninklijke Philips N.V. agreed Thursday to resolve its second FCPA enforcement action by paying the SEC $62 million for violations in China.

The SEC charged Amsterdam-based Philips in an administrative order with violating the FCPA’s books and records and internal accounting controls provisions.

The company settled without admitting or denying the SEC’s findings. It agreed to pay a civil penalty of $15 million and $47.1 million in disgorgement and pre-judgment interest.

According to the SEC, between 2014 and 2019, Philips’ subsidiaries in China used “special price discounts” with distributors of the company’s medical diagnostic imaging equipment that created risks of improper payments to Chinese government officials. Employees, distributors, or sub-dealers of Philips’ China subsidiaries also engaged in improper conduct to influence hospital officials to draft technical specifications in public tenders to favor Philips’ products.

In 2013, Philips agreed to pay the SEC $4.5 million for FCPA books and records and internal controls offenses based on similar conduct in Poland. In at least 30 bids, employees of Philips’ subsidiary in Poland “made improper payments to public officials of Polish healthcare facilities to increase the likelihood that public tenders for the sale of medical equipment would be awarded to Philips,” the SEC said.

In Thursday’s action, the SEC said a Philips sales manager for Hainan Province delivered $14,500 in equivalent currency to the home of a director of a hospital’s radiology department in return for help winning sales worth $4.6 million for two devices.

The SEC’s Charles Cain said in a statement Thursday, “Despite remediation done in connection with its prior violations, Phillips nevertheless failed over the course of several years to implement sufficient internal accounting controls with respect to its sales of medical technology products in China.”

According to data from FCPA Tracker, Philips first disclosed the investigation into its China operation in an SEC filing in July 2019.

In a February 2023 SEC filing, the company said it was also discussing with the DOJ a resolution for the same offenses. In a May 13 company statement, Philips said the DOJ had “closed its parallel inquiry” into the related matters. 

Philips has about 70,000 employees in over 100 countries.

It trades on the New York Stock Exchange under the symbol PHG.

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