Biotech company receives declination with disgorgement for Mexico bribes

Lifecore Biomedical, Inc., formerly known as Landec Corporation, received a declination with disgorgement Friday from the DOJ for FCPA violations in Mexico.

According to the Declination Letter, the DOJ found evidence that between May 2018 and August 2019, employees of Lifecore’s former U.S. subsidiary, Yucatan Foods L.P., bribed one or more Mexican government officials before and after Lifecore’s December 1, 2018 acquisition of Yucatan.

Lifecore agreed to disgorge to the U.S. Treasury $406,505 of duties it owed Mexican regulators but avoided paying.

Yucatan owned and operated a guacamole manufacturing facility in the Mexican state of Guanajuato called Procesadora Tanok S. de R.L. de C.V.

(Lifecore, which has since divested Yucatan and Tanok, makes injectable medical devices and pharmaceutical drug products.)

The Yucatan employees paid $14,000 in bribes to a government official through a third-party intermediary to secure a wastewater discharge permit, the DOJ said.

Tanok employees and agents also paid a third-party service provider $310,000 to prepare fraudulent manifests purporting to show the provider had delivered wastewater to a municipal water company for disposal. The Tanok employees knew a portion of the fee was used to bribe one or more local Mexican government officials to sign the manifests to help make them appear legitimate, the DOJ said.

During Lifecore’s pre-acquisition due diligence of Yucatan and Tanok, at least one Yucatan officer tried to conceal the misconduct from Lifecore and its auditor.

After Lifecore learned about the misconduct during post-acquisition integration, it launched an internal investigation that led to the voluntary self-disclosure.

The DOJ said it declined to prosecute Lifecore based on factors set out in the Criminal Division’s Corporate Enforcement and Voluntary Self Disclosure Policy and the Principles of Federal Prosecution of Business Organizations, Justice Manual 9-28.300. The factors included:

1. Lifecore’s timely and voluntary self-disclosure of the misconduct, which it reported to the DOJ’s FCPA Unit within three months of first discovering the possibility of misconduct and hours after an internal investigation confirmed that misconduct had occurred.
2. Lifecore’s full and proactive cooperation (including providing all known relevant facts about the misconduct) and its agreement to continue to cooperate with any ongoing government investigations and any prosecutions that might result in the future, including following Lifecore’s divestiture of Tanok and the legacy Yucatan business.
3. The nature and seriousness of the offense.
4. Lifecore’s timely and appropriate remediation, including the termination of the Yucatan officer engaged in the in the bribe scheme, withholding that officer’s bonus and other compensation, and substantially improving its compliance program and internal controls.
5. And, the fact that Lifecore agreed to disgorge the costs it avoided having to pay as a result of the bribery scheme.

According to data from FCPA Tracker, Lifecore also made a self-disclosure to the SEC, which has an ongoing investigation into the company.

Lifecore, then Landec, first disclosed the investigation in a January 2020 SEC filing.