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FCPA Scorecard Blog

Foreign Corrupt Practices Act & Anti-Corruption

Sector Sweep Continues: Medical Device Manufacturer Orthofix Resolves FCPA Violations Related to Conduct in Mexico

Orthofix Mexico

On July 10, 2012, medical device manufacture Orthofix International N.V. became the latest in a string of companies in the sector to resolve an FCPA matter with the U.S. government.  The Orthofix FCPA resolution calls for the company to pay a criminal fine to the U.S. Department of Justice (DOJ) of $2.22 million, and a civil monetary sanction (including disgorgement and interest) of $5.2 million to the U.S. Securities and Exchange Commission (SEC).  The DOJ resolved the matter through a Deferred Prosecution Agreement, which was attached to the company's 8-K of July 10, 2012, reporting the resolution. According to the allegations in the SEC's Complaint, Promeca S.A. de C.V, a subsidiary based in Mexico, paid bribes to employees of the government-operated health care system, referring to the payments as "chocolates" and booking inaccurate reimbursement requests as meals, car tires or training expenses.  The Mexico subsidiary made approximately $317,000 in improper payments over a 7-year period, according to the SEC. As initially reported in an August 31, 2010 8-K, the company disclosed to the DOJ and the SEC that it was investigating certain conduct at Promeca.  The FCPA resolution follows a June 7, 2012 guilty plea by the U.S. subsidiary, Orthofix Inc., on a False Claims Act-related matter, resulting in $7.8 million fine and payment of over $34 million to resolve a civil action (see DOJ Press Release). The settlement adds Orthofix to the list of device manufacturers that have settled FCPA matters in 2012, along with Smith & Nephew and Biomet, which settled in February and March 2012, respectively.