Medical Device Company Reaches Second FCPA Settlement in the Span of Five Years
On January 18, Texas-based medical device company Orthofix International N.V. (Orthofix) admitted wrongdoing and agreed to pay approximately $6 million to the SEC to settle FCPA books and records and internal controls charges in connection with improper payments made by its Brazilian subsidiary to doctors through third parties. In related non-FCPA proceedings, Orthofix also agreed to pay a $8.25 million penalty to resolve various accounting violations, and former executives Jeff Hammel, Kenneth Mack, Bryan McMillan, and Brian McCollum each consented to accounting-related SEC orders without admitting or denying the findings.
According to the Administrative Order Instituting Cease-and-Desist Proceedings, Orthofix’s Brazilian subsidiary Orthofix do Brasil LTDA employed third-party commercial representatives and distributors to make improper payments to doctors employed at government-owned hospitals to induce them to use Orthofix’s products, thereby increasing sales. Orthofix also improperly recorded revenue, leading to the related accounting charges.
In settling with the SEC, Orthofix has now resolved two separate FCPA cases in the span of five years. In 2012, Orthofix resolved FCPA actions with both the SEC and DOJ in connection with bribes paid to Mexican officials by its Mexican subsidiary. Given the prior corruption and internal controls issues, the SEC found that Orthofix failed to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances to detect and prevent such payments. Orthofix agreed to hire a compliance consultant for one year.