Biomet to cough up almost $23M to settle bribery charges

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Another devicemaker has been ensnared in a Foreign Corrupt Practices Act probe.

The Department of Justice and the Securities and Exchange Commission, which have been cracking down lately on FCPA violations, announced earlier this week that they had settled with orthopedic devicemaker Biomet. The company allegedly made improper payments between 2000 to 2008 to publicly employed healthcare providers in Argentina, Brazil and China to secure business with hospitals. 

In its complaint, the SEC details some of the actions that got Biomet into trouble. In one instance, email described how one Chinese doctor was trying to stop commissions being paid to physicians by device companies. However, subsequent email said he'd "become the most loyal customer of Biomet if we send him to Switzerland," according to the complaint. Apparently, he wanted to visit his daughter.

But he wasn't the only one. Doctors, who typically received cash upon the completion of surgery, expected a lot more, too. "Chinese surgeons typically receive a commission on sales, which can range from 5% to 25%. Distributors are expected to hold banquets for surgeons, and to sponsor meetings."

The Warsaw, IN-based company will have to pay a $17.28 million criminal penalty plus $5.4 million in disgorgement of profits as a result of the settlement. Furthermore, under the deferred prosecution agreement between the parties, Biomet will implement internal controls, cooperate fully with the department and retain a compliance monitor for 18 months.

For its part, Biomet says it's been trying to do better. "Over the past several years, we have significantly enhanced our global compliance procedures and financial controls, and we fully intend to work with the independent monitor and the Department of Justice and Securities and Exchange Commission to bolster our FCPA compliance practices and procedures," says Biomet's President and CEO Jeffrey Binder in a statement.

In its statement, the DoJ notes that Johnson & Johnson ($JNJ) and Smith & Nephew ($SNN) have agreed to pay criminal penalties and entered into deferred prosecution agreements related to FCPA probes.

As Fortune notes, the SEC's complaint didn't name Biomet's private equity owners, including big names like The Blackstone Group, Goldman Sachs, Kohlberg Kravis Roberts & Co. and TPG Capital. This omission might allow PE attorneys to rest easy for a while. They had previously thought their clients would get hit with Foreign Corrupt Practices Act charges, too, if one of their portfolio companies got into trouble. However, this has yet to happen.

- read the DoJ statement
- check out Biomet's response
- see the SEC's compliant (.pdf)
- check out the Fortune blog piece

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