UPDATED: Smith & Nephew settles with gov't over bribery allegations, impresses with earnings announcement
Smith & Nephew ($SNN) will pay about $22 million after reaching a settlement with the Securities and Exchange Commission and Department of Justice over allegations its subsidiaries paid bribes to gain business in Greece.
In a complaint, the SEC maintains Smith & Nephew subsidiaries used a distributor to create a slush fund to make illicit payments to Greek doctors employed by government hospitals or agencies. Although it appeared as if the subsidiaries were paying for marketing services, no services were actually performed, the SEC alleges. The system created off-shore funds that were not subject to Greek taxes and were then improperly used to induce the public physicians to buy Smith & Nephew products.
For its part, Smith & Nephew said it had reported the evidence of the improper payments by the Greek distributor after being approached by the SEC and DOJ. The individuals implicated are no longer associated with the company.
"We have what I believe to be a world-class compliance programme, having enhanced it significantly since this investigation began in 2007," said CEO Olivier Bohuon (pictured). "These legacy issues do not reflect Smith & Nephew today. But they underscore that we must remain vigilant every place we do business and let nothing compromise our commitment to integrity."
Word of the settlement came days after the devicemaker reported better-than-expected quarterly results, posting fourth-quarter revenues of $1.1 billion. In fact, The Guardian noted, Smith & Nephew's results stand out as an example of success among disappointing news from big companies in a number of industries--including pharma and oil.
During the earnings presentation, Bohoun, who came onboard in April, touted the results from the advanced wound management unit, the company's fastest growing business. AWM revenue was up 8% to $271 million in the quarter, growing more than twice the estimated global market rate of 3%. And the company sees the 2012 outlook for AWM to be above market growth.
As execs with Johnson & Johnson ($JNJ) and Stryker ($SYK) recently noted, demand for hips and knees has dipped as the economy tries to recover. The lesser demand has had an impact on Smith & Nephew as well. Global knee growth for the company was at 2%--a market-leading performance, Bohuon reported.
However, Bohuon also touched on the 7% reduction in the company's global employee base over the next three years as part of a restructuring initiative. As he noted, 220 positions have already been lost to date. The announcement marked the first time the company, which has been the subject of takeover rumors, provided more detail about workforce reduction, which will entail the laying off of about 800 staff of Smith & Nephew's 11,000-person head count, as The Telegraph noted.