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Catch of the Week — Fresenius Medical Care

Posted  April 5, 2019

German-based medical device production and services company Fresenius Medical Care AG & Co. KGaA (“FMC”), agreed on March 29th to a $231 million settlement with both DOJ and the SEC to resolve allegations it violated the Foreign Corrupt Practices Act by paying bribes between 2007 and 2016 to publicly employed health and/or government officials to obtain or maintain business in Angola and Saudi Arabia. Additionally, in Angola, Saudi Arabia, Morocco, Spain, Turkey, and various countries in West Africa, FMC was found to have “knowingly and willfully failed to implement reasonable internal accounting controls over financial transactions and failed to maintain books and records that accurately and fairly reflected the transactions.”

FCPA Violations

This settlement resolved allegations that from 2007 to 2016, FMC bribed health providers and governments to provide FMC business. In Angola, FMC offered valuable shares in local joint ventures and other things of value to Angolan military health officers who had authority over state-run military hospitals where FMC sought business. In Saudi Arabia, FMC similarly participated in improper conduct such as a check cashing scheme and improper consulting relationships with government health officials and doctors. In Morocco, FMC paid bribes to Moroccan state officials to obtain government contract to develop kidney dialysis centers in Moroccan state-run hospitals. Overall, the DOJ found that FMC engaged in bribery of government officials in thirteen countries that resulted in more than $140 million in profits for FMC.

The DOJ found that while FMC did voluntarily self-disclose some of the improper behavior, it continued its conduct through 2016 and was not fully forthcoming with the government about the scope. FMC ultimately admitted to some of the allegations and agreed to enter into a non-prosecution agreement with the DOJ and to pay criminal penalties totaling $84,715,273. FMC also settled a related matter with the SEC and agreed to pay $147 million in disgorgement and prejudgment interest. The combined settlements and penalties bring the total amount paid by FMC to $231 million.

Analysis

Regarding the settlement, Assistant Attorney General Brian A. Benczkowski from the Department of Justice Criminal Division said “Fresenius doled out millions of dollars in bribes across the globe to gain a competitive advantage in the medical services industry, profiting to the tune of over $140 million, Today’s resolution, under which Fresenius has agreed to retain an independent compliance monitor for at least two years, reflects the Department’s firm commitment to both rooting out bribery and promoting the kind of effective corporate compliance programs that will prevent misconduct going forward.”

U.S. Attorney Andrew E. Lelling of the District of Massachusetts said “Bribery, in all forms, is corrosive and illegal. As today’s announcement makes clear, this Office will continue its long tradition of aggressively investigating companies and individuals who use bribes and kickbacks to gain an unfair and illicit business advantage, or who deliberately turn a blind eye to that conduct.”

While this enforcement action was not triggered by a whistleblower, qualified individuals who file submissions with the SEC under the whistleblower provisions in the Dodd-Frank Act can be rewarded under the statute. Large settlements like this one provide one measure of the importance of whistleblowers in addressing fraud against the government. Whistleblowers are often in a prime position to provide information on improper conduct by their employers, competitors, or related entities that can lead to the government’s recovery of ill-gotten gains across the globe. Such recoveries ensure that taxpayer money is properly spent, government programs worldwide are not defrauded, and corruption is curtailed. Here, where FCPA violations were alleged and admitted, resolution also assures patients around the world that the providers they are given access to entered the market without the benefit of bribery, favoritism, or corruption.

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Tagged in: Catch of the Week, FCPA,


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