January 18, 2017

Texas-based medical device company Orthofix International will admit wrongdoing and pay more than $14 million to settle charges that it improperly booked revenue in certain instances and made improper payments to doctors at government-owned hospitals in Brazil to increase sales.  According to the SEC’s order, Orthofix improperly recorded certain revenue as soon as a product was shipped despite contingencies requiring certain events to occur in order to receive payment in the transaction.  In other instances, Orthofix immediately recorded revenue when it had provided customers with significant extensions of time to make payments.  The accounting failures caused the company to materially misstate certain financial statements from at least 2011 to the first quarter of 2013.  Four former Orthofix executives will pay penalties to settle cases related to these accounting failures.  A separate SEC order found that Orthofix violated the Foreign Corrupt Practices ACT (FCPA) when its subsidiary in Brazil schemed to use high discounts and make improper payments through third-party commercial representatives and distributors to induce doctors under government employment to use Orthofix’s products.  Orthofix will pay a $8.25 million penalty to resolve the accounting violations and more than $6 million in disgorgement and penalties to settle the FCPA charges.  SEC

Tagged in: Accounting Fraud, FCPA,