The DOJ and SEC frequently speak about the importance of transparency in Foreign Corrupt Practices Act enforcement – as well they should because transparency is a fundamental tenet of the rule of law.
Those in the know however have long recognized that FCPA enforcement is seldom transparent. However, assessing this is nearly impossible in most instances because FCPA internal investigation documents are seldom in the public domain.
Yet, as highlighted in this post, certain Bio-Rad FCPA internal investigation documents were recently publicly disclosed as exhibits in an FCPA-related whistleblower action and the documents call into question the transparency of the FCPA enforcement action against the company.
In terms of background, as highlighted in this previous post , in November 2014 Bio-Rad agreed to pay $55 million to resolve a parallel DOJ and SEC FCPA enforcement action based on alleged conduct in Russia, Thailand and Vietnam. Like most FCPA enforcement actions against health-care related companies, the Bio-Rad enforcement action was premised in large part on the enforcement theory that doctors and others employed by foreign healthcare systems are “foreign officials” under the FCPA.
In terms of further background, as highlighted in this previous post , in May 2015 Sanford Wadler, the former General Counsel and Secretary of Bio-Lab Laboratories, filed a civil complaint against the company and certain executive officers and board members alleging various unfair employment practices including that Wadler was terminated for blowing the whistle on certain potential FCPA issues. As highlighted in this previous post , Wadler’s claims were fully litigated and in February 2017 a jury awarded Wadler $2.9 million in back pay and stock compensation and $5 million for punitive damages.
Exhibits publicly filed in the case included this September 15, 2011 “Bio-Rad Laboratories Final Report of Investigation”  by Steptoe & Johnson, this January 4, 2012 Bio-Lad Laboratories presentation  by Steptoe & Johnson, and this June 4, 2013 “FCPA Inquiry: Status Report for the Board of Directors of Bio-Rad Laboratories, Inc” by Davis Polk .
What these documents clearly suggest is that Bio-Rad’s problematic conduct was not just limited to business activity in Russia, Thailand, and Vietnam (as alleged in the DOJ and SEC’s FCPA enforcement action) but much more extensive.
For instance, regarding Korea the presentation states: “expensive golf clubs and lavish entertainment provided to doctor at state-owned hospital to protect sales to hospital and because doctor had influence in industry generally.”
Regarding India, the presentation states: “Regional Institute of Paramedical and Nursing Services (gov’t) free equipment to employee and $500 cash to employee thru agent.”
Regarding Morocco, the presentation states: “$30K in consultants’ fees to prominent doctor at Gendarmerie Royale lab and $15K in cash payments to BR employee for pass-through to same doctor.”
Regarding Tunisia, the presentation states: “US$400K in sales via new distributor Bio-Faster. Bio-Faster reportedly owned by senior official at state-owned hospital and his brother; hospital is major Bio-Rad customer in Tunisia. Local BR sales manager was former employee of the same senior official; directed BR sales tru Bio-Faster.”
Regarding Egypt, the presentation states: “Egyptian doctor part-owner of distributor used in major DiaMed sale to Egyptian gov’t. Doctor may have previously held high gov’t positions; sources conflict on current status.”
Regarding Oman and Iran, the presentation states: “Isolated documentary evidence of one-off improper payments.”
As noted at the beginning of this post, FCPA internal investigation documents are seldom in the public domain.
This is what makes the Bio-Rad FCPA internal investigation documents unique in that they provide an interesting window to assess FCPA enforcement transparency.
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