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Commission Payments To Chinese Lab Personnel And Doctors Leads To Enforcement Action

DPC

[This post is part of a periodic series regarding “old” FCPA enforcement actions]

In 2005,  the DOJ and SEC brought a coordinated enforcement action against Diagnostic Products Corp. (DPC – a California-based company which provided immunodiagnostic systems and immunochemistry kits) and its wholly-owned subsidiary DPC (Tianjin) Co. Ltd. (See here and here).

The conduct at issue focused on DPC Tianjin making cash commission payments to laboratory personnel and doctors employed by hospitals owned by the Chinese government to obtain and retain certain business involving the sale of immunodiagnostic systems, immunochemistry kits, and other medical equipment.

The overall settlement amount was approximately $4.8 million (a $2 million criminal fine and approximately $2.8 million in disgorgement and prejudgment interest paid to the SEC).

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Stock Option Grants For Doctors Results In FCPA Enforcement Action

stockoptions

[This post is part of a periodic series regarding “old” FCPA enforcement actions]

In March 2005, the DOJ announced that Micrus (a medical device company based in California) agreed to non-prosecution agreement and to pay a $450,000 criminal penalty to resolve its Foreign Corrupt Practices Act liability. The conduct at issue largely focused on stock option grants provided to physicians at publicly owned and operated hospitals in France, Turkey, Spain, and Germany.

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Healthcare Professionals As “Foreign Officials”

healthcare providers

It is one of the more dubious FCPA enforcement theories there is.  It has never been subjected to judicial scrutiny.  It is a relatively new enforcement theory when one considers that the Foreign Corrupt Practices Act was enacted in 1977.  It is an enforcement theory that has been used 30 times since introduced to the FCPA context in 2002 and thus is one of the reasons for the general increase in FCPA enforcement in the modern era.

It is the enforcement theory that employees (such as physicians, nurses, mid-wives, lab personnel, etc.) of certain foreign health care systems are “foreign officials” under the FCPA and thus occupy a status akin to a President or Prime Minister.

This post traces the origins and prominence of this theory,  contains comments from the former DOJ FCPA enforcement attorney who came up with this theory, and highlights a data point relevant to the legitimacy and validity of this theory.

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Issues To Consider From The Fresenius Enforcement Action

Issues

This previous post went in-depth into the approximate $232 million Fresenius FCPA enforcement action and this post continues the analysis by highlighting additional issues to consider.

Timeline

As highlighted in this prior post, Fresenius disclosed its FCPA scrutiny in August 2012. Thus from start to finish, its FCPA scrutiny lasted an unconscionable 6.5 years.

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Fresenius Medical Care Pays Approximately $232 Million To Resolve Its Long-Standing FCPA Scrutiny

fresenius

German healthcare firm Fresenius Medical Care AG (a company with American Depositary Receipt shares traded on the NYSE) has been under FCPA scrutiny since 2012 (no that is not a typo).

Today the DOJ and SEC announced (here and here) an approximate $232 million enforcement action ($84.7 million to the DOJ and $147 million to the SEC) against the company for alleged bribery schemes involving physicians and other healthcare personnel in Angola, Saudi Arabia, Morocco, Spain, Turkey, Gabon, Benin, Burkina Faso, Senegal, Ivory Coast, Niger, Cameroon China, Serbia, Bosnia, and Mexico.

While not specified in any of the resolution documents, the DOJ’s non-prosecution agreement and SEC’s administrative order make generic reference to the Angola and Saudi Arabia conduct involving ‘agents and employees utiliz[ing] the means and instrumentalities of U.S. interstate commerce, including the use of internet-based email accounts hosted by numerous service providers located in the United States.”

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