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Friday Roundup

Roundup

Whistleblower award, interesting observations, scrutiny update, why in the world, you lose some and you win some, and guilty plea. It’s all here in the Friday roundup.

Whistleblower Award

According to this report, “a former Brazilian surgeon who blew the whistle on a medical device company that allegedly bribed doctors to win business will get a $4.5 million award from U.S. regulators, according to his lawyers. The surgeon will get the money for playing a crucial role in helping the SEC uncover a bribery scandal at Biomet Inc. that spanned the globe. (See here for the SEC release).

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Defamation Claim Advances By Former Biomet Argentina Employee Against Zimmer Biomet Holdings

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Foreign Corrupt Practices Act enforcement actions rarely tell the whole story about the facts and circumstances relevant to the underlying action. Thus, it is nice (from the perspective of getting a more complete alleged picture including specific names relevant to an FCPA enforcement action) when civil litigation is filed in connection with an FCPA enforcement action.

Such is the case regarding a recent civil action filed by Alejandro Yeatts, who from 2005 to September 2015 was employed by Biomet Argentina, in which he alleges various tort claims against Zimmer Biomet Holdings. Although the court recently dismissed Yeatts’s intentional infliction of emotional distress and negligent infliction of emotional distress claims, the court denied Zimmer’s motion to dismiss Yeatts’s defamation claim meaning the claim will advance to the next stage in litigation.

This post summarizes Yeatts’s defamation claim and the court’s recent decision (Yeatts v. Zimmer Biomet Holdings, 2017 WL 1375117 (N.D. Ind., Apr. 17, 2017).

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Issues To Consider From The Zimmer Biomet Enforcement Action

Issues

This previous post went in-depth into the $30.4 million Foreign Corrupt Practices Act enforcement action against Zimmer Biomet announced on January 12th.

This post highlights additional issues to consider.

Repeat Offender

Biomet is not the first company to be a repeat FCPA criminal offender, just the latest. Other criminal examples include Aibel Group / Vetco entities and Marubeni (and there several other examples involving SEC civil violations such as Orthofix Int’l recently becoming a repeat FCPA offender). To learn more about these examples, see the article “Measuring the Impact of NPAs and DPAs on FCPA Enforcement.”

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Biomet Becomes An FCPA Repeat Offender

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For many years, the DOJ has advanced the policy position that DPAs and NPAs “have had a truly transformative effect on particular companies and, more generally, on corporate culture across the globe.” (See here for the prior post). Specifically in the Foreign Corrupt Practices Act context, the DOJ has stated that “the companies against which DPAs and NPAs have been brought have often undergone dramatic changes.”  (See here for the prior post).

As highlighted here, in March 2012 Biomet resolved an FCPA enforcement action involving alleged conduct in Brazil, Argentina, and China by agreeing to pay approximately $22.8 million ($17.3 million via a DOJ deferred prosecution agreement, and $5.5 million via a settled SEC civil complaint).

Since then, FCPA Professor has chronicled (herehere and here) how Biomet’s DPA was extended, how the DOJ ultimately came to conclude that Biomet had breached its DPA based on subsequent improper conduct, and how an additional FCPA enforcement was expected.

Last week, the DOJ and SEC announced (here and here) the additional FCPA enforcement action against Zimmer Biomet Holdings (in 2015 Zimmer Holdings acquired Biomet) and Biomet. As highlighted below, a portion of the improper conduct involved the same distributor in Brazil that gave rise to the 2012 FCPA enforcement action.

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In Times Like These, We Need To Ask: Is The FCPA Effective?

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In passing the Foreign Corrupt Practices Act, Congress anticipated that the “criminalization of foreign corporate bribery will to a significant extent act as a self-enforcing preventative mechanism.” Likewise since the FCPA’s earliest days, the DOJ has recognized that the “most efficient means of implementing the FCPA is voluntary compliance by the American business community.”

In short, the FCPA was never intended to be just a mechanism to achieve “hard enforcement” (actual enforcement actions), but more a mechanism to achieve “soft enforcement” (compliance) in furtherance of the statutory objective of  reducing bribery and corruption. Indeed, as stated by the Sixth Circuit in Lamb v. Phillip Morris Inc., 915 F.2d 1024 (1990) and repeated by several other courts, the FCPA’s statutory scheme “clearly evinces a preference for compliance in lieu of prosecution.”

Yet, as the FCPA nears its 40th anniversary those in this space need to start asking the question of whether the FCPA – as currently written and currently enforced – has been effective?

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