As highlighted here, in March 2016 Olympus Latin American Inc. (OLA), a Miami-headquartered company that distributes medical imaging equipment in the Caribbean, Central America, and South America for Olympus Corporation (a Japanese company) resolved an approximate $23 million Foreign Corrupt Practices Act enforcement action through a deferred prosecution agreement (DPA).
According to the charging documents, from 2006 to 2011 OLA provided approximately $3 million in “hundreds of unlawful payments” to publicly employed healthcare professionals in Brazil, Bolivia, Colombia, Argentina, Mexico, and Costa Rica to “induce the purchase of Olympus products, influence public tenders, or prevent public institutions from purchasing or converting to the technology of competitors.”
Thereafter, Instituto Mexicano Del Seguro Social (“IMSS” – the Mexican Social Security Institute, an agency of the Mexican government funded through taxation and compulsory contributions which provides health care services to Mexican citizens at hospitals throughout Mexico) filed a complaint in U.S. Federal Court in November 2020 against OLA alleging fraud. In September 2021, the court granted OLA’s motion to dismiss but allowed IMSS leave to amend the complaint which it did.
OLA again filed a motion to dismiss and recently, Judge Kathleen Williams (S.D. FL) granted the motion.
In terms of background, IMSS alleged:
“[T]hat Defendant’s illegal activity affected Plaintiff directly. For example, Defendant allegedly manipulated Plaintiff’s tender for purchase of endoscopy equipment and medical accessories; sent a deceiving email regarding Plaintiff’s business needs to gain a competitive advantage; formed a joint venture with a Mexican agent with the goal of getting more business and splitting improperly obtained profits; concealed payments to its Mexican agent that would be used to bribe government officials; and actively concealed its wrongdoings from Plaintiff using bagmen, bribes, and schemes. Plaintiff alleges it relied on Defendant’s false, material statements and omissions in conducting business transactions for the purchase of Defendant’s products.”
Among the reasons OLA argued required dismissal was that the fraud claim was time-barred by the applicable four year statute of limitations.
As summarized by the court:
“Defendant argues that Plaintiff’s claim is time-barred because Plaintiff should have discovered the fraud as early as 2008 when the alleged bribery scheme began, but no later than March 2016 when Defendant’s DPA was made public. In support of its argument that the statute of limitations began to run in 2008, Defendant states that Plaintiff’s officials were heavily involved in the fraud and their knowledge is imputed to Plaintiff “through the principle of constructive knowledge.” Plaintiff contends that it did not have knowledge of the fraud while it was happening due to Defendant’s concealment and opposes Defendant’s constructive knowledge argument, stating: “[t]he knowledge of co-conspirators is not imputed to the victimized principal.” Instead, Plaintiff argues that Defendant concealed its wrongdoings, and during the time of concealment, the statute of limitations was tolled.
Further, Plaintiff argues that its fraud claim was tolled past March 2016 because it had no way of knowing that the conduct Defendant confessed to in the DPA affected or related to it. Specifically, Plaintiff states that the DPA did not mention it by name and Plaintiff did not know it contracted with Defendant because Defendant did not sell its products directly to Plaintiff.”
The court stated and concluded (internal citations omitted):
“The Court need not determine whether Plaintiff had knowledge—actual or constructive—of the fraud while it was occurring because, assuming arguendo that Plaintiff did not have knowledge of the fraud while it was happening and the statute of limitations was tolled from the start of the fraud and throughout Defendant’s concealment, its claim is still time-barred. “An action founded upon fraud . . . must be begun . . . from the time the facts giving rise to the cause of action were discovered or should have been discovered with the exercise of due diligence.” In essence, the latest time that a statute of limitations begins to run is when a plaintiff acquires “knowledge of facts that would lead a reasonable person to begin investigating the possibility that his legal rights [have] been infringed.”
The latest possible date that the statute of limitations was tolled for Defendant’s conduct relating to the DPA would be March 2016 when the DPA was made public. Defendant’s DPA, which “was publicly available and the subject of significant media attention,” explicitly stated that it paid illegal bribes in several countries, including Mexico. Therefore, upon learning of a healthcare-related bribery scheme in Mexico, a reasonable company that purchases healthcare equipment and provides healthcare services in Mexico would begin investigating the “possibility of fraud” and that its legal rights were infringed.
Plaintiff’s argument that the tolling did not end in 2016 because it did not know it was doing business with Defendant and the DPA did not mention it by name fails. The applicable standard does not require actual knowledge, but rather requires a plaintiff to exercise due diligence in investigating the potential of fraud. Even assuming Plaintiff did not know it was doing business with Defendant, it still should have investigated the possibility of fraud following the DPA—even though they weren’t mentioned by name— and identified that they were a victim of Defendant’s bribes. In fact, Plaintiff had previously sued equipment manufacturers who, like Defendant, confessed to bribing Mexican officials. And in some of those instances, Plaintiff identified the fraud and filed the fraud-based lawsuits even though Plaintiff was not explicitly named in the manufacturer’s confessions. This demonstrates that due diligence on Plaintiff’s part following the DPA would likely have led it to discover Defendant’s alleged fraud.
Moreover, as Plaintiff conceded, the conduct Defendant confessed to in March 2016 is the conduct that, in large part, forms the basis of Plaintiff’s fraud claim. The fact that Plaintiff’s claim is premised on the conduct Defendant confessed to in the DPA further demonstrates that due diligence would have led Plaintiff to timely discover and seek recourse on its alleged fraud claim against Defendant.
Given that Plaintiff waited until November 2021 to file its claim against Defendant— four years and eight months after Defendant’s DPA with the DOJ was made public— Plaintiff did not file its claim within the four year statute of limitations period. Therefore, any conduct on which Plaintiff’s claim is predicated that relates to Defendant’s DPA is time-barred.”
