As highlighted in this prior post, in 2013 Stryker resolved a $13.2 million Foreign Corrupt Practices Act enforcement action based on alleged conduct in Mexico, Poland, Romania, Argentina, and Greece.
As a condition of settlement, Stryker agreed to cease and desist from committing or causing any violations and any future violations of the FCPA’s books and records and internal controls provisions.
The SEC order also contained a separate section titled “Stryker’s Remedial Efforts” and stated among other things:
“Since the time of the conduct …, Stryker implemented a company wide anti-corruption compliance program, which includes: (a) enhanced corporate policies and standard operating procedures setting forth specific due diligence and documentation requirements for relationships with foreign officials, health care professionals, consultants, and distributors; (b) compliance monitoring and corporate auditing specifically tailored to anticorruption, including the hiring of a chief compliance officer and a sizeable full-time dedicated staff in both its internal audit and compliance functions to ensure FCPA compliance and the implementation of periodic self-assessments; (c) enhanced financial controls and governance; (d) expanded anti-corruption training to all Stryker employees; and (e) the maintenance of an Ethics Hotline which serves as a mechanism for employees to report any actual or suspected illegal or unethical behavior. In addition to its internal anti-corruption enhancements, from 2007 through the present, Stryker engaged a third-party consultant to perform FCPA compliance assessments and compile written reports for Stryker’s operations in dozens of foreign jurisdictions across the world at least annually. Stryker voluntarily produced documents that permitted the Commission staff to assess how Stryker’s internal audit and compliance functions used the results of each of the assessments to implement additional enhancements to its infrastructure, to target jurisdictions for future assessments, and to create management action plans in collaboration with local management.”
The SEC specifically stated: “based on the improvements …, Stryker has demonstrated a commitment to designing and funding a meaningful compliance program in order to prevent and detect violations of the FCPA and other applicable anti-bribery laws.”
As highlighted in this prior post, in 2018 Stryker resolved a $7.8 million FCPA enforcement action for not having internal accounting controls “sufficient to detect the risk of improper payments in sales of Stryker products in India, China, and Kuwait” and because “Stryker’s India subsidiary failed to maintain complete and accurate books and records.”
As a condition of settlement, Stryker agreed to cease and desist from committing or causing any violations and any future violations of the FCPA’s books and records and internal controls provisions.
The SEC order also contained a separate section titled “Stryker’s Remedial Efforts” and stated among other things:
“Since the time of the conduct …, Stryker undertook a number of remedial efforts, which include: (1) enhanced and updated policies, procedures, and best practices for Stryker India; (2) new compliance measures with additional controls around (i) the monitoring of Stryker’s relationship with HCPs and indirect channels, including dealers and distributors, (ii) reducing the risk of unauthorized business practices in India, and (iii) due diligence of third parties; (3) increased training of all Stryker India employees and local management, including an FCPA compliance workshop for Stryker India’s leadership team; (4) a new centralized system for dealer documentation, and a modified dealer commission model designed to increase transparency around the payment of commissions to dealers in India; (5) compliance audits related to marketing events, event documentation, and employee reimbursements in India; and (6) audits of dealers’ and distributors’ business practices in India. Further, Stryker terminated certain senior employees at Stryker India, appointed new leadership to head Stryker India, and sent a notice of termination to the Kuwait Distributor.
Also in response to the Commission’s investigation, Stryker fortified its existing compliance program, which is designed to prevent, detect, and remediate potential misconduct. This program develops, maintains, and implements corporate policies and standard operating procedures setting forth specific due diligence and documentation requirements for relationships with foreign officials, HCPs, consultants, and distributors.”
As a further condition of settlement, Stryker was also required to retain for an 18 month period “an independent compliance consultant to review and evaluate its internal controls, record-keeping, and anti-corruption policies and procedures relating to use of dealers, agents, distributors, sub-distributors, and other such third parties that sell on behalf of Stryker.”
Recently, Stryker disclosed:
“We are currently investigating whether certain business activities in a foreign country violated provisions of the Foreign Corrupt Practices Act (FCPA) and have engaged outside counsel to conduct this investigation. We have been contacted by the United States Securities and Exchange Commission and United States Department of Justice and are cooperating with both agencies. At this time we are unable to predict the outcome of the investigation or the potential impact, if any, on our financial statements.”
