Earlier this week, the DOJ announced (as part of a much larger enforcement action) a Foreign Corrupt Practices Act action against 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).
This post highlights the OLA enforcement action (the latest FCPA enforcement based on the theory that certain health care professionals are “foreign officials” under the FCPA) in which the DOJ charged the company in this criminal complaint with conspiring to violate the FCPA’s anti-bribery provisions and violating the FCPA’s anti-bribery provisions. The charges were resolved via this deferred prosecution agreement in which OLA agreed to pay $22.8 million.
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.” According to the charging documents, OLA recognized approximately $7.5 million in profits as a result of the alleged unlawful payments.
According to the Statement of Facts in the DPA:
“Beginning in or about 2006 and continuing until in or about August 2011, OLA’s senior management designed and implemented a plan to increase medical equipment sales in Central and South America by providing personal benefits, including cash, money transfers, personal or non-Olympus medical education travel, free or heavily discounted equipment, and other things of value to certain health care practitioners (“HCPs”) employed at government-owned and private health care facilities who could authorize or influence those facilities’ decisions to purchase Olympus equipment and to prevent public institutions from purchasing or converting to the technology of competitors. During this time period, the primary manner that OLA used to deliver improper benefits to HCPs was by opening and directing excessive side benefits to “training centers” for targeted HCPs. Although one purpose of the training centers was to provide education and to encourage the development of minimally invasive procedures in the region, the primary manner that OLA implemented the training center program was to provide pecuniary benefits to pre-selected HCPs who were employed by public institutions or who sat on public tender boards.
During the relevant period, OLA identified and targeted certain HCPs in Central and South America who could influence purchasing decisions and labeled them as “Key Opinion Leaders” (“KOLs”). OLA designated certain senior employees to manage its training centers and identify new KOLs in Latin America. OLA repeatedly encouraged its employees to select KOLs based on the future expected sales that those KOLs could influence.
In or about February 2007, OLA established a plan to provide KOLs who managed training centers an annual salary of $65,000 per year, a 50% discount on Olympus equipment, and a $130,000 budget for what was termed “VIP Management.” 9. Between in or about February 2007 and in or about June 2010, OLA opened thirteen training centers, including seven connected to state-owned hospitals in Central and South America. During this period, an OLA employee located in Miami, Florida tracked OLA equipment sales attributable to each training center and KOL.
In or about 2008, OLA established a “Miles Program” to provide free travel to KOLs for personal, non-training center or non-business reasons. Under the program, one “mile” was equivalent to one U.S. dollar that could be used for personal or non-Olympus medical education travel expenses. OLA offered certain KOLs who operated training centers between 5,000 and 30,000 miles (i.e., $5,000 and $30,000) in compensation under the Miles Program. OLA did not require any pre-approval of the travel and did not establish or use any review process for submitted expenses that were to be redeemed under the Miles Program.
Throughout the relevant period, OLA, certain of its senior management, and certain sales employees took steps to hide the improper benefits being provided to HCPs by OLA from relevant governmental and hospital authorities, including the government agencies employing the HCPs, by omitting reference to payments, gifts, donations, and personal equipment discounts from relevant contract language or entering into side agreements with HCPs. For example, on or about September 1, 2010, an OLA employee in Miami, Florida sent an email to a distributor in Honduras about an upcoming donation to influence a tender with a ministry of health, writing (as translated): “The document should make no allusion (mention, comment, etc) to the fact that the donation to be made, will favor or promote new business with Olympus or with [the distributor]. The donation should not be interpreted as an action which conditions business later. . . . This is extremely important. I’ll explain in detail later.”
Throughout the relevant period, OLA, certain of its senior management, and certain employees further took steps to explicitly link the provision of improper benefits to obtaining or retaining business. For example, on or about January 31, 2007, an OLA employee in Miami emailed a colleague and distributor to direct them to confirm the corrupt arrangement with the doctor who had received a personal equipment donation, writing (as translated): “But it is important for [the HCP] to understand that what we are doing is not because we are nuns from Mother Teresa’s order in Calcutta. Rather, we expect reciprocity on his part. . . .”
Throughout the relevant period, OLA, its senior management and employees tracked the sales that could be attributed to KOLs using a shared spreadsheet and connecting the value of benefits provided with the “return on investment” that KOLs gave to OLA.
Throughout the relevant period, OLA, certain of its senior management, and certain employees further took steps to guarantee that HCPs to whom improper benefits had been A-5 provided agreed to purchase equipment, influence tenders, or follow through on the agreed quid pro quo. For example, on or about October 4, 2010, multiple OLA employees in Miami, Florida and employees of an OLA distributor discussed over email how to pressure an HCP to purchase equipment, writing (as translated): “I would be grateful if, during your visit to [Chile] you could remind [the HCP] that two years ago [the distributor] bought a trip to Europe for his sister and HE DIDN’T BUY THE OLYMPUS EQUIPMENT AS AGREED.
In total, from 2006 to 2011, OLA and certain employees, agents, and third-party distributors, authorized the payment, directly or indirectly, of at least $2,999,560 in hundreds of unlawful payments, including payments made through the training centers and the Miles Program, to publicly employed HCPs in Central and South America to induce the purchase of Olympus products, influence public tenders, or prevent public institutions from purchasing or converting to the technology of competitors. During this time period, OLA recognized at least $7,556,566 in profits as a result of its unlawful payments, from the training center program and other conduct, described herein.”
Specifically as to Brazil, the DPA states:
“In or about late 2007, OBL [a Brazil corporation majority-owned by OLA] senior management and OLA employees prepared an “Action Plan” and other documents to create a training center at Brazil Hospital #1 [a government owned and operated hospital]. The training center was part of a broader OLA “General strategy against [an Olympus competitor].” Through this strategy, OLA sought to provide improper benefits to a physician who was a member of Brazil Hospital #2’s [a government owned and operated hospital] tender committee for endoscopy purchases.
In or about early 2008, an official at a Brazilian health ministry, who served as an auctioneer for an upcoming public tender of endoscopy equipment to Brazil Hospital #2, solicited an OBL employee for a bribe as a quid pro quo to award the tender to OBL. Thereafter, OBL senior management agreed to pay 97,000 Brazilian Real (then worth approximately $42,000) to the official and instructed a Brazil-based distributor to deliver the bribe payment, which was done in or about early 2009.
In or about June 2008, an Olympus KOL who was a physician on Brazil Hospital #1’s tender committee, and who had received and would continue to receive improper benefits from OLA and OBL, provided confidential tender information to OBL employees, specifically that an Olympus competitor would be filing a challenge to the tender specifications as biased towards Olympus. On that basis, OBL prepared a response to the Olympus competitor’s expected objections and provided it to the physician to use in ensuring that the tender was awarded to Olympus.
Between in or about late April 2008 and in or about October 2009, OLA and OBL provided at least $110,000 in improper gifts, travel, and pecuniary benefits to two physicians, employed at Brazil Hospital #2 who were members of its tender committee, including the KOL A-7 who had previously provided the confidential tender information, for the purpose of, among other things, influencing the award of 2009 endotherapy tender in favor of Olympus.
In or about March 2009, after receiving a payment from Brazil Hospital #1, OBL made a payment of approximately 97,000 Brazilian Real (approximately $42,000) to an individual located in Brazil who had been designated to receive the previously solicited bribe and falsely recorded the payment as an “advance” for an equipment purchase.”
Specifically as to Bolivia, the DPA states:
“On or about April 8, 2009, a physician at Bolivia Hospital [a public hospital under the control of the Ministry of Health] (“Physician #1”), who participated in the hospital’s tender process, emailed an OLA employee in Miami, Florida, to advise the employee that OLA’s proposal to have Bolivia Hospital purchase certain equipment was not permitted under Bolivian law, as all purchases had to be made through public tenders. Physician #1 also implied that if Olympus wanted to win the tender to supply equipment then Olympus should make a “donation” to a private clinic owned by Physician #1.
On or about May 20, 2009, an OLA employee in Miami sent an email to another OLA employee relating, in substance, that Bolivia Hospital would purchase an Olympus A-8 enteroscope through “competitive bidding” in exchange for OLA donating an endoscopy tower with various accessories to Physician #1’s private clinic for his personal use.
Between in or about June 2009 and in or about April 2010, OLA provided at least $25,000 in free equipment, personal or non-Olympus medical education travel, and pecuniary benefits to Physician #1 to improperly influence Physician #1 with regard to the enteroscope purchase by Bolivia Hospital.
On or about November 12, 2009, an OLA employee confirmed that OLA had agreed to give 10,000 Miles, through the Miles Program, to Physician #1 and stated (as translated) “we will handle extra contractually” to make clear that the gift would not be recorded in the formal agreement to be signed between OLA and Bolivia Hospital.”
Specifically as to Colombia, the DPA states:
“Between in or about 2008 and 2009, OLA provided a physician employed at Colombia Hospital [a publicly owned and operated hospital] and who participated in the hospital’s tender processes (“Physician #2”), personal or non-Olympus medical education travel valued at more than $20,000, and approximately $4,000 in cash, to improperly influence him to continue purchasing Olympus equipment and to dissuade him from converting Colombia Hospital’s endoscopy equipment to a major Olympus competitor.
In or about December 2009, an OLA employee in Miami, Florida, emailed employees of an OLA distributor and stated (as translated), “[Physician #2] sees the glass half empty and does not appreciate everything that we at Olympus [and its distributor] have done for him. I spoke to him about the trips he has already made . . . which no one else will consistently offer to him and about the almost 100 enteroscopies which have been done at no cost to him and the institution.”
In or about February 2010, an OLA employee in Miami, Florida sent an email concerning an agreement between OLA and Physician #2, which read, in part (as translated): “Dear all, I am re-sending the Agreement, eliminating clauses 3.1 and 3.4, and I also eliminated the one about the Olympus miles. As we said, we are going to offer them but we are not going to put it in writing.”
In or about mid-2010, an OLA employee sent an email stating that Physician #2 had caused a public tender by Colombia Hospital to be awarded to OLA. The email also noted that Olympus’ competitor’s losing bid was fifty-percent less expensive than OLA’s bid.”
Specifically as to Argentina, the DPA states:
“Between in or about April 2008 and December 2009, OLA offered or provided a physician employed at Argentina Hospital [a public hospital] and who participated in the hospital’s tender process (Physician #3), personal or non-Olympus medical education travel worth approximately $20,000, A-10 in order to improperly influence Physician #3 to continue purchasing Olympus equipment and to counter offers from two Olympus competitors to supply equipment to Argentina Hospital.
In or about early 2009, an OLA employee based in Miami, Florida, and Physician #3 signed an agreement whereby OLA improperly provided free equipment to Physician #3 which could be used for his personal practice and which intentionally omitted the provision of approximately $20,000 in personal or non-Olympus medical education travel that had been provided to him.”
Specifically as to Mexico, the DPA states:
“In or about April 2008, prior to the MHS Tender [a tender to purchase endoscopy equipment and medical accessories by a public hospital system in Mexico] being publicly announced, an OLA distributor’s president and general manager traveled from Mexico City, Mexico to Miami, Florida, to meet with an OLA employee. At the meeting, the OLA employee was informed that health ministry officials had changed the specifications of the MHS Tender to favor OLA and prevent Olympus’s primary competitor from qualifying for the MHS Tender. No employees of OLA inquired or sought information as to how the distributor had achieved the changes in the tender to improperly exclude a key competitor, and OLA continued to support the distributor’s efforts to manipulate the tender specifications.
In or about May 2008, an OLA employee in Miami, Florida sent an email stating that OLA had “strategically” reduced the number of endoscopy towers that would be requested by the government under the tender because doing so would have the effect of leaving a key Olympus competitor “totally out” of the running for winning the tender.
In or about June 2008, an OLA distributor and OLA formed a new joint-venture company (“Mexico JV”) to bid on the MHS Tender. Under the terms of the joint venture, OLA and the distributor would split profits on the MHS Tender contract (the “MHS Contract”) equally.
In or about June 2008, OLA, through Mexico JV, submitted a bid for the MHS Tender, and was awarded the MHS Contract.
On or about August 8, 2008, employees of OLA traveled from Miami, Florida to Mexico City, Mexico to discuss ongoing problems with the contract and to discuss ways to increase revenues from the procedures being performed.
Following the meeting, an OLA employee prepared a report indicating that Mexico JV would begin meeting on a monthly basis with a senior government official in Mexico to address the MHS Contract.
On or about August 15, 2008, one week after the joint meeting with OLA, Mexico JV, on behalf of OLA, signed a service agreement dated August 15, 2008, with an individual located in Mexico City, Mexico (“Mexico Agent”) under which Mexico Agent would be paid on a monthly basis to “streamline … administrative processes” and perform various services that were not called for or needed under the MHS Contract. Further, in connection with the agreement with Mexico Agent, OLA agreed to reduce the revenues it would receive under the MHS contract despite receiving no actual services from the Mexico Agent.
Between in or about December 2008 and in or about December 2010, Mexico JV, on behalf of OLA, made and falsely recorded payments to the Mexico Agent as being for “administrative and advisory services for public bids” and for other services, none of which were rendered or required by the MHS Contract, and which employees knew or were aware of the high probability that the payments would be used, in part, to pay bribes to government officials. The purpose of the payments was to improperly influence officials overseeing the MHS Contract to increase payments to and obtain favorable contract modifications for the Mexico JV, OLA, and an OLA distributor.
Between in or about December 2008 and August 2011, employees at the Mexico JV falsified various accounting records and invoices, to give the false appearance that Mexico Agent had provided services related to the MHS Contract when in fact there was no evidence that Mexico Agent provided any services.”
Specifically as to Costa Rica, the DPA states:
“On or about July 28, 2010, an OLA employee located in Miami, Florida, sent an email about an upcoming public tender by a Costa Rican health ministry for nineteen endoscopy towers. In the email (as translated), the OLA employee stated that a physician employed by the ministry (“Physician #4”) had requested payment for travel and “could positively influence the A-13 final decision on the bidding process.” The OLA employee also stated in the email that if they refused to provide the travel to Physician #4, “we could have problems with him and this could influence the issue that I have mentioned to you.”
Between in or about July 2010 and September 2010, OLA offered or provided Physician #4 personal or non-Olympus medical education travel valued at more than $3,000, for the improper purpose of securing the tender award to OLA.”
The criminal charges against OLA were resolved via a DPA with a three year term. Under the heading “Relevant Considerations,” the DPA states:
“[The DOJ enters] into this Agreement based on the individual facts and circumstances presented by this case and by the Company. Among the factors considered were the following: (a) the Company did not timely, voluntarily disclose the FCPA violations at issue; (b) the Company received credit of 20% for its cooperation, including conducting an extensive internal investigation, translating documents as necessary, and collecting, analyzing, and organizing voluminous evidence and information for the Offices; (c) the Company remediated by, among other things, terminating its involvement with numerous responsible parties, including employees and third-party distributor relationships in Latin America, and enhancing its due diligence for third-party agents and consultants; (d) the Company and OCA have committed to continue to enhance their compliance programs and internal controls, including ensuring that their compliance programs satisfy the minimum elements set forth in Attachment C to this Agreement and to retain a monitor for a period of three years; (e) the nature and scope of the offense conduct; (f) the Company has no prior criminal history; and (g) the Company’s agreement to continue to cooperate with the Offices in any ongoing investigation of the conduct of the Company, and its officers, directors, employees, agents, and consultants relating to possible violations under investigation …”.
The advisory guidelines calculation in the DPA yielded a fine range of $28.5 million – $57 million and the DPA states that the agreed upon $22.8 million fine “is appropriate given the facts and circumstances of this case, including the Company’s cooperation and the nature and scope of the offense conduct.”
As a condition of settlement, OLA agreed to retain a monitor for a three year period as well as a host of compliance undertakings set forth in Attachment C of the DPA. As is customary in FCPA DPA’s, the company also agreed to a so-called muzzle clause.
In the DOJ’s release, DOJ Principal Deputy Assistant Attorney General Bitkower stated:
“Olympus Latin America admitted to bribing publicly employed health care providers and hospital officials across Central and South America so that it could illegally win business and sell its products. […] The FCPA resolution announced today demonstrates the department’s commitment to ensuring the integrity of the health-care equipment market, regardless whether the illegal bribes occur in the U.S. or abroad.”
As noted in the DOJ’s release, the FCPA enforcement action against OLA was part of a much broader criminal action announced by the DOJ. In addition to the FCPA component, the DOJ also announced that OCA entered into a three-year DPA to resolve criminal charges that it conspired to violate the Anti-Kickback Statute which prohibits payments to induce purchases paid for by federal health care programs. For this non-FCPA conduct, OCA agreed to pay a $312.4 million criminal penalty and an additional $310.8 million to settle civil claims under the federal and various state False Claims Act.
Regarding the non-FCPA portion of the overall settlement, the DOJ’s release states:
“OCA won new business and rewarded sales by giving doctors and hospitals kickbacks, including consulting payments, foreign travel, lavish meals, millions of dollars in grants and free endoscopes. For example:
- OCA gave a hospital a $5,000 grant to facilitate a $750,000 sale;
- OCA held up a $50,000 research grant until a second hospital signed a deal to purchase Olympus equipment;
- OCA paid for a trip for three doctors to travel to Japan in 2007 as a quid pro quo for their hospital’s decision to switch from a competitor to Olympus; and
- a doctor with a major role in a New York medical center’s buying decisions received free use of $400,000 in equipment for his private practice.
These and other kickbacks helped OCA obtain more than $600 million in sales and realize gross profits of more than $230 million.
The criminal complaint alleges that the improper payments happened while Olympus lacked training and compliance programs. Unlike other medical and surgical products companies, Olympus did not create the position of compliance officer until 2009 and did not hire an experienced compliance professional until August 2010.”
In this statement, Olympus stated:
“Olympus leadership acknowledges the Company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees. Olympus is committed to complying with all laws and regulations and to adhering to our own rigorous Code of Conduct which guides our business processes, decisions and behavior. The Company has implemented and will continue to enhance its robust compliance program.
The mission of Olympus is to help people around the world lead safer, healthier and more fulfilling lives. We remain committed to achieving this mission, both as individuals and as a Company, with uncompromised integrity.”