Medical device maker Stryker Corp. will pay $13.3 million to the Securities and Exchange Commission to settle civil charges that the company bribed physicians, healthcare professionals and government officials to obtain or keep business in five countries.
The SEC claimed that Stryker subsidiaries in Argentina, Greece, Mexico, Poland and Romania made illicit payments totaling $2.2 million that the company incorrectly recorded as legitimate expenses in its records, going as far back as 2003, the securities watchdog said in a news release. As a result of the improper payments, Kalamazoo, Mich.-based Stryker made $7.5 million in illicit profits.
Stryker is settling the violations of the Foreign Corrupt Practices Act without admitting or denying the charges.
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“Stryker’s misconduct involved hundreds of improper payments over a number of years during which the company’s internal controls were fatally flawed,” said Andrew M. Calamari, director of the SEC’s New York Regional Office, in the release.
For example, Stryker’s subsidiary in Greece contributed almost $200,000 in 2007 to a public university in Greece to fund a laboratory that was a special project of a public hospital doctor in return for providing business for Stryker, the SEC said.
And in exchange for the promise of future business from the director of a public hospital in Poland, Stryker paid travel costs for the director and her husband in 2004 for trips to New York and Aruba.
The company said in an emailed response that when it was alerted in 2007 by the SEC and Department of Justice, it performed internal investigations into the possible improper payments related to the sale of medical devices outside the U.S. Stryker provided detailed reports and supporting documents to the agencies.
“Stryker has enhanced its company-wide anti-corruption compliance program that includes enhanced corporate policies and processes, financial controls and governance systems,” said Stryker spokesman Joe Cooper.
The settlement amount includes disgorgement of $7.5 million in profits, prejudgment interest of $2.3 million, and a penalty of $3.5 million.
Compared to settlement of the long-running bribery case, Stryker has a lot more on the line with costs related to litigation related to product recalls of its Rejuvenate and ABG II hip replacement systems. Stryker said in its latest quarterly SEC filing that it may spend between $700 million and $1.13 billion to resolve it.
The previous week, Stryker had announced third-quarter net earnings of $103 million, or $.27 a share, a drop of 70.8 percent from $353 million, or $.92 a share in the year-ago quarter, on one-time charges stemming from the voluntary recall of two hip replacement systems and restructuring as a result of acquisitions, as well as the expected acquisition of Mako Surgical Corp. Sales for the third quarter were $2.15 billion compared with $2 billion last year.