$70m bribery settlement for Johnson & Johnson

Johnson & Johnson agreed to pay $70m to settle charges of foreign bribery brought by the U.S. Securities and Exchange Commission and the Department of Justice.

The company was charged with making improper payments to government doctors in Greece, Poland and Romania in violation of the Foreign Corrupt Practices Act and with paying kickbacks to the former government of Iraq under the United Nations Oil for Food Program.

The SEC alleged that since at least 1998, subsidiaries of the New Brunswick, N.J.-based company paid bribes to doctors in Greece who selected J&J surgical implants, to public doctors and hospital administrators in Poland who awarded contracts to the company, and public doctors in Romania to prescribe J&J pharmaceutical products.

J&J agreed to settle the SEC's charges by paying more than $48.6m in disgorgement and prejudgment interest. J&J also agreed to pay a $21.4m fine to settle parallel criminal charges brought by the DOJ.

According to the SEC, J&J acquired a private company for the purpose of paying bribes, and used sham contracts, off-shore companies, and slush funds to cover its tracks

In 2007, J&J voluntarily disclosed to the DOJ and the SEC that subsidiaries outside the US were believed to have made improper payments in connection with the sale of medical devices.

"We are deeply disappointed by the unacceptable conduct that led to these violations," J&J CEO William Weldon said in a written statement. "We have undertaken significant changes since then to improve our compliance efforts, and we are committed to doing everything we can to ensure this does not occur again."

The Department of Justice did give the company credit for coming forward. "As today's agreement reflects, we are committed to holding corporations accountable for bribing foreign officials while, at the same time, giving meaningful credit to companies that self-report and cooperate with our investigations," said principal deputy assistant attorney general Mythili Raman of the Criminal Division in a news release.

SEC Enforcement Division head Robert Khuzami took a harder line. "The message in this and the SEC's other FCPA cases is plain – any competitive advantage gained through corruption is a mirage," he said in a written statement.

A resolution of a related investigation by the UK Serious Fraud Office is anticipated.

(Published by BLT - April 8, 2011)