The Department of Justice filed a status report earlier this month regarding Zimmer Biomet, a medical device manufacturer. In the report, the DOJ says Zimmer Biomet breached its deferred prosecution deal. This breach leaves Zimmer Biomet open to criminal prosecution. The company promised to comply with DOJ requests and entered into “discussions to resolve this matter which would obviate the need for a trial.”
The Department of Justice filed a status report earlier this month regarding Zimmer Biomet, a medical device manufacturer. In the report, the DOJ says Zimmer Biomet breached its deferred prosecution deal. This breach leaves Zimmer Biomet open to criminal prosecution. The company promised to comply with DOJ requests and entered into “discussions to resolve this matter which would obviate the need for a trial.”
Deferred prosecution agreements (DPAs) are voluntary agreements entered into by both parties in which the prosecutor agrees to not prosecute the defendant providing the defendant meets its obligations under the DPA. The DOJ stated that the current DPA was breached by the company’s activities in Brazil and Mexico, as well as by its failure to maintain a corporate compliance program.
The agreement, entered into on March 26, 2012, stemmed from claims that Biomet, since purchased by Zimmer Holdings, gave roughly $1.5M in bribes to state-employed healthcare providers in Brazil, China and Argentina with the intent of getting hospital business in those countries, according to the DOJ’s 2012 statement. The claims state that the company mislabeled the bribes in financial reports, calling them “commissions,” “consulting fees,” “royalties” and “scientific incentives.”
This alleged conduct was a direct violation of the Foreign Corrupt Practices Act, a law that forbids bribing foreign officials. In addition to the corporate compliance program, the company also agreed to create an ethics program specifically designed to prevent further FCPA violations. The ethics program was to be reviewed by an independent compliance monitor.
Zimmer Biomet was also on the hook to pay $17.3M in criminal penalties and a $5.4M civil settlement to the Securities and Exchange Commission (SEC).
Under the terms of the DPA, the DOJ wouldn’t prosecute Zimmer Biomet if the company complied with the DPA for three years. According to the DOJ, the company violated the DPA through its “conduct in Mexico and Brazil” as well as not creating and maintaining the ethics compliance program.
One wonders how Zimmer Biomet will talk its way out of this one.
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