Bribery Settlement Costs J&J $70 Million

Johnson & Johnson has agreed to settle federal, civil and criminal allegations that it carried out a multi-year bribery plot involving European doctors and paid kickbacks to secure contracts under the United Nations Oil for Food Program.

The U.S. Securities and Exchange Commission (SEC) charged the medical device and pharmaceutical giant with violating the Foreign Corrupt Practices Act (FCPA), alleging that J&J subsidiaries bribed doctors in Greece, Poland, and Romania. In addition, J&J is accused of paying kickbacks to Iraq in order to obtain 19 contracts.

J&J agreed to pay more than $48.6 million in disgorgement and prejudgment interest, as well as a$21.4 million fine to settle parallel criminal charges announced by the U.S. Department of Justice on Friday. The company hopes to settle a related investigation by the U.K. Serious Fraud Office in several days.

“The message in this and the SEC’s other FCPA cases is plain—any competitive advantage gained through corruption is a mirage,” said Robert Khuzami, director of the SEC’s Division of Law Enforcement. “J&J chose profit margins over compliance with the law by acquiring a private company for the purpose of paying bribes, and using sham contracts, off-shore companies, and slush funds to cover its tracks.”

J&J apparently has learned from its mistake. The firm’s chief executive said the company has implemented “significant changes” since first reporting the improper payments.

“More than four years ago, we went to the government to report improper payments and have taken full responsibility for these actions,” William C. Weldon, Chairman and CEO, said in a formal statement on J&J’s website. “We are deeply disappointed by the unacceptable conduct that led to these violations. 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 New Brunswick, N.J.-based company voluntarily disclosed some employee violations and conducted a thorough internal investigation, including proactive investigations in more than a dozen countries by both its internal auditors and outside council, which was essential in clarifying the full extent of FCPA violations.

J&J’s alleged bribes varied. The company was accused of paying public doctors in Greece to choose its surgical implants; paying doctors and hospital administrators in Poland to award contracts to J&J, and compensating doctors in Romania to prescribe certain J&J pharmaceutical products. Cash and inappropriate travel were among the ways the company compensated doctors.

J&J has not admitted or denied the SEC’s allegations, but have consented to the entry of a court order permanently enjoining it from future violations from specific sections of the Securities Exchange Act of 1934. The court order requires the company to pay $38.2 million in disgorgement, $10.4 million in prejudgment interest, and to comply with certain undertakings of the FCPA compliance program.

“I know that these actions are not representative of Johnson & Johnson employees around the world who do what is honest and right every day, in the conduct of our business and in service to patients and customers worldwide,” Weldon’s statement read. “We will continue to demonstrate that Johnson & Johnson is a company that embraces responsible corporate behavior.”