Smith & Nephew to pay $22 million settlement

Posted: February 6, 2012 - 2:45 pm ET

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Smith & Nephew will pay about $22 million to the U.S. Justice Department and the Securities and Exchange Commission to resolve allegations that it made improper payments to physicians in Greece in violation of the Foreign Corrupt Practices Act.

The Justice Department entered into a deferred prosecution agreement with the Memphis-based device maker to pay $16.8 million to settle the criminal allegations, according to a news release. In addition, Smith & Nephew will pay $5.4 million in disgorgement of profits, including pre-judgment interest, to settle the civil charges with the SEC.

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Smith & Nephew subsidiaries allegedly sold medical products at full price to an Athens-based distributor and then paid about $9.4 million in distributor discounts to a shell company controlled by the distributor from 1998 to 2008, the Justice Department said. The funds were used to provide cash and incentives to Greek healthcare providers to use Smith & Nephew products during that period.

According to the Justice Department, Smith & Nephew “acknowledged responsibility for the actions of its affiliates, subsidiaries, employees and agents.” The agreement said that the company cooperated with the investigation and will implement new internal controls and retain a compliance monitor for 18 months.

Smith & Nephew did not admit or deny the SEC's allegations.

“These legacy issues do not reflect Smith & Nephew today,” said Smith & Nephew CEO Olivier Bohuon in a company news release. “But they underscore that we must remain vigilant every place we do business and let nothing compromise our commitment to integrity.”

Smith & Nephew said the Justice Department and SEC requested information about improper payments to government-employed doctors from it and other device manufacturers in 2007 and the company later reported evidence of the improper payments.

In April, Johnson & Johnson announced a settlement with the Justice Department and the SEC relating to charges that the company bribed physicians in Greece, Poland and Romania and paid kickbacks to Iraq to win contracts.