J&J Announces Settlement for Corrupt Practices

Johnson and Johnson (J&J) has agreed to pay more than $77 million after being charged for violations of the US Foreign Corrupt Practices Act (FCPA), which include bribing public doctors in several European countries and paying kickbacks to illegally obtain business in Iraq. The charges stem from investigations conducted by the US Securities and Exchange Commission (SEC), the US Department of Justice (DOJ) and the UK’s Serious Fraud Office (SFO) according to an US Securities and Exchange Commission (SEC) press release.

The investigations have already been publicly disclosed by J&J. The company voluntarily notified the DOJ and SE in 2007 that it believed its subsidiaries had made improper payments related to sales of medical devices.

“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 at J&J, explained in a 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.”

J&J has agreed to pay $48.6 million in disgorgement and prejudgment interest and a $21.4 million fine to settle the SEC and DOJ charges, respectively. The company has also been ordered by the SFO to pay a Civil recovery Order of approximately $7.9 million. Overall, J&J will have to pay more than $77 million.

According to releases from the SEC and the DOJ, various subsidiaries, employees and agents of J&J rewarded public doctors and administrators in Greece, Poland, and Romania who ordered or prescribed J&J products. Rewards reportedly included cash and inappropriate travel. J&J also acknowledged that kickbacks were paid to Iraq’s former government, on behalf of J&J subsidiary companies, to secure contracts to provide humanitarian supplies.

“The message in this and the SEC’s other Foreign Corrupt Practices Act cases is plain—any competitive advantage gained through corruption is a mirage,” Robert Khuzami, director of the SEC's Division of Enforcement, said in the SEC press release. “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.”

However, J&J has also been recognized for its disclosure and cooperation during the investigations. Part of the settlement also includes a Deferred Prosecution Agreement with the DOJ and a Consent to Final Judgement with the SEC. In its press statement, J&J explained: “These agreements reflect the recognition by DOJ and SEC of Johnson & Johnson’s voluntary disclosures and subsequent cooperation, as well as the company’s compliance efforts over the past four years. If the company completes three years of enhanced FCPA compliance undertakings and reporting to the DOJ and the SEC, the charges filed by the DOJ against a subsidiary company will be dismissed.”