Medical device maker Zimmer Biomet Holdings disclosed in a regulatory filing Wednesday that it has reached the end of its monitorship, eight years after resolving parallel settlements with the Department of Justice and Securities and Exchange Commission for violations of the Foreign Corrupt Practices Act (FCPA).
“On July 17, 2020, the independent compliance monitor submitted a letter to the SEC and DOJ certifying that our compliance program, including its policies and procedures, is reasonably designed and implemented to prevent and detect violations of the FCPA and is functioning effectively,” the regulatory filing states. “We expect the monitorship to conclude no later than Aug. 7, 2020 and the charges against us to be dismissed with prejudice.”
Zimmer Biomet first faced FCPA charges by the SEC and entered into a deferred prosecution agreement (DPA) with the Justice Department in March 2012, agreeing to pay more than $22 million to settle both cases. As part of the SEC settlement, the company agreed to retain an independent compliance consultant to review its FCPA compliance program.
However, as Zimmer Biomet was implementing recommendations from the independent monitor, the company learned about potential anti-bribery violations in Brazil and Mexico and notified the monitor and the SEC in 2013. An SEC order found Biomet continued to interact and improperly record transactions with a known prohibited distributor in Brazil and used a third-party customs broker to pay bribes to Mexican customs officials to facilitate the importation and smuggling of unregistered and mislabeled dental products.
According to admissions made in the resolution documents, even after the 2012 DPA between the Justice Department and Biomet, the company “knowingly and willfully” continued to use a third-party distributor in Brazil known to have paid bribes to government officials on its behalf. Biomet also failed to implement an adequate system of internal accounting controls at the company’s subsidiary in Mexico, despite employees and executives having been made aware of red flags suggesting bribes were being paid.
By failing to require appropriate due diligence and documentation and contracts for payments to third parties, Biomet allowed its Mexican subsidiary, Biomet 3i Mexico, to pay bribes to Mexican customs officials through customs brokers and sub-agents so that 3i Mexico could import contraband dental implants into Mexico. Importing those products into Mexico violated Mexican law because they lacked proper registration or labeling.
In January 2017, Zimmer Biomet paid a $17.4 million criminal penalty for paying bribes to government officials in Mexico and for violations of the internal control provisions of the FCPA involving the company’s operations in Mexico and Brazil. In related proceedings, the SEC filed a cease-and-desist order whereby the company agreed to pay disgorgement of $6.5 million including pre-judgment interest and a $6.5 million civil penalty.
Zimmer Biomet entered a three-year DPA in connection with a superseding criminal information, filed in January 2017 in the District of Columbia, charging the company with failing to implement a system of effective internal accounting controls. In addition to the criminal penalty, Zimmer Biomet agreed to retain an independent corporate compliance monitor for three years.