Mead Johnson Nutrition will pay $12.03 million to settle civil charges that it violated books and records requirements of the Foreign Corrupt Practices Act when a China-based unit made improper payments at state-owned hospitals. The settlement, the result of an administrative proceeding, was detailed in an Offer of Settlement the Securities and Exchange Commission released on Tuesday.
The violations include the misuse of marketing and sales funds in China. Despite prohibitions in the FCPA and Mead Johnson’s internal policies, certain employees of a majority-owned subsidiary in China, Mead Johnson Nutrition (China) Co., made improper payments health care professionals at state-owned hospitals in China to recommend its nutrition products and provide information about them to expectant and new mothers. For the period from 2008 through 2013, Mead Johnson China paid approximately $2 million to hospital personnel in improper payments and derived approximately $7.8 million in profits. Mead Johnson China failed to accurately reflect the improper payments in its books and records.
“Mead Johnson failed to devise and maintain an adequate system of internal accounting controls over Mead Johnson China’s operations sufficient to prevent and detect the improper payments that occurred over a period of years,” the SEC alleged.