Pharmaceuticals company Lifecore Biomedical won’t face prosecution for apparent violations of the Foreign Corrupt Practices Act after satisfying multiple factors of the Department of Justice’s (DOJ) recently updated voluntary self-disclosure policy.
Lifecore’s legal representatives received a declination letter from the DOJ on Thursday, despite the agency finding evidence employees and agents of Lifecore’s former subsidiary Yucatan Foods engaged in bribes paid to Mexican government officials to secure a wastewater discharge permit.
Lifecore agreed to disgorge approximately $406,000 believed to be financial benefit attributable to the alleged bribery conduct.
The details: Between May 2018 and August 2019, employees and agents of Yucatan—along with employees of manufacturing facility Procesadora Tanok, which was owned and operated by Yucatan in Mexico—“engaged in a scheme to pay approximately $14,000 in bribes to a government official through a third-party intermediary to secure a wastewater discharge permit,” according to the DOJ. A third-party service provider was allegedly paid $310,000 to prepare fraudulent manifests to support the scheme.
These alleged activities occurred before and after Lifecore’s December 2018 acquisition of Yucatan and Tanok, the DOJ noted.
An officer of Yucatan took steps to conceal the alleged misconduct while Lifecore was conducting pre-acquisition due diligence, according to the DOJ. Lifecore learned of the apparent scheme during post-acquisition integration, initiated an internal investigation, and voluntarily self-disclosed the matter to the DOJ’s Criminal Division.
Lifecore announced the sale of Yucatan in February.
Compliance considerations: The DOJ said it assessed the following factors in determining to decline prosecution in the case:
- Lifecore’s timely and voluntary self-disclosure of the misconduct. The company came forward “within three months of first discovering the possibility of misconduct and hours after an internal investigation confirmed that misconduct had occurred”;
- The company’s full cooperation, including in any potential future related cases;
- The nature and seriousness of the offense;
- Lifecore’s timely remediation, including firing the Yucatan officer engaged in the alleged scheme, withholding his or her bonus and other compensation, and “substantially improving its compliance program and internal controls”; and
- The company’s disgorgement agreement.
The disgorgement agreement was reduced because Lifecore already incurred nearly $880,000 in expenses by constructing a wastewater treatment plant and paying Mexican regulators the duties it owed, the DOJ said.
Lifecore acknowledged the declination in a press release Monday.
The DOJ in February codified its new voluntary self-disclosure policy that provides companies with enhanced incentives to report corporate misconduct before “imminent threat of disclosure or government investigation.” Declinations are one such benefit offered.
Last month, Deputy Attorney General Lisa Monaco announced a mergers and acquisitions safe harbor policy for companies to receive the presumption of a declination when coming forward with evidence of misconduct discovered pre- or post-acquisition at an acquired entity.
Editor’s note: This story was updated Nov. 21 to add reference to Lifecore’s press release on the declination.