Medical waste disposal company Stericycle has agreed to pay $84 million in civil and criminal penalties to resolve allegations it paid bribes to win government contracts in Brazil, Mexico, and Argentina.
Stericycle must pay a criminal penalty of $52.5 million under a deferred prosecution agreement (DPA) with the Department of Justice (DOJ), the agency said Wednesday in a press release.
The DOJ said it will credit up to one-third of the criminal penalty against fines Stericycle pays to Brazilian authorities in related proceedings, including approximately $9.3 million to resolve investigations by the Controladoria-Geral da União (CGU) and the Advocacia-Geral de União (Attorney General’s Office) in Brazil.
In addition, Stericycle has agreed to pay approximately $28 million to resolve a parallel investigation by the Securities and Exchange Commission (SEC).
Stericycle had previously disclosed to investors in February it expected to pay more than $80 million to resolve the charges.
The details: According to the DOJ, Stericycle paid approximately $10.5 million in bribes from 2011-16 to foreign officials in the three countries to obtain and retain business and other advantages for Stericycle in connection with its waste management services. The corrupt scheme generated approximately $21.5 million in profits, the DOJ said.
As a result of its investigation, the DOJ charged the company with two counts of conspiracy to violate the anti-bribery provision of the Foreign Corrupt Practices Act and the FCPA’s books and records provision. The SEC also found the company violated the internal accounting controls provisions of the FCPA.
The DOJ said the cash payments were made to foreign government officials as percentages of underlying contract payments owed to Stericycle and were tracked by Stericycle employees through spreadsheets with code names and euphemisms like CP (commission payment) in Brazil; IP (incentive payment) in Mexico and “alfajores” (a popular cookie) or “IP” in Argentina. The scheme also included “sham third-party vendors who used false invoices to conceal cash payments to government clients,” the SEC said in a press release.
Compliance takeaways: The SEC found Stericycle “also failed to have sufficient internal accounting controls in place, such as a centralized compliance department, to prevent or even detect the misconduct and failed to implement its FCPA policies or procedures prior to 2016.”
“Stericycle rapidly expanded in Latin America without any meaningful oversight or compliance measures, as evidenced by widespread bribery schemes lasting for many years in most of its Latin America operations,” said Eric Bustillo, director of the SEC’s Miami Regional Office. “Companies in pursuit of global expansion cannot disregard the need for appropriate controls.”
According to court documents, Stericycle entered into a three-year DPA with the DOJ. As part of the DPA, Stericycle agreed to hire an independent compliance monitor for two years, enhance its compliance program, and self-report to the DOJ for the remainder of the DPA term. The DOJ noted that while Stericycle fully cooperated with the investigation, the enhancements it has made to its compliance program have not been “fully implemented or tested.”
Stericycle said following an internal investigation, the company has “taken extensive steps to establish a strong global anti-corruption compliance program by enhancing its compliance policies, procedures, and internal controls in every country in which it operates.”
The company took a number of steps to improve its compliance function and internal controls, according to its press release, including:
- Updating its code of conduct and internal controls relating to anti-corruption; retention; management of commercial agents and other third parties; and gifts, travel, and entertainment;
- Enhancing its internal reporting, investigations, and risk assessment processes;
- Overhauling its compliance training and communications;
- Terminating employees involved in the relevant conduct; and
- Divesting its subsidiaries in Argentina and Mexico.
“Resolving this legacy matter represents another important milestone in Stericycle’s business transformation journey,” said Stericycle Chief Executive Cindy Miller. “Over the past several years, we have focused on fully remediating the issues identified during the investigation. This includes instituting new policies, procedures, and internal controls and building a culture of compliance, integrity, and accountability that aligns with our core values across our entire global operation.”
In addition to naming Miller as president and CEO in 2019 and naming multiple new board and leadership team members, Stericycle has hired a chief ethics and compliance officer who reports to Miller and the audit committee. Michael Weisman, who had previously served as chief ethics and compliance officer for The Kraft Heinz Company, was hired as Stericycle’s CECO in April 2018, according to the firm’s website.