Medical device company Stryker Corporation has agreed to pay more than $13.2 million to the Securities and Exchange Commission to settle civil charges for violating the Foreign Corrupt Practices Act.

On Oct. 24, the SEC charged Stryker with violating the FCPA after its subsidiaries in five different countries bribed doctors, health care professionals, and other government-employed officials in order to obtain or retain business.

According to the SEC’s investigation, Stryker’s subsidiaries in Argentina, Greece, Mexico, Poland, and Romania made illicit payments totaling approximately $2.2 million that were incorrectly described as legitimate expenses in the company’s books and records.  Descriptions varied from a charitable donation to consulting and service contracts, travel expenses, and commissions.  Stryker made approximately $7.5 million in illicit profits as a result of the improper payments.

“Stryker’s misconduct involved hundreds of improper payments over a number of years during which the company’s internal controls were fatally flawed,” Andrew Calamari, director of the SEC’s New York Regional Office, said in a statement. “Companies that allow corruption to occur by failing to implement robust compliance programs will not be allowed to profit from their misconduct.”

The SEC’s order instituting settled administrative proceedings details improper payments by employees of Stryker’s subsidiaries as far back as 2003.  They used third parties to make the payments in order to win or keep lucrative contracts for the sale of Stryker’s medical technology products. 

According to the SEC’s order, Stryker’s subsidiary in Greece made a purported “donation” of nearly $200,000 in 2007 to a public university in Greece to fund a laboratory that was a pet project of a public hospital doctor.  In exchange for the payment, the doctor agreed to provide business to Stryker. 

The SEC’s investigation also found that Stryker’s subsidiaries bribed foreign officials by paying their expenses for trips that lacked any legitimate business purpose. For example, in exchange for the promise of future business from the director of a public hospital in Poland, Stryker paid travel costs for the director and her husband in May 2004.  This included a six-night stay at a New York City hotel, attendance at two Broadway shows, and a five-day trip to Aruba.

The SEC’s order requires Stryker to pay $7.5 million in disgorgement, $2.2 million in prejudgment interest, and a penalty of $3.5 million. Without admitting or denying the allegations, Stryker agreed to cease and desist from committing or causing any violations and any future violations of the Securities Exchange Act.