SEC Eyes Biomet Latin American Sales, Again

Questionable sales and marketing efforts in Latin America continue to dog Biomet, Inc.

The Securities and Exchange Commission (SEC) has sent Biomet a subpoena to investigate possible improprieties in Mexico and Brazil. The government is also looking at a potential violation of the company’s current Deferred Prosecution Agreement (DPA) and Consent Order with the government.

Alleged Improprieties in Brazil and Mexico

The company reported on July 3, 2014 that in October 2013, it became aware of “certain alleged improprieties regarding its operations in Brazil and Mexico. Biomet retained counsel and other experts to investigate both matters. Based on the results of the investigation, Biomet terminated, suspended or otherwise disciplined certain of the employees and executives involved in these matters, and took certain other remedial measures. Additionally, pursuant to the terms of the DPA, in April 2014, Biomet disclosed these matters to the independent compliance monitor and to the DOJ [Department of Justice] and SEC.”

Current DPA and Consent Order

Biomet entered into a DPA with the U.S. Department of Justice and a Consent to Final Judgment with the SEC on March 26, 2012 regarding possible violations of the Foreign Corrupt Practices Act. The government agreed to defer prosecution of the company for those possible violations if Biomet entered into a three year DPA, the Consent Order and promised not to violate the Act in the future.

According to the company disclosure of the July 2, 2014 subpoena, the DOJ has sole discretion to determine whether conduct by Biomet constitutes a violation or breach of the DPA. If the DOJ determines that the conduct underlying these investigations constitutes a violation or breach of the DPA, the DOJ could, among other things, extend or revoke the DPA or prosecute Biomet and/or the involved employees and executives.

Previous Investigation – Argentina, Brazil and China

Biomet agreed to pay over $22 million to avoid prosecution and resolve the charges from the 2012 investigation.

According to the criminal information filed on March 26, 2012, Biomet, its subsidiaries, employees and agents, “made various improper payments from approximately 2000 to 2008 to publicly employed health care providers in Argentina, Brazil and China to secure lucrative business with hospitals. During this time, more than $1.5 million in direct and indirect corrupt payments were made.”

In addition, at the end of each fiscal year, Biomet, its executives, employees and agents falsely recorded the payments on its books and records as “commissions, ” “royalties, ” “consulting fees” and “scientific incentives” to conceal the true nature of the payments. Sales in China, according to published reports, were made through a distributor who was known to provide publicly employed doctors with money and travel.

Biomet Cooperation Noted

The government recognized the company’s cooperation in the previous investigation with “thorough and wide-reaching self-investigation” of the underlying conduct and “remedial efforts and compliance improvements.” In addition, Biomet received a reduction in its penalty as a result of its cooperation in the ongoing investigation of other companies and individuals.”

The company says it continues to cooperate with the SEC and DOJ in the current investigation and expects that discussions with the SEC and the DOJ will continue.