SEC Calls Strike Two on Stryker Over Foreign Corruption

Strike two for Stryker Corporation.

While not admitting any wrongdoing, the Michigan-based company has agreed to pay $7.8 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) in India, China and Kuwait.

This is the second time the company has settled allegations of violating the FCPA.

This time, according to a September 28, 2018 U.S. Securities & Exchange Commission (SEC) announcement, the government alleged that the company failed to institute required fail-safes in its bookkeeping procedures for its business in those countries.

According to the Wall Street Journal, the SEC alleged that Stryker dealers in India regularly issued inflated invoices upon the request of certain private hospitals, calling it a “widespread practice.” The company had received internal complaints and uncovered overbilling in 2012 when conducting an audit of three of its dealers.

In China, the SEC said Stryker’s local unit allegedly worked with unauthorized sub-distributors, which increased the risk of improper payments connected to the sale of the company’s products.

A distributor in Kuwait for Stryker’s Dutch unit allegedly made more than $32,000 in improper “per diem” payments to health-care professionals to attend Stryker events when the company had already directly paid the costs of lodging, meals and local transportation for the people.

Strike One

In 2013, the company agreed to a $13.2 million settlement with the SEC over charges that company subsidiaries in Argentina, Greece, Mexico, Poland and Romania made about $2 million in illicit payments “that were incorrectly described as legitimate expenses in the company’s books and records,” the SEC said at the time, resulting in $7.5 million in illicit profits.

Marc Berger, the director of the SEC’s New York office, said, “Stryker’s failures to implement sufficient internal accounting controls and keep accurate books and records are unacceptable, especially as this is not the first time the company has been charged for these types of violations. The penalty ordered along with the imposition of a compliance consultant are appropriate and necessary.”

Independent Compliance Consultant

According to the SEC, the company will be required to hire an independent compliance consultant to review and evaluate its internal controls, record-keeping, and anti-corruption policies and procedures.