Analogic Corporation, incorporated and headquartered in Massachusetts, designs and manufactures medical imaging, ultrasound, and security technology systems. The company maintains a class of common stock on the NASDAQ exchange.
Analogic operates through a series of subsidiaries, including its Danish subsidiary, BK Medical ApS, which focuses on the manufacture and sale of ultrasound systems. Lars Frost served as BK Medical’s CFO from 2008 until 2011.
The SEC claims that between 2001 and 2011, BK Medical engaged in an improper payment scheme related to the sale of Analogic’s ultrasound products that resulted in distributing approximately $20 million in funds without knowing what the funds were used for. Lars Frost was allegedly responsible for personally authorizing approximately 150 payments to unknown third parties during his tenure as CFO of BK Medical despite knowing that the payments violated the company’s internal accounting controls. According to the SEC, the scheme primarily involved BK Medical’s operations in Russia and, to a lesser extent, Ghana, Israel, Kazakhstan, Ukraine, and Vietnam.
As the SEC explains, the scheme involved the creation of fictitious documents reflecting inflated purchase prices for products BK Medical sold to its Russian distributor. In essence, at the Russian distributor’s request, BK Medical would facilitate the creation of inflated invoices which the Russian distributor would pay and, at a later point in time, the Russian distributor would direct BK Medical to wire the excess funds to an unknown entity. According to the SEC, BK Medical complied with the Russian distributor’s instructions despite not knowing how the funds were being used.
On June 23, 2016, the SEC announced that it had resolved an enforcement action against Frost for violations of the books-and-records and internal controls provisions of the FCPA. As part of the enforcement action, Frost agreed to pay a civil monetary penalty of $20,000. The DOJ and SEC separately settled enforcement actions against Analogic and BK Medical, causing the companies to pay approximately $15 million in sanctions.
Books and records (Issuer), Internal controls (Issuer)