Publicly employed doctors in Greece; publicly employed doctors and hospital administrators in Poland; publicly employed doctors and pharmacists in Romania; top Ministry of Health officials in Iraq
The SEC alleged that subsidiaries, employees, and agents of Johnson & Johnson, a NYSE-listed, U.S.-based manufacturer and seller of health care products, paid bribes to publicly-employed health care providers in Greece, Poland, and Romania and paid kickbacks to the former government of Iraq in connection with the United Nations Oil for Food Program.
Johnson & Johnson acquired DePuy, Inc., another medical device company, in 1998. At that time, DePuy's subsidiary, Depuy International, was allegedly engaged in a widespread bribery scheme, and executives at Johnson & Johnson were aware of and complicit in that scheme after the acquisition. From at least 1998 to 2006, DePuy International, through a Greek distributor which it later acquired, allegedly paid bribes to public doctors in Greece who selected DePuy’s surgical implants. The scheme featured a complicated web of transactions involving distributors and agents paid through commissions overseas and allegedly resulted in $24,258,072 in profit.
In Poland, a Johnson & Johnson subsidiary, MD&D Poland, is alleged to have bribed publicly employed doctors and hospital administrators to use their medical devices and award them medical device tenders from 2000 to 2006. This scheme was carried out through sham civil contracts and false travel invoices and resulted in approximately $4,348,000 in profit for the company.
The SEC further alleged that from 2000 to 2007, employees of Johnson & Johnson’s Romanian subsidiary bribed publicly employed doctors and pharmacists to prescribe Johnson & Johnson products through cash and travel payments. The Johnson & Johnson subsidiary, Pharma Romania, used local distributors to generate the cash that was ultimately paid to the doctors in exchange for the doctors prescribing Johnson & Johnson products. The purported profit to Johnson & Johnson from these sales was $3,515,500.
Finally, two other Johnson & Johnson subsidiaries in Europe, Cilag AG International and Janssen Pharmaceutica N.V., were accused of paying a Lebanese agent a bloated commission that included a 10% kickback to the former government of Iraq for participation in the United Nations Oil for Food Program. The stated reason for the high commission to the Lebanese agent was “promotional activities,” yet that agent was unable to provide detailed evidence or description of any of those activities. There are allegations of $857,387 in kickbacks in connection with nineteen Oil for Food contracts. The total profit on those contracts is alleged to be $6,106,255.
Apart from the Oil-for-Food allegations, Johnson & Johnson had self-disclosed some wrongdoing and had conducted wide-reaching internal investigations. Johnson & Johnson settled this action with the SEC without admitting or denying the facts alleged in the SEC's complaint.
On April 8, 2011, Johnson & Johnson consented to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934; ordering it to pay $38,227,826 in disgorgement and 10,438,490 in pre-judgment interest; and ordering it to comply an FCPA compliance program.
A parallel criminal case was brought by the Department of Justice in which the company acknowledged wrongdoing and agreed to pay a $21,400,000 criminal penalty as part of a deferred prosecution agreement.
Anti-bribery (Issuer), Books and records (Issuer), Internal controls (Issuer)
Disgorgement, Prejudgment Interest
Disgorgement of $38,227,826 plus pre-judgment interest of $10,438,490