Jump to content Jump to menu
Why Register?

Shearman FCPA Website: Cases Logo Shearman & Sterling LLP FCPA.Shearman.com: The One-Stop Resource on the Foreign Corrupt Practices Act

In the Matter of Mead Johnson Nutrition Company

 
:
Mead Johnson Nutrition Company
:
SEC Civil
:
July 28, 2015
:
In the Matter of Mead Johnson Nutrition Company
:
In the Matter of Matter of Mead Johnson Nutrition Company, Admin. Pro. File No. 3-16704 (2015)
:
Mead Johnson agreed to pay approximately $12 million in sanctions in order to settle charges that its Chinese subsidiary made improper payments to health care professionals at government-owned hospitals.
:
Healthcare-Pharmaceutical
:
China
:
2008; 2009; 2010; 2012; 2013
:
Health care professionals at state-owned hospitals in China.
:
Mead Johnson Nutrition Company is an infant formula and child nutrition product manufacturer and marketer based in Glenview, Illinois. The company maintains stock listed on the New York Stock Exchange. According to the SEC’s cease-and-desist order, from 2008 through 2013, Mead Johnson’s subsidiary in China made improper payments to health care professionals at government-owned hospitals.

According to the SEC, Mead Johnson relies on third-party distributors to market, sell, and distribute the company’s products in China. Pursuant to contracts between Mead Johnson and its third-party distributors, Mead Johnson agreed to sell its products to the third-party distributors for resale at discounted prices (referred to as a “Distributor Allowance”). The SEC claims that the funds generated by the discounted Mead Johnson products were used by the third-party distributors as illicit payments to healthcare professionals for recommending Mead Johnson products and improperly providing the contact information for expecting mothers.

Though the funds belonged to these third party distributors, Mead Johnson employees maintained certain control over the use of the funds and kept records related to the Distributor Allowance. Upon examination, the SEC claims that the records relating to the use of the Distributor Allowance were incomplete and did not indicate that a portion of the Distributor Allowance was used in a manner that was contrary to internal company policies (which prohibited conduct that might violate the FCPA).

The SEC alleges that Mead Johnson failed to devise and maintain an adequate system of internal controls over Mead Johnson’s subsidiary in China to ensure that the marketing and sales expenditures were not used for improper purposes in violation of Mead Johnson’s internal policies.

The SEC announced on July 28, 2015 that the Commission and Mead Johnson had settled charges in a cease-and-desist order. According to the SEC, Mead Johnson’s Chinese subsidiary violated the FCPA’s books-and-records and internal control provisions. According to the order, Mead Johnson agreed to pay a total corporate sanction of $12,030,000.
:
Books and records (Issuer), Internal controls (Issuer)
:
Cease and Desist
:
Mead Johnson agreed to pay disgorgement of $7,770,000, prejudgment interest of $1,260,000, and civil monetary penalty of $3,000,000.
:
12,030,000
:
0
:
Issuer
:
U.S.
:
United States
:
Other Business Advantage
:
Not stated.
:
Sales Agent/Consultant, Subsidiary Company
:
2,070,000
:
China
:
No
:
No