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SEC v. Orthofix International N.V.

 
:
Orthofix International, N.V.
:
SEC Civil
:
July 10, 2012
:
SEC v. Orthofix International N.V.
:
SEC v. Orthofix Int'l N.V., No. 4:12-cv-419 (E.D. Tex. 2012)
:
Healthcare-Medical Devices
:
Mexico
:
2003; 2004; 2005; 2006; 2007; 2008; 2009; 2010
:
Officials and employees at Instituto Mexicano del Seguro Social, a Mexican government-owned healthcare and social services institution.
:
Orthofix International N.V. is an orthopedics medical device company formed under the laws of Netherlands Antilles. Its corporate administrative offices are located in Lewisville, Texas. Orthofix's common stock is traded on the Nasdaq Global Select Market. Promeca S.A. de C.V. is Orthofix's wholly-owned Mexican subsidiary.

According to the SEC Complaint, Promeca repeatedly paid bribes to Mexican officials and employees of Instituto Mexicano del Seguro Social ("IMSS"), a Mexican state-owned healthcare and social services institution, to obtain and retain sales contracts from IMSS.

The improper payments, including cash, gifts, travel, and entertainment, were referred to internally at Promeca as "chocolates." The bribes were falsely recorded on the company's books as cash advances to Promeca executives or training and promotions expenses. Because of the bribery scheme, Promeca's training and promotional expense were significantly over budget. In one instance, Orthofix launched an inquiry into these expenses, but did not control them.

Promeca also established a system of bribery to ensure that it was awarded business under a new national tender system. Promeca made payments to three front companies, which were controlled by certain IMSS officials. Promeca falsely recorded these bribes on its books as payments for training courses, meetings and congresses, and promotional costs.

Prior to the discovery of the bribery schemes, Orthofix did not have an effective FCPA compliance policy or FCPA-related training. The existing code of ethics and anti-bribery training were only available in English, and it was unlikely that Promeca employees understood them, as most Promeca employees spoke minimal English. Upon discovery of the bribe payments through a Promeca executive, Orthofix immediately self-reported the matter to the SEC staff and conducted an internal investigation.
:
Books and records (Issuer), Internal controls (Issuer)
:
Civil Settlement, Disgorgement
:
Orthofix was ordered to pay $4,983,644 in disgorgement, plus $242,057 in pre-judgment interest.
:
5,225,701
:
0
:
Issuer
:
Foreign
:
Netherlands
:
Contract Procurement/Retention
:
8,700,000
:
Cash, Entertainment, Gifts, Goods/Services, Travel
:
Direct, Shell entity, Subsidiary Company
:
317,000
:
Mexico
:
No
:
Yes