Bio-Rad to pay $55m to settle bribery charges

By Joseph James Whitworth

- Last updated on GMT

Bio-rad self-disclosed the FCPA violations in 2010
Bio-rad self-disclosed the FCPA violations in 2010
Bio-Rad Laboratories will pay a settlement of $55m to resolve US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) allegations of unlawful payments to get or keep business in Thailand, Vietnam and Russia from 2005 to 2010.

The DOJ said the firm agreed to pay a $14.35m penalty for violating the Foreign Corrupt Practices Act (FCPA) by falsifying books and records and failing to have adequate internal controls regarding sales made in Russia.

The SEC said it had entered into a cease and desist order in which the company will pay $40.7m in disgorgement and prejudgment interest to do with sales in Russia, Thailand and Vietnam.

Bio-Rad also agreed to report to the DOJ for a two-year period concerning compliance efforts.

The firm discovered the potential FCPA violations and self-reported them to the DOJ and SEC in May 2010.

DOJ said that it entered into a non-prosecution agreement mostly due to Bio-Rad’s self-disclosure of the misconduct and cooperation with the investigation.

SEC findings

Bio-Rad made $35.1m in profits from improper payments, said the SEC.

An investigation found that Bio-Rad lacked sufficient internal controls to prevent or detect $7.5m in bribes paid during a five-year period and improperly recorded as legitimate expenses like commissions, advertising, and training fees.

In Russia, Bio-Rad’s foreign subsidiary paid three off-shore agents for alleged services in connection with sales of its medical diagnostic and life science equipment to government agencies.

At the start of 2010, Bio-Rad Russia terminated the services of the agents and immediately after that the firm lost its first government contract in the country, said the SEC.

SEC also found that from 2005 to 2009 the country manager of the Vietnam office authorized payment of bribes to government officials to obtain business.

“At the direction of the country manager, the sales representatives made cash payments to officials at government-owned hospitals and laboratories in exchange for their agreement to buy Bio-Rad’s products.”

Bio-Rad response

Norman Schwartz, Bio-Rad president and CEO, said the discovered actions were ‘completely contrary​’ to the way it wants to do business.

"We took strong, decisive action to end the problematic practices and prevent anything like this from happening in the future, including terminating involved employees and committing substantial resources to strengthening our compliance functions and financial controls," ​he said. 

“Bio-Rad prides itself on operating with the highest levels of integrity, and I am pleased that this settlement fully resolves the government’s FCPA investigation and puts this matter behind us."

DOJ investigation

The DOJ said that Bio-Rad SNC, a subsidiary in France, retained and paid intermediary companies commissions of 15-30% purportedly in exchange for various services with certain governmental sales in Russia. However, the intermediary companies did not perform these services.

Several high-level managers, responsible for overseeing business inRussia, reviewed and approved the commission payments to the intermediary companies despite knowing that the intermediary companies were not performing such work.

These managers knowingly caused the payments to be falsely recorded on Bio-Rad SNC’s and Bio-Rad’s books, said the DOJ.  

Bio-Rad, through several of its managers, failed to implement adequate controls and compliance systems, to its Russian operations while knowing that such a failure allowed intermediary companies to be paid significantly above-market commissions for little or no services.

Leslie R Caldwell, assistant attorney general of the Justice Department’s criminal division, said public companies that cook their books and hide improper payments foster corruption.

“The department pursues corruption from all angles, including the falsification of records and failure to implement adequate internal controls. The department also gives credit to companies, like Bio-Rad, who self-disclose, cooperate and remediate their violations of the FCPA.”

Bio-Rad previously reserved $43m for the settlement and an additional $12.05m in the third quarter so the total settlement was reserved as of September 30, 2014.

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