Zimmer Biomet to pay $30M in criminal and civil penalties

January 16, 2017

Medical device manufacturer Zimmer Biomet Holdings Inc. has reached a multimillion-dollar settlement with the Securities and Exchange Commission and the U.S. Department of Justice for repeat violations of the Foreign Corrupt Practices Act.

In a settlement announced Thursday, the Warsaw, Indiana-based company will pay about $30.5 million in criminal and civil penalties. According to the SEC and Justice Department, Zimmer Biomet or a subsidiary continued to engage in and improperly record transactions with a prohibited distributor in Brazil and bribed Mexican customs officials to facilitate the importation and smuggling of unregistered and mislabeled dental products.

Prior to being acquired by Zimmer Holdings in 2015, Biomet was similarly charged with violating the FCPA in 2012. The company entered into a deferred prosecution agreement, agreeing to pay $22 million and to retain an independent compliance consultant to review its FCPA compliance program for three years.

“Biomet didn’t entirely learn its lesson the first time around as it continued to use a prohibited agent in Brazil and engaged in a new bribery scheme in Mexico,” Kara Brockmeyer , chief of SEC Enforcement Division’s FCPA unit, said in a press release.

According to the Department of Justice, independent monitor was ultimately unable to certify Zimmer Biomet’s compliance program met the requirements of the 2012 agreement. The company cooperated with the investigation but, the Justice Department pointed out, the company failed to implement an effective compliance program and committed additional crimes while under the 2012 agreement.    
“Zimmer Biomet had the opportunity to avoid criminal charges but its misconduct allowed the bribes to continue,” Assistant Attorney General Leslie Caldwell of the Justice Department’s Criminal Division, said in a press release. “Zimmer Biomet is now paying the price for disregarding its obligations under the earlier deferred prosecution agreement.”

Under the current agreement, Zimmer Biomet will pay a $17.4 million criminal penalty and retain an independent corporate compliance monitor for three years. Also, the company agreed to pay the SEC disgorgement of $6.5 million including pre-judgment interest and $6.5 million as a civil penalty.

Also Zimmer Biomet’s indirect subsidiary, JERDS Lunexbourg Holding S.ár.l., agreed to plead guilty to a one-count criminal information, charging it with causing Biomet to violate the books and records provision of the FCPA.

“We are pleased to have reached this resolution involving legacy Biomet FCPA compliance matters,” Chad Phipps, senior vice president, general counsel and secretary of Zimmer Biomet Holdings Inc., said in a press release. “Zimmer Biomet is committed to upholding the highest ethical and legal standards in our business practices across the globe, and we look forward to continuing to integrate the legacy Biomet business operations into our robust corporate compliance program.”


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