On May 11, the U.S. Securities and Exchange Commission (SEC) announced that Koninklijke Philips N.V., an Amsterdam-based medical supplier, agreed to pay $62 million to settle charges that it violated the Foreign Corrupt Practices Act (FCPA). The charges stem from Philips’ conduct related to its sales of medical diagnostic equipment in China.
According to the SEC, Philips’ subsidiaries in China, “used special price discounts with distributors that created a risk that excessive distributor margins could be used to fund improper payments to government employees” and “engaged in improper conduct to influence hospital officials to draft technical specifications in public tenders to favor Philips’ products.”
“This matter highlights the need for companies to design and implement internal accounting controls sufficient for the scale of their business. Despite remediation done in connection with its prior violations, Phillips nevertheless failed over the course of several years to implement sufficient internal accounting controls with respect to its sales of medical technology products in China,” said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit.
The SEC had previously charged Philips over similar alleged FCPA violations in Poland that had occurred between 1999 and 2007.
The FCPA is the United States’ premier anti-bribery law. It prohibits the payment of anything of value to foreign government officials in order to obtain a business advantage. It also contains accounting provisions which require publicly traded corporations to make and keep books and records that accurately reflect the transactions of the corporation.
Under the Dodd-Frank Act, violations of the FCPA are covered through the SEC Whistleblower Program. Individuals who voluntarily provide original information about FCPA violations are eligible for monetary awards of 10-30% of the funds collected by the SEC in the case.
In May 2023, the SEC issued its largest ever whistleblower award: a $279 million award.
Further Reading:
Dutch Medical Supplier Philips to Pay More Than $62 Million to Settle FCPA Charges