Fresenius pays $231 million to resolve FCPA actions

Bad Homburg, Germany-based company Fresenius Medical Care has agreed to pay a total of roughly $231 million to resolve investigations by the US Department of Justice (DoJ) and the SEC into alleged violations of the FCPA.

The SEC states in a regulatory filing that from at least 2009 through 2016 millions of dollars in bribes were paid to procure business throughout Fresenius’ operations in Saudi Arabia, Angola and eight countries in West Africa. Fresenius’ operations in those countries, as well as in Turkey, Spain, China, Serbia, Bosnia and Mexico, did not accurately reflect payments in the company’s books and records, according to the agency. 

Fresenius, a global supplier of products and services for individuals with chronic kidney failure, also failed to have sufficient internal accounting controls, which contributed to the alleged misconduct continuing for many years across multiple continents, the commission says.

In connection with misconduct detailed by the SEC in Saudi Arabia, West Africa and Angola, Fresenius employees and agents used the ‘means and instrumentalities of US interstate commerce, including the use of internet-based email accounts hosted by numerous service providers located in the [US]’, and the company benefitted by more than $135 million as a result of the improper payments, according to the SEC.

The company’s American depositary shares trade on the NYSE and are registered with the commission.

The SEC states that Fresenius failed to promptly address numerous red flags of corruption in its operations that were known about since the early 2000s. This includes employees making improper payments through various schemes such as using sham consulting contracts, falsifying documents and funneling bribes through a system of third-party intermediaries, the agency says.

According to the commission, Fresenius failed to properly assess and manage its worldwide risks and invested insufficient resources in compliance. In many cases, senior management thwarted compliance efforts, personally engaging in corruption schemes and directing employees to destroy records of the alleged misconduct, the SEC adds.

‘Failure to address the corruption risks in its growing business allowed complicit managers to engage in bribery schemes that went undetected for more than a decade,’ says Charles Cain, chief of the SEC’s FCPA enforcement unit, in a statement. ‘As companies expand their business, their internal accounting controls and compliance programs must keep up.’

In the DoJ’s announcement on the case, FBI special agent in charge Joseph Bonavolonta says: ‘This case shows the FBI will hold accountable those who treat corruption as the cost of doing business. Fresenius’ admissions are incredibly concerning because no company should break the law by paying off international partners to obtain or retain business.’

SETTLEMENT
Under its settlement with the SEC, Fresenius will pay $135 million in disgorgement and prejudgment interest of $12 million, for a total of $147 million. The commission did not impose a civil penalty based on the imposition of an $84.7 million criminal fine as part of Fresenius’ resolution with the DoJ.

In reaching the settlement, the SEC took into account remedial acts promptly undertaken by Fresenius and the company’s co-operation with its investigation. The company self-reported certain misconduct and voluntarily provided facts developed during its internal investigation, according to the agency. Fresenius’ remediation included firing employees and third parties and enhancing its internal accounting controls.

The company has also beefed up its global compliance organization, enhanced its policies and procedures regarding the due diligence process and the use of third parties, created positions to address potential risks and increased training of employees on anti-bribery issues, according to the SEC. It will further engage an independent compliance monitor.

Fresenius entered into a related non-prosecution agreement (NPA) with the DoJ, as part of which it agreed to continue to co-operate with the department’s investigation, enhance its compliance program, implement rigorous internal controls and retain an independent corporate compliance monitor for at least two years.

In reaching the NPA, the department says it took into account factors such as that while Fresenius voluntarily self-disclosed in April 2012, it did not respond to certain requests in a timely manner and sometimes did not provide ‘fulsome’ responses to requests for information.

Fresenius CEO Rice Powell says in a statement: ‘We are pleased to have concluded these investigations and to have resolved the issues we identified and voluntarily disclosed to the US authorities. Since the investigation began we have taken extensive steps to further a culture of ethical business behavior throughout the entire company and to strengthen our compliance programs and internal controls. And we will continue to do so in close co-operation with the authorities. Enhancing these programs is an ongoing effort that will also help us to improve our service to our patients, which is our primary mission.’