Compliance measures help mitigate Bio-Rad Laboratories’ FCPA settlement

By Moises Ulloa

The Department of Justice (DOJ) announced on November 3rd that it had reached a settlement with Bio-Rad Laboratories Inc. (Bio-Rad) over allegations of violations of the Foreign Corrupt Practices Act (FCPA).  The FCPA prohibits the direct or indirect payment of a bribe to a foreign official, including physicians and administrators in government-run hospitals. Bio-Rad is a California based diagnostics and laboratory equipment manufacturer.

Bio-Rad settled with the DOJ for allegations that it paid bribes in violation of the FCPA to doctors in Thailand, Vietnam and Russia. In the various countries Bio-Rad faced allegations that an acquired subsidiary passed along portions of a large commission to government officials, that sales reps made cash payments to government officials at government-owned hospitals as payment for contracts to purchase Bio-Rad products, as well as paying for sham third-party intermediary contracts. Bio-Rad agreed to pay a $14.5 million penalty, in addition to the disgorgement of $40.7 million in related profits.

The government cited cooperation with the investigation, prompt corrective action and self-disclosure of the violations as reasons for the relatively small criminal penalty. These mitigation actions included an internal audit committee investigation of over 100 in-person interviews, termination of problematic practices and employees, and developing and implementing FCPA compliance procedures such as third party due diligence and contracting policies.

In order to pre-empt and safeguard against potential FCPA violations, companies that operate internationally need to ensure that policies and SOPs regarding interactions with government officials are in place, especially for gifts, travel and entertainment. These policies and SOPs should be available to all global affiliates in the local language. In addition, companies should seriously consider requiring all third-party vendors to be trained on these policies. Companies should ensure that thorough due diligence is conducted before engaging agents, and all third-party vendor contracts should include a right to audit clause. Lastly, regular risk based audits of agents and affiliates in countries with a high corruption perception index are good practice.