Wednesday, April 21, 2021

Fresenius Agrees to $231 Million FCPA Settlement to Resolve Allegations of Bribery in 13 Countries

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Recently, Fresenius Medical Care agreed to pay approximately $231 million to resolve a case brought by the Department of Justice (“DOJ”) and Securities and Exchange Commission (“SEC”) regarding allegations that Fresenius engaged in bribery schemes with health or government officials in 13 countries in order to “win business” in those countries. The alleged misconduct occurred between 2007 and 2016, and generated over $140 million in profits for Fresenius.

This case centers around the Foreign Corrupt Practices Act (“FCPA”), which makes it unlawful for entities “to make payments to foreign government officials to assist in obtaining or retaining business.” The FCPA also requires certain companies to maintain accounting and compliance systems that “make and keep books and records that accurately and fairly reflect the transactions of the corporation,” and that devise and maintain an adequate system of internal accounting controls.” Many laud the anti-bribery and fair-play intent of the law. However, the FCPA also has numerous critics that argue that it is overly vague, penalizes honest businesses and is an enforcement overreach. Some argue that the FCPA is particularly counterproductive in impoverished countries where “corruption – pay to play – is endemic,” as it creates barriers to economic growth since American companies are less likely do business there.

Here, the alleged misconduct involved numerous and different bribery schemes. In Angola, Fresenius allegedly provided “things of value,” including sham consultancy agreements, to an Angolan military health officer and publicly-employed doctors, to obtain and retain business with the Angolan government’s military hospital. In Saudi Arabia, Fresenius allegedly participated in a check-cashing scheme benefitting Saudi government doctors. In Morocco, Fresenius allegedly paid bribes through sham commission payments to a Moroccan state official to generate contracts directed to developing dialysis centers in Moroccan government military hospitals. Additional allegations involve fictitious consulting agreements in Spain, sham joint ventures with doctors in Turkey, and knowingly paying bribes to health officials and doctors in 8 countries in West Africa.

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Fresenius did have compliance systems in place during the time period that the alleged misconduct occurred, and detected and voluntarily self-disclosed the misconduct to the DOJ in April 2012. However, the DOJ noted that “the company did not offer timely responses to certain requests and sometimes did not provide full responses to requests,” and furthermore, that the misconduct continued in some countries until 2016.

Fresenius entered into a non-prosecution agreement with the DOJ, in which it agreed to pay $84,715,273 in criminal penalties. The company also entered into a separate settlement with the SEC,in which it agreed to pay $147 million in disgorgement and prejudgment interest. In the DOJ agreement, Fresenius additionally agreed to continue cooperation with the investigation, and to implement “rigorous internal controls.” Finally, Fresenius agreed to compliance monitoring and reporting for a period of at least three years, with the first two of years of monitoring to be performed by an independent compliance monitor.

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