Medical Device Company Smith & Nephew Resolves Foreign Corrupt Practices Act Investigation

Agrees to Pay $16.8 Million Penalty Related to Bribery in Greece

WASHINGTON—Smith & Nephew Inc. has entered into a deferred prosecution agreement with the Department of Justice to resolve improper payments by the company and certain affiliates in violation of the Foreign Corrupt Practices Act (FCPA), the Department of Justice announced today. The matter is part of an investigation into bribery by medical device companies of physicians employed by government institutions.

Smith & Nephew, a Delaware corporation, is headquartered in Memphis, Tenn., and is a wholly owned subsidiary of Smith & Nephew plc, an English company traded on the New York Stock Exchange. The company manufactures and sells medical devices worldwide.

Smith & Nephew acknowledged responsibility for the actions of its affiliates, subsidiaries, employees and agents who made various improper payments to publicly employed health care providers in Greece from 1998 until 2008 to secure lucrative business.

According to the criminal information filed today in U.S. District Court in the District of Columbia in connection with the agreement, Smith & Nephew, through certain executives, employees and affiliates, agreed to sell products at full list price to a Greek distributor based in Athens, and then pay the amount of the distributor discount to an offshore shell company controlled by the distributor. These off-the-books funds were then used by the distributor to pay cash incentives and other things of value to publicly employed Greek health care providers to induce the purchase of Smith & Nephew products. In total, from 1998 to 2008, Smith & Nephew, its affiliates and employees authorized the payment of approximately $9.4 million to the distributor’s shell companies, some or all of which was passed on to physicians to corruptly induce them to purchase medical devices manufactured by Smith & Nephew.

The agreement recognizes Smith & Nephew’s cooperation with the department’s investigation, thorough self-investigation of the underlying conduct, and the remedial efforts and compliance improvements undertaken by the company. As part of the agreement, Smith & Nephew will pay a $16.8 million penalty and is required to implement rigorous internal controls, cooperate fully with the department and retain a compliance monitor for 18 months.

In a related matter, Smith & Nephew reached a settlement today with the U.S. Securities and Exchange Commission, under which Smith & Nephew agreed to pay $5.4 million in disgorgement of profits, including pre-judgment interest.

This case is being prosecuted by Trial Attorney Kathleen M Hamann of the Criminal Division’s Fraud Section with assistance from the FBI Washington Field Office’s dedicated FCPA squad.

The Justice Department acknowledges and expresses its appreciation for the assistance provided by the authorities of the 8th Ordinary Interrogation Department of the Athens Court of First Instance (international police) and the Athens Economic Crime Squad in Greece, as well as the significant coordination with and assistance by the Securities and Exchange Commission’s Division of Enforcement.