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Friday, March 29, 2019

FRESENIUS MEDICAL CARE AGREES TO PAY $231 MILLION TO RESOLVE FOREIGN CORRUPT PRACTICES ACT CHARGES

FRESENIUS MEDICAL CARE AGREES TO PAY $231 MILLION
TO RESOLVE FOREIGN CORRUPT PRACTICES ACT CHARGES

BOSTON – Fresenius Medical Care AG & Co. KGaA (Fresenius), a German-based provider of medical products and services, has agreed to pay approximately $231 million to resolve the Department of Justice (DOJ) and Securities and Exchange Commission’s (SEC) investigation into violations of the Foreign Corrupt Practices Act (FCPA) in connection with Fresenius’s participation in various corrupt schemes to obtain business in multiple countries.

            “Bribery, in all forms, is corrosive and illegal,” said United States Attorney Andrew E. Lelling of the District of Massachusetts. “As today’s announcement makes clear, this Office will continue its long tradition of aggressively investigating companies and individuals who use bribes and kickbacks to gain an unfair and illicit business advantage, or who deliberately turn a blind eye to that conduct.”

“Fresenius doled out millions of dollars in bribes across the globe to gain a competitive advantage in the medical services industry, profiting to the tune of over $140 million,” said Assistant Attorney General Benczkowski.  “Today’s resolution, under which Fresenius has agreed to retain an independent compliance monitor for at least two years, reflects the Department’s firm commitment to both rooting out bribery and promoting the kind of effective corporate compliance programs that will prevent misconduct going forward.”

“This case shows the continued commitment of the FBI and our partners to investigate bribery and corruption worldwide,” said FBI Assistant Director Robert Johnson.  “The FBI's dedicated International Corruption Squads across the United States will continue to combat foreign corruption that reaches our shores and send a strong message that, no matter how long it takes, we will not wane in our efforts to uphold the law.”

“This case shows the FBI will hold accountable those who treat corruption as the cost of doing business,” said Joseph R. Bonavolonta, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division. “Fresenius’s admissions are incredibly concerning because no company should break the law by paying-off international partners to obtain or retain business.  We will continue to work with our law enforcement partners to root out corrupt schemes and ensure they do not become common practice at the expense of other hard-working businesses.” 

According to Fresenius’s admissions, between 2007 and 2016, the company paid bribes to publicly-employed health and/or government officials to obtain or retain business in Angola and Saudi Arabia.  In Angola and Saudi Arabia, as well as in Morocco, Spain, Turkey, and countries in West Africa, Fresenius knowingly failed to implement reasonable internal accounting controls over financial transactions, and failed to maintain books and records that accurately and fairly reflected the transactions.

In Angola, Fresenius offered or provided bribes to an Angolan military health officer and his family, as well as prominent Angolan government-employed nephrologists.  Specifically, Fresenius offered these individuals shares in a joint venture, storage contracts, and consultancy agreements, all for the purpose of securing an improper advantage and assisting Fresenius with obtaining and retaining business in Angola.

In Saudi Arabia, Fresenius employed a check cashing scheme, entered into sham consulting and commission agreements for which no services were ever performed, entered into fake collection commission agreements, made payments to a government charity, gave gifts, and made payments for travel with no business or educational justification, the company admitted.

In Morocco, Fresenius paid bribes to a Moroccan state official for the purpose of obtaining contracts to develop kidney dialysis centers at Moroccan state-owned military hospitals.

In Spain, Fresenius entered into fake consulting agreements with publicly-employed doctors or professionals who could influence or provide information about public tenders, gave gifts or provided other benefits such as travel to medical conferences, and made donations to fund projects for the doctors.

In Turkey, Fresenius entered into joint ventures with publicly-employed doctors in exchange for those doctors directing business from their public employer to Fresenius Turkey clinics.

In West Africa, Fresenius paid bribes to publicly-employed health officials in various countries, including Benin, Burkina Faso, Cameroon, the Ivory Coast, Niger, Gabon, Chad, and Senegal. Fresenius paid these bribes through a combination of direct payments, payments made through third parties, and payments through a third-party distributorship, all to obtain and retain business in those countries. 

In total, Fresenius earned more than $140 million in profits from the corrupt schemes.

To resolve the case, Fresenius entered into a non-prosecution agreement (NPA) with DOJ and agreed to pay a total criminal penalty of $84,715,273. As part of the NPA, Fresenius also agreed to continue to cooperate with DOJ’s investigation, enhance its compliance program, implement rigorous internal controls, and retain an independent corporate compliance monitor for at least two years.

DOJ reached this resolution based on a number of factors. Notably, although Fresenius voluntarily self-disclosed the misconduct in April 2012, the company did not timely respond to certain requests by the DOJ and, at times, did not provide fulsome responses to requests for information. In addition, misconduct occurred in 13 countries, yielded profits of more than $140 million, and continued in certain countries until 2016, and the company has not yet had the opportunity to test the effectiveness of its compliance enhancements. Therefore, the company did not qualify for a declination under the Corporate Enforcement Policy, and instead received a discount of 40 percent below the low end of the U.S. Sentencing Guidelines fine range, and an independent compliance monitor for a term of two years, followed by an additional year of self-reporting to the DOJ.

Fresenius settled a related FCPA matter with the SEC today and will pay $147 million in disgorgement and prejudgment interest to the SEC, which the DOJ credited in its resolution, bringing the total monetary amount to over $231 million.

Assistant U.S. Attorney Jordi de Llano of the District of Massachusetts and Trial Attorneys Paul A. Hayden and Sonali D. Patel of the Department’s Criminal Division’s Fraud Section are prosecuting this matter. The Department appreciates the significant cooperation and assistance provided by the U.S. Securities and Exchange Commission in this matter. 

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