Imaging manufacturer Philips will pay more than $62 million to settle allegations of corruption, the U.S. Securities and Exchange Commission announced Thursday.
The allegations pertain to the Amsterdam-based corporation’s sales of diagnostic imaging equipment in China. SEC investigators found that employees, distributors and sub-dealers allegedly engaged in “improper conduct,” drafting technical specifications to favor Philips’ products in competitive bidding.
In one instance, a Philips district sales manager allegedly provided a $14,500 (USD) bribe to the director of a hospital radiology department in exchange for help during a public procurement process. The SEC also previously charged Philips with similar violations of the Foreign Corrupt Practices Act in 2013 for conduct that occurred in Poland between 1999-2007.
“This matter highlights the need for companies to design and implement internal accounting controls sufficient for the scale of their business,” Charles Cain, chief of the SEC Enforcement Division’s FCPA Unit, said in a May 11 announcement. “Despite remediation done in connection with its prior violations, Phillips nevertheless failed over the course of several years to implement sufficient internal accounting controls with respect to its sales of medical technology products in China.”
In other instances, Philips China allegedly granted “special price discounts” with its distributors in the Republic. These created a risk that “excessive distributor margins” could be used to fund “improper payments” to government employees, the SEC said. In another example, the manufacturer’s employees allegedly worked with hospital directors to rig procurement so that only Philips’ and two other companies would qualify for the bid. Other times, Philips employees prepared sham additional bids for competitors’ products to “create the appearance of legitimate public tenders.”
The company consented to the SEC order without admitting or denying the findings that it violated the books and records and internal accounting controls provisions of the Securities Exchange Act. The payment includes $15 million in civil penalties and more than $47 million in “disgorgement and prejudgment interest.” Philips' alleged conduct occurred between 2014-2019, with the company “unjustly enriched” by about $41 million.
In a statement issued Saturday, May 13, Philips said it fully cooperated with the SEC and undertook a "thorough internal investigation." The company deployed outside experts to dig into the matter and took "remedial measures" to address any findings.
"Resolving these legacy matters is important to Philips," the company said, adding that it is "committed to achieving and maintaining the highest standards in its global business, building on a culture of integrity and compliance."
A Dutch multinational corporation founded in Eindhoven, Netherlands, Philips employs approximately 79,000 people in more than 100 countries. The company recorded roughly $18.7 billion in revenue last year.
Editor's note: This story has been updated to include comments from Philips.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.