The Securities and Exchange Commission has charged Bio-Rad Laboratories, a clinical diagnostic and life science research company based in California, with violating the Foreign Corrupt Practices Act when its subsidiaries made improper payments to foreign officials in Russia, Vietnam, and Thailand in order to win business. The company, which self-reported the misconduct, agreed to pay $55 million to settle the SEC’s charges and a parallel action announced today by the U.S. Department of Justice.
An SEC investigation found that Bio-Rad Laboratories lacked sufficient internal controls to prevent or detect approximately $7.5 million in bribes that were paid during a five-year period and improperly recorded in books and records as legitimate expenses like commissions, advertising, and training fees. The improper payments enabled Bio-Rad to earn an estimated $35 million in illicit profits.
“This enforcement action, which reflects credit for Bio-Rad’s cooperation in our investigation, reiterates the importance of all companies ensuring they have the proper internal controls to prevent FCPA violations,” Andrew Ceresney, director of the SEC’s Division of Enforcement, said in a statement.
According to the SEC’s order instituting settled administrative proceedings, Bio-Rad made payments disguised as commissions to foreign agents with phony Moscow addresses and off-shore bank accounts. The agents had no employees and no capacity to perform the purported services for Bio-Rad; they were retained primarily to influence Russia’s Ministry of Health and help the company win bids for government contracts. Bio-Rad managers repeatedly ignored various red flags indicating that the “Russian agents were likely bribing government officials, and they condoned an atmosphere of secrecy,” the SEC says. Country managers were allowed to communicate through at least 10 different personal e-mail addresses with aliases, and referred to the commissions with code words such as “bad debts.”
According to the SEC’s order, Bio-Rad employees similarly used local intermediaries in Vietnam and Thailand to funnel bribes through to foreign officials in exchange for business. Its Singapore subsidiary sold products at a deep discount to Vietnamese distributors, who passed through a portion of it as bribes. Bio-Rad also acquired a company in Thailand and failed to uncover a pre-existing bribery scheme in which Thai agents received inflated commissions that were partially used for improper payments.
Bio-Rad agreed to pay $40.7 million in disgorgement and prejudgment interest to the SEC, and a $14.35 million criminal fine to the Department of Justice. The company also must report its FCPA compliance efforts to the SEC for a period of two years.
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