Philips can’t seem to stay out of the headlines these days. The Amsterdam, Netherlands-based company will pay $62 million to resolve charges it violated the Foreign Corrupt Practices Act over its conduct related to sales of medical equipment to China, according to a report from Reuters.
According to the SEC’s order, Philips’ subsidiaries in China, cumulatively referred to in the order as Philips China, used special price discounts with distributors that created a risk that excessive distributor margins could be used to fund improper payments to government employees. The SEC’s order also found that employees, distributors, or sub-dealers of Philips’ subsidiaries in China engaged in improper conduct to influence hospital officials to draft technical specifications in public tenders to favor Philips’ products.
For example, the order found that, in one instance, a district sales manager at Philips China provided funds to a hospital director in return for the director’s assistance in the procurement process, and, in another instance, Philips China employees discussed tailoring technical specifications for a public tender with hospital directors so that only Philips China and two other manufacturers would qualify for the bid.
In a release, Philips said it 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 of 1934, and agreed to pay $15 million in civil penalties and more than $47 million in disgorgement and prejudgment interest in Philips’ products.
"This matter highlights the need for companies to design and implement internal accounting controls sufficient for the scale of their business. 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," said Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit, in a release.
News of the settlement comes on the heels of Philips shareholders voting against discharging the board of its responsibilities for 2022. The year was challenging as Philips lost 70% of its market value because of the respiratory device recalls.