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Stryker Corp. has agreed to pay more than $13.2 million to settle charges.that its subsidiaries in five foreign countries made illicit payments and tried for several years to bribe doctors, health care professionals, and government-employed officials to obtain or retain business.

(MLive/Gazette File)

KALAMAZOO, MI

-- An investigation by federal authorities found that Stryker Corp. subsidiaries in five foreign countries made illicit payments and tried for several years to bribe doctors, health care professionals and government-employed officials in order to obtain or retain business.

Stryker has agreed to pay more than $13.2 million to settle the charges.

The SEC charged the Kalamazoo-based medical technologies company with violating the Foreign Corrupt Practices Act, alleging that its subsidiaries in Argentina, Greece, Mexico, Poland and Romania made illicit payments totaling approximately $2.2 million "that were incorrectly described as legitimate expenses in the company's books and records."

The SEC said descriptions of the payments varied from a charitable donation to consulting and service contracts, travel expenses, and commissions.

The SEC states that Stryker made about $7.5 million in illicit profits as a result of the improper payments. It did not specify during what year all of the events occurred, but indicated some as far back as 2003.

Saying it was asked by the SEC and the U.S. Department of Justice in 2007 to investigate possible improper payments in connection with the sale of medical devices outside the United States, Stryker Corp. says an extensive internal investigation followed and it provided detailed reports and supporting documents to the SEC and the Department of Justice.

In response to the charges and Stryker's settlement, Joe Cooper, director of global communications for Stryker, stated in a written response Thursday that the company "has entered into a settlement with the U.S. Securities and Exchange Commission in connection with the previously disclosed investigation into issues under the Foreign Corrupt Practices Act. The settlement requires Stryker to pay a total of $13,283,523, which includes amounts for disgorgement of profit, pre-judgment interest and a civil monetary penalty. Stryker has been advised that the United States Department of Justice (DOJ) has closed its parallel investigation into these matters."

The SEC’s order requires Stryker to pay $7,502,635 to disgorge itself of associated profits, $2,280,888 for prejudgment interest, and a penalty of $3.5 million.

The settlement does not not require Stryker to admit or deny the allegations, although the maker of hospital beds, orthopedic implants and surgical devices agreed "to cease and desist from committing or causing any violations and any future violations" of the Securities Exchange Act of 1934.

According to Cooper, "Stryker has enhanced its company-wide anti-corruption compliance program that includes enhanced corporate policies and processes, financial controls and governance systems."

In the SEC press release, which was issued Thursday (Oct. 24), Andrew M. Calamari, director of the SEC’s New York Regional Office, stated, “Stryker’s misconduct involved hundreds of improper payments over a number of years during which the company’s internal controls were fatally flawed. Companies that allow corruption to occur by failing to implement robust compliance programs will not be allowed to profit from their misconduct.”

The SEC’s order instituting settled administrative proceedings details improper payments by employees of Stryker’s subsidiaries as far back as 2003.

According to the SEC, "They used third parties to make the payments in order to win or keep lucrative contracts for the sale of Stryker’s medical technology products. For example, in January 2006, Stryker’s subsidiary in Mexico directed a law firm to pay approximately $46,000 to a Mexican government employee in order to secure the winning bid on a contract. The result was $1.1 million in profits for Stryker. The subsidiary reimbursed the Mexico-based law firm for the bribe and booked the payment as a legitimate legal expense. However, no legal services were actually provided and the law firm simply acted as a funnel to pay the bribe."

According to the SEC’s order, Stryker’s subsidiary in Greece made a purported “donation” of nearly $200,000 in 2007 to a public university in Greece to fund a laboratory that was a pet project of a public hospital doctor. In exchange for the payment, the doctor agreed to provide business to Stryker.

The SEC stated that its investigation also found that Stryker subsidiaries bribed foreign officials by paying their expenses for trips that lacked any legitimate business purpose.

"For example, in exchange for the promise of future business from the director of a public hospital in Poland, Stryker paid travel costs for the director and her husband in May 2004," according to the SEC. "This included a six-night stay at a New York City hotel, attendance at two Broadway shows, and a five-day trip to Aruba."

Contact business writer Al Jones may at ajones5@mlive.com. Follow me on Twitter at ajones5_al.