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SEC probes Siemens, GE and Philips over business with China

por John R. Fischer, Senior Reporter | June 05, 2019
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Philips also was not aware of the investigation. "Philips is committed to fully complying with local and international anti-bribery and anti-corruption laws as part of its efforts to maintain strong and effective controls. This includes Philips’ strict prohibition of receiving, accepting, offering, paying or authorizing any bribe and/or any other form of corruption," said Steve Klink, head of Philips Group Press Office. "As part of Philips’ compliance commitment, Philips has a mandatory global due diligence process (DDP) in place to ensure that it adequately manages the risks attached to the use of business partners in the sales process."

Included as evidence in the GE lawsuit were translations of Chinese criminal court rulings that found middlemen who sold GE equipment guilty of bribing government and hospital officials, and other rulings of prison sentences handed out to hospital administrators who confessed in open court. GE was not charged in any of the rulings.

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Public data on how much Chinese hospitals paid for equipment was also provided, with the suit claiming that such prices were routinely at least 40 percent above that paid by the middlemen to the companies. The difference was then distributed as bribes to health officials, and some was pocketed by the middlemen and flowed back to the companies, which are accused of then “covering” bids to make the public tender appear more competitive.

The launch of the SEC investigation is a reflection of greater attempts by U.S. regulators to crack down on alleged corruption in the sale of medical devices worldwide. Its inquiry in Brazil, for instance, stems from claims that more than 20 companies acted as part of a “cartel” that paid bribes and charged the government inflated prices for equipment and parts, including MR systems and prosthetics, in exchange for contracts over public health programs.

“We are constantly sharing information with the FBI on this [medical equipment] case. They ask for documents, and we send them, and they are assisting our investigation in return,” Brazilian federal prosecutor Marisa Ferrari told Reuters when the Brazilian probe launched, adding that the Securities and Exchange Commission was also assisting the Brazilian investigation. “We’ve received a lot of material from the Department of Justice and from the SEC.”

In addition to the sale of devices, Reuters reports that the companies in both China and Brazil accrued bigger profit margins in servicing systems during their 10-to-15 year lifespan, as well as from selling software updates, spare parts and materials used in operating machines.

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