United States SEC Fines Dutch Philips $62 Million for Medical Sales Corruption in China, Improper Payments to Government Employees, Influence Hospital Officials to Draft Specifications in Favour of Philips Products, Submit Bids with other Manufacturers to Creating False Appearance of Proper Bidding Process
19th May 2023 | Hong Kong
The United States Securities & Exchange Commission (SEC) has fined Dutch group Philips $62 million for medical sales corruption in China (Foreign Corrupt Practices Act), making improper payments to government employees, influencing hospital officials to draft specifications in favour of Philips’ products, and submitting bids with other manufacturers to creating false appearance of proper bidding process. United States SEC: “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. The order further found that the employees, distributors, or sub-dealers engaged in improper bidding practices by preparing additional bids with other manufacturers’ products to create the appearance of legitimate public tenders and to meet the minimum bids requirement under Chinese public tender laws.” In April 2013 the Commission had also charged Philips in connection with similar misconduct in Poland that had occurred between 1999 and 2007.
” United States SEC Fines Dutch Philips $62 Million for Medical Sales Corruption in China, Improper Payments to Government Employees, Influence Hospital Officials to Draft Specifications in Favour of Philips Products, Submit Bids with other Manufacturers to Creating False Appearance of Proper Bidding Process “
About Royal Philips
Royal Philips (NYSE: PHG, AEX: PHIA) is a leading health technology company focused on improving people’s health and well-being through meaningful innovation. Philips’ patient- and people-centric innovation leverages advanced technology and deep clinical and consumer insights to deliver personal health solutions for consumers and professional health solutions for healthcare providers and their patients in the hospital and the home. Headquartered in the Netherlands, the company is a leader in diagnostic imaging, ultrasound, image-guided therapy, monitoring and enterprise informatics, as well as in personal health. Philips generated 2022 sales of EUR 17.8 billion and employs approximately 74,000 employees with sales and services in more than 100 countries.
United States SEC Fines Dutch Philips $62 Million for Medical Sales Corruption in China
Dutch Medical Supplier Philips to Pay More Than $62 Million to Settle FCPA Charges
11th May 2023 – The Securities and Exchange Commission today announced that Amsterdam-based Koninklijke Philips N.V. will pay more than $62 million to resolve charges that it violated the Foreign Corrupt Practices Act (FCPA) with respect to conduct related to its sales of medical diagnostic equipment in China.
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. The order further found that the employees, distributors, or sub-dealers engaged in improper bidding practices by preparing additional bids with other manufacturers’ products to create the appearance of legitimate public tenders and to meet the minimum bids requirement under Chinese public tender laws.
“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 April 2013 the Commission charged Philips in connection with similar misconduct in Poland that had occurred between 1999 and 2007.
Philips consented to today’s 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. The SEC’s investigation was conducted by Christine E. Neal, Michael K. Catoe, Paul W. Sharratt, and Sonali Singh.
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