In the first quarter of the year, Olympus Corp., the United States’ largest distributor of endoscopes and related equipment, agreed to pay $623.2 million to resolve criminal charges and civil claims relating to a scheme to pay kickbacks to doctors and hospitals.
It was further announced that a subsidiary of the distributor will pay $22.8 million to resolve criminal charges relating to the Foreign Corrupt Practices Act (FCPA) in Latin America. If anything, this settlement is another in a line of cases where corporate integrity was replaced with bribery, kickbacks, and other forms of misconduct.
Most major cases arise when companies shift their focus on earning money and increasing revenue by any possible means, even if it is earned through a path of misconduct. The worst part is that these companies often become victims of their prevalent culture of misconduct and end up in trouble with law enforced and financial scandals in the long run. One such company is Olympus.
Whether Olympus will recover from this mess is pretty much unknown at the moment, but what we know for sure is that it is going to take years for the manufacturer to recover from this predicament.
A Unique Moniker
Olympus bears the unique moniker of engaging in a triple play of misconduct. Not only did the manufacturer violate the domestic anti-kickback statute, Olympus further violated the False Claims Act and the FCPA. Although the root of the problem appears to be a culture focused on bribery and kickbacks, we need to bear in mind the fact that the manufacturer indulged in this triple play at a time when its corporate culture was experiencing severe accounting and financial misconduct.
For the record, the $623.2 million settlement by Olympus is the largest in the history of the enforcement of the anti-kickback statute for a medical device firm.
When it comes to anti-kickback violations, Olympus entered into a three-year DPA and agreed to pay a $312.4 million criminal penalty together with a $310.8 civil penalty as a step to avoid a criminal conviction and to resolve related federal and state fraud charges. The manufacturer continually provided hospitals and doctors with multiple illegal kickbacks. These included:
– Lavish meals
– Millions of dollars in grants
– Free endoscopes
– Consulting payments
– Foreign travel
Most importantly, Olympus took no steps whatsoever to uphold a compliance program. From what is known, an experienced compliance officer was hired by the firm only in 2010. But now, under the DPA, Olympus has to implement significant compliance improvements. Also, as part of the remediation program, it is necessary for Olympus to adopt an executive financial recoupment program in which any executives who fail to promote compliance or indulge in misconduct will forfeit up to three years of performance pay.
Olympus and its FCPA Violations
Olympus further entered into a separate three-year DPA and agreed to pay $22.8 million for the resolution of its criminal FCPA charges. The manufacturer was charged for making illegal payments to physicians at government-owned healthcare facilities in Central and South America. The payments made by the firm included:
– Money Transfer
– Cash
– Personal grants
– Travel
– Free or discounted equipment
Olympus established training centers all through Central and South America, where these operations were used to funnel illegal payments to a few chosen doctors. The manufacturer paid around $3 million in bribes to accelerate the purchase of its products. Although the illegal conduct was not self-reported by Olympus, the firm benefitted from a 20% discount for its cooperation during the investigation.
