Olympus Corp. of the Americas’ jaw-dropping $646 million settlement with the Justice Department this week was important not just because it set a new record for kickback cases, but also because it shows how important whistleblowers are to regulators’ global anti-corruption enforcement agenda.
Now, more than ever, international companies are vulnerable to a variety of legal charges in the US when they export illegal sales practices.
Those vulnerabilities are heightened even more by the possibility that employees – whether in the US or other countries – may decide to blow the whistle on those hidden practices because of US programs that offer whistleblowers significant rewards and also, in some instances, job protection and confidentiality.
That’s what happened with Olympus. A former compliance officer for the company filed a whistleblower lawsuit under the False Claims Act (FCA), which launched a Justice Department investigation that delivered a triple punch to Olympus: civil charges under the FCA, criminal charges under the US Anti-Kickback Statute and criminal charges under the Foreign Corrupt Practices Act (FCPA) – all for essentially the same illegal sales practices of offering kickbacks to doctors and hospitals in the US and in Central and South America to increase sales of medical equipment.
The whistleblower and the Justice Department said Olympus paid the kickbacks to induce purchases of endoscopes used to examine patients’ gastrointestinal tracts.
Out of the total settlement, Olympus paid $311 million to settle the whistleblower-initiated lawsuit, as well as a $340 million criminal penalty for violating the US Anti-Kickback Statute. The whistleblower was awarded $51 million under the False Claims Act’s whistleblower reward provisions.
Olympus also paid an additional $22.8 million to settle the foreign bribery charges. The Justice Department said the company’s Latin American subsidiary gave cash, personal travel and free or heavily discounted equipment to government healthcare providers from 2006 until August 2011 in order to increase medical equipment sales in Central and South America. The FCPA prohibits payments to foreign officials to obtain business.
The settlement requires Olympus to pay penalties of nearly three times its gross profits from the US sales tied to kickbacks – more than $230 million – and also three times the company’s profits of more than $7.5 million in Central and South America.
To deter future misconduct, the US demanded an executive clawback provision that requires company officials who engage in misconduct or fail to promote compliance to forfeit up to three years of performance pay.
The Olympus case, along with the billions pharmaceutical manufacturers have paid to settle similar improper marketing allegations in whistleblower lawsuits, demonstrates the peril companies face when they engage in corrupt practices anywhere in the world.
