On November 16, 2023, the US Department of Justice issued a declination letter to Lifecore Biomedical, Inc. in connection with alleged violations of the Foreign Corrupt Practices Act by employees and agents of the company and one of its subsidiaries.
Lifecore, formerly known as Landec Corporation, is a contract development and manufacturing organization for formulation and packaging of medical devices and pharmaceuticals. The company is headquartered in Chaska, Minnesota.
Lifecore acquired Yucatan Foods L.P., and Yucatan’s subsidiary Procesadora Tanok S. de R. L. de C. V. on December 1, 2018. According to the DOJ, employees and agents of Lifecore, Yucatan and Tanok engaged in a bribery scheme involving a Mexican government official, for the purpose of obtaining a wastewater discharge permit for Tanok’s operations in Guanajuato, Mexico; as described by the DOJ, the scheme entailed the preparation of fraudulent manifests to justify excessive payments to a third party intermediary, with the understanding that a portion would be paid to a government official. The fraudulent transactions were deliberately concealed from Lifecore during pre-acquisition due diligence, but when the misconduct was discovered by Lifecore during the post-acquisition integration process, Lifecore initiated an internal investigation and voluntarily self-disclosed its findings to the DOJ.
The DOJ’s reasons for declining to prosecute Lifecore for violations of the FCPA are enumerated in the declination letter:
- Lifecore reported the misconduct to the DOJ voluntarily and in timely fashion – in fact, the DOJ was informed of Lifecore’s findings within three months after the internal investigation;
- The company cooperated fully and proactively with the DOJ, and has committed to continuing to cooperate;
- The limited scope and value of the misconduct;
- Remediation measures undertaken by Lifecore, including withholding the bonus of the Yucatan officer involved in the bribery, and terminating that officer, in addition to improving compliance and internal controls, and;
- Lifecore’s agreement to disgorge the amount of benefit derived from the bribery scheme – that is, the costs and associated duties the company avoided paying by not establishing on-site wastewater treatment. The stipulated disgorgement of $406,505 was calculated by subtracting the expenses of constructing a wastewater treatment plant that have already been paid by Lifecore ($879,555) from the amount that would have been due and payable to Mexican regulatory authorities had the bribery scheme not been carried out ($1,286,060).