August 5, 2020

US orthopedic device maker announces imminent end of DPA

On August 5, 2020, Zimmer Biomet Holdings, Inc., a medical device manufacturer based in Warsaw, Indiana, announced in a regulatory filing that it expected its monitorship to end on or before August 7, 2020, and for the charges resulting from its January 2017 deferred prosecution agreement with the US. Department of Justice to be dismissed with prejudice.

Zimmer’s 2017 DPA concerned pre-acquisition conduct by Biomet, Inc. (which Zimmer acquired in 2015), and stemmed from Biomet’s failure to comply with a prior March 2012 DPA it had entered into with the DOJ in connection with allegations that Biomet had violated the anti-bribery and accounting provisions of the US Foreign Corrupt Practices Act.  The allegations related to improper payments acknowledged by Biomet to have been made by itself and its subsidiaries between 2000 and 2008 in China, Argentina, and Brazil.  In the March 2012 DPA, Biomet agreed to pay a fine of $17.3 million, hire an independent monitor for 18 months, and implement enhanced anti-corruption controls.   Biomet also entered into a consent agreement with the SEC at the same time, under which it agreed to pay an additional $5.5 million in disgorgement and prejudgment interest.

Over the next several years, Biomet’s monitor term was repeatedly extended as a result of Biomet’s discovery of additional potential improper activities in Mexico and Brazil.  In January 2017 Zimmer entered into a new DPA with the DOJ relating to alleged violations of the FCPA’s internal controls provisions, under which it acknowledged that Biomet had failed to comply with the terms of the 2012 DPA, and agreed to pay $24 million in penalties, disgorgement, and pre-judgment interest, and to appoint an independent monitor for three years.  The SEC also entered into an administrative settlement in January 2017 for this same misconduct, under which Zimmer agreed to pay an additional $13 million in penalties, disgorgement, and pre-judgment interest.

In its recent filing, Zimmer stated that the compliance monitor appointed as a result of the January 2017 DPA had submitted a letter to the SEC and DOJ on July 17, 2020, certifying that the Company’s compliance program is reasonably designed to prevent and detect violations of the FCPA, and that the program is functioning effectively.  As a result, the Company stated that it expects the monitorship to end by August 7, 2020, and for the FCPA charges to be dismissed with prejudice.

Form 10-Q