A Los Angeles medical instrument maker’s Chinese subsidiary has agreed to plead guilty to a U.S. charge of bribing physicians and laboratory workers at government-operated hospitals in China, the company and federal authorities said Friday.
DPC Tianjin, a unit of Diagnostic Products Corp., will pay $4.8 million in fines and fees.
The parent company discovered the problem more than two years ago and went to U.S. authorities, said Jim Brill, chief financial officer. “We felt it was the right thing to do,” he said. “As an American company, we cannot do business in that way.”
The parent company, which makes and sells diagnostic medical equipment and supplies worldwide, had sales of $450 million last year, 70% of them abroad. DPC told analysts in February that it had reached a tentative accord with authorities and had set aside nearly $5 million for fines.
The settlement announced Friday includes a $2-million criminal penalty for violating the Foreign Corrupt Practices Act, which bars U.S. companies from bribing foreign officials. The balance is the profit that federal authorities said the company made from the tainted sales.
A criminal complaint filed in federal court in Los Angeles on Friday accuses the firm of paying the employees of three Chinese hospitals $1.6 million in bribes over an 11-year period, according to the Justice Department. In most cases, the payments were made in cash and hand-delivered to people responsible for purchasing decisions.
The scheme, aimed at gaining and retaining business, was authorized by the subsidiary’s general manager, and the payments were recorded on its books as selling expenses, U.S. authorities said.
The company also has agreed to adopt compliance measures and cooperate with continuing criminal and civil investigations.
“It’s just nice to have it over,” Brill said. “The legal bills are almost as large as the fine.”
Shares of Diagnostic Products fell 31 cents to $44.41 on the New York Stock Exchange.