J&J; exec quits over illegal payments

Johnson & Johnson disclosed Monday that some of its subsidiaries outside the U.S. made improper payments in the marketing of medical devices and that the executive in charge left the company.

The payments in “two small-market countries” violated company policies, J&J;, the world’s largest maker of medical products, said it told the U.S. Justice Department and Securities and Exchange Commission. Michael J. Dormer, the worldwide chief of medical devices, retired and took responsibility, J&J; said in a statement.

“I think the company’s reputation is tarnished by this,” said Jan David Wald, a medical-device industry analyst with A.G. Edwards & Sons in Boston. “I would bet you that there are people inside the countries involved that were more directly responsible. The issue is whether the company is going to face criminal charges.”

It is unlikely that the incident will inflict much damage on Johnson & Johnson, which has a market value of $189.8 billion, Wald said. Medical devices and diagnostic products, including heart stents and artificial orthopedic joints, accounted for 38% of J&J;’s $53.3 billion in 2006 sales.

New Brunswick, N.J., based J&J; replaced Dormer with Nicholas Valeriani.

Dormer said in a letter to the company that he bore “ultimate responsibility by virtue of my position” for the actions of unnamed subsidiaries involved in improper payments, J&J; said. The company declined to elaborate further.

Dormer was chief operating officer of DePuy Inc., the maker of artificial hips and knees, when J&J; bought DePuy in 1998 for $535.5 million. He immediately became a group chairman of some of J&J;’s more than 100 subsidiaries. In 2002 he became worldwide chairman of the medical devices group.

Shares of J&J; fell 14 cents to $65.46 before the company released its statement. J&J; stock declined another 6 cents in after- hours trading.