Left Menu
Development News Edition

EXCLUSIVE-FBI targets Johnson & Johnson, Siemens, GE, Philips in Brazil graft case -Sources

Reuters | Updated: 17-05-2019 16:34 IST | Created: 17-05-2019 15:35 IST
EXCLUSIVE-FBI targets Johnson & Johnson, Siemens, GE, Philips in Brazil graft case -Sources
Image Credit: Flickr

The FBI is investigating corporate giants Johnson & Johnson, Siemens, General Electric and Philips for allegedly paying kickbacks as part of a scheme involving medical equipment sales in Brazil, two Brazilian investigators have told Reuters.

The firms are suspected by Brazilian prosecutors of channelling illegal payoffs to government officials to secure contracts with public health programs across the South American country over the past two decades. Brazilian authorities say more than 20 companies may have been part of a "cartel" that paid bribes and charged the government inflated prices for medical gear such as magnetic resonance imaging machines and prosthetics. The four multinationals, with a combined market capitalization of nearly $600 billion at Thursday's market close, are the largest foreign enterprises to be investigated in an unprecedented anti-corruption push in Brazil in recent years.

Big U.S. and European firms found to have engaged in wrongdoing in Brazil could also face heavy fines and other punishment under the U.S. Foreign Corrupt Practices Act (FCPA). Since 1977, that law has made it illegal for American citizens, U.S. companies or foreign companies whose securities are listed in the United States to pay foreign officials to win business. Foreign firms are the latest targets of government corruption probes in Brazil. Over the past five years, prosecutors have uncovered pervasive graft in state institutions and private-sector companies seeking to do business with them.

The sprawling investigations by prosecutors and federal police, including the famed "Car Wash" dragnet centred on Brazil's state-run oil company Petrobras, have toppled business and political leaders across Latin America. Authorities say plea-bargain testimonies garnered from suspects alerted them to other possible schemes, including alleged bribes paid by multinationals to obtain public contracts in Brazil.

'CONSTANTLY SHARING' Brazilian federal prosecutor Marisa Ferrari confirmed in an interview with Reuters that U.S. authorities from the Justice Department and the Securities and Exchange Commission were assisting in the Brazilian medical equipment investigation she helps lead.

In 2016, the U.S. and Brazilian prosecutors jointly negotiated the world's largest-ever compliance penalty, a $3.5 billion fine against Brazilian construction conglomerate Odebrecht SA for its part in the Car Wash scandal. "We are constantly sharing information with the FBI on this (medical equipment) case. They ask for documents and we send them, and they are assisting our investigation in return," Ferrari said. In addition, Ferrari said, "we've received a lot of material from the Department of Justice and from the SEC."

She declined to name which companies U.S. law enforcement agencies were investigating. Two Brazilian investigators with direct knowledge of the matter confirmed to Reuters that Johnson & Johnson, Siemens AG, General Electric Co, and Koninklijke Philips NV were being targeted by the FBI for alleged bribery in Brazil. The people requested anonymity because they were not authorized to discuss the U.S. side of the investigation.

The FBI would not confirm or deny the existence of any investigations. The SEC, which also investigates FCPA allegations, said by email that it declined to comment. Boston-based GE declined to comment on any investigation related to its business in Brazil. It said in an emailed statement that "we are committed to integrity, compliance and the rule of law in Brazil and every other country in which we do business."

Siemens, which is based in Munich, said in an emailed statement that the firm "is not aware of any FBI investigation of the company related to cartel activity in Brazil." It said its policy is always to cooperate with law enforcement investigations when they occur. Amsterdam-based Philips confirmed in an email that it is under investigation in Brazil. In its 2018 annual report, Philips acknowledged that it "has also received inquiries from certain US authorities with respect to this matter."

In its emailed response to Reuters, Philips said: "it is not uncommon for US authorities to show an interest in these matters and it is too early to draw any conclusions." New Brunswick, New Jersey-based Johnson & Johnson said in an emailed response that the Department of Justice and the SEC "have made preliminary inquiries to the company" in regard to a raid by Brazilian federal police on its Sao Paulo offices last year and that the firm is cooperating.

'TRULY MASSIVE' Ferrari, the Brazilian prosecutor, said the medical equipment investigation was in its early stages. Still, she said evidence points to widespread bribery and price-gouging by firms looking to tap into Brazil's public healthcare system, one of the world's largest, serving 210 million people.

"Because the Brazilian government's health budget is so huge, this scheme is truly massive," Ferrari said. "This first case is just a tiny sliver of what is to come." In addition to paying kickbacks through intermediaries to secure contracts, some suppliers charged Brazil's government inflated prices - up to eight times the market price - to help cover the cost of their bribes, according to court filings and plea-bargain testimony secured by prosecutors.

GE's former chief executive for Latin America, Daurio Speranzini, and 22 others was charged last year in the first case connected to the alleged scheme. Prosecutors say that case, focused on Rio de Janeiro state, saw Brazilian taxpayers bilked out of at least 600 million reais ($149.38 million) between 2007 and 2018 through padded contracts awarded to crooked medical equipment suppliers.

Lawyers for Speranzini, who left GE in November, said by email that he is innocent. Prosecutors allege Speranzini first took part in the cartel as the head of the Philips Healthcare operation in Latin America from 2004 until the end of 2010. A whistleblower told Philips' compliance office about the fraud, and Speranzini was fired after an internal probe, according to the documents.

He was hired by GE a few months after leaving Philips. Investigators say they have strong evidence that Speranzini continued with the scheme while at GE. GE declined to comment on Speranzini's hiring or exit from the company.

($1 = 4.0165 reais)



Rethinking Rural Livelihoods in the Times of COVID-19

The reverse migration caused by COVID 19 pandemic has put an additional burden of about one crore people on Indian villages particularly in the states of Uttar Pradesh, Bihar, Bengal and Odisha. Besides increasing the risk of spreading the ...

‘Discounted Deaths’ and COVID 19: Anthropology of Death and Emotions

Death is a social event rather than the mere cessation of biological functions. As seen by anthropologists, death is not just physical but intensely social, cultural, and political....

Indigenous knowledge of communities a must for maximizing impact of community work

Generally, it has been observed that the majority of the academicians in higher education institutions neglect the wisdom of community people and throw their weight around thinking that they know everything and the community knows nothing. ...

In rebuking FBR, Pakistan’s courts take a stand for public health

The system, if implemented effectively, will allow Pakistans revenue service to combat the illicit trade in tobacco products and potentially add hundreds of millions of dollars to the states budget each year. ...


Latest News

EXCLUSIVE-Winning bidder for Grindr has ties to Chinese owner

An investor group that got U.S. approval to buy Grindr Inc has financial and personal links to the dating apps current owner, Chinas Beijing Kunlun Tech Co Ltd, Reuters has found, in a possible departure from Washingtons national security p...

New Delhi, Jun 2 (PTI) These are the top stories from the northern region at 4.30 pm.

These are the top stories from the northern region at 4.30 pm. . DES1 RJ-VIRUS-CASES 171 new COVID-19 cases in Rajasthan toll 201 Jaipur The novel coronavirus cases in Rajasthan rose to 9,271 on Tuesday after 171 people tested positive...

Choking on diesel costs, Somali firm turns to solar for cheaper power

A new solar power plant in Mogadishu should quadruple the citys generation capacity and cut bills, the owners said, providing relief to businesses facing crippling costs from diesel-generated electricity.BECO, Somalias largest electricity s...

FEATURE-As home working takes root, are U.S. suburbs poised for post-virus revival?

New Jersey realtor Peter Engelmann says he got his first COVID-19 exodus call in early March from a New Yorker who ended up buying a three-bedroom suburban house.With New York Citys coronavirus lockdown confining many residents to tiny apar...

Give Feedback