Philips to pay SEC $62m for corrupt China sales

Philips has been ordered to pay $62m to resolve charges brought by the US Securities and Exchange Commission (SEC) that the Dutch medical supplier breached the Foreign Corrupt Practices Act (FCPA) in sales of medical diagnostic equipment to China.

The SEC said Philips’s subsidiaries in China used special price discounts with distributors, which created the risk that excessive margins could be used to fund improper payments to government employees.

The SEC also found that employees, distributors and sub-dealers of Philip’s subsidiaries in China engaged in improper conduct to influence hospital officials. It found that the hospital officials drafted public tenders that favoured Philip’s products and prepared additional bids using products with other manufacturers to make the public tenders appear legitimate.

“This matter highlights the need for companies to design and implement internal accounting controls sufficient for the scale of their business. Despite remediation done in connection with its prior violations, Philips nevertheless failed over the course of several years to implement sufficient internal accounting controls with respect to its sales of medical technology products in China,” said Charles Cain, chief of the SEC enforcement division’s FCPA unit.

In 2013, the SEC charged Philips with similar corruption breaches in Poland between 1999 and 2007 and Philips paid $4.5m in a settlement.

Philips consented to the SEC’s latest order without admitting or denying the findings.