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greek doctors are “foreign government officials” February 6, 2012

Posted by Bradley in : corruption , trackback

According to the SEC which charged Smith & Nephew PLC with violations of the FCPA (Smith and Nephew settled):

The SEC’s complaint against Smith & Nephew PLC alleges that its subsidiaries used a distributor to create a slush fund to make illicit payments to public doctors employed by government hospitals or agencies in Greece. On paper, it appeared as though Smith & Nephew’s subsidiaries were paying for marketing services, but no services were actually performed. The scheme basically created off-shore funds that were not subject to Greek taxes to pay bribes to public doctors to purchase Smith & Nephew products.

Last year the Central District of California held that:

a state-owned corporation having the attributes of CFE may be an instrumentality”of a foreign government within the meaning of the FCPA, and officers of such a state-owned corporation, as Messrs. Nestor Moreno and Arturo Hernandez are alleged to be, may therefore be “foreign officials”within the meaning of the FCPA

But even if this is a correct interpretation of the FCPA, isn’t there a real difference between officers of a government owned corporation and doctors in a hospital? Are the doctors “officials” in any real sense?


1. Michael Froomkin - February 7, 2012

If they are on the books as state employees under Greek law, and they have purchasing authority, why shouldn’t the doctors be covered under the FCPA? Just because the bribes are designed to get purchases of pharmaceuticals rather than guns?

So my vote is that the answer to your next-to-last question is “No,” and for the last one “Yes.”

2. Dan Froomkin - February 8, 2012

A really great way not to get caught violating the FCPA is not to bribe people, period. See my story: http://www.huffingtonpost.com/2011/08/12/chamber-of-commerce-foreign-corrupt-practices-act_n_919617.html

3. Patrick (G) - February 9, 2012

Question: does this hold foreign doctors to a higher standard than U.S. doctors are held to (whether or not they are govt employees)? Because if it does, and I think it might, then I don’t see how it can be fairly applied.

4. Bradley - February 9, 2012

Smith & Nephew has previously settled other claims relating to kickbacks in the domestic market in the US – it entered into a deferred prosecution agreement in 2007. There’s a significant amount of regulation of kickbacks in the healthcare industry in the US. These new claims relating to behaviour in Greece have also produced a deferred prosecution agreement announced by DOJ: http://www.justice.gov/opa/pr/2012/February/12-crm-166.html

This announcement makes it clear that Greek authorities co-operated with the investigation (although Greece isn’t in much of a position these days to stand up to the country with most say in how the IMF is run).

Corruption clearly is a bad thing. And there are some real internal governance issues to worry about here with respect to corporations which subject themselves to US laws.

But I wonder about publishing companies who provide university lecturers working in public universities with free books to encourage them to adopt the books for their classes. Wouldn’t that be similar to the situation of the Greek doctors?

5. Michael Froomkin - February 10, 2012

I don’t agree that the publication example is at all the same. If the books are given for free with no obligation to adopt them, that is not a bribe. It’s a free sample, like a candy bar at the mall. It’s legal marketing so long as there is no quid pro quo in the mix.

On the other hand, when companies offer free things to instructors if a certain number of their students buy the company’s wares then that feels more like a bribe. I’ve always thought there was something off about the New York Times’s education subscription plan in which instructors get a free daily subscription if 10 students sign up.