Smith & Nephew Settlement of $22M to Resolve Foreign Bribery Charges

Smith & Nephew Plc. has agreed to pay $22.2 million and plead guilty to foreign bribery charges brought by the U.S. Justice Department. 

The hip and knee implant manufacturer has admitted in court filings that it bribed doctors in government hospitals in Greece over the last decade.

The admission of guilt comes as part of a deferred prosecution agreement, which allows Smith & Nephew to avoid an actual conviction that may have barred the company from doing business with U.S. health care programs.

According to an agreement filed on Monday in U.S. District Court in Washington, the Smith & Nephew settlement calls for the company to pay $16.8 million in fines to the Justice Department and $5.4 million to the Securities and Exchange Commission (SEC) as part of a civil suit. The company will also have to undergo corporate monitoring and participate in any bribe investigations. If the company stays clean for three years the charges will be dropped.

The $9.4 million in bribes occurred from 1998 to 2008, prosecutors say. The Greek doctors were bribed through marketing services sent by fake companies set up for the purpose of funneling cash from Smith & Nephew to the surgeons as a reward for promoting and using their implants.

The investigation suggests that bribery is widespread among implant manufacturers, as one e-mail from to a Smith & Nephew vice president complained that other companies were paying more in bribes.

Smith & Nephew officials have indicated that the individuals involved in the scandal are no longer with the company.

The company currently faces a growing number of lawsuits over Smith & Nephew Journey knee replacements, which have been filed by consumers who allege the company manufactured, promoted and sold a defective component that caused them to experience problems within a few years of their surgery. The lawsuits stem from a number of Smith & Nephew recalls that have been issued in recent years for different components involved in the knee replacement system.

Nearly 40,000 Journey Uni Tibial Baseplates were recalled in early 2010, due to a number of reported failures, which suggested that the component may have a tendency to fracture or break. This could result in severe pain and instability, often resulting in the need for surgery to revise the Smith & Nephew knee replacement or replace the base plate.

In February 2011, a study was presented to the American Academy of Orthopaedic Surgeons that found that 16% of Smith & Nephew Journey-Deuce knee implants began to fail within 21 months and 39% of recipients reported poor results after receiving the implant.