WASHINGTON—Mead Johnson has agreed to pay $12 million to settle federal civil charges that its Chinese subsidiary bribed hospital professionals to recommend its infant formula to new or expecting mothers who were patients.
The Securities and Exchange Commission announced the settlement Tuesday, July 28, with Mead Johnson Nutrition Co., which has operations around the world and makes Enfamil formula. The Glenview, Illinois, company neither admitted nor denied SEC allegations that it violated the Foreign Corrupt Practices Act, which prohibits bribery of foreign government officials or company executives to secure or retain business.
Mead Johnson has said its business in China, where it makes and sells products, is one of its most important operations.
The SEC said the Chinese subsidiary paid doctors and other professionals in state-owned hospitals to recommend the formula and to give the company the contact information of patients for marketing purposes.
The improper payments totaled more than $2 million from 2008 to 2013 and generated about $7.8 million in profits for the company, according to the SEC. Mead Johnson failed to accurately record the payments on its books, the agency alleged.
Employees of the subsidiary paid for the bribes by tapping funds for outside distributors that market and sell Mead Johnson products in China, the SEC said. [/morearticles]1529466[/morearticles]
Kara Brockmeyer, who heads the foreign corrupt practices unit in the SEC’s enforcement division, said the company’s lax internal controls enabled the subsidiary to use “off-the-books slush funds” for the payments.
Mead Johnson is paying $7.77 million in restitution plus $1.26 million in interest and a $3 million penalty under the settlement.
The SEC said that after conducting internal investigations, the company took corrective measures such as firing senior staff of Mead Johnson China, improving accounting controls, and establishing a unit in China to monitor compliance.
“We are pleased to have reached this final resolution with the SEC,” Mead Johnson CEO Kasper Jakobsen said in a statement. He said the company will continue to stress principles of integrity and compliance with the law “in all our interactions with customers and business partners.”