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California firm to pay $55M for profiting from overseas bribes

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A California clinical diagnostic and life sciences company has agreed to pay $55 million to settle U.S. Securities and Exchange Commission and Department of Justice charges that it violated the Foreign Corrupt Practices Act when its subsidiaries made improper payments to foreign officials in Russia, Vietnam and Thailand to win business, the agencies announced Monday.

Hercules, California-based Bio-Rad Laboratories Inc. said in a statement it had self-reported the violations to the SEC and the Department of Justice in May 2010 and had followed the reporting with a thorough investigation.

The SEC said in its statement that Bio-Rad lacked sufficient internal controls to prevent or detect about $7.5 million in bribes that were paid during a five-year period and improperly recorded in books and records as legitimate expenses such as commissions, advertising and training fees. The payments earned the company $35 million in illicit profits, according to the SEC.

The SEC said in the statement that the company made excessive payments disguised as commissions to foreign agents with phony Moscow addresses and off-shore bank accounts. The agents were retained primarily to influence Russia’s Ministry of Health and help the company win bids for government contracts, the SEC said.

The SEC said the company’s employees also used local intermediaries in Vietnam and Thailand to funnel bribes to foreign officials in exchange for business.

Bio-Rad agreed to pay $40.7 million in disgorgement and prejudgment interest to the SEC, and a $14.35 million criminal fine to the Department of Justice, the SEC said in its statement.

“Bio-Rad Laboratories failed to detect a bribery scheme and did not properly address red flags that such a scheme was underway,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement, in the statement.

“This enforcement action, which reflects credit for Bio-Rad’s cooperation in our investigation, reiterates the importance of all companies ensuring they have the proper internal controls to prevent FCPA violations.”

Bio-Rad said in a statement that after self-reporting the violations, it conducted a thorough global investigation with the assistance of independent legal and forensic specialists, terminated involved employees and third-party agents and “significantly enhanced its internal controls, procedures training and compliance functions designed to prevent future violations.”

“The actions that we discovered were completely contrary to Bio-Rad’s culture and values and ethical standards for conducting business,” said Norman Schwartz, Bio-Rad president and CEO, in the statement.

“We took strong, decisive action to end the problematic practices and prevent anything like this from happening in the future, including terminating involved employees and committing substantial resources to strengthening our compliance functions and financial controls.”

“Bio-Rad prides itself on operating with the highest levels of integrity, and I am pleased that this settlement fully resolves the government's FCPA investigation and puts this matter behind us.”

The company said it had previously reserved $43 million for this settlement and had reserved an additional $12.05 million in the third quarter so that the total settlement amount would be fully reserved as of Sept. 30, 2014.

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