Biomet Acquisition Deal Could be Imperiled by Foreign Bribery InvestigationsDec 29, 2014
Foreign bribery allegations against medical device maker Biomet could imperil a proposed $13.35 billion deal acquisition by rival medical device maker Zimmer Holdings.
Biomet is under investigation by both the Justice Department and the Securities and Exchange Commission (SEC) for allegations that it helped to bribe government officials in Mexico and Brazil. An anonymous whistleblower revealed that distributors hired by Biomet to sell its orthopedic devices in Brazil were paying kickbacks to government doctors, The New York Times reports. Within days of that revelation, Biomet discovered unrelated bribery accusations in Mexico, involving bribes to Mexican customs officials.
The Times says its review of the documents shows that Biomet failed to halt the misconduct as it unfolded.
Biomet is reportedly in talks to settle the investigation and its lawyers have asked the government to resolve the matter quickly so the deal can be completed in the first quarter of 2015. Federal guidelines require prosecutors to consider collateral consequences of criminal charges against a company, including “disproportionate harm” to innocent shareholders. In mergers, the government often declines to take action against companies that cooperate fully with an investigation, according to the Times. Lawyers briefed on the Biomet investigations say the Justice Department has discussed the possibility of a deferred prosecution agreement under which criminal charges against Biomet’s U.S. arm would be withheld in exchange for certain concessions. Critics of deferred prosecution contend that such arrangements enable a pattern of corporate recidivism. Biomet reached a deferred prosecution agreement for similar acts of bribery less than three years ago, the Times reports.
If Biomet and its subsidiaries are forced to plead guilty to criminal charges, this could result in a temporary ban on Biomet’s participation in federal health care programs, an important source of revenue for device makers. This, in turn, could sour Zimmer on the acquisition deal, the Times writes.