Skip to main content
Premium Trial:

Request an Annual Quote

Bio-Rad Resolves Foreign Corruption Investigation; Will Pay $55M to SEC, DOJ

NEW YORK (GenomeWeb) — Bio-Rad Laboratories has resolved a US Securities and Exchange Commission investigation into its violation of the Foreign Corrupt Practices Act due to the company's subsidiaries having made improper payments to foreign officials in Russia, Vietnam, and Thailand in order to win business.

Bio-Rad, which self-reported its misconduct and extensively cooperated during the investigation, has agreed to pay $55 million to settle the SEC's charges and a parallel action by the US Department of Justice.

The investigation, which has been ongoing since 2010, found that Bio-Rad lacked sufficient internal controls to prevent or detect approximately $7.5 million in bribes that were paid from at least 2005 to 2010 and improperly recorded in books and records as legitimate expenses such as commissions, advertising, and training fees.

According to SEC documents, Bio-Rad during this period "made excessive payments disguised as commissions to foreign agents with phony Moscow addresses and off-shore bank accounts. The agents had no employees and no capacity to perform the purported services for Bio-Rad, and were retained primarily to influence Russia's Ministry of Health and help the company win bids for government contracts."

The SEC said that Bio-Rad managers "repeatedly ignored various red flags indicating that the Russian agents were likely bribing government officials, and they condoned an atmosphere of secrecy."

Furthermore, the investigation found that Bio-Rad employees used local intermediaries in Vietnam and Thailand to funnel bribes to foreign officials in exchange for business. For instance, "Bio-Rad's Singapore subsidiary sold products at a deep discount to Vietnamese distributors, who passed through a portion of it as bribes," the agency said. "Bio-Rad acquired a company in Thailand and failed to uncover a pre-existing bribery scheme in which Thai agents received inflated commissions that were partially used for improper payments."

All told, these improper payments enabled Bio-Rad to earn $35 million in illicit profits, the SEC said.

Bio-Rad initially voluntarily self-disclosed potential FCPA violations to SEC staff and the Department of Justice in May 2010, and immediately thereafter the company's audit committee retained independent counsel to conduct an investigation of the alleged violations.

The audit committee conducted a thorough internal investigation, and subsequently expanded it voluntarily to cover a large number of additional potentially high-risk countries, the SEC said. Bio-Rad also undertook "significant and extensive remedial actions," according to the agency.

In a statement today, Bio-Rad noted that the DOJ declined to prosecute the company, and the parties entered into an agreement under which Bio-Rad will pay a penalty of $14.35 million. Under the terms of the civil settlement with the SEC, the company will also pay $40.7 million in disgorgement and prejudgment interest. Further, Bio-Rad has agreed to certain future reporting, compliance, and self-monitoring provisions over the next two years.

Bio-Rad said that it had previously reserved $43 million for this settlement and has reserved an additional $12.05 million in the third quarter so that the total settlement amount will have been fully reserved as of Sept. 30, 2014.

"The actions that we discovered were completely contrary to Bio-Rad's culture and values and ethical standards for conducting business," Bio-Rad President and CEO Norman Schwartz said in a 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," Schwartz added. "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."