Johnson & Johnson settles bribery case for $70 million

WASHINGTON — Johnson & Johnson has agreed to pay $70 million to settle civil and criminal charges of bribing doctors in Europe and paying kickbacks to the Iraqi government to illegally obtain business.

The Securities and Exchange Commission (SEC) said Friday the company settled the charges with the agency and the Justice Department without admitting or denying guilt.

The government accused J&J subsidiaries of providing money and travel gifts to doctors in Greece, Poland and Romania in exchange for their prescribing J&J products to patients. The SEC says J&J agents used fake contracts and sham companies to deliver the bribes. The SEC says the bribes began at least 13 years ago.

J&J subsidiaries also are suspected of paying kickbacks to the Iraqi government under Saddam Hussein to obtain contracts under the United Nations Oil for Food Program.

The charges are the latest in a series of problems that have battered the company's image. The company has issued more than 50 product recalls since the start of last year involving such household brands as Tylenol, Children's Tylenol, Motrin, Rolaids and Benadryl, and contact lenses. Last year, it recalled two popular hip implants that a recent study suggested may fail early in close to half of the patients who receive them. The recalls came long after surgeons warned the company the implants were defective.

Last month, federal health regulators took legal control of the plant where millions of bottles of defective medication were produced.

The New Brunswick, N.J.-based health-care company sells everything from Band-Aids to biotech drugs.

J&J said it has cooperated with the Department of Justice in its criminal investigation since 2007. It alerted the U.S. government to the medical-device kickbacks and identified similar violations across multiple businesses over the next three years, it said.

"We went to the government to report improper payments and have taken full responsibility for these actions," said William Weldon, chairman and chief executive officer of J&J.

A spokeswoman for the company added that none of the employees cited in the charges are currently employed by J&J.

The company will pay $21.4 million in criminal penalties for improper payments and return $48.6 million in illegal profits, according to the government.

Department of Justice officials said penalties against the company were reduced because it cooperated with investigators.

In a separate announcement, United Kingdom regulators said they reached a $7.9 million settlement with J&J over illegal payments made to orthopedic doctors in Greece. The U.K.'s Serious Fraud Office said it launched its investigation in 2007 after receiving information about the payments from U.S. authorities.

The charges against J&J were brought under the Foreign Corrupt Practices Act, which bars publicly traded companies from bribing officials in other countries to get or retain business. In the past five years, the Justice Department has investigated several companies for legal violations in selling medical devices in foreign countries.

Industry experts say giving gifts and payments to doctors is not uncommon among drug and medical-device companies that operate in dozens of countries.

Such practices arise "partly because it's the only way to play in some markets and partly because big-pharma companies are under intense revenue pressure and non-U.S. markets are the final growth frontier," said Erik Gordon, a former drug-industry executive and professor at the University of Michigan's school of business.

A criminal complaint against a J&J subsidiary quoted an internal email as saying that were the company to stop paying bribes in Greece, "we'd lose 95% of our business by the end of the year."

Material from The New York Times is included in this report.