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Orthofix (OFIX) reached final resolutions of two previously-disclosed SEC investigations and agreed to pay ~US $14.0MM to settle charges regarding historic accounting matters and anti-bribery matters in Brazil. OFIX also agreed to retain an independent compliance consultant for one year.
The first resolution relates to accounting errors that were addressed in restated financial statements filed in March 2014 and March 2015.
In particular, it was found that from 2011 to 2013, OFIX materially overstated distributor revenue and operating income in various reports filed with the SEC. The majority of the misconduct occurred within the company’s Spine segment, though revenue was reported as improperly recognized in the Orthopedics segment via extra-contractual agreements used at its Brazil subsidiary.
As a result of misconduct, OFIX restated financial results for 1Q13, all of 2012 and 2011, and its annual report for 2010. (For example, OFIX announced that it had overstated net sales for 2011 by 6% and operating income by over 430%.)
OFIX agreed to pay $8.25MM to resolve accounting violations, and has instituted widespread measures to detect and prevent issues. Additionally, four former company executives agreed to pay penalties to settle cases regarding the accounting matters.
The second resolution regards anti-bribery violations at Orthofix do Brasil from at least 2011 to 2013.
In particular, from at least 2011 to 2013, senior personnel in Brazil employed at least four schemes, with third-party commercial representatives and distributors, to make improper payments to doctors employed at government-owned hospitals to induce them to use OFIX products, thereby increasing sales. Improper payments to doctors employed at government hospitals were improperly recorded as legitimate expenses, generating profits of ~$2.9MM.
OFIX will pay $6.1MM in disgorgement and penalties to settle Foreign Corrupt Practices Act charges, and will retain a one-year independent compliance consultant. The Department of Justice has decided to take no further action with respect to this matter.
Sources: Orthofix International N.V.; SEC.gov
Orthofix (OFIX) reached final resolutions of two previously-disclosed SEC investigations and agreed to pay ~US $14.0MM to settle charges regarding historic accounting matters and anti-bribery matters in Brazil. OFIX also agreed to retain an independent compliance consultant for one year.
The first resolution relates to accounting errors that...
Orthofix (OFIX) reached final resolutions of two previously-disclosed SEC investigations and agreed to pay ~US $14.0MM to settle charges regarding historic accounting matters and anti-bribery matters in Brazil. OFIX also agreed to retain an independent compliance consultant for one year.
The first resolution relates to accounting errors that were addressed in restated financial statements filed in March 2014 and March 2015.
In particular, it was found that from 2011 to 2013, OFIX materially overstated distributor revenue and operating income in various reports filed with the SEC. The majority of the misconduct occurred within the company’s Spine segment, though revenue was reported as improperly recognized in the Orthopedics segment via extra-contractual agreements used at its Brazil subsidiary.
As a result of misconduct, OFIX restated financial results for 1Q13, all of 2012 and 2011, and its annual report for 2010. (For example, OFIX announced that it had overstated net sales for 2011 by 6% and operating income by over 430%.)
OFIX agreed to pay $8.25MM to resolve accounting violations, and has instituted widespread measures to detect and prevent issues. Additionally, four former company executives agreed to pay penalties to settle cases regarding the accounting matters.
The second resolution regards anti-bribery violations at Orthofix do Brasil from at least 2011 to 2013.
In particular, from at least 2011 to 2013, senior personnel in Brazil employed at least four schemes, with third-party commercial representatives and distributors, to make improper payments to doctors employed at government-owned hospitals to induce them to use OFIX products, thereby increasing sales. Improper payments to doctors employed at government hospitals were improperly recorded as legitimate expenses, generating profits of ~$2.9MM.
OFIX will pay $6.1MM in disgorgement and penalties to settle Foreign Corrupt Practices Act charges, and will retain a one-year independent compliance consultant. The Department of Justice has decided to take no further action with respect to this matter.
Sources: Orthofix International N.V.; SEC.gov
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JV
Julie Vetalice is ORTHOWORLD's Editorial Assistant. She has covered the orthopedic industry for over 20 years, having joined the company in 1999.
