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Johnson & Johnson settles bribery case with feds

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J&J's household reputation has been battered in the past year by a string of recalls, including over-the-counter medicines — such as Children's Tylenol and Benadryl — contact lenses and orthopedic hips.Toby Talbot / AP
/ Source: The Associated Press

Pharmaceutical giant 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 said Friday that 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 allegedly paid kickbacks to the Iraqi government to obtain contracts under the United Nations Oil for Food Program.

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 J&J cooperated with investigators.

"We are committed to holding corporations accountable for bribing foreign officials while, at the same time, giving meaningful credit to companies that self-report and cooperate with our investigations," said Mythili Raman, a deputy assistant attorney with the Department of Justice.

J&J said in a statement that it alerted the government to the medical device kickbacks in 2007. The company 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 CEO of J&J. "I know that these actions are not representative of Johnson & Johnson employees around the world who do what is honest and right every day."

A spokeswoman for the company added that none of the employees cited in the charges are currently employed by J&J. The company said it expects to reach a settlement with regulators in the United Kingdom in the next several days.

Under terms of the settlement, J&J must put in place a program to make sure it complies with anti-bribery laws across its businesses. The plan includes the creation of several new positions, including a chief compliance officer who will report to the company's board of directors. J&J must update the government on the plan every six months.

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 that sell medical devices in foreign countries for violating the law.

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

"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.

J&J's household reputation has been battered in the past year by a string of recalls, including over-the-counter medicines — such as Children's Tylenol and Benadryl — contact lenses and orthopedic hips.

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 shares fell 2 cents to $59.47 Friday.