Enforcement Action

 

Docket or Case Number:    3-16231

Court:    N/A

Initiation Date:    11/03/2014  Information

Prosecuting Agency:    US Securities and Exchange Commission

Name of Prosecuting Attorneys:   

  • Catherine W. Brilliant, SEC Los Angeles Regional Office
  • Alka N. Patel, SEC Los Angeles Regional Office

Assisting Agencies:    U.S. Department of Justice , Federal Bureau of Investigation , Latvian Financial and Capital Market Commission , Financial Services Commission , Bank of Lithuania

Type of Action:    SEC Administrative Proceeding

Origin of the Proceeding:    Voluntary disclosure

Whistleblower:    Yes (General Counsel at Bio-Rad)

Case Status:    Resolved


Summary

Bio-Rad Laboratories, Inc. ("Bio-Rad") was a multinational medical diagnostics and life sciences manufacturing and sales company that was incorporated in Delaware and headquartered in Hercules, California. Bio-Rad maintained a class of publicly traded securities registered pursuant which traded on the New York Stock Exchange. Bio-Rad operated around the world through a number of subsidiaries and joint ventures.

Bio-Rad Laboratorii OOO ("Bio-Rad Russia") was a wholly owned subsidiary of Bio-Rad located in Moscow, Russia. Bio-Rad Russia primarily sold Bio-Rad clinical diagnostic products, such as HIV testing kits. Approximately 90% of its clientele were government customers, most notably the Russian Ministry of Health.

Bio-Rad SNC was an indirect wholly owned subsidiary of Bio-Rad headquartered in Marnes-la-Coquette, France. Bio-Rad SNC manufactured, sold, and distributed Bio-Rad products worldwide.

Bio-Rad Laboratories (Singapore) Pte. Limited (“Bio-Rad Singapore”) is Bio­Rad’s wholly-owned subsidiary, located in Singapore. Bio-Rad Singapore’s books, records, and financial accounts are consolidated into Bio-Rad’s books and records and reported by Bio-Rad in its financial statements.

Diamed South East Asia Ltd. (“Diamed Thailand”) was a 49%-owned subsidiary of Diamed AG (Switzerland) that was acquired by Bio-Rad in October 2007. Local majority owners ran Diamed Thailand’s operations until 2011, when Bio-Rad bought out their interest in the company. Diamed Thailand’s financial statements are consolidated into those of Bio-Rad.

From approximately 2005 to 2010, Bio-Rad Singapore and Diamed Thailand made unlawful payments in Vietnam and Thailand, respectively, to obtain or retain business. During the same period, Bio-Rad SNC and Bio-Rad Russia paid commissions to three off-shore intermediary companies in exchange for various services that the intermediary companies were not equipped to provide nor, in fact, provided. In paying these commissions, Bio-Rad's subsidiaries disregarded the high probability that at least some of the money would be used to make unlawful payments to government officials in Russia.

On November 3, 2014, the SEC ordered Bio-Rad to cease and desist violations of the anti-bribery, books & records and internal controls provisions of the FCPA. In anticipation of the Order, Bio-Rad consented to the proceedings without admitting or denying responsibiliy of the alleged conduct. As part of the agreement between Bio-Rad and the SEC, Bio-Rad agreed to disgorge $35.1 million plus prejudgment interest of $5.6 million and to provide annual reports for a period of two years to the SEC on the implementation of the companies enhanced anti-corruption policies and procedures. The SEC entered into the Agreement due, in large part, to Bio-Rad’s self-disclosure of the misconduct, full cooperation with the DOJ, and significant remedial actions.

In a related matter, on November 3, 2014, Bio-Rad entered into a two year Non-Prosecution Agreement with the DOJ. Under the terms of the Agreement, Bio-Rad accepted responsibilty for the conduct alleged in the Agreement's statement of facts, and the company agreed to pay a monetary penalty of $14.35 million and to continue to implement and enhance its anti-corruption compliance policies and procedures, which included two years of self-reporting to the DOJ.

Country(ies) involved:    Russia, Thailand, Vietnam

Sanction to Bribe Ratio:    $40,700,000 / $7,500,000 = 542.67 %

Sanction to Revenue Ratio:    $40,700,000 / $67,800,000 = 60.03 %

Sanction to Profit Ratio:    $40,700,000 / $35,100,000 = 115.95 %

Number of Related Enforcement Actions (Including This Enforcement Action):    2

Country(ies) involved:    Russia, Thailand, Vietnam

Total $ Bribery Payments:    $7,500,000

Total $ Revenue Generated from Bribery:    $67,800,000

Total $ Profit Earned or Expenses Avoided from Bribery:    $35,100,000

Total $ Monetary Sanctions:    $55,050,000

Sanction to Bribe Ratio:    $55,050,000 / $7,500,000 = (734.00 %)

Sanction to Revenue Ratio:    $55,050,000 / $67,800,000 = (81.19 %)

Sanction to Profit Ratio:    $55,050,000 / $35,100,000 = (156.84 %)

Name:    Bio-Rad Laboratories, Inc.

Place of Incorporation:    United States

HQ Country(ies):    United States

Entity Type:    Public Company

FCPA Claims:    Anti-Bribery, Primary, Issuer (15 U.S.C. § 78dd-1) ; Books & Records, Primary, Issuer (15 U.S.C. § 78m (b)(2)(A)) ; Internal Controls, Primary, Issuer (15 U.S.C. § 78m(b)(2)(B))

Related Claims:    N/A

Statutory Basis for FCPA Jurisdiction:    Issuer

Period of Bribery:   2005 - 2010

Total Bribery Payments:    $7,500,000

Total Revenue Generated from Bribery:    $67,800,000

Total Profit Earned or Expenses Avoided from Bribery:    $35,100,000

Country(ies) involved:    Russia, Thailand, Vietnam

Officials Potentially Influenced (Name; Title; Organization): 

  • Name N/A, Official; Russian government
  • Name N/A, Officials; Vietnamese government
  • Name N/A, Officials; Thai government

Defendant-Related Entities Involved in the Misconduct:    Bio-Rad Laboratories (Singapore) Pte. Limited - Subsidiary ; Bio-Rad Laboratorii OOO - Subsidiary ; Bio-Rad SNC - Subsidiary ; Diamed South East Asia Ltd. - Subsidiary

Third-Party Intermediary:   

  • Belizan intermediary company , Shell Company
  • Panamanian intermediary company , Shell Company
  • Thai sales agent , Agent/Consultant/Broker
  • U.K. intermediary company , Shell Company

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Improperly recorded payments in Russia

Period of Bribery:   2005 – 2010

Total Bribery Payments:    $4,600,000

Total Revenue Generated from Bribery:    $38,600,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Russia

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Official; Russian government;

Defendant-Related Entities Involved in the Misconduct:    Bio-Rad Laboratorii OOO - Subsidiary ; Bio-Rad SNC - Subsidiary

Third Party Intermediary:    Belizan intermediary company - Shell Company
Panamanian intermediary company - Shell Company
U.K. intermediary company - Shell Company

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Improper payments in Vietnam

Period of Bribery:   2005 – 2009

Total Bribery Payments:    $2,200,000

Total Revenue Generated from Bribery:    $23,700,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Vietnam

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Officials; Vietnamese government;

Defendant-Related Entities Involved in the Misconduct:    Bio-Rad Laboratories (Singapore) Pte. Limited - Subsidiary

Third Party Intermediary:    N/A

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    Obtain/retain business

TRANSACTION OVERVIEW
Improper payments in Thailand

Period of Bribery:   2007 – 2010

Total Bribery Payments:    $708,608

Total Revenue Generated from Bribery:    $5,500,000

Total Profit Earned or Expenses Avoided from Bribery:    N/A

Country(ies) involved:    Thailand

Officials Potentially Influenced (Name; Title; Organization):  

  • Name N/A, Officials; Thai government;

Defendant-Related Entities Involved in the Misconduct:    Diamed South East Asia Ltd. - Subsidiary

Third Party Intermediary:    Thai sales agent - Agent/Consultant/Broker

Type of Bribe:   Money

Cash, Wire or Check:    N/A

Purpose of Bribe:    Obtain/retain business

Misconduct by Subsidiary?  Yes


Parent(s):   Bio-Rad Laboratories, Inc.

Subsidiary:  Bio-Rad Laboratories (Singapore) Pte. Limited

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    Yes
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Diamed South East Asia Ltd.

  • Percentage of Ownership:    49.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    Yes
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Bio-Rad Laboratorii OOO

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Unknown
  • Parent Had Knowledge of Sub’s Bribery?:    Yes
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

Subsidiary:  Bio-Rad SNC

  • Percentage of Ownership:    100.00 %
  • Direct or Indirect Ownership:    Indirect
  • Parent Had Knowledge of Sub’s Bribery?:    Yes
  • Subsidiary Expressly Alleged to Be Parent's Agent:    No
  • Parent Liable for Sub Misconduct?:    Yes

M&A Negotiated or Completed During Misconduct, Investigation, or Resolution?     Yes

Type of Transaction:    Acquisition


Successor(s):   Bio-Rad Laboratories, Inc.

Predecessor:  Diamed South East Asia Ltd.

  • Nature of Misconduct   
    • Misconduct Occurred Solely Pre-acquisition:    No
    • Misconduct Occurred Pre- and Post-acquisition, with NO Knowledge and/or Involvement of Successor:    Yes
    • Misconduct Occurred Pre and Post-acquisition, with Knowledge and/or Involvement of Successor:    No
  • Quality of Due Diligence:   
    • Poor Due Diligence Cited:    Yes
    • Good Due Diligence Cited /(e.g. as mitigating factor/):    No
  • Voluntary Disclosure by Successor in Connection with the Transaction:    Yes
  • DOJ Opinion Sought in Connection with Transaction:    No
  • Successor Liable for Predecessor Misconduct? :    No

  

Re: Bio-Rad Laboratories, Inc.

  • Inadequate safeguards concerning use of third parties
  • Inadequate internal controls or auditing
  • Inadequate supervision of subsidiaries and/or employees
  • Inadequate due diligence in connection with M&A

Mitigating Factors Referenced by the Government (Company Defendants):

Defendant Self-Report Cooperation Voluntary Remedial Measures Misconduct Limited to Low Level Individuals Other factors
Bio-Rad Laboratories, Inc.    

Aggravating Factors Referenced by the Government (Company Defendants):

Defendant Insufficient Cooperation Insufficient Remedial Measures
Bio-Rad Laboratories, Inc.    

Total Monetary Sanctions for the Action:    $40,700,000

Case Status:    Resolved


Disposition:    Cease and Desist Order

Date of Disposition:    11/03/2014

Bio-Rad Laboratories, Inc.

—  Total Monetary Sanctions for Defendant:    $40,700,000

—  Compliance Obligation:    Yes

—  Reporting Obligation:    Self-reporting

—  Admission of Guilt/Acceptance of Responsibility:    No

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