Amsterdam-based Koninklijke Philips N.V. will pay more than $62 million to resolve charges that it violated the Foreign Corrupt Practices Act (FCPA) with respect to conduct related to its sales of medical diagnostic equipment in China. According to the SEC’s order https://www.sec.gov/litigation/admin/2023/34-97479.pdf , Philips’ subsidiaries in China, cumulatively referred to in the order as Philips China, used special price discounts with distributors that created a risk that excessive distributor margins could be used to fund improper payments to government employees. The SEC’s order also found that employees, distributors, or sub-dealers of Philips’ subsidiaries in China engaged in improper conduct to influence hospital officials to draft technical specifications in public tenders to favor Philips’ products. For example, the order found that, in one instance, a district sales manager at Philips China provided funds to a hospital director in return for the director’s assistance in the procurement process, and, in another instance, Philips China employees discussed tailoring technical specifications for a public tender with hospital directors so that only Philips China and two other manufacturers would qualify for the bid.

The order further found that the employees, distributors, or sub-dealers engaged in improper bidding practices by preparing additional bids with other manufacturers’ products to create the appearance of legitimate public tenders and to meet the minimum bids requirement under Chinese public tender laws.

Philips consented to today’s SEC order without admitting or denying the findings that it violated the books and records and internal accounting controls provisions of the Securities Exchange Act of 1934, and agreed to pay $15 million in civil penalties and more than $47 million in disgorgement and prejudgment interest.

The SEC’s investigation was conducted by Christine E. Neal, Michael K. Catoe, Paul W. Sharratt, and Sonali Singh.

Jeffrey Newman is a whistleblower lawyer representing individuals under the SEC whistleblower program. His firm also handles False Claims Act cases. He can be reached at Jeff@JeffNewmanLaw.com or at 617-823-3217