J&J, Siemens, GE, Philips targeted in Brazil graft case

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RIO DE JANEIRO (Reuters) – The US FBI is investigating corporate giants Johnson & Johnson, Siemens AG, General Electric Co and Philips for allegedly paying kickbacks as part of a scheme involving medical equipment sales in Brazil, two Brazilian investigators have told Reuters.

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Brazilian prosecutors suspect the companies channelled illegal payoffs to government officials to secure contracts with public health programs across the South American country over the past two decades.

Brazilian authorities say more than 20 companies may have been part of a “cartel” that paid bribes and charged the government inflated prices for medical gear such as magnetic resonance imaging machines and prosthetics.

The four multinational companies, with a combined market capitalisation of nearly $600 billion at Thursday’s market close, are the largest foreign enterprises to be investigated in an unprecedented anti-corruption push in Brazil in recent years.

Big US and European companies found to have engaged in wrongdoing in Brazil could also face heavy fines and other punishment under the US Foreign Corrupt Practices Act (FCPA). Since 1977, that law has made it illegal for American citizens, US companies or foreign companies whose securities are listed in the United States to pay foreign officials to win business.

Foreign companies are the latest targets of government corruption probes in Brazil. Over the past five years, prosecutors have uncovered pervasive graft in state institutions and private-sector companies seeking to do business with them.

The sprawling investigations by prosecutors and federal police, including the famed “Car Wash” dragnet centred on Brazil’s state-run oil company Petrobras, have toppled business and political leaders across Latin America.

Authorities say plea-bargain testimonies obtained from suspects alerted them to other possible schemes, including alleged bribes paid by multinationals to obtain public contracts in Brazil.

Brazilian federal prosecutor Marisa Ferrari confirmed in an interview with Reuters that US authorities from the Justice Department and the Securities and Exchange Commission were assisting in the Brazilian medical equipment investigation she helps lead.

In 2016, US and Brazilian prosecutors jointly negotiated the world’s largest-ever compliance penalty, a $3.5 billion fine against Brazilian construction conglomerate Odebrecht SA for its part in the Car Wash scandal.

“We are constantly sharing information with the FBI on this (medical equipment) case. They ask for documents and we send them, and they are assisting our investigation in return,” Ms Ferrari said. In addition, she said, “We’ve received a lot of material from the Department of Justice and from the SEC.”

She declined to name which companies US law enforcement agencies were investigating.

Two Brazilian investigators with direct knowledge of the matter confirmed to Reuters that Johnson & Johnson, Siemens, GE, and Koninklijke Philips NV were being targeted by the FBI for alleged bribery in Brazil. The people requested anonymity because they were not authorized to discuss the US side of the investigation.

The FBI would not confirm or deny the existence of any investigations. The SEC, which also investigates FCPA allegations, said by email that it declined to comment.

Boston-based GE declined to comment on any investigation related to its business in Brazil. It said in an emailed statement, “We are committed to integrity, compliance and the rule of law in Brazil and every other country in which we do business.”

Siemens, which is based in Munich, Germany, said in an emailed statement that the company “is not aware of any FBI investigation of the company related to cartel activity in Brazil.” It said its policy is always to cooperate with law enforcement investigations when they occur.

Amsterdam-based Philips confirmed in an email that it is under investigation in Brazil. In its 2018 annual report, Philips acknowledged that it “has also received inquiries from certain US authorities in respect to this matter.”

In its emailed response to Reuters, Philips said, “It is not uncommon for US authorities to show an interest in these matters and it is too early to draw any conclusions.”

New Brunswick, New Jersey-based Johnson & Johnson said in an emailed response on Friday that in an SEC filing last October it disclosed that the Department of Justice and the SEC “have made preliminary inquiries to the company” in regard to a raid by Brazilian federal police on its Sao Paulo offices last year, and that the company is cooperating.

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