Published in Manufacturing

Mexican agency accuses Stryker of bribery in federal lawsuit

BY Wednesday, October 30, 2019 09:19am

A federal lawsuit claims Stryker Corp. for years used bribery “as an integral part of its world-wide marketing strategy” to sell medical products to an agency of the Mexican government that provides care to residents.

In a lawsuit filed this month in U.S. District Court in Grand Rapids, the Instituto Mexicano del Seguro Social accuses the Mexican subsidiary of Kalamazoo-based Stryker of paying “tens of thousands of dollars in bribes to illicitly obtain contracts” with the agency that generated more than $2.1 million in profits.

Stryker Corp. headquarters, Kalamazoo, Mich. COURTESY PHOTO

A Mexican law firm served as the “bag man” for the bribes by including the amounts on invoices to conceal them, according to the lawsuit. Stryker’s Mexican subsidiary would then record the payments as legitimate expenses, the lawsuit claims.

“Stryker bribed IMSS officials with funds culled from the profit that Stryker was reaping on IMSS contracts Stryker illegally obtained through bribery. The contract price, therefore, was inflated at least by the amount of the bribes. At a minimum, this amount represented economic harm to IMSS,” according to court filings.

Stryker declined to comment on the lawsuit. As well, executives did not address and were not asked about the case during a Tuesday afternoon conference call to discuss third quarter results.

The lawsuit follows a $13.2 million settlement in 2013 with the U.S. Securities and Exchange Commission for violating the U.S. Foreign Corrupt Practices Act in five counties, including Mexico, from 2003 to 2015. A year ago, Stryker settled another case and paid a $7.8 million penalty for what the SEC called “internal accounting controls (that) were not sufficient to detect the risk of improper payments in sales of Stryker products in India, China, and Kuwait.”

In the new case, the Mexican agency claims Stryker “subverted the fiduciary duties of the IMSS officials responsible for ensuring that IMSS’ procurement procedures were followed.”

“The same officials who should have challenged Stryker’s illegal conduct were the officials who received Stryker’s bribes. As a result, IMSS was unable to bring this lawsuit until the recent change in governmental administration,” according to court documents.

The case was filed by an attorney with the law firm Maney & González-Félix PC in Houston, Texas.

Stryker (NYSE: SYK) on Tuesday reported quarterly sales of $3.58 billion for the July-to-September period, an increase of 10.6 percent from the third quarter of 2018.

Strong sales growth came across product categories and global markets and should continue into next year, Chairman, President and CEO Kevin Lobo said in the conference call.

“We just have terrific momentum across our businesses and across our geographies,” Lobo said. “On an overall basis, we’re feeling very, very good about our businesses and kind of imagine 2020 turning out to be very similar.”

Stryker reported lower net income of $466 million, or $1.23 per diluted share, compared to $590 million, or $1.55 per diluted share, a year earlier. Minus one-time impacts, Stryker recorded a nearly 13-percent increase in adjusted net income of $725 million, or $1.91 per diluted share.

Nine-month sales totaled $10.75 billion, up 9.7 percent from the same period in 2018, with net income of $1.35 billion, or $3.58 per diluted share.

Stryker expects organic sales for all of 2019 to grow 7.5 percent to 8 percent with diluted earnings per share of $8.20 to $8.25. The company expects fourth quarter adjusted net income of $2.43 to $2.48 per diluted share.

The quarterly guidance includes the negative effect of foriegn currency of about 15 cents per share, CFO Glenn Boehnlein said.

Read 1458 times Last modified on Wednesday, 30 October 2019 09:31
SUBSCRIBE TO MIBIZ TODAY FOR WEST MICHIGAN’S FINEST BUSINESS NEWS REPORTING >