## Facts

- The United States accused Johnson & Johnson (J&J) and its wholly owned subsidiary, DePuy, Inc., of violating the Foreign Corrupt Practices Act (FCPA) in connection with overseas sales of orthopedic medical devices.
- DOJ filed a two-count criminal information in the U.S. District Court for the District of Columbia (No. 11-CR-00099), naming DePuy, Inc. and describing conduct carried out through subsidiaries, employees, agents, and distributors.
- According to the information, from roughly 1998 to 2006 DePuy, acting through intermediaries in countries including Greece, Poland, and Romania, authorized or paid improper benefits to publicly employed health-care providers and public hospital personnel to influence purchasing decisions and win public tenders.
- The alleged payments were described as items such as “commissions,” “consultancy fees,” or sham “training” reimbursements, and were used to influence product selection, tender outcomes, and related government-linked purchasing activity.
- The charging documents alleged that distributors and agents were used to channel payments, and that offshore accounts and other methods were used to conceal the true purpose of the transfers.
- The government also alleged that improper payments were recorded as legitimate business expenses (for example, as marketing or promotional costs), creating inaccurate books and records and reflecting weaknesses in internal accounting controls at the consolidated corporate level.
- The government offered to defer prosecution if J&J agreed to strengthen its FCPA compliance program by adopting additional: (1) corporate anticorruption policies; (2) compliance standards and procedures for directors, employees, foreign agents, and foreign business partners; (3) compliance oversight duties for senior executives; (4) training and certification and other communication mechanisms; (5) measures for reporting violations; (6) disciplinary procedures; (7) due-diligence requirements for agents and business partners; (8) standard anticorruption contract provisions; and (9) periodic testing to evaluate program effectiveness.
- The deferred prosecution arrangement also required cooperation with the government, ongoing reporting, and an independent compliance monitor for the DPA term, along with payment of a criminal penalty.

## Issues

1. Whether the court should approve a deferred prosecution agreement that postpones prosecution of J&J/DePuy on FCPA-related charges in exchange for a criminal penalty, cooperation, and specified compliance-program requirements.
2. Whether the conduct described in the information—payments to publicly employed health-care providers and related concealment—supported charges for conspiracy to violate the FCPA (including accounting provisions) and substantive anti-bribery violations (including aiding and abetting).
3. Whether successful performance of the DPA terms warranted dismissal of the criminal information without a conviction.

## Decision

- DOJ filed a two-count criminal information on April 8, 2011, charging: (1) conspiracy to violate the FCPA’s anti-bribery and accounting-related provisions (18 U.S.C. § 371, referencing 15 U.S.C. §§ 78dd-2, 78m(b)(2), 78m(b)(5), 78ff); and (2) substantive FCPA anti-bribery violations and aiding and abetting (15 U.S.C. § 78dd-2; 18 U.S.C. § 2).
- The court approved a three-year Deferred Prosecution Agreement (DPA) under which prosecution was deferred while J&J/DePuy satisfied specified obligations; the case was stayed during the DPA term and time was excluded under the Speedy Trial Act.
- Under the DPA, J&J paid a $21.4 million criminal penalty, accepted responsibility for described conduct by employees, subsidiaries, and agents, cooperated with the government, and implemented the required compliance measures (including an independent compliance monitor and periodic reporting).
- After the DPA term concluded and DOJ determined the company satisfied the agreement’s terms, DOJ moved to dismiss the information; the court dismissed the case in 2014, ending the criminal matter without a conviction.

## Legal Principles

- A deferred prosecution agreement may be used to resolve FCPA charges by deferring prosecution for a fixed term while requiring payment, cooperation, compliance-program requirements, and court-supervised case management, with dismissal available after satisfactory performance.
- Under the FCPA, liability can be based on corrupt payments made through third parties (agents, distributors, or other intermediaries) when intended to influence foreign officials in order to obtain or retain business.
- Publicly employed physicians and public hospital personnel can qualify as “foreign officials” when they act for state-controlled health-care institutions or public hospitals involved in government-linked purchasing and tender decisions.
- Recording improper payments as legitimate business expenses may support theories tied to inaccurate books and records and weak internal accounting controls, including when consolidated financial reporting is affected.
- Corporate resolutions may require detailed compliance measures, including written anticorruption policies, senior-level oversight, training and certification, reporting mechanisms, discipline, third-party due diligence, contract controls, and periodic testing, along with independent monitoring.

## Conclusion

United States v. Johnson & Johnson (Depuy) involved DOJ’s filing of a two-count FCPA-related information and the court’s approval of a three-year DPA under which J&J paid a $21.4 million criminal penalty, cooperated, and implemented specified compliance-program requirements (including third-party controls, training, reporting, discipline, testing, and independent monitoring); after DOJ concluded the terms were satisfied, the court dismissed the information in 2014.


United States v. Johnson & Johnson (Depuy), No. 11-CR-00099 (2011)