Zimmer Biomet breached deferred prosecution deal, U.S. says

NEW YORK (Reuters) - Medical device maker Biomet Inc breached a deferred prosecution agreement it reached in 2012 to resolve a foreign corruption investigation, U.S. prosecutors said in a court filing.

In a status report filed in federal court in Washington, D.C. on June 6, the U.S. Department of Justice said Biomet breached the agreement through activity in Brazil and Mexico that it disclosed in 2014, and by failing maintain a corporate compliance program.

The finding means the company could face criminal prosecution, though the Justice Department said the company had pledged to cooperate and was in “discussions to resolve this matter which would obviate the need for a trial.”

Indiana-based Biomet, now called Zimmer Biomet Holdings Inc after being acquired by Zimmer Holdings last year, did not immediately respond to a request for comment.

Biomet entered into the deferred prosecution agreement to settle allegations that it paid bribes to state-employed healthcare providers in Argentina, Brazil and China in order to secure business with hospitals, the Justice Department said in 2012.

Prosecutors said Biomet disguised those payments in its financial reports as “commissions,” “consulting fees,” “royalties” and “scientific incentives.”

The company also agreed to pay a $17.3 million criminal penalty, along with a $5.4 million civil settlement to the U.S. Securities and Exchange Commission, and to maintain a compliance program to prevent future misconduct.

The Justice Department said Biomet’s conduct violated the Foreign Corrupt Practices Act, which prohibits bribery of foreign officials. It agreed not to prosecute the company if it abided by the deal for three years.

However, the agreement has since been extended for two successive years as prosecutors have continued to investigate Biomet’s conduct.

The case is USA v. Biomet Inc, U.S. District Court, District of Columbia, No. 12-cr-80.

Reporting By Brendan Pierson in New York; Editing by David Gregorio