Johnson & Johnson Discloses Serious Payment Breaches in Foreign Unit

Johnson & Johnson said Monday evening it has informed the U.S. Department of Justice and the SEC that some of its foreign units likely made improper payments connected with the sale of medical devices in two small-market countries. The statement didn't name the countries nor detail the payments made. Michael Dormer, Worldwide Chairman, Medical Devices & Diagnostics (the unit had $20b in sales last year, over 1/3 of the company's total sales), resigned immediately, saying he bore ultimate responsibility. The company said the improper payments may fall within the jurisdiction of the Foreign Corrupt Practices Act. The 1977 Act forbids American companies to pay foreign government officials to influence business deals outside the U.S. New York Times writes that Morgan Stanley analyst Glenn Reicin said in a research note that the disclosure may help J&J avoid federal enforcement action, and called Dormer's acceptance of responsibility "a very big statement... Since a company that is found guilty of a felony can be barred from Medicare programs, we suspect that J&J management probably had to find a way to make it clear to authorities that this matter is being taken seriously." Nicholas J. Valeriani, a J&J executive with nearly 30 years' experience, takes responsibility for businesses previously under the management oversight of Mr. Dormer.

Sources: J&J Press Release, New York Times, MarketWatch
Commentary: JNJ: Barron's Looks at Wall Street's Most and Least Respected Companies
Stocks/ETFs to watch: Johnson & Johnson (JNJ)
Related: Wikipedia on Foreign Corrupt Practices Act • DOJ's Lay Person's Guide to the FCPA • Lucent fires four executives in China over allegations of bribery

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Comments

[Sr. Pessimist:]

How about the Domestic Corrupt Practices Act, 2007? That would be sweet.

2007 Feb 13 07:47 PM