Amsterdam-based Koninklijke Philips will pay $62.2 million in a settlement with the Securities and Exchange Commission for alleged violations of the Foreign Corrupt Practices Act (FCPA) resulting from misconduct related to its sales of medical diagnostic equipment in China.
According to the SEC’s order, between 2014 and 2019, employees, distributors, or sub-dealers of Philips’ subsidiaries in China (Philips China) “engaged in improper conduct to influence foreign officials in connection with tender specifications in certain public tenders to increase the likelihood that Philips’ products were selected.”
“In some cases, Philips China’s employees, distributors, or sub-dealers also engaged in improper bidding practices to create the appearance of legitimate public tenders by preparing additional bids with other manufacturers’ products to meet the minimum bids requirement under Chinese public tender rules,” the order stated. “As a result, Philips was unjustly enriched by approximately $41 million.”
With some of these transactions, Philips China “provided special pricing discounts to distributors, which created a corruption risk that the increased margins could be used to fund improper payments to employees of government-owned hospitals,” the order stated.
Additionally, according to the SEC, Philips China had “insufficient internal accounting controls to prevent and detect” such conduct and failed to provide reasonable assurances that certain transactions were recorded accurately in Philips China’s books and records, “which were consolidated into the books and records of Philips. These deficiencies in China also created an environment that facilitated the conduct.”
Philips consented to the SEC order without admitting or denying the findings. The settlement breakdown included approximately $41.1 million in disgorgement; $6 million in prejudgment interest; and a $15 million civil monetary penalty.
The SEC highlighted Philips’ ongoing remediation, which included, in part, improving its policies and procedures; increasing accountability for enforcement of compliance policies by business leaders; terminating or disciplining Philips China employees involved in the conduct; and terminating business relationships with distributors involved in the conduct.
“The company also improved its internal accounting controls relating to distributors, bidding practices, and the use of discounts and special pricing,” the order stated. “Additionally, Philips has revised its compliance training.” 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.