Analogic Corporation (NASDAQ:ALOG) and its Danish subsidiary called BK Medical have agreed to a nearly $15 million settlement with U.S. regulators over alleged illicit payments. The settlement ends years of investigations by the U.S. Securities and Exchange Commission and the Department of Justice. Analogic and its subsidiary were accused of violating U.S. Foreign Corrupt Practices Act, which bars U.S. companies from making payments to foreign officials or companies to get or keep business.
Analogic Corporation will be directly responsible for $11.5 million in the settlement while its Danish subsidiary has been fined $3.4 million. The reason Analogic is carrying much of the weight in the non-prosecution settlement is that it failed to maintain proper account controls that would have prevented the abuse.
Payment to Russian distributors
Investigations revealed BK Medical carried out hundreds of sham payments totaling about $20 million. Those payments were made to people in Russian and others to shell companies registered in the British Virgin Islands, Belize, Seychelles and Cyprus. The vast majority of the illicit payments at about $16 million were made to people in Russia.
A statement of facts from the settlement reveals that a Russian distributor would ask BK Medical to raise the sales price of equipment beyond what BK Medical would normally charge for its products. The distributor would then go ahead and pay the inflated price but ask BK Medical to channel the excess funds to third parties that the distributor has selected.
Former CFO fined for cover-up
A former CFO of BK Medical, Lars Frost, agreed to pay a penalty of $20,000 to the SEC to settle charges that he authorized about 150 illicit payments and tried to cover up the scheme by falsifying books and records. Frost neither admitted nor denied the claims.
Past tense
Although it has been slapped with a fine, Analogic Corporation is glad that it has been able to put the matter behind it. The company said that it has put in place financial controls to ensure that a repeat of the violations that have seen it fined millions of dollars doesn’t happen again. Investigations of Analogic and its subsidiary over the illicit payments scheme began in 2011.