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Biomet Whistleblower Receives $4.5 Million Award

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A former orthopedic surgeon who worked in Brazil received a $4.5 million whistleblower reward for alerting the U.S. Securities and Exchange Commission (SEC) to alleged kickbacks offered by a Zimmer Biomet subsidiary in violation of the Foreign Corrupt Practices Act (FCPA).

Zimmer Biomet is an American medical device manufacturer with headquarters in Indiana. In 2015, Zimmer Holdings purchased Biomet, which led to the creation of Zimmer Biomet. The whistleblower allegations that led to the $4.5 million reward concern misconduct that occurred at Biomet before the Zimmer Holdings acquisition.

While the SEC did not officially identify the company involved or the whistleblower who came forward with the fraud allegations, the Wall Street Journal reported that the allegations involved a Biomet subsidiary. The anonymous whistleblower, who was also a former president of the Brazilian Orthopedic Sports Medicine Society, received the reward roughly two years after Zimmer Biomet agreed to pay more than $30 million to settle parallel SEC and Department of Justice (DOJ) investigations into potential FCPA violations.

Specifically, the investigations found that Biomet interacted and improperly recorded transactions with a known prohibited distributor in Brazil. According to an SEC press release, the company also used a third-party customs broker to pay bribes to Mexican customs officials to facilitate the importation and smuggling of unregistered and mislabeled dental products.

Biomet Paid $30 Million to Resolve FCPA Violation Investigations

Biomet initially entered into a deferred prosecution agreement with DOJ in 2012, agreeing to pay $22 million to settle allegations of bribes made to doctors in China, Argentina, and Brazil. As part of its settlement, the company agreed to retain an independent compliance monitor to review its FCPA compliance program.

In 2013, after the DOJ settlement and as Biomet was implementing recommendations from the compliance monitor, the former orthopedic surgeon whistleblower sent an anonymous email alerting Biomet executives that the company was engaged in a kickback scheme in Brazil. The whistleblower submitted the same information to the SEC within 120 days of the email to Biomet execs.

Biomet conducted an internal investigation based on the whistleblower’s allegations, then submitted a report of the company’s findings to the SEC. In turn, the SEC then opened an investigation into the alleged misconduct.

“Biomet didn’t entirely learn its lesson the first time around as it continued to use a prohibited agent in Brazil and engaged in a new bribery scheme in Mexico,” said Kara Brockmeyer, Chief of the SEC Enforcement Division’s FCPA Unit.

The Zimmer Biomet whistleblower award is the first time a whistleblower received an award under provisions that allow an award where a company self-reports wrongdoing.

“In this case, the whistleblower was credited with the results of the company’s internal investigation, which were reported to the SEC by the company and led to the Commission’s resulting enforcement action and the related action,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower. “The whistleblower gets credit for the company’s internal investigation because the allegations were reported to the Commission within 120 days of the report to the company.”

SEC Issued Around $381 Million in Whistleblower Awards

Since 2012, the SEC has issued approximately $381 million to 62 whistleblowers who were brave enough to come forward with allegations of securities fraud. Whistleblowers who provide original, timely and credible information that results in successful enforcement action from the SEC can be eligible for between 10 and 30 percent of any money the SEC collects when fines issued are more than $1 million.

Securities fraud covers a range of activities that may be carried out by individuals or companies. Among the more common forms of SEC fraud are Ponzi schemes, insider trading, and accounting fraud.

Despite protections such as the Dodd-Frank Act, whistleblowers may still have justifiable concerns about coming forward with information about illegal acts, including securities fraud. The decision to become a whistleblower is a difficult one and often people considering it has questions and concerns about the process.

At Baum Hedlund Aristei & Goldman, our attorneys have extensive experience representing whistleblowers and ensuring their rights are protected throughout the process. We rigorously investigate each case and have a proven track record of success holding companies accountable for committing fraud against the government.



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