Source: https://www.scribd.com/doc/80665528/Smith-and-Nephew
Timestamp: 2017-05-23 22:05:03
Document Index: 208368882

Matched Legal Cases: ['§ 371', '§ 78', '§ 7', '§ 2', '§ 18', '§ 2', '§ 3161', '§ 1320', '§ 78', '§ 781', '§ 78', '§ 18', '§\n78', '§ 78', '§ 371', '§ 78', '§ 2', '§ 78', '§ 2', '§ 78']

Smith and Nephew | Corruption | Crime & Justice
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Fraud Section, Suite 4100, Bond Building 1400 New York Avenue, NW Washington, D.C. 20530
Februar i, 2012
Sidley Austin LLP 1501 K Street, N.W. Washington, DC 20005
liS. District &
Angela T. Burgess Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10017
Re: Smith & Nephew, Inc.
Dear Mr. Gerlach and Ms. Burgess:
Courts íortlie District oí
Smith & Nephew, Inc. ("Smith & Nephew"), by its undersigned attorneys, pursuant to
Directors, and the United States Deparent of Justice, Criminal Division, Fraud Section (the "Deparment") enter into this deferred prosecution
authority granted by Smith & Nephew's Board of agreement (the "Agreement"). The terms and conditions of
this Agreement are as follows:
1. Criminal Information and Acceptance of Responsibilty: Smith & Nephew
agrees to waive venue and accepts and acknowledges that the United States will file a three-count criminal Information in the United States Distrct Court for the District of Columbia. The Information charges Smith & Nephew, Inc. with conspiracy to commit an offense against the United States, in violation of is U.S.C. § 371, that is, to violate the Foreign Corrupt Practices Act ("FCPA"), 15 U.S.C. § 78dd-1 et seq. (Count One); one count of violating the FCPA, 15 U.S.C. § 7Sdd-2 and is U.S.C. § 2 (Count Two); and one count of violating the books and
records provisions of
the FCPA, 15 U.S.C. § 18m and is U.S.C. § 2 (Count Three).
a. In so doing, Smith & Nephew knowingly waives its right to indictment on
these charges, as well as all rights to a speedy trial pursuant to the Sixth Amendment to the
United States Constitution, is U.S.C. § 3161, and Federal Rule of addition, Smith & Nephew consents to the filing of
Criminal Procedure 4S(b). In
the Information and the Agreement in the United States District Court for the District of Columbia.
b. Smith & Nephew admits, accepts, and acknowledges that it is responsible
for the acts of its offcers, employees and agents, and wholly-owned subsidiaries, as set fort in the Statement of Facts attached hereto as Attachment A, and incorporated by reference into this Agreement, and that the allegations described in the Information and the facts described in
Attachment A are true and accurate. Should the Department initiate the prosecution that is deferred by this Agreement, Smith & Nephew agrees that neither it nor any Smith & Nephew Facts in subsidiar or affiliate will contest the admissibility of, or contradict, the Statement of any such proceeding, including any guilty plea or sentencing proceeding.
2. Term of the Agreement: This Agreement is effective for a period beginnng on the date on which the Information is fied in the United States District Cour for the District of Columbia and ending three (3) years from that date (the "Term"). However, Smith & Nephew agrees that, in the event that the Deparment determines, in its sole discretion, that Smith & this Agreement, an extension or extensions of provision of Nephew has knowingly violated any the Agreement may be imposed by the Department, in its sole discretion, for up to a the term of total additional time period of one year, without prejudice to the Department's right to proceed as provided in Paragraph 14 below. Any extension of the Agreement extends all terms of this Agreement, including the obligations of corporate compliance monitorship and reporting described in Paragraphs 7-12 below, for an equivalent period. Conversely, in the event the Department finds, in its sole discretion, that there exists a changc in circumstaces sufficient to eliminate the need for reporting and the other provisions of this Agreement have been satisfied,
the Agreement may be terminated early.
3. Relevant Considerations: The Deparent enters into this Agreement based on
the individual facts and circumstances presented by this case and Smith & Nephew. Among the facts considered were the following:
a. Smith & Nephew investigated and disclosed to the Deparent and the United States Securities and Exchange Commission (the "SEC") the misconduct described in the Facts; Information and Statement of
b. Smith & Nephew reported its findings to the Deparment and the SEC;
c. Smith & Nephew cooperated fully with the Deparment's investigation of
ths matter, as well as the SEC's investigation;
d. Smith & Nephew undertook remedial measures, including the
implementation of an enhanced compliance program and agreed to undertake fuer remedial
measures as contemplated by this Agreement;
e. Smith & Nephew agreed to continue to cooperate with the Department in the conduct of Smith & Nephew and its directors, officers, employees, agents, consultants, subsidiaries, contractors, and subcontractors relating to violations of the FCPA;
any investigation of
f. Smith & Nephew has cooperated and agreed to continue to cooperate with
the SEC and, at the direction of the Deparent, foreign authorities investigating the conduct of
Smith & Nephew and its directors, officers, employees, agents, consultants, subsidiaries, contractors, and subcontractors relating to corrpt payments;
g. Smith & Nephew has cooperated and agreed to continue to cooperate with the Deparment in the Department's investigations of other companies and individuals in
coniection with business practices overseas in various markets; and
h. Were the Department to initiate a prosecution of Smith & Nephew and
obtain a conviction, instead of entering into this Agreement to defer prosecution, Smith & Nephew would potentially be subj ect to exclusion from paricipation in federal health care programs pursuantto 42 CS.C. § 1320a-7(a).
this Agreement, Smith & Nephew shall continue to cooperate fully with the Deparment in any and all matters relating to corrpt
4. Cooperation: During the term of payments, related false books and records, and inadequate internal controls. At the request of
the Department, Smith & Nephew shall also cooperate fully with such other domestic or foreign law enforcement authorities and agencies, as well as the multilateral development bans ("MDBs"), in any investigation of Smith & Nephew or any of its present and former directors, officers,
employees, agents, consultants, contractors, and subcontractors, or any other par, in any and all matters relating to corrpt payments, related false books and records, and inadequate internal
controls, in such marer as the paries may agree. Smith & Nephew agrees that its cooperation
a. Smith & Nephew shall truthfully disclose all factual information not protected by a valid claim of attorney-client privilege or work product doctrine with respect to its
acti vilies and those of its present and f0l111er subsidiaries and afliates, and the directors,
offcers, employees, agents, subsidiaries, consultants, contractors, and subcontractors thereof, concernng all matters relating to corrupt payments, related. false books and records, and inadequate internal controls about which Smith & Nephew has any knowledge or about which
the Deparment may inquire. This obligation of truthful disclosure includes the obligation of
Smith & Nephew to provide to the Dcparmcnt, upon rcqucst, any non-privilcgcd document, record ,or other tangible evidence relating to such corrupt payments, false books and records, and inadequate internal controls about which the Deparment may inquire of Smith & Nephew.
the Deparent, with respect to any issue relevant to its
investigation of corrpt payments, related false books and records, and inadequate internal
controls in coniection with the operations of Smith & Nephew, Smith & Nephew shall designate knowledgeable employees, agents, or attorneys to provide the Deparment with the information and materials described in Paragraph 4(a) above, on behalf of Smith & Nephew. It is further understood that Smith & Nephew must at all times provide complete, truthful, and accurate information.
corrupt payments, related false books and records, and inadequate internal controls in connection with the operations of Smith & Nephew or any of its present or former subsidiaries or affliates, Smith & Nephew shall use its best efforts to make available for intervews or testimony, as requested by the Department, present or former directors, officers, employees, agents, and consultants of Smith & Nephew as well as directors, officers, employees, agents, and consultants of contractors and subcontractors. This includes, but is not limited to, sworn testimony before a law enforcement federal grand jury or in federal trials, as well as interviews with federal authorities. Cooperation under this Paragraph will include identification of witnesses who, to the knowledge of Smith & Nephew, may have material information regarding the matters under investigation.
d. With respect to any information, testimony, documents, records, or other
tangible evidence provided to the Deparment pursuant to this Agreement, Smith & Nephew
consents to any and all disclosures, subject to applicable law and regulations, to other governental authorities. including United Slates authorilies anù lhose of a foreign government, and the MDBs, of such materials as the Deparment, in its sole discretion, shall deem appropriate.
Monetary Penalty: The Deparment and Smith & Nephew agree that the United States Sentencing Guidelines ("USSG" or "Sentencing Guidelines") to application of determine the applicable fine range yields the following analysis:
5. Payment of
a. Base Offense. Based upon USSG 2Cl., the total offense level is 32, calculated as follows:
2Cl.(b)(1) 2Cl.(b)(2)
Base Offense Level More than one bribe Value of benefit received between $2.5-7 milion
b. Base Fine. Based upon USSG § SC2.4(a)(1) and (d), the base fine is
$17,500,000 (the fine indicated in the Offense Level Fine Table ($17,500,000) is used where such number is greater than the pecuniary gain to the organization from the offense (approximately $4,000,000)).
c. Culpability Score. Based upon DSSG § SC2.5, the culpability score is 6, calculated as follows:
Base Culpability Score
(b)(l) Unit of
the organization had 200 or more employees and
parcipated in, condoned, or was willfully ignorant of
offense +3
an individual within high-level personnel of
(g)(l) The organzation, prior to an imminent
threat of disclosure or govermnent investigation, withi a reasonably prompt time after becoming aware of the offense, reported the offense, fully cooperated, and clearly demonstrated recognition and affirmative acceptance of
responsibility for its criminal conduct; -2
TOTAL CULPABILITY SCORE
d. Calculation of Fine Range.
1.2 (minimum)/2.4 (maximum) $21,000,000-42,000,000
Smith & Nephew agrees to pay a monetar penalty in the amount of $16,800,000, a 20 percent
reduction off the bottom ofthe fine range. Smith & Nephew and the Deparent agree that this fine is appropriate given Smith & Nephew's internal investigation, the natue and extent of Smith
& Nephew's cooperation in this matter, and Smith & Nephew's extensive remediation. Smith &
Nephew and the Deparment agree that Smith & Nephew will pay this $16,800,000 monetary
penalty within ten days of the execution of this agreement. The $16,800,000 penalty is final and shall not be refunded. Furhermore, nothing in this Agreement shall be deemed an agreement by
the Deparment that the $ 1 6,800,000 amount is the maximum penalty that may be imposed in any
futue prosecution, and the Department is not precluded from arguing that the Cour should impose a higher fine, although the Deparment agrees that under those circumstances, it wil
recommend to the Cour that the amount paid under this Agreement should be offset against any fine the Cour imposes as par of a future judgment. Smith & Nephew acknowledges that no tax deduction may be sought in connection with the payment of any par of ths $16,800,000 penalty.
6. Conditional Release from Criminal Liabilty: In retun for the full and truthfu
cooperation of Smith & Nephew, and its compliance with the terms and conditions of this Agreement, the Department agrees not to use any infonnation related to the conduct described in the attached Statement of Facts against Smith & Nephew or any of its wholly-owned or controlled subsidiaries in any criminal or civil case, except: (a) in a prosecution for perjur or obstrction of justice; (b) in a prosecution for making a false statement; (c) in a prosecution or other proceeding relating to any crime of violence; or (d) in a prosecution or other proceeding relating to a violation of any provision of Title 26 of the United States Code. In adcltion, the
Deparment agrees, except as provided herein, that it will not bring any criminal or civil case against Smith & Nephew related to the conduct of present and former directors, offcers, employees, agents, consultants, contractors, and subcontractors, as described in the attachcd
Facts, or relating to information Smith & Nephew disclosed to the Departent prior
to the date on which this Agreement was signed.
corrupt payments, false books and records, or inadequate internal controls issues, if any, by Smith & Nephew in the futue.
b. In addition, this Paragraph does not provide any protection against
prosecution for any corrupt payments, false books and records, or inadequate internal controls
issues in the past which are not described in the attached Statement of Facts or were not disclosed to the Deparment prior to the date on which this Agreement was signed. In addition,
this Paragraph does not provide any protection against criminal prosecution of any present or former director, offcer, employee, shareholder, agent, or consultant of Smith & Nephew for any violations committed by them.
7. Corporate Compliance Program: Smith & Nephew represents that it has implemented and will continue to implement and maintain a compliance and ethics program the FCPA and other applicable anticorruption laws designed to prevent and detect violations of throughout its operations, including those of its affiliates, j oint ventures, contractors, and subcontractors, with responsibilities that include interactions with foreign officials or other highrisk activities. Implementation of these policies and procedures shall not be construed in any future enforcement proceeding as providing immunity or amnesty for any crimes not disclosed to the Deparent as of the date of signing this Agreement for which Smith & Nephew would otherwise be responsible.
8. Corporate Monitor: Smith & l\ephew agrees to engage an independent
corporate compliance monitor ("the Monitor") within ninety (90) calendar days of signing this Agreement. Within thirty (30) calendar days after the signing of this Agreement, and after
consultation with the Department, Smith & Nephew will recommend to the Deparent three
qualified Monitor candidates. The Monitor shall have, at a minimum, the following qualifications:
a. demonstrated expertise with respect to the FCP A, including
experience counseling on FCP A issues;
b. experience designing and/or reviewing corporate compliance
policies, procedures, and internal controls, including FCPA-specific policies, procedures, and
c. the ability to access and deploy resources as necessar to discharge
the Monitor's duties as described in the Agreement; and
d. suffcient independence from Smith & Nephew to ensure effective
and imparial performance of the Monitor's duties as described in this Agreement.
9. The Deparment retains the right, in its sole discretion, to accept or reject any Monitor candidate proposed by Smith & Nephew pursuant to the Agreement. In the event the
Deparment rejects a proposed Monitor, Smith & Nephew shall propose another candidate within
ten (10) calendar days after receiving notice of the rejection. This process shall continue until a Monitor acceptable to both paries is chosen. The Deparent may also propose the names of qualified Monitor candidates for consideration. The term of the monitorship, as set forth in Attachment D, shal commence upon the Deparment's acceptance of a Monitor candidate proposed by Smith & Nephew.
eighteen (18) months from the date the Monitor is selected. The term of including the circumstances that may support an extension of
10. The Monitor wil be retained by Smith & Nephew for a period of not less than the monitorship,
the term, as well as the Monitor's powers; duties, and responsibilities wil be as set fort in Attachment D. Smith & Nephew may not employ or be affiliated with the Monitor for a period of not less than one year from the date of the lermination of the monitorship.
the monitorship, provided all requirements set forth in Paragraph 8 Attachment D are met, Smith & Nephew will report on its compliance to the Department as
Ii. At the end of
set forth in Paragraph 12 below for the remainder of the term of this Agreement.
12. Corporate Compliance Reporting: Smith & Nephew agrees that, following the monitorship, it wil report to the Deparment periodically, at no less than six-month intervals, for the remainder of this Agreement, regarding remediation and implementation of the enhanced
compliance measures set forth by the monitor as described in Paragraph 8 of Attachment D.
Smith & Nephew shall designate a senior company offcer as the person responsible for overseeing Smith & Nephew's corporate compliance reporting obligations. Should Smith & Nephew discover credible evidence that questionable or corrupt payments or questionable or corrupt transfers of propert or interests may have been offered, promised, paid, or authorized by any Smith & Nephew entity or person, or any entity or person working directly for Smith & Nephew, or that related false books and records have been maintained, Smith & Nephew shall
promptly report such conduct to the Deparment. During this period, Smith & Nephew shall
conduct and prepare at least thee follow-up reviews and reports, as described below:
a. Smith & Nephew shall undertake follow-up reviews at six-month intervals, each incorporating the Department's views and comments on Smith & Nephew's prior
reviews and reports, to fuher monitor and assess whether the policies and procedures of Smith
& Nephew are reasonably designed to detect and prevent violations ofthe FCPA and other
applicable anticorrption laws. Reports shall be transmitted to Deputy Chief - FCP A Unit, Fraud
Section, Criminal Division, U.S. Deparment ofJustice, 10th and Constitution Ave., N.W., Bond
Building, Fourth Floor, Washington, D.C. 20530.
b. The first follow-up review and report shall be completed by no later than
i 80 calendar days afer the approval of the enhanced compliance measures described in
Paragraph 8 of Attachment D by the Deparment. Subsequent follow-up reviews and reports
shall be completed by no later than i 80 calendar days after the completion ofthe preceding
c. Smith & Nephew may extend the time period for submission of any of follow-up reports with prior written approval of
the Deparment.
13. Deferred Prosecution: In consideration of: (a) the past and futue cooperation of
Smith & Nephew described in Paragraph 4 above; (b) Smith & Nephew's payment ofa monetar
penalty of$16,800,OOO; and (c) Smith & Nephew's implementation and maintenance of
measures, the Deparment agrees that any prosecution of Smith & Nephew for the conduct set
the Deparent, prior to the signing of
Facts, and for the conduct that Smith & Nephew disclosed to this Agreement, be and hereby is deferred for the Term of this Agreement. The Deparent further agrees that if Smith & Nephew fully complies with all of its obligations under this Agreement, the Department wil not continue the criminal
fort in the attached Statement of
prosecution against Smith & Nephew described in Paragraph i and, after the Term, this Agreement shall expire and the Deparent shall seek move to dismissal with prejudice of the
criminal Information filed against Smith & Nephew.
14. Breach of the Agreement: If, during thc Tcrm of
ths Agrecmcnt, thc
Deparment determines, in its sole discretion, that Smith & Nephew has: (a) committed any
felony under federallawl subsequent to the signing of this Agreement; (b) at any time, provided deliberately false, incomplete or misleading information; or (c) otherwise breached the Agreement, Smith & Nephew shall thereafter be subject to prosecution for any federal criminal violation of which the Department has knowledge, including the charges in the Information,
which may be pursued by the Deparent in the U.S. District Court for the District of Columbia.
Any such prosecutions may be premised on information provided by Smith & Nephew. Any
such prosecution that is not time-bared by the applicable statute of limitations on the date of the
signing of this Agreement may be commenced against Smith & Nephew notwithstanding the expiration of the statute of limitations between the signing of this Agreement and the expiration of the Term plus one year. Thus, by signing this Agreement, Smith & Nephew agrees that the statute of limitations with respect to any prosecution that is not time-barred on the date of this Agreement shall be tolled for the Term plus one year.
The filing or unsealing ofa qui tam action shall not, by itself, constitute a breach of
15. In the event that the Deparment determines that Smith & Nephew has breached
this Agreement, the Deparment agrees to provide Smith & Nephew with written notice of such breach prior to instituting any prosecution resulting from such breach. Smith & Nephew shall, within thirty (30) days of receipt of such notice, have the opportunity to respond to the Department in writing to explain the nature and circumstances of such breach, as well as the actions Smith & Nephew has undertaken to address and remediate the situation, which explanation the Deparment shall consider in determining whether to institute a prosecution.
16. In the event that the Deparment determines that Smith & Nephew has breached
a. All statements made by or on behalf of Smith & Nephew to the
Department or to the Court, including the attached Statement of Facts, and any testimony given by Smith & Nephew before a grand jur or any tribunal, at any legislative hearings whether prior or subsequent to this Agreement, or any leads derived from such statements or testimony, shall be admissible in evidence in any and all criminal proceedings brought by the Department against Smith & Nephew; and
b. Smith & Nephew shall not assert any claim under the United States the Federal Rules of Criminal Procedure, Rule 410 of the Federal Constitution, Rule 1 l(t) of Rules of Evidence, or any other federal rule, that statements made by or on behalf of Smith & Nephew prior or subsequent to this Agreement, and any leads derived therefrom, should be suppressed. The decision whether conduct or statements of any curent director or employee, or any person acting on behalf of, or at the direction of, Smith & 'Jephew, will be imputed to Smith & Nephew for the purose of determining whether Smith & Nephew has violated any provision
oflhis Agreement shall be in the sole discretion of
the Depattment.
17. Smith & Nephew acknowledges that the Deparent has made no representations,
assurances, or promises concerning what sentence may be imposed by the Cour if Smith & Nephew breaches this Agreement and this matter proceeds to judgment. Smith & Nephew furthcr acknowledges that any such sentence is solely within the discretion of thc Cour and that nothing in this Agreement binds or restricts the Cour in the exercise of such discretion.
18. Sale or Merger: Smith & Nephew agrees that in the event it sells, merges, or
transfers all or substantially all of its business operations as they exist as of the date of this Agreement, whether such sale is structured as a stock or asset sale, merger, or transfer, it shall include in any contract for sale, merger, or transfer a provision binding the purchaser, or any successor in interest thereto, to the obligations described in this Agreement.
19. Public Statements by Smith & Nephew: Smith & Nephew expressly agrees that
it shall not, through present or future attorneys, directors, officers, employees, agents, or any other person authorized to speak for Smith & Nephew make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by Smith & Nephew set fort above or
the facts described in the attached Statement of
Facts. Any such contradictory statement shall, this Agreement subject to cure rights of Smith & Nephew described below, constitute a breach of and Smith & Nephew thereafter shall bc subjcct to prosecution as set forth in Paragraphs 14- 1 6 of this Agreement. The decision whether any public statement by any such person contradicting Facts wil be imputed to Smith & Nephew for the purpose of a fact contained in the Statement of determining whether they have breached this Agreement shall be at the sole discretion of the Deparment. If the Deparent determines that a public statement by any such person contradicts
in whole or in part a statement contained in the Statement of Facts, the Deparent shall so
notify Smith & Nephew, and Smith & Nephew may avoid a breach of
this Agreement by publicly repudiating such statement(s) within five business days after notification. Consistent with the obligations of Smith & Nephew as set forth above, Smith & Nephew shall be permitted to raise defenses and to assert affirmative claims in civil and regulatory proceedings relating to the not apply to any statement made Facts. This Paragraph does matters set forth in the Statement of by any present or former employee of Smith & Nephew in the course of any criminal, regulatory, or civil case initiated against such individual, uness such individual is then specifically authorized to speak on behalf of Smith & Nephew.
20. Smith & Nephew agrees that if it or any of its direct or indirect affliates or subsidiaries issues a press release or holds any press conference in connection with this Agreement, Smith & Nephew shall first consult the Deparment to determine: (a) whether the release or proposed statements at the press conference are true and accurate with respect to
matters between the Deparment and Smith and Nephew; and (b) whether the Deparent has no
objection to the release.
2 i. The Department agrees to bring to the attention of goverilental and other
aulhorities the facts and circUlistances relating to the nature of
the conduct underlying this
Agreement, including the nature and quality of Smith & Nephew's cooperation and remediation, if requested by Smith & Nephew to do so. By agreeing to provide this information, the
Deparent is not agreeing to advocate on behalf of Smith & Nephew, but rather is providing facts to be evaluated independently by the authorities.
22. Limitations on Binding Effect of Agreement: This Agreement is binding on
Smith & Nephew and the Departent but specifically does not bind any other federal agencies,
or any state, local, or foreign law enforcement or regulatory agencies, although the Deparment
will bring the cooperation of Smith & Nephew and its compliance with its other obligations under this Agreement to the attention of such agencies and authorities if requested to do so by Smith & Nephew.
23. Complete Àgreement: This Agreement sets forth all the terms of the Deferred
Prosecution Agreement between Smith & Nephew and the Deparment. No amendments,
modifications, or additions to this Agreement shall be valid uuless they are in writing and signed
Deparment and a duly authorized representative of Smith & Nephew.
24. Notice: Any notice to the Deparment under this Agreement shall be given by
personal delivery, overnight delivery by a recognized delivery service, or registered or certified
mail, in each case, for the Deparent, addressed to Deputy Chief - FCP A Unit, Fraud Section,
Crimial Division, U.S. Deparent of Justice, Fourth Floor, 1400 New York Avenue, N.W.,
Washington, D.C. 20005. Any notic.e to Smith & Nephew under this agreement shall be given by personal delivery, overnight delivery by a recognized delivery service, or registered or certified mail, addressed to Jean Mercer, Associate General Counsel, Smith & Nephew, Inc., 7135 Goodlett Farms Parkway, Cordova, Tennessee, 38016. Notice shall be effective upon actual
receipt by the Deparment or Smith & Nephew.
FOR Smith & Nephew, Inc.:
!ùv~
Sidley Austin LLP Counsel for Smith & Nephew, Inc.
~_ ~.i~I'~~a/¿ LA T. BURGESS Davis Polk & Wardwell LLP
Counsel for Smith & Nephew, Inc.
JOHN W. CAMPO, JR.
:J~U ~c
Executive Vice President and General COW1Sc!
BY:'~~
Deputy Chief, Fraud Section
CHAES E. DUROSS
Trial Attorney, Fraud Section Criminal Division United States Department of Justice 1400 New York Avenue, NW Washington, D.C. 20530 (202) 305-7413
Filed at Washington, D.C., on this3'J. day of
I have read this Agrccmcnt and carefully reviewed every par of it with counsel for Smith this Agreement and voluntarily & Nephew, Inc. ("Smith & Nephew"). I understand the tenns of agree, on behalf of Smith & Nephew, to each of its terms. Before signng this Agreement, I the rights of consulted with outside counsel for Smith & Nephew. Counsel fully advised me of Smith & Nephew, of possible defenses, of the Sentencing Guidelines' provisions, and of the
consequences of entering into this Agreement.
Directors of Smith & I have carefuly reviewed this Agreement with the Board of Nephew. I have advised, and caused outside counsel for Smith & Nephew to advise, that Board of Directors fully of the rights of Smith & Nephew, of possible defenses and of the consequences of entering into the Agreement.
No promises or inducements have been made other than those contained in this Agreement. Furhermore, no one has threatened or forced me, or to my knowledge any person
authorizing this Agreement on behalf of Smith & Nephew, in any way to enter into ths Agreement. I am also satisfied with the attorney's representation in this matter. I certify that I
am an officer of Smith & Nephew and that I have been duly authorized by Smith & Nephew to execute this Agreement on behalf of Smith & Nephew.
Date: t;bri "OJ,3 ,2012
By: :CkW~~
JOHN W. CAMPO, .
Executive Vice President and General Counsel Smith & Nephew, Inc.
I am counsel for Smith & Nephew, Inc. ("Smith & Nephew") in the matter covered by this Agreement. In connection with such representation, I have examined relevant Smith & Nephew documents and have discussed this Agreement with Smith & Nephew Board of Directors. Based on my review of the foregoing materials and discussions, I am of the opirlon that: the representative of Smith & Nephew has been duly authorized to enter into this Agreement on behalf of Smith & Nephew and that this Agreement has been duly and validly authorized, executed, and delivered on behalf of Smith & Nephew and is a valid and binding obligation of Smith & Nephew. Further, I have carefully reviewed ths Agreement with the Board of Directors and General Counsel of Smith & Nephew. I have fully advised them ofthe the Sentencing Guidelines' provisions and of rights of Smith & Nephew, of possible defenses, of the consequences of entering into this Agreement. To my knowledge, the decision of Smith & Nephew to enter into this Agreement is an informed and voluntar one.
Date: J;'hD.)CU'jO ,2012
Paul Gerlach Sidley Austin LLP
¡¿ý~
CÄil ~i.~aQ
;Angei~. Burgess
Davis Polk & Wardwell LLP Counsel for Smith & Nephew, Inc.
The following Statement of Facts is incorporated by reference as par of the Deferred
Prosecution Agreement (the "Agreement") between the United States Deparent of Justice, Criminal Division, Fraud Section (the "Deparent") and Smith & Nephew, Inc. ("Smith &
Nephew") and the paities hereby agree and stipulate that the following information is true and the Agreement, Smith & Nephew accepts and accurate. As set forth in Paragraph i of acknowledges that it is responsible for the acts of its officers, employees, and agents that are set forth below.
Should the Departent initiate the prosecution that is deferred by thi s Agreement, Smith
& Nephew agrees that it will neither contest the admissibilty of, nor contradict, this Statement of Facts in aiiy such proceeding.
i. The Foreign Corrupt Practices Act ofl977 ("FCP A"), as amended, Title 15,
United States Code, Sections 78dd-l, et seq., was enacted by Congress for the purpose of, among other things, making it unlawfl for certain classes of persons and entities to act corruptly in
furtherance of an offer, promise, authorization, or payment of money or anything of value to a
foreign goverrent offcial for thepurose of securing any improper advantage, or of obtaining
or retaining business for, or directing business to, any person. The FCP A also requires that any
issuer of securities shall make and keep books, records, and accounts, which, in reasonable detail,
accurately and fairly reflect the traiisactions aiid dispositions ofthe assets of
2. Greece has a national healthcare system wherein most Greek hospitals are publicly
owned and operated. Health care providers who work at publicly-owned hospitals ("HCPs") are
govenunent employees, providing health care services in their official capacities. Therefore, such HCPs in Greece are "foreign officials" as that term is defined in the FCPA, 15 U.S.C. § 78dd-2(h)(2)(A).
3. Smith & Nephew, pic ("PLC") was incorporated in England and Wales and had
business in the United Kingdom. It issued and maintained a class of the Securities Exchaiige Act of publicly-traded securities registered pursuant to Section 12(b) of 1934 (15 U.S.C. § 781), which traded on the New York Stock Exchange. As such, it was required to fie periodic reports with the United States Securities and Exchange Commission
its principal place of under Section 13 of "issuer" within the meaning of
the Securties Exchange Act (15 U.S.C. § 78m). Accordingly, PLC was an
the FCPA, 15 U.S.C. § 18dd-1(a). By virtue of its status as an issuer, PLC was required to make and keep books, records, and accounts which, in reasonable
detail, accurately and fairly reflected the transactions and disposition of assets of PLC and its subsidiaries, including those described below, which were incorporated into the books, records, and accounts ofPLC.
4. Defendant Smith & Nephew, Inc. ("S&N"), a wholly-owned subsidiar ofPLC,
together with related companies, was a global manufacturer and supplier of ortopedic medical devices. S&N was incorporated in Delaware and headquarered in Memphis, Tennessee, and, through related companies and subsidiaries, maintained operations in a number of foreign countries. S&N was a "domestic concern" as that term is defined in the FCPA, 15 U.S.C. §
78dd-2(h)(1 )(B).
5. Smith & Nephew Orthopaedics GmbH ("GmbH."), is a German corporation
headquarered in Tuttlingen, Germany and reporting to S&N. GmbH operated a factory and sold its products through a distributor in Greece.
6. "Greek Distributor," based in Athens, Greece, was an agent and distributor for
S&N and GmbH in Greece.
7. "VP International," a U.S. citizen, was Vice President for International Sales for
S&N until May 2004 and was based in Memphis, Tennessee.
8. "Greece Sales Manager," a U.S. citizen, oversaw S&N sales in Greece until
September 2003 and was based in Memphis, Tennessee.
9. "Legal Advisor," a U:S. citizen, was Senior Corporate Counsel for S&N and was
10. Until in or around late 1997, S&N and GmbH had standard relationships with the
Greek Distributor's entities in which they sold products at a discount to the "list" price and the
Greek Distributor would re-sell to Greek HCPs and governent hospitals at a profit. The
arrangement provided that S&N and GmbH would cover marketing expenses for Greek Distributor, up to ten percent of sales.
11. Beginning in or around 1998, S&N and GmbH had various "marketing"
arrangements with two offshore shell companies controlled by Greek Distributor, which provided that a percentage of sales made by Greek Distributor would be paid to the shell companies. Arrangements with a third offshore shell company provided for increased discounts to generate cash for improper purposes. No true services were provided in exchange for these payments and discounts. S&N and GmhH maintained these relationships with Greek Distributor and his companes until in or around December 2007.
12. In January 1998, GmbH signed a contract for "marketing services" with a shell company incorporated in the United Kingdom that was owned by Greek Distributor. The shell company did not perform any services and was paid approximately 40 percent of the sales made
to Greek HCPs by Greek Distributor.
13. In or around May 1998, Greek Distributor met with Greek Sales Manager and
S&N's Vice President for Marketing, and recommended that S&N also sign a contract for "marketing services" with an offshore shell company controlled by Greek Distributor.
14. In or around October 1998, an S&N executive in Memphis signed a contract for
"marketing services" with a shell company ("Shell Company A") incorporated in the Isle of Man that was owned by Greek Distributor. Shell Company A did not perform any true services and the sales to Greek HCPs made by Greek Distributor. was paid between 25 and 35 percent of
15. In or around late fall 1999, the S&N Chief Financial Offcer raised with S&N
Legal questions from internal auditors about the payments to the Greek Distributor's shell compames.
16. On or around November 9,1999, Greece Sales Manager met with Legal Advisor
to discuss issues with GmbH's relationship with Greek Distributor, during which the fact that surgeons in Greece were being paid to use medical devices products was discussed; notes from
the meeting include reference to the fact that such payments were "not legal or ethic( aIJ."
1 7. On or around November 17, 1999, Legal Advisor spoke with an employee of
GmBH, notes from the cali reflect that GmBH pays "promotion support," stating that it is the "same as Memphis (S&NJ."
1 8. Also on or around November 17, 1999, Legal Advisor briefed a more senior S&N
lawyer on the issue; notes from the meeting reflect that they discussed the fact that Greek Distributor was receiving "promotion support" from GmbH and that S&N was doing the same thing, but no services were received in exchange.
19. In or around January 2001, S&N renewed the contract with the Shell Company A
purortedly to provide "marketing services" when in reality it was to provide bribes to Greek HCPs.
20. In or around Februar 2002, Greek Distributor traveled to Memphis, Tennessee
and met with VP International and others regarding reductions in Greek governent
reimbursement rates for S&N products sold by Greek Distributor; during the meeting, Greek discount to Greek Distributor be increased to account for the Distributor proposed that the reimbursement reduction, without any reduction in the "marketing" payments to Shell Company
21. On or around Februar 23,2002, VP International sent an email from Memphis,
Tennessee to Greek Distributor, proposing that ile "marketing" payments to Shell Company A should also be reduced.
22. On or around March 8, 2002, Greek Distributor sent an email from Athens to VP International in Memphis, Tennessee, copying Greece Sales Manager, stating, "the (Shell Company A J commission canot be reduced for the time being, since it is already not sufficient to cover my company's cash incentive requirements at the current market level, with major
competitors paying 30-40% more than (Greek Distributor). As I explained to you in Memphis (as well as during your last visit to Athens) I absolutely need this fud to promote my sales with surgeons, at a time when competition offers substantially higher rates. (Shell Company AJ's only reason for being is the need for cash incentives, a real pain in the neck but an unavoidable fact of Greek life;" Greek Distributor goes on to state, "In case it is not clear to you, please understand
that I am paying cash incentives right after each surgery.. .." (Emphasis in originaL.)
23. In or around mid-2002, Greek Distributor and S&N agreed on an eight percent
reduction in price on some products sold to Greek Distributor, with no reduction in "marketing"
payments to Shell Company A.
24. In or around Januar 2003, the contract with Shell Company A was terminated
and VP International in Memphis signed a new "marketing services" contract with a new shell company ("Shell Company B"), which was owned by Greek Distributor with which GmbH had a contract; although the contract stated that the shell company would charge based on a fee system, the invoices were still based on a percentage of sales by Greek Distributor of approximately 26 percent.
25. In or around mid-2004, internal auditors asked VP International about the
payments to Shell Company A and Shell Company B due to an investigation into GmbH
payments by fOlCign authoritics.
26. On or around May 28,2004, VP International
left S&N.
27. On or around Janua i, 2005, S&N entered into a "distribution" contract with a different shell company, incorporated in the United Kingdom, which was owned by Greek Distributor ("Shell Company C"). Shell Company C did not perform any true services.but was a
pass-though for Greek Distrbutor. Shell Company C received a 35 percent discount off
purchases of S&N orthopedic products sold in Greece, which Greek Distributor used to fud bribe payments to Greek HCPs.
28. In or around December 2004, GmbH terminated its relationships with Greek Distributor and related companies.
2005, Greek Distributor contacted S&N about a reduction in 29. In or around April reimbursement rates by the Greek government; S&N requested a marketing plan from Greek Distributor to justifY furter discounts to Shell Company C.
30. In or around May 2005, Greek Distributor met with an S&N representative, who
informed Greek Distributor that it could not make payments to doctors, and that Greek Distributor would need to produce a marketing plan; no further steps were taken to ensure that Greek Distributor was not paying Greek HCPs.
31. In or around mid-February 2007, in connection with the acquisition of a company
as a new subsidiary of S&N's operations in Greece, an employee of Greek Distributor stated to an S&N employee that Greek Distributor was paying "incentives" to doctors and that the newly acquired company paid even higher incentives to Greek HCPs for purchasing medical products.
the acquisition of 32. In or around June 2007, subsequent to completion of the company, Greek Distributor again noted to an S&N employee that he paid Greek Reps for' purchasing S&N's products, but that he paid them at a lower rate than the Greek subsidiar of the newly-acquired company.
33. In or around December 2007, the contract between S&N and Shell Company C
expired; however, S&N continued to sell products to Greek Distributor.
34. In or around June 2008, S&N tem1Inated all relationships with Greek Distributor
35. From in or around 1998 through in or around at least June 2008, in thc District of the District of Columbia and elsewhere, at the end of each of PLC's fiscal years, the books and
records of S&N contained false characterizations of payments made to Greek Distributor to fud bribes paid to publicly employed Greek HCPs as "marketing services," as well as false characterizations of "discounts" given to Greek Distributor, and those books and records were preparing PLC's year-end incorporated into the books and records ofPLC for purposes of financial statements, which were filed with the Securities and Exchange Commission in Washington, D.C.
ATTACHMNTB
WHEREAS, Smith & Nephew, Inc. ("Smith & Nephew" or, the "Company") has been engaged in discussions with the United States Deparent of Justice, Criminal Division, Fraud Section (the "Deparment") in connection with issues arsing in relation to certain corrpt payments to foreign officials to obtan and retain business for Smith & Nephew; and
WHEREAS, in order to resolve such discussions, it is proposed that the Company enter
into a certain agreement with the Deparent; and
WHEREAS the Company's General Counsel, together with outside counsel for the Company, have advised the Board of Directors of the Company's rights, possible defenses, the Sentencing Guidelines' provisions, and the consequences of entering into such agreement with
the Deparent;
Therefore, this Board hereby RESOLVES that:
1. The Company (a) consents to the fiing in the United States Distrct Cour for the District of Columbia of an Information charging Smith & Nephew, Inc. with conspiracy to commit an offense against the United States, namely, to violate the Foreign Corrpt Practices Act bribes, in ("FCPA") (15 U.S.C. § 78dd-1 et seq.), in violation of 18 U.S.C. § 371; the payment of the books violation of 15 U.S.C. § 78dd-2 and 18 U.S.C. § 2 (Count Two); and falsification of and records of an issuer, 15 U.S.C. § 78m and 18 U.S.C. § 2 (Count Thee); (b) waives
indictment on such chages and enters into a Deferred Prosecution Agreement with the Deparent; and (c) agrees to accept a monetar penalty against Smith & Nephew of
$16,800,000, and to pay $16,800,000 to the United States Treasur with respect to the conduct described in the Information and the Statement of Facts.
directed, on behalf of
the Company, to execute the Deferred Prosecution Agreement substantially
in such form as reviewed by this Board of Directors at this meeting with such changes as the General Counsel, or his delegate, may approve;
directed to take any and all actions as may be necessar or appropriate, and to approve the forms,
terms, or provisions of any agreement or other documents as may be necessar or appropriate to
car out and effectuate the purose and intent of the foregoing resolutions; and
have been 4. AJI of the actions of the General Counsel, which actions would authorized by the foregoing resolutions except that such actions were taen prior to the adoption of such resolutions, are hereby severally ratified, confrred, approved, and adopted as actions on
the Company. '"
Date~~~ :3 ,2012
Smi' Nephew, Inc.
Jean e cer, Assistant Secreta Bo d 0 Directors
CORPORATE COMPLIANCE PROGRA
In order to address deficiencies in its internal controls, policies, and procedures regarding compliance with the Foreign Corrupt Practices Act ("FCPA"), 15 US.C. §§ 78dd-l, et seq., and other applicable anti-corrption laws, Smith & Nephew, Inc. and its subsidiaries (collectively, "Smith & Nephew") agree lo continue to conduct, in a maimer consistent with all of its obligations under this Agreement, appropriate reviews of its existing internal controls, policies,
Where necessary and appropriate, Smith & Nephew agrees to adopt new or to modifY
existing internal controls, policics, and proccdurcs in order to ensure that it maintains: (a) a
system of internal accounting controls designed to ensure that Smith & Nephew makes and keeps fair and accurate books, records, and accounts; and (b) a rigorous anti-corruption compliance code, standards, and procedures designed to detect and deter violations of the FCP A and other applicable anti-corruption laws. At a minimum, this should include, but not be limited to, the following elements to the extent they are not already par of the company's existing internal controls, policies, and procedures:
1. Smith & Nephew wil develop and promulgate a clearly ariculated and visible corporate policy against violations of the FCP A, including its anti-bribery, books and records, and internal controls provisions, and other applicable counterparts (collectively, the "anticorrption laws,"), including strong, explicit, and visible support and commitment from senior
management to the program.
2. Smith & Nephew will develop and promulgate compliance standards and
the anti-corruption laws and Smith & Nephew's compliance code and wil take appropriate measUIes to encourage and support the observance of ethics and compliance standards and procedures against foreign bribery at all the company. These standards and procedures shall apply to all directors, offcers, and levels of
procedures designed to reduce the prospect of vi olati om of
employees and, where necessar and appropriate, outside parties acting on behalf of Smith &
Nephew in a foreign
jurisdiction, including but not limited to, agents and intermediaries,
consultants, representatives, distributors, teaming partners, contractors and suppliers, consortia, and joint venture parers (collectively, "agents and business partners"), and shall notifY all
employees that compliance with the standards and procedures is the duty of individuals at all levels of the company. Such standards and procedures shall include policies governing:
3. Smith & Nephew wil develop these compliance standards and procedures,
including internal controls, ethics, and compliance programs on the basis of a risk assessment
addressing the individual circumstances of the company, in particular the foreign bribery risks
facing the company, including, but not limited to, its geographical organization, interaction with
governments, and industral sector of operation.
4. Smith & Nephew shall review its compliance standards and procedures, including internal controls, ethics, and compliance programs, no less than annually, and updated as appropriate, taking into account relevant developments in the field and evolving international and
industry standards, and update and adapt as necessar to ensure the continued effectiveness of the
company's internal controls, ethics, and compliance programs.
5. Smith & Nephew will assign responsibility to one or more semor corporate
executives of Smith & Nephew for the implementation and oversight of compliance with
policies, standards, and procedures regarding the anti-corruption laws. Such corporate official(s)
shall have direct reporting obligations to independent monitoring bodies, including internal audit,
Smith & Nephew's Board of Directors, or any appropriate committee of the Board of Directors, have an adequate level of autonomy from management as well as suficient resources and shall and authority to maintain such autonomy.
financial and accounting procedures, including a system of internal controls, reasonably designed to ensure the
6. Smith & Nephew will ensure that it has a system of
maintenance of fair and accurate books, records, and accounts to ensure that they canot be used
for the purpose of foreign bribery or concealing such bribery.
7. Smith & Nephew wil implement mechanisms designed to ensure that the
policies, standards, and procedures of Smith & Nephew regarding the anti-corrption laws are effectively communicated to all directors, officers, employees, and, where appropriate, agents
and business partners. These mechansms shall include: (a) periodic training for all directors,
offcers, and employees, and, where necessar and appropriate, agents and business partners; and (b) anual certifications by all such directors, offcers, and employees, and, where necessar and
appropriate, agents, and business parers, certifying compliance with the training requirements.
8. Si.ith & Nephew wil establish an effective system for:
where appropriate, agents and business parners, on complyig with Smith & Nephew's compliance policies, standards, and procedures, including when they need advice on an urgent basis on diffcult situations in foreign jurisdictions; .
b. Internal and, where possible, confidential reportingby, and protection of,
directors, offcers, employees, and, where appropriate, agents and business partners, not wiling to violate professional standards or ethics under instructions or pressure from hierarchical superiors, as well as for directors, offcers, employcc, and, where appropriate, agents and business
parers, wiling to report breaches of the law or professional standards or
ethics concernng anti-corruption occurrng within the company, suspected criminal conduct, and/or violations of the compliance policies, standards, and procedures regarding the anti -corrption laws for directors, officers, employees, and, where necessary and appropriate, agents and business partners; and
c. Responding to such requests and undertaking appropriate action in
response to such reports.
9. Smith & Nephew wil institute appropriate disciplinary procedures to address,
the anti-corruption laws and Smith & Nephew's compliance and ethics program by Smith & Nephew's directors, officers, and employees. Smith & Nephew shall implement procedures to ensure that where misconduct is discovered, reasonable steps are taken to remedy the harm resulting from such misconduct, and to ensure that appropriate steps are taken to prevent furer similar misconduct, including assessing the internal controls, ethics, and compliance program and making modifications necessar to ensure the program is effective.
among other things, violations of
10. Smith & Nephew wil institute appropriate due diligence and compliance
requirements pertaining to the retention and oversight of all agents and business partners, including:
a. Properly documenled risk-based due diligence peitaining to the hiring and
appropriate and regular oversight of agents and business parners;
b. Informing agents and business partners of Smith & Nephew's commitment
to abiding by laws on the prohibitions against foreign bribery, and of Smith & Nephew's ethics and compliance standards and procedures or other measures for preventing and detecting such bribery; and
c. Seeking a reciprocal commitment from agents and business parners.
i i. Where appropriate, Smith & Nephew will include standard provisions in
agreements, contracts, and renewals thereof with all agents and business parers that are
reasonably calculated to prevent violations of the anti-corruption laws, which may, depending
upon the circumstances, include: (a) anti-corrption representations and undertakings relating to
compliance with the anti-cDrruption laws; (b) rights tD conduct audits ofthe books and records of
the agent or business parner to ensure c0llpliai1ce with the foregoing; and (c) rights to terminate an agent Dr business parner as a result of any breach of anti-corruption laws, and regulations or representations and undertakings related to such matters. .
12. Smith & Nephew will conduct periodic review and testing of the compliance code, standards, and procedures designed to evaluate and improve their effectiveness in preventing and detecting violations of anti-corruption laws and Smith & Nephew's compliance and ethics programs, takg into account relevant developments in the field and evolving
international and industr standards.
The duties and authority of the Corporate Compliance Monitor (the "Monitor"), and the obligations of Smith & Nephew, Inc. ("Smith & Nephew") with respect to the Monitor and the Deparment, are as described below:
1. Smith & Nephew shall retain the Monitor for a period of not less than eighteen (18) months. Subject to certain conditions specified below that would, in the sole discretion of the term (the "Term ofthe Monitorship"), the Deparment, allow for a reduction or extension of the Monitor shall be retained until the criteria in Paragraph 8 are satisfied or the Agreement
expires, whichever occurs first.
2. The Monitor's primary responsibility is to assess and monitor Smith & Nephew's
compliance with the terms of this Agreement so as to specifically address and reduce the risk of
any recurrence of Smith & Nephew's misconduct. During the Term of the Monitorship, the.
Monitor will evaluate, in the manner set forth in Paragraphs 3 though 10 below, the the corporate complimice program, internal controls and effectiveness and implementation of financial reporting policies and procedures of Smith & Nephew as they relate to Smith & the FCPA and Nephew's current and ongoing compliance with the anti-bribery provisions of other anti-corruption laws applicable to Smith & Nephew (collectively, the "anti-corrption laws"), and take such reasonable steps as, in his or her view, may be necessar to fulfill the foregoing mandate (the "Mandate").
3. Smith & Nephew shall cooperate fully with the Monitor, and the Monitor shall have the authority to talce such reasonable steps as, in his or her view, may be necessary to be fully informed about Smith & Nephew's compliance program withi the scope of the Mandate in
accordance with the principles set fort herein and applicable law, including data protection,
blocking statutes, and labor laws and regulations applicable to Smith & Nephew. To that end, Smith & Nephew shall: provide the Monitor access to Smith & Nephew's documents mid resources; not limit such access, except as provided in this Paragraph; and provide guidance on applicable laws (such as relevant data protection, blocking statutes, and labor laws). Smith & Nephew shall provide the Monitor with access to all information, documents, records, facilities the Mandate ofthe and/or employees, as requested by the Monitor, that fall within the scope of Monitor under this Agreement. Any disclosure by Smith & Nephew to the Monitor conceruing corrupt payments shall not relieve Smith & Nephew of any otherwse applicable obligation to truthfully disclose such matters to the Deparent.
a. The paries agree that no attorney-client relationship shall be formed.
between Smith & Nephew and the Monitor.
b. In the event that Smith & Nephew seeks to withold from the Monitor
access to information, documents, records, facilities and/or employees of Smith & Nephew that
may be subject to a claim of attorney-client privilege or to the allorney work-product doctrine, or
where Smith & Nephew reasonably believes production would otherwise be inconsistent with applicable law, Smith & Nephew shall work cooperatively with the Monitor to resolve the matter to the satisfaction of the Monitor. If the matter canot be resolved, at the request of the Monitor,
Smith & Nephew shall promptly provide written notice to the Monitor and the Deparent. Such
notice shall include a general description of the nature of the information, documents, records, facilities and/or employees that are being withheld, as well as the basis for the claim. To the
extent Smith & Nephew has provided information to the Deparment in the course ofthe
investigation leading to this action pursuant to a non-waiver of privilege agreement, Smith & Nephew and the Monitor may agree to production of such information to the 'vonitor pursuant to a similar non-waiver agreement.
4. To carry out the Mandate during the Term of the Monitorship, the Monitor shall conduct an initial review and prepare an initial report, followed by at least one (1) follow-up review and report as described in Paragraph 7 below, and one (l) final report as described in
Paragraph 8 below. With respect to the initial report and the follow-up review, after consultation
with Smith & Nephew and the Deparment, the Monitor shall prepare a written work plan, which shall be submitted no fewer than sixty (60) calendar days prior to commencing each review to Smith & Nephew and the Department for comment, which comment shall be provided no more
than thrty (30) calendar days afer receipt of the written work plan. The Monitor's work plan for
the initial review shall include such steps as are reasonably necessary to conduct an effective initial review in accordance with the Mandate, including developing an understanding, to the extent the Monitor deems appropriate, of the facts and circumstances surounding any violations that may have occured before the date ofthis Agreement is filed with the Court. In developing
such understading, the Monitor is to rely to the extent possible on available information and
documents provided by Smith & Nephew, and it is not intended that the Monitor wil conduct his or her own inquiry into those historical events. In developing each work plan and in caring out the reviews pursuant to such plans, the Monitor is encouraged to coordinate with Smith & Nephew personnel, including auditors and compliance personnel, and, to the extent the Monitor deems appropriate, he or she may rely on Smith & Nephew processes, on the results of studies, reviews, audits and analyses conducted by or on behalf of Smith & Nephew and on sampling and testing methodologies. Any disputes between Smith & Nephew and the Monitor with respect to the work plan shall be decided by the Department in its sole discretion.
5. The initial review shall commence no later than ninety (90) calendar days from
the date of the engagement of
the Monitor (unless otherwise agreed by Smith & Nephew, the
Monitor and the Deparment), and the Monitor shall issue a written report within ninety (90)
calendar days of iiùtiating the initial review, setting forth the Monitor's assessment and making rccommendations reasonably dcsigncd to improvc the effcctiveness of Smith & Nephew's program for ensuring compliance with the anti-corrption laws. The Monitor is encouraged to consult with Smith & Nephew concernig his or her other findings and recommendations on an
ongoing basis, and to consider and reflect Smith & Nephew's comments and input to the extent the Monitor deems appropriate. The Monitor need not in his or her initial or subsequent reports
recite or describe comprehensively Smith & Nephew's history or compliance policies,
procedures and practices, but rather may focus on those areas with respect to which the Monitor wishes to make recommendations for improvement or which the Monitor otherwse concludes
merit paricular attention. The Monitor shall provide the report to the Board of Directors of Smith
& Nephew and contemporaneously transmit copies to Deputy Chief - FCPA Unit, Fraud Section,
Crimnal Division, U.S. Deparment of Justice, i Oth and Constitution Ave., N.W., Bond
Building, Four Floor, Washington, D.C. 20530. After consultation with Smith & Nephew, the
Monìtor may extend the time period for issuance of the report for up to thirt (30) calendar days the Deparment. with prior v,Titten approval of
6. Within ninety (90) calendar days after receiving thc Monitor's report, Smith &
Nephew shall adopt all recommendations in the report; provided, however, that within thiry (30)
calendar days afer receiving the report, Smith & Nephew shall notify the Monitor and the
Deparment in writing of any recommendations that Smith & Nephew considers unduly burdensome, inconsistent with local or other applicable law or regulation, impractical, unduly costly or otherwise inadvisable. With respect to any recommendation that Smith & Nephew considers unduly burdensome, inconsistent with local or other applicable law or regwation, impractical, unduly costly or otherwise inadvisable, Smith & Nephew need not adopt that recommendation within that time but shall propose in writing an alternative policy, procedure or system designed to achieve the same objective or purpose. As to any recommendation on which Smith & Nephew and the Monitor do not agree, such paries shall attempt in good faith to reach an agreement withn thir (30) calendar days after Smith & Nephew serves the written notice. In the event Smith & Nephew and the Monitor are unable to agree on an acceptable alternative proposal, Smith & Nephew shall promptly consult with the Deparment. Any disputes between Smith & Nephew, on the one hand, and the Monitor, on the other hand, with respect to the recommendations shall be decided by the Department in its sole discretion. The Deparent may consider the Monitor's recommendation and Smith & Nephew's reasons for not adopting the recommendation in determining whether Smith & Nephew has fuly complied with its obligations under this Agreement. Pending such determination, Smith & Nephew shall not be required to implement any contested recommendation(s). With respect to any recommendation that the Monitor determines caunot reasonably be implemented within ninety (90) calendar days after receiving the report, the Monitor may extend the time period for implementation with prior written approval of the Deparent.
7. The Monitor shall undertake at least one follow-up review to car out the
Mandate. Within one hundred and twenty (120) calendar days of initiating the follow-up review, the Monitor shall: (a) complete the review; (b) certify whether the compliance program of Smith & Nephew, including its policies and procedures, is reasonably designed and implemented to detect and prevent violations within Smith & Nephew of the anti -corruption laws and is fuctioning effectively; and (c) report on the Monitor's findings in the same fashion as set forth in Paragraph 5 with respect to the initial review. The first follow-up review shall commence one
year afer the initial review commenced. If, reasonably promptly after completing the follow-up
review, the Monitor and the Deparment mutually agree that Smith & Nephew has not by that time successfully satisfied its obligations under the Agreement with respect to the Monitor's Mandate, the Term of the Monitorship shall be extended for one additional year, and the Monitor shall undertake a second follow-up review in accordance with the procedures for such follow-up reviews set out in the Agreement. If, after completing a second follow-up review, the Monitor
and the Deparment again mutually agree that Smith & Nephew has not successfully satisfied its
obligations under the Agreement with respect to the Monitor's Mandate, the Term ofthe Monitorship shall be extended until expiration of the Agreement, and the Monitor shall undertake a third follow-up review in accordance with the procedures for such follow-up reviews set out in the Agreement. Additional follow-up reviews, should any be required, shall commence one year after the first follow-up review commenced. After consultation with Smith & Nephew, the Monitor may extend the time period for these follow-up reviews for up to sixty (60) calendar days with prior written approval of the Deparent.
8. If, reasonably promptly afer completing a follow:up review, the Monitor, the
Deparent, and Smith & Nephew mutually agree that Smith & Nephew's compliance program
is reasonably designed and implemented to detect and prevent violations of
the anti-corrption
laws and is fuctioning effectively, the Monitor and Smith & Nephew shall submit to the
Department a written report within sixty (60) calendar days of the submission of the follow up review setting forth a complete description of its remediation efforts to date, its proposals reasonably designed to improve the internal controls, policies, and procedures of Smith & Nephew for ensuring compliance with the FCPA and otlier applicable anticorruption laws, and the proposed scope for Smith & Nephew's self-reporting. This report shall ìnclude a schedule of enhanced compliance obligations already undertaken by Smith & Nephew for the Deparment's approval, and Smith & Nephew's self-reporting shall include measures taken to implement the
enhanced compliance obligations. Smith & Nephew may extend the time period for issuance of thc rcport with prior writtcn approval of the Deparment. At such time as the Depaliiient
approves the schedule of enhanced compliance obligations, the Monitorship shall be terminated and Smith & Nephew will self-report to the Department on its enhanced compliance obligations for the remainder of the term of the Agreement, as described in Paragraph 12 of the Agreement.
9. In undertaking the assessments and reviews described in Paragraphs 4 through 8
of this Agreement, the Monitor shall formulate conclusions based on, among other things: (a) inspection of relevant documents, including Smith & Nephew's curent anti-corrption policies and procedures; (b) on-site observation of selected systems and procedures of Smith & Nephew at sample sites, including internal controls and record-keeping and internal audit procedures; (c) meetings with, and interviews of, relevant employees, officers, directors and other persons at mutually convenient times and places; and (d) analyses, studies and testing of Smith & Nephew's compliance program with respect to the anticorruption laws.
10. Should the Monitor, during the course of his or her engagement, discover that questionable or corrupt payments or questionahle or corrpt transfers of propert or interests may
entity or person within Smith & Nephew, or any entity or person working directly or indirectly for Smith & Nephew, either Cal after the date on which ths Agreement is accepted by the Court or (b) that have not been adequately dealt with by Smith & Nephew (collectively, "improper activities"), the Monitor shall promptly report
have been offered, promised, paid or authorized by any
such improper activities to Smith & N cphcw' s General Counsel for fuer action. If the Monitor
believes that any improper activity or activities may constitute a significant violation oflaw, the Monitor shall also report such improper activity to the Deparment. The Monitor shall disclose improper activities in his or her discretion directly to the Deparment, and not to the General Counsel, only if the Monitor believes that disclosure to Smith & Nephew's General Counsel would be inappropriate under the circumstances, and in such case should disclose the improper activities to Smith & Nephew's General Counsel as promptly and completely as the Monitor deems appropriate under the circumstances. The Monitor shall address in his or her reports the appropriateness of Smith & Nephew's response to all improper activities, whether previously
disclosed to the Department or not. Furer, in the event that Smith & Nephew, or any entity or
person working directly or indirectly within Smith & Nephew, refuses to provide information necessary for the performance of the Monitor' s responsibilities, if the Monitor believes that such refusal is without just cause, the Monitor shall disclose that fact to the Department. Smith & Nephew shall not take any action to retaliate against the Monitor for any such disclosures or for
any other reason. The Monitor may report any criminal or regnlatory violations by Smith &
Nephew or any other entity discovered in the course of performing his or her duties in the same maner as described above.
11. At least anually, and more frequently if appropriate, representatives from Smith
& Nephew and the Deparment wil meet together to discuss the monitorship and any suggestions, comments or improvements Smith & Nephew may wish to discuss with or propose to the Deparment.
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