Stericycle has agreed to pay $84 million to settle FCPA violations
To resolve allegations that it paid bribes to win government contracts in Brazil, Mexico, and Argentina, medical waste disposal company Stericycle has agreed to pay $84 million in civil and criminal penalties.
According to a press release issued by the Department of Justice (DOJ), Stericycle must pay a criminal penalty of $52.5 million as part of a deferred prosecution agreement (DPA).
The Department of Justice said it will credit up to one-third of the criminal penalty against fines Stericycle pays to Brazilian authorities in related proceedings, including $9.3 million to settle investigations by the Controladoria-Geral da Unio (CGU) and the Advocacia-Geral de Unio (Attorney General's Office) in Brazil.
In addition, Stericycle has agreed to pay approximately $28 million to settle a Securities and Exchange Commission investigation (SEC).
In February, Stericycle informed investors that it expected to pay more than $80 million to settle the charges.
According to the DOJ, Stericycle paid approximately $10.5 million in bribes to foreign officials in the three countries between 2011 and 2016 in order to obtain and retain business and other benefits related to its waste management services. According to the DOJ, the corrupt scheme made $21.5 million in profit.
The DOJ charged the company with two counts of conspiracy to violate the Foreign Corrupt Practices Act's (FCPA) anti-bribery provision and the FCPA's books and records provision as a result of its investigation. The company also broke the FCPA's internal accounting controls provisions, according to the SEC.
The cash payments were made as percentages of underlying contract payments owed to Stericycle, according to the DOJ, and were tracked by Stericycle employees using spreadsheets with code names and euphemisms like CP (commission payment) in Brazil, IP (incentive payment) in Mexico, and "alfajores" (a popular cookie) or "IP" in Argentina. The SEC said in a press release that the scheme included "sham third-party vendors who used false invoices to conceal cash payments to government clients."
Stericycle also "failed to have sufficient internal accounting controls in place, such as a centralized compliance department, to prevent or even detect the misconduct, and failed to implement its FCPA policies or procedures prior to 2016," according to the SEC.
"Stericycle rapidly expanded in Latin America without any meaningful oversight or compliance measures, as evidenced by widespread bribery schemes lasting for many years in most of its Latin America operations,” said Eric Bustillo, director of the SEC’s Miami Regional Office. “Companies in pursuit of global expansion cannot disregard the need for appropriate controls. "
Stericycle and the DOJ agreed to a three-year deferred prosecution agreement (DPA), according to court documents. Stericycle agreed to hire an independent compliance monitor for two years, improve its compliance program, and self-report to the DOJ for the rest of the DPA term as part of the DPA. While Stericycle cooperated fully with the investigation, the DOJ noted that the improvements to its compliance program had not been "fully implemented or tested."
Stericycle said it has "taken extensive steps to establish a strong global anti-corruption compliance program by enhancing its compliance policies, procedures and internal controls in every country in which it operates" as a result of an internal investigation.
According to the company's press release, it took a number of steps to improve its compliance function and internal controls, including:
- Updating its code of conduct and internal controls relating to anti-corruption, retention and management of commercial agents and other third parties, and gifts, travel and entertainment;
- Enhancing its internal reporting, investigations, and risk assessment processes;
- Overhauling its compliance training and communications;
- Terminating employees involved in the relevant conduct; and
- Divesting its subsidiaries in Argentina and Mexico.
Stericycle CEO Cindy Miller stated, "resolving this legacy matter represents another important milestone in Stericycle’s business transformation journey. Over the past several years, we have focused on fully remediating the issues identified during the investigation. This includes instituting new policies, procedures and internal controls and building a culture of compliance, integrity and accountability that aligns with our core values across our entire global operation."
Stericycle has hired a chief compliance officer who reports to Miller and the audit committee, in addition to naming Miller as president and CEO in 2019 and naming multiple new board and