Johnson & Johnson criminal fines reduced by $17M by tattling

Johnson & Johnson (NYSE:JNJ) saved millions in criminal fines for providing federal prosecutors with information on its competitors’ transgressions, according to a U.S. Dept. of Justice press release.

The medical products conglomerate received “a reduction in its criminal fine as a result of its cooperation in the ongoing investigation of other companies and individuals,” the DOJ said in a prepared release. Those reductions may have amounted to about $17 million in savings, according to Main Justice.

Johnson & Johnson agreed late last week to pay $70 million in fines in a deferred prosecution agreement in the U.S. and more than $8 million in the U.K. The U.S. settlement, which also covers bribery charges over its pharmaceutical products and an alleged kickbacks scheme to win contracts under the United Nations Oil-for-Food program in Iraq, is only the latest black eye for the company. Johnson & Johnson did not admit to or deny any of the allegations, according to a press release from the federal Securities & Exchange Commission.

The alleged infractions took place between 1998 and 2006 when the Warsaw, Ind.-based company, through its DePuy International Ltd. unit, began funneling funds to a Greek distributor which would in turn pay doctors working in the Greek public health system to purchase orthopedic implants made by DePuy.

While the scheme originated prior to JNJ’s 1998 buyout of DePuy, investigators say that J&J officials knew of the arrangement and allowed it to continue, even allowing DePuy to purchase the Greek distributor in 2001 and rename it DePuy Helles despite several red flags being raised internally.

Still, prosecutors at the DOJ were generous in their praise of the New Brunswick, N.J.-based conglomerate, saying that the agreement “recognizes J&J’s timely voluntary disclosure, and thorough and wide-reaching self-investigation of the underlying conduct; the extraordinary cooperation provided by the company to the department.”

The company’s cooperation also allowed it to skate some other nagging problems that could have arisen from a criminal conviction. For example, J&J was not required to retain a corporate monitor because of its “pre-existing compliance and ethics programs, extensive remediation and improvement of its compliance systems and internal controls,” according to the feds. But JNJ will still have to bring the DOJ up to speed on the implementation of its remediation and enhanced compliance efforts every six months for the duration of the agreement.

Investigators said the scheme ended in 2006, when an internal auditor at the company discovered the payments after receiving a whistleblower complaint. The company then reported its findings to the Justice Dept. and the SEC, which each launched an investigation.