U.S. News

Johnson & Johnson Discloses Improper Payments Overseas


Johnson & Johnson says it will cooperate with federal officials after disclosing that some of the company's subsidiaries outside the U.S. may have made improper payments in connection with the sale of medical devices in two small-market countries.

The New Brunswick, N.J.-based health care giant also said the executive responsible for the subsidiaries was leaving the company, effective immediately.

J&J said Monday that the subsidiaries' actions broke J&J's own corporate policies and fell within the jurisdiction of the Foreign Corrupt Practices Act.

The company voluntarily disclosed the information to the Justice Department and the Securities and Exchange Commission.

Company spokesman Jeffrey J. Leebaw declined to disclose any additional information, including the identities of the exact subsidiaries and the countries involved.

J&J said Michael J. Dormer, worldwide chairman of the company's Medical Devices and Diagnostics segment, was retiring immediately.

In a letter to the company, Dormer acknowledged he had "ultimate responsibility by virtue of my position" for the subsidiaries that were the subject of the disclosure, J&J said in a statement.

Morgan Stanley analyst Glenn Reicin said in a research note that Dormer's departure may help the company avoid federal enforcement action.

"Since a company that is found guilty of a felony can be barred from Medicare programs, we suspect that JNJ management probably had to find a way to make it clear to authorities that this matter is being taken seriously," Reicin said.

J&J said Nicholas J. Valeriani, previously worldwide chairman of the Cardiovascular Devices & Diagnostics segment, has assumed Dormer's job and title, which now includes Valeriani's previous responsibilities.

The company's Medical Devices and Diagnostics group makes products ranging from blood glucose meters to artificial joints. The division accounted for $20.28 billion in sales last year, or about 38% of J&J's total sales.