Siemens AG, Philips NV and General Electric (GE) are staring at a mega scandal that could affect their global businesses, entailing uncouth business practices marred with corruption and and kickbacks in China and Brazil.
According to Reuters, the three companies used local middlemen to negotiate bribes with Chinese government and hospital officials to sell medical equipment.
U.S. Securities and Exchange Commission (SEC) are investigating the bribery claims, where the three companies have used bribes to influence business decisions for expensive medical equipment sold to other countries.
The medical equipment is the same that was supplied to Kenya by Philips, in a deal that was marred with graft allegations, even as some of the equipment lies idle in Kenyan hospitals.
In the deal, Kenya may have lost close to Ksh7 billion in the procurement of 37 CT scanners at an inflated cost of Ksh227 million per unit under the Managed Equipment Service (MES).
Ordinarily, a unit costs between Ksh40-45 million at the current market prices, but the Ministry of Health procured each at a whooping Ksh227 million.
Despite this, the companies denied knowing of existence of investigations by SEC.
If found guilty of violating the US Foreign Corrupt Practices Act of 1977 (FCPA), firms could face fines from the SEC.
Reuters reports that China’s medical device market stood at $58.63 billion (Ksh5.9 trillion) in 2017 – compared to $10.8 billion (Ksh1.1 trillion) for Brazil.
According to sources, on top of the profits, the companies would benefit from margins made in servicing the machines for 10-to-15 year lifespan as well as selling software updates, spare parts and the materials used in operating the machines.
The bribery claims were also revealed in a law suit filed in New York state Supreme Court last December.
In the suit it is alleged that GE employees in China or workers at its subsidiaries “have bribed hospital administrators, engaged in collusive bidding, and given kickbacks to government officials.”
The allegations date back to 2011.
According to evidence presented in court, hospital administrators confessed in open court and received prison sentences.
“The lawsuit accuses GE of colluding with Philips, Siemens and Toshiba Corp’s medical unit – which was bought by Canon Inc in 2016 – to fix prices and rig tenders for expensive medical equipment, such as MRI machines and CT scanners, through Chinese middlemen,” reports Reuters.
The prices were escalated by 40 percent, with the ‘extra’ money being shared within the cartels as bribes and kickbacks.
GE said the case lacked merit, while Philips denied any involvement in bribery. Siemens on its part said that it would investigate the claims while Canon said that it has a zero tolerance toward bribery.
Toshiba said that it was not aware of the New York state lawsuit.