The Chinese subsidiary of medical device manufacturer Diagnostic Products Corp. agreed Friday to plead guilty to paying $1.6 million in bribes to employees of state-owned hospitals in China over more than a decade, the Securities and Exchange Commission announced.


The subsidiary, DPC (Tianjin) Co. Ltd., pleaded guilty to one felony count of violating the Foreign Corrupt Practices Act, and agreed to pay a $2 million criminal penalty to settle the matter with the Department of Justice.


In a related civil action, the parent company was charged by the SEC with violating FCPA provisions covering anti-bribery, books and records, and internal controls. Diagnostic Products neither admitted nor denied guilt but agreed to disgorge about $2.8 million in income and interest. It also will have an independent consultant review and report on its compliance with the act for the next three years.


The SEC said that the payments were made from 1991 through 2002 and were made with the knowledge and approval of senior officers of DPC (Tianjin) in an effort to secure business at the hospitals.


Company officials could not be reached for comment on Friday. However, the government began investigating the payments only after Diagnostic Products publicly disclosed them after an audit conducted of the subsidiary in 2002. The company has previously stated that senior managers of the subsidiary involved in the payments have been replaced. It also has stated that no senior management of the parent company knew about or were involved with the payments.


Friday's action does not end the company's troubles with the government, which began investigating the illegal payments two years ago. The SEC said it is continuing to investigate the company.


Last year, the U.S. Attorney's Office in Los Angeles convened a grand jury to investigate Diagnostic Products following separate problems with its clinical trials procedure. The problems had prompted the Food and Drug Administration to investigate the company and ban it from submitting new product applications. The Business Journal reported that company insiders sold millions of dollars worth of stock before the FDA probe was publicly disclosed. Diagnostic Products has maintained no illegal transactions took place.

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