Mead Johnson Settles Chinese Corruption Case Involving Infant Health

Mead Johnson Nutrition Company has now ended an investigation into alleged corrupt practices in China by agreeing to pay a paltry USD12 million settlement.

Both common wisdom and medical studies show how much more healthy and vital mothers' milk is for infants than synthetic baby formula, but U.S.-based Mead Johnson Nutrition Company still tried to influence and corrupt Chinese medical professionals into recommending new mothers use their infant formula.

The United States Securities and Exchange Commission announced that Mead Johnson has agreed to settle charges that its Chinese subsidiary made improper payments to health care professionals at government-owned hospitals to recommend the company's infant formula to patients who were new or expectant mothers. Mead Johnson Nutrition agreed to pay to settle the SEC's finding that it violated the U.S. Foreign Corrupt Practices Act.

An SEC investigation found that employees funded the improper payments through "distributor allowance" funds paid to third-party distributors who market, sell, and distribute the company's products in China. Although the funds contractually belonged to the distributors, employees exercised some control over how the money was spent and provided specific guidance to distributors on how to use the funds. Cash and other incentives were subsequently paid to health care professionals in China hospitals to recommend Mead Johnson Nutrition products and provide the company with contact information for patients who were new or expectant mothers so it could market its infant formula to them directly. The SEC says the company did not accurately reflect in its books and records the more than USD2 million in improper payments made during a five-year period.

The SEC's order instituting a settled administrative proceeding finds that Mead Johnson Nutrition violated the books and records and internal control provisions of the Securities Exchange Act of 1934. The company consented to the order without admitting or denying the findings and agreed to pay USD7.77 million in disgorgement, USD1.26 million in prejudgment interest, and a USD3 million penalty.

Unfortunately, by not admitting guilt, Mead Johnson may still be able to deceive Chinese parents in the future into believing their infant formula is recommended over breastfeeding for newborns and infants.

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