The U.S. Securities and Exchange Commission has opened a new probe into allegations of bribes negotiated between leading manufacturers — Siemens AG, Philips NV, and General Electric Co,— and Chinese government and hospital officials for the sale of medical equipment.

The allegations, outlined in a Rueters exclusive, come less than a month after the FBI launched a separate investigation into allegations made against Siemens, Philips, GE and Johnson & Johnson concerning illegal kickbacks to government officials in exchange for securing contracts with public health programs across Brazil over the past two decades.

If true, the actions in both cases go against the U.S. Foreign Corrupt Practices Act of 1977 (FCPA), which bars Americans, U.S. companies and foreign enterprises whose securities are listed in the U.S. from paying foreign officials in exchange for business. Violating the act could result in fines from the SEC.

The new allegations with China first came to light in a shareholder lawsuit, known as the Cuker complaint, filed in December in New York State court, accusing GE employees in China or workers at the company’s subsidiaries since 2011 of having “bribed hospital administrators, engaged in collusive bidding, and given kickbacks to government officials.”

It asserts that GE worked with Philips, Siemens and Toshiba Corp’s medical unit (now owned by Canon) to fix prices and rig tenders for expensive equipment, such as MR and CT systems, through Chinese middlemen. All four deny any wrongdoing or any knowledge of the SEC probe into their operations in China, according to Reuters.

“We are committed to integrity, compliance and the rule of law in every country in which we do business,” a GE spokesperson told HCB News. “With regard to the Cuker complaint, we believe the complaint lacks merit.”

Siemens said that it was not informed of the probe but that it cooperates with authorities in any such instance. "To date, the SEC has not informed the company that it is being investigated in China in connection with alleged FCPA violations," said Lance Longwell, director of communications and public relations at Siemens Medical Solutions USA. "It is Siemens policy to cooperate with law enforcement investigations when they occur. Please understand that we cannot further comment."

Philips also was not aware of the investigation. "Philips is committed to fully complying with local and international anti-bribery and anti-corruption laws as part of its efforts to maintain strong and effective controls. This includes Philips’ strict prohibition of receiving, accepting, offering, paying or authorizing any bribe and/or any other form of corruption," said Steve Klink, head of Philips Group Press Office. "As part of Philips’ compliance commitment, Philips has a mandatory global due diligence process (DDP) in place to ensure that it adequately manages the risks attached to the use of business partners in the sales process."

Included as evidence in the GE lawsuit were translations of Chinese criminal court rulings that found middlemen who sold GE equipment guilty of bribing government and hospital officials, and other rulings of prison sentences handed out to hospital administrators who confessed in open court. GE was not charged in any of the rulings.

Public data on how much Chinese hospitals paid for equipment was also provided, with the suit claiming that such prices were routinely at least 40 percent above that paid by the middlemen to the companies. The difference was then distributed as bribes to health officials, and some was pocketed by the middlemen and flowed back to the companies, which are accused of then “covering” bids to make the public tender appear more competitive.

The launch of the SEC investigation is a reflection of greater attempts by U.S. regulators to crack down on alleged corruption in the sale of medical devices worldwide. Its inquiry in Brazil, for instance, stems from claims that more than 20 companies acted as part of a “cartel” that paid bribes and charged the government inflated prices for equipment and parts, including MR systems and prosthetics, in exchange for contracts over public health programs.

“We are constantly sharing information with the FBI on this [medical equipment] case. They ask for documents, and we send them, and they are assisting our investigation in return,” Brazilian federal prosecutor Marisa Ferrari told Reuters when the Brazilian probe launched, adding that the Securities and Exchange Commission was also assisting the Brazilian investigation. “We’ve received a lot of material from the Department of Justice and from the SEC.”

In addition to the sale of devices, Reuters reports that the companies in both China and Brazil accrued bigger profit margins in servicing systems during their 10-to-15 year lifespan, as well as from selling software updates, spare parts and materials used in operating machines.

GE’s lawyers filed a motion for dismissal in February on the grounds that the complaint fails to connect any illegal activity in China to the defendants. A motion has not been ruled on the matter.

This is a developing story. Healthcare Business News has reached out to involved parties and will update the article as more information is obtained..