AGA Medical fined $2 million

Medical device maker AGA Medical Corp. has agreed to pay a $2 million criminal fine in connection with corrupt payments to Chinese government officials, the U.S. Justice Department said Tuesday.

The Justice Department and Plymouth-based AGA signed a deferred-prosecution agreement, which means prosecution will be delayed for three years. If AGA abides by the terms of the agreement, the government will dismiss the charges.

Information filed in U.S. District Court for the District of Minnesota charges AGA with one count of conspiring to make bribery payments to Chinese hospitals and doctors and one count of violating the Foreign Corrupt Practices Act by authorizing "corrupt payments" to Chinese officials.

Ronald Lund, AGA's general counsel, said the company is "very, very happy to get this behind us. This is a fast-growing company that makes lifesaving devices, and these events have occupied a lot of our time." AGA makes minimally invasive devices that repair congenital heart defects.

Between 1997 and 2005, a "high-ranking officer of AGA" and other company employees agreed to make "corrupt payments" through a distributor to doctors in China who were employed by government-owned hospitals, the Justice Department said in a news release.

Neither the company nor a Justice Department spokeswoman would identify the "high-ranking" AGA executive. Court papers describe a central AGA figure as a U.S. citizen and part-owner of the company.

The alleged payments came in the form of "discounts" and "commissions" paid to the hospitals and physicians, respectively, according to court documents. In exchange for payments, Chinese doctors directed hospitals to exclusively purchase AGA products.

The criminal information also claims that from 2000 to 2002, AGA tried to patent several of its products with China's State Intellectual Property Office.

The company and a "high-ranking" officer agreed to make payments through their Chinese distributor to government officials employed by the Chinese patent office to ensure the patents were approved.

The distributor told the company in an e-mail that he would have to "sponsor" the patent official for the patent review, documents said.

In a subsequent e-mail detailed in court papers, the "high-ranking" AGA officer agreed to cover the fee paid to the patent official: "[I] will cover her fee as long as we can get the patent issued in a timely manner."

A March 2002 e-mail from the Chinese distributor to the company officer stated that a patent official had been paid $20,000 to approve AGA's patents, according to court documents.

Lund said AGA voluntarily approached the Justice Department "after the possibility came to the attention of the board that there might be a problem." He said the company enhanced its corporate compliance policies and procedures, hired an independent monitor and audited its agreements with other distributors.