AGA Medical forced to pay DoJ over illegal Chinese activities. Source: K.A. Johnson and Associates

The U.S. Department of Justice (DoJ) has reported that AGA Medical has agreed to pay a $2 million criminal penalty for making corrupt payments to Chinese government officials.

AGA worked between 1997 and 2005 with a Chinese distributor that provided kickbacks to doctors in China employed by government-owned hospitals for purchasing AGA products, according to paperwork filed in U.S. District Court in Minneapolis.

The filing also noted that the Plymouth, Minn.-based company made payments to a government official to help the company win patents.

According to the DoJ, from 2000 through 2002, AGA sought patents on several products from the Chinese government. As a part of this effort, AGA and a high-ranking company officer agreed to make payments through their local Chinese distributor to government officials to have the patents approved, according to the filing.

AGA, which manufactures devices to repair congenital and structural heart defects, was charged with two counts of criminal information, one count of conspiring to make bribe payments and one count of violating the Foreign Corrupt Practices Act in connection with the authorization of specific corrupt payments to Chinese officials.

AGA Medical's sales in China totaled about $13.5 million between 1997 and 2005, according to court papers filed Tuesday. During that time, the company's distributor in China regularly reported back to AGA Medical officials about the payments to Chinese officials, according to the court filing.

With the settlement, the Justice Department has agreed to defer prosecution for three years, because the company voluntarily disclosed the problems and cooperated with the investigation. If AGA abides by the terms of the agreement, which includes paying the penalty and implementing increased compliance policies and procedures, the DoJ said it will dismiss the criminal information.

“We terminated (the contract with) the former distributor ... in 2006, and we put in place at that time a very new compliance program designed to really detect and correct any frailties of this kind,” said Ron Lund, AGA’s general counsel.

“I can't say we're happy to pay $2 million to anybody, but we're happy to get it behind us,” Lund added. "It's been a distraction for the last three years of how we could get this behind us.”