July 11, 2018 / 6:32 PM / a year ago

Brazil prosecutors allege jailed GE executive helped company partake in medical cartel

    By Brad Brooks
    SAO PAULO, July 11 (Reuters) - General Electric Co's       
chief executive for Latin America took part in a medical
equipment price-fixing scheme while at the conglomerate, making
it a member of an international health-care cartel, according to
allegations in a document filed by federal prosecutors.
    The executive, Daurio Speranzini Jr., was one of 20 people
jailed last week in what prosecutors say was an arrangement
among multinational companies Philips         , Johnson &
Johnson        , and several others. They say the scheme
involved bribing government health officials, in return for help
in inflating prices for an array of medical gear such as
magnetic resonance imaging machines and prosthetics.
    While those arrests and the general allegations were widely
reported last week, a close examination by Reuters of a 362-page
court document filed with a Rio de Janeiro judge to gain
approval to carry out arrest and search warrants shows that
prosecutors also argue that GE was part of the group of
companies that allegedly funneled bribes through a politically
connected local medical supply firm. 
    That firm, Oscar Iskin, then passed varying percentages of
the bribes to government officials to fix prices for medical
equipment and other products, prosecutors assert. 
    “The situation takes on an even greater gravity given that
even after the internal investigation (at Philips) that resulted
in Speranzini’s departure from the company, he joined another
company in the health sector (GE) in which he continued carrying
out illicit practices relative to government contracts,” the
document states. 
    The documents cited “robust evidence” that Speranzini
“participated in the crimes of corruption, fraudulent bidding,
and forming a criminal organization," adding, “there is also
evidence that he attempted to cover-up the crimes so that
regulating bodies would not find out." 
    In response to questions from Reuters, GE spokeswoman
Jennifer Erickson said Monday that GE is “currently not aware of
any improper conduct involving GE Healthcare and are committed
to cooperating with authorities to the extent we are contacted.”
    At the time of Speranzini’s arrest on July 4, GE in a
statement said that the allegations refer to a period in which
the executive was leading a different company, though did not
specify which one, and added that GE is not the target of the
    Alexandre Lopes, a lawyer for Miguel Iskin, the CEO of the
supply firm, denied the allegations of price-fixing and passing
of bribes, and said the company had improved the quality of care
available to the general population.
    Reuters was unable to locate a lawyer for Speranzini. There
are no lawyers listed in the government documents, and GE
declined to comment on anything related to the executive still
listed on LinkedIn as an employee.
    Prosecutors declined to comment beyond what was in the
document, or elaborate on whether they had contacted GE and
whether they were delving into its conduct as a target. They
said in their filing in Rio de Janeiro that their investigation
is ongoing and that they think it will involve more companies,
more arrests and the uncovering of more fraud. 
    It was unclear from the document whether prosecutors believe
GE had been participating in the cartel before Speranzini's
arrival at the company, but the document asserts that he was
central to GE’s involvement once he was there. 
    Federal prosecutors said in the document that Speranzini
took part in the cartel first as the head of the Philips
Healthcare operation in Latin America from 2004 until the end of
2010, when an internal whistleblower told Philips' compliance
office about the fraud and he was fired after an internal probe.
His firing and the internal probe at Philips have not been
previously reported.
    Philips spokesman Steve Klink told Reuters that they have
been informed by the Brazilian authorities that the latest
arrests are part of an investigation into the medical device
industry in Brazil.  
    “Philips in Brazil, as well as other companies in the
country, are subjects of the investigation. We believe that any
allegation against Philips relates to a period that was many
years ago,” he said.
    Two months after being dismissed by Philips, Speranzini was
hired by GE Healthcare and climbed the company ladder, becoming
a vice president in Milwaukee before being named as GE's chief
executive officer for Latin America in January. GE did not
comment on Speranzini’s hiring.  
    Cesar Romero - the former No. 2 official at the Rio de
Janeiro state health secretariat - states in his plea bargain
testimony that Speranzini won contracts from Brazil’s National
Traumatology Institute while at Philips and GE to provide
medical equipment at inflated prices at least until the end of
2014, prosecutors said. 
    The National Traumatology Institute said they could not
comment, referring questions to the federal Health Ministry. The
Health Ministry did not respond to requests for comment.
    According to prosecutors, Romero also testified that GE was
part of what he called an “international bidding club,” which
included other multinational health companies such as Philips.
    Lawyers for Romero did not immediately return a call seeking
comment. Informants in criminal investigations in Brazil are
barred by law from talking to the press.
    The investigation, code-named "Operation Resonance," is the
latest outgrowth of Brazil's unprecedented four years of graft
inquiries that have sent scores of powerful politicians and
businessmen to prison and rocked the nation's elite, who enjoyed
impunity in how they carried out their business.
    The inquiry is tied to a long-running corruption scheme
attributed to jailed former Rio state governor Sergio Cabral
that snatched $100 million from public coffers, prosecutors
   ($1 = 3.9324 reais)

 (Additional reporting by Toby Sperling and Alwyn Scott; 
Editing by Christian Plumb and Edward Tobin)
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