Philips execs knew of alleged bribes in Brazil in 2010, says whistleblower

A former Philips' subsidiary employee claims to have warned the company of the alleged bribes back in 2010

August 21, 2019
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by John R. Fischer , Staff Reporter
A former employee of a Philips’ subsidiary claims to have reported nearly a decade ago alleged bribes that the company is now under investigation for regarding the sale of medical equipment in Brazil.

Jose Israel Masiero Filho, a former supply chain executive for Dixtal Biomedica Industria e Comercio Ltda., says he was fired after alerting at least three senior executives in 2010, one of whom was former chief executive of Philips Healthcare, Steve Rusckowski. He then tipped off authorities about the bribes in 2014 following Operation Car Wash, a probe that unveiled corruption surrounding contracting graft at state oil company Petrobras, and involving leaders at the highest level of Brazilian politics and business.

“His information was key to helping us break up this scheme,” Marisa Ferrari, a lead prosecutor in the case surrounding the alleged bribes, told Reuters.

Philips is one in a number of leading healthcare OEMs accused of paying kickbacks to government officials in exchange for contracts with public health programs. Others include General Electric, Siemens, Johnson & Johnson and Stryker Corp. In addition to Brazil’s investigation, the FBI, Department of Justice and the Securities and Exchange Commission opened their own probes into the matter this past May.

Masiero, who was hired by Dixtal in 2006, says he first learned of the bribes in January 2010 when he found irregularities in three sales agreements to a Brazilian middleman, Moses Trading American, that had secured big contracts with Brazil’s Ministry of Health. One revolved around the sale of 750 heart defibrillators, while the other two were for 3,972 Dixtal vital-signs monitors, a combined total of 68.9 million reis (about $40 million at that time), according to government records, which showed that neither Philips nor Dixtal put in a bid for the contracts.

Masiero also found it strange that Philips did not compete directly for such a major piece of business, and was suspicious that the Health Ministry was paying above market prices for the equipment. Tasked with transporting the equipment to the winner of the contracts, a medical supply firm called Rizzi Comercio e Representacoes Ltda., Masiero said he knew it was a "red flag" when he found it to be a tiny storefront in a dilapidated Sao Paulo neighborhood. An email from Philips’ sales executive, Frederik Knudsen, directed him to send the first shipment of 60 defibrillators to Rizzi Comercio.

“The value that should be on the order is what was agreed to with the Health Ministry — $16,700 per unit — and not what we sold them to Rizzi for ($9,991),” the alleged email is said to have instructed, a markup of 67 percent.

Masiero reached out to Caroline Visser, the chief of Philips’ global compliance at the time, who told him an investigation would be launched. Steve Klink of Philips's press office, told HCB News that the investigation did not "identify direct evidence of wrongdoing. However, we did conclude at the time that there was a need to further enhance Philips’ internal control processes in Brazil, which Philips did. Philips had no reason for further follow-up at the time. The dismissal of Mr. Masiero was not related to this matter."

After being transferred to a logistics post within Philips in Sao Paulo — which Masiero saw as a demotion — he reached out to Rusckowski, and received a response from Clement Revetti Jr., the chief legal officer for Philips Healthcare, who told him to refrain from contacting Rusckowski about the matter again. He then messaged both again after learning the intermediary, Moses Trading American, was operated out of a private home on a golf course in Phoenix.

Upon voicing his concerns to Visser in person in Sao Paulo, Masiero was fired the same day "without cause." He claims to have been blacklisted, is unemployed, and recently moved to an unspecified country.

Invoices show that Philips continued to sell to Moses Trading American, which is run by a Peruvian named Oscar Moses. Prosecutors are investigating Moses regarding a string of allegedly fraudulent medical equipment deals involving his company in Brazil, though he has not been charged with a crime, reports Reuters.

Brazilian prosecutors claim that more than 20 companies may have been involved in the scheme as part of a "cartel" that paid bribes and charged the government inflated prices for equipment and parts.

Knudsen, who still works for Philips, is now on trial in Rio de Janeiro, along with Daurio Speranzini, who led the healthcare giant’s operations in Latin America for seven years before joining GE in 2011. He was arrested in connection to the case last July. “We clarify that the allegations refer to a period in which the executive was leading a different company," said GE in a statement upon his arrest.

Klink said upon being notified in 2018 of its involvement in the investigation, the initial Philips' investigation was reopened, and that the company is "cooperating with the Brazilian authorities."

Rusckowski, who left Philips in 2012, is now the CEO of Quest Diagnostics. He did not return Reuter’s request for comment.

Masiero is reported to be cooperating with Brazilian prosecutors in the case.

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