Philips, under investigation in U.S. and Brazil, fired whistleblower who warned of graft

SAO PAULO, August 21 (Reuters) – Healthcare giant Philips was warned of suspicious sales of its medical equipment to the Brazilian government, and failed to halt them, nearly a decade before an alleged bribery racket was exposed in the company’s Brazil operations last year, Reuters has learned.

Claims of malfeasance reached the highest levels of the Dutch conglomerate as early as 2010, according to court records filed by federal prosecutors, internal company documents and Reuters interviews with a former manager at a Philips subsidiary in Brazil who says he told superiors of the suspected scheme and was later sacked.

That ex-employee, Jose Israel Masiero Filho, a former supply-chain executive with Dixtal Biomedica Industria e Comercio Ltda., spoke extensively with Reuters in his first interview with foreign media. He said in January 2010 he spotted irregularities in three deals to sell Philips and Dixtal equipment to an obscure Brazilian middleman who had landed big contracts with Brazil’s Ministry of Health. Masiero said he suspected payoffs had been used to secure that government business, allegations now at the heart of a burgeoning graft probe in Brazil, court records show.

Masiero emailed an internal Philips hotline immediately to report his suspicions, met soon after with the company’s top compliance officer, and alerted at least three other senior executives during 2010. Among them was Steve Rusckowski, former chief executive of Philips Healthcare, the company’s largest division. Masiero’s warnings were detailed in emails, internal company memos and court records viewed by Reuters.

“Philips should consider that by approving and accepting these sales, it will be involved in illegal activities if discovered,” Masiero wrote to Rusckowski in an email dated October 14, 2010.

Still, Koninklijke Philips (PHG.AS), as the company is formally known, continued to sell to the Brazilian intermediary to fulfill the Health Ministry contracts, invoices show.

Rusckowski, who served as Philips Healthcare’s chief executive until April 2012, did not respond to requests for comment. He is now CEO of New Jersey-based Quest Diagnostics (DGX.N).

In an emailed statement to Reuters, Philips said it is cooperating with Brazilian authorities investigating the nation’s medical device industry. The company said it launched an internal investigation in 2010 in response to an “anonymous complaint” but “did not identify direct evidence of wrongdoing.” The company said it did, however, tighten up its internal control processes in Brazil.

Philips would not discuss ex-employee Masiero or the circumstances surrounding his dismissal.

Brazil’s Health Ministry did not respond to requests for comment.


Reuters | August 22nd, 2019

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