USDC IN/ND case 3.20--C\/-00099—DRL-MGG-
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`oeflriieni’il’ fi ed 01/30/20 page 1 of 8
`ND
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`'IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF INDIANA
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`SOUTH BEND DIVISION
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`i
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`INSTITUTO MEXICANO DEL SEGURO
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`SOCIAL,
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`P/az'fltzfl,
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`V.
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`ZIMMER BIOMET HOLDINGS, INC.,
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`Dgimdafll.
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`7m
`“ ii
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`Civil Action NO.
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`j ; 20 4 V07 2
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`IMSS’ ORIGINAL COMPLAINT
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`The Instituto Mexicano del Seguro Social (“IMSS”), an agency Of the Mexican government,
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`complains of Zirmner Biomet Holdings, Inc. (“Zimmer Biomet”) as follows:
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`NATURE OF THE CASE
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`1.
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`For years, Zirnmer Biomet used bribery as an integral part Of its world—wide marketing
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`strategy. Zimmer Biomet conducted the extensive, international scheme from its home Office in
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`Warsaw.
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`2.
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`Zimmer Biomet’s conduct is well established. In 2012, before the merger of Biomet
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`and Zimmer, Biomet entered into agreements with the Department of Justice and the Securities and
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`Exchange Commission in which Biomet admitted its use of bribery in Argentina, Brazil and China
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`and agreed to pay $22.8 million in fines and forfeitures for its illicit conduct in those countries.
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`3.
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`Despite these agreements, Zimmer Biomet continued its illegal bribery. As a result, in
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`early 2017, Zimmer Biomet entered into another deferred prosecution agreement with the
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`Department OfJustice and another settlement with the SEC. In both cases, Zimmer Biomet confessed
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`IMSS’ ORIGINAL COMPLAINT—~page 1
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`USDC IN/ND case 3:20-cv-00099-DRL-MGG document 1
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`to organized bribery in Mexico and Brazil. In total, Zirnmer Biomet paid $30.5 million in fines and
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`forfeitures as a result of its admitted conduct.
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`4.
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`Zirnmer Biomet’s bribery was not limited to foreign nations. In 2007, Zirnmer and
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`Biomet separately confessed to paying kickbacks to US physicians to sell its products and agreed to
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`pay nearly $200 million in fines and forfeitures for their illegal conduct.
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`5.
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`In Mexico, Zimmer Biomet paid bribes to illegally sell unregistered medical devices to
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`IMSS, a decentralized agency of the Mexican government that purchases medical products provided
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`to Mexican citizens by various agencies of the Mexican government, including IMSS itself.
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`6.
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`If IMSS had known of the lack of registrations or the bribery, it could not have made
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`any purchases from Zimmer Biomet. All of IMSS’ contracts with Zimmer Biomet since at least 2008
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`are therefore voidable.
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`JURISDICTION AND VENUE
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`7.
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`This Court has jurisdiction pursuant to 28 U.S.C. § 1332 (a) (4) because this action is
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`between a foreign state (according to the Foreign Sovereign Immunities Act (the FSIA)) and a citizen
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`of the United States.
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`8.
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`This Court has venue pursuant to (1) 28 U.S.C. § 1391(b) (1) because Zimmer Biomet
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`has its principal place of business in this District and (2) 28 U.S.C. § 1391(2) because a substantial part
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`of the events and omissions giving rise to the claims presented herein occurred in this District.
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`PARTIES
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`9.
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`IMSS is the Mexican Social Security Institute, a decentralized agency of the United
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`Mexican States. IMSS is therefore a “foreign state” pursuant to the FSIA, and its officials are covered
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`by the Foreign Corrupt Practices Act.
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`IMSS’ ORIGINAL COMPLAINT—page 2
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`USDC IN/ND case 3:20-cv-00099-DRL-MGG document 1
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`10.
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`Zirnmer Biomet
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`is
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`a multinational corporation principally involved in the
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`development, manufacture, and marketing of medical devices. Zirnmer Biomet is headquartered in
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`Warsaw, Indiana.
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`11.
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`Zimmer Biomet is the successor to Biomet, Inc., also of Indiana. Zirnmer Biomet has
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`assumed all of the rights and obligations of Biomet, Inc.
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`12.
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`Zimmer Biomet’s registered agent for service of process is Corporation Service
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`Company, 135 North Pennsylvania Street, Suite 1610, Indianapolis, Indiana 46204.
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`FACTUAL BACKGROUND
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`T/ae Parfz'er’ Business Relations/92,2)
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`13.
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`IMSS is the main social-service agency of the Mexican government. IMSS was created
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`in 1943 by order of the Mexican President, who continues to nominate IMSS’s General Director.
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`14.
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`IMSS provides health care services to tens of millions of Mexican citizens at hospitals
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`that IMSS owns and operates throughout Mexico. The Mexican government funds IMSS through
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`taxation and compulsory contributions. IMSS also manages the purchases of medical supplies for
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`other Mexican governmental agencies, including the Instituto de Seguridad y Servicios Sociales de los
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`Trabajadores del Estado (ISSSTE), Petroleos Mexicanos (Pemex), and the Mexican military.
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`15.
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`16.
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`IMSS is the appropriate agency to bring the claims presented herein.
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`Zimmer Biomet is an orthopedic medical device company. The company distributes
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`its products both domestically in the United States and internationally in multiple countries.
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`17.
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`In Mexico, Zimmer Biomet distributed its products through Biomet 3i Mexico, an
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`indirectly wholly—owned subsidiary.
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`IMSS’ ORIGINAL COMPLAINT—page 3
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`USDC IN/ND case 3:20-cv-00099-DRL-MGG document 1
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`Zimmer Biomef’s Inter/1611mm! Bribeg/ 56/96/726
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`18.
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`For years, Zimmer Biomet used bribes to sell its products to governmental agencies
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`throughout the world, including within the United States and Mexico. Zimmer Biomet’s conduct was
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`international in scope and orchestrated from Zimmer Biomet’s corporate officesn in Warsaw, Indiana.
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`Zimmer Biomet utilized a similar scheme in at least the United States, Mexico, Brazil, China, and
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`Argentina.
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`19.
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`Zimmer Biomet’s international bribery strategy has been established in actions brought
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`by the DO] and the SEC.
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`20.
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`In 2012, Biomet entered into a deferred prosecution agreement with the Department
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`ofJustice and a settlement agreement with the SEC based on Biomet’s illegal bribery in Brazil, China,
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`and Argentina. Zimmer Biomet became bound by those agreements following the merger of Zimmer
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`and Biomet in 2015. As part of its 2012 agreements, Biomet paid a $17.3 million fine to the DO] and
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`$5.5 million in disgorgement of illicit profits and interest to the SEC. Biomet also agreed to a number
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`of internal remedial actions designed to prevent further Violations of United States law, including the
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`creation of an independent compliance monitor.
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`21.
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`Despite its earlier confessions,
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`the fines and disgorgements, and the purported
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`compliance monitor, Zimmer Biomet continued to pay bribes to foreign government officials.
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`22.
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`Accordingly, in 2017, Zimmer Biomet entered into another deferred prosecution
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`agreement with the DO] and another settlement with the SEC, this time for bribes paid from at least
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`2008 through 2013 in Mexico and Brazil.
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`23.
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`Zimmer Biomet’s use of bribes and kickbacks was not limited to foreign countries.
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`Zimmer Biomet also utilized illicit payments to sell its products in the United States. Prior to their
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`merger, Zimmer and Biomet separately admitted to utilizing the same illicit practices in the United
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`States. Zimmer Biomet paid kickbacks to US physicians to make sales funded by the US government.
`IMSS’ ORIGINAL COMPLAINT—page 4
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`USDC IN/ND case 3:20-cv-00099-DRL-MGG document 1
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`As a result of this domestic conduct, Zimmer and Biomet paid nearly $200 million in fines and
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`forfeitures to the SEC and DO].
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`24.
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`As a result of its prior agreements with the US government, Zimmer Biomet cannot
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`deny its illegal conduct. In both the 2012 and 2017 deferred prosecution agreements with the DO],
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`Zimmer Biomet agreed that it would not “make any public statement, in litigation or otherwise,
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`contradicting the acceptance of responsibility” for its illegal conduct and the conduct of its agents.
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`Zimmer Biomet is also bound by the SEC agreements that resulted in final administrative orders.
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`Zimmer Biomet? Conduct 2'72 Mexico
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`25.
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`In Mexico, between at least 2008 and 2013, Zimmer Biomet knowingly paid bribes to
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`Mexican government officials to facilitate the sale of products to and through IMSS.
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`26.
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`From 2008 through 2013, Zimmer Biomet paid almost $1 million to its Mexican
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`agents, who acted as bagmen for passing on bribes to Mexican government officials. The bribes were
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`paid so Zimmer Biomet could illegally smuggle unregistered medical products into Mexico so the
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`unregistered products could be sold to IMSS.
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`27.
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`Zimmer Biomet was informed the conduct was illegal, but decided to continue the
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`profitable scheme.
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`28.
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`Zimmer Biomet knew of, and directly supported, the illegal activities of its wholly~
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`owned subsidiaries and its agents throughout the world and specifically including Mexico. In the
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`alternative, Zirnmer Biomet acted with willful ignorance of the bribery scheme, using its wholly—owned
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`subsidiaries and its agents to obscure illicit payments that benefited Zimmer Biomet.
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`29.
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`To control the international scheme, Zimmer Biomet personnel communicated with
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`Zimmer Biomet personnel around the world, including within Mexico. Zimmer Biomet personnel
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`would also travel to and from Mexico in support of the scheme.
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`IMSS’ ORIGINAL COMPLAINT—page 5
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`USDC IN/ND case 3:20-cv-00099-DRL-MGG document 1
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`Eflm‘ on IMSS
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`30.
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`Zimmer Biomet made millions from its bribes in Mexico. Zimmer Biomet has
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`confessed to (firefly receiving $2,652,100 in illicit profits through its Mexican bribery scheme, but
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`Zimmer Biomet received far more indirectly. Zirnmer Biomet’s illegal conduct voids all of its IMSS
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`contracts from 2008 to the present.
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`31.
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`To obtain IMSS contracts, Zirnmer Biomet had to represent that it had and was
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`complying with all legal requirements for the sale of medical equipment to IMSS and within Mexico.
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`Zimmer Biomet made the required representations, but its statements were manifestly false. IMSS
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`relied on Zimmer Biomet’s false, material statements and omissions in order to consummate business
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`transactions with Zimmer Biomet.
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`32.
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`In addition, Zimmer Biomet bribed Mexican government officials so Zimmer Biomet
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`could smuggle unregistered medical products into Mexico and sell the unregistered medical products
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`to IMSS. The sale of unregistered devices was and is illegal in Mexico. IMSS could not have knowingly
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`purchased unregistered medical devices.
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`33.
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`lMSS’ reliance on Zirnmer Biomet’s false representations lasted longer than the bribes
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`and illegal importation of medical devices. With each additional contract, Zimmer Biomet had to
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`represent that it had and would comply with Mexican law. Following the first bribes and illegally
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`imported products, those representations were false. Absent the false representations, IMSS would
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`have been legally barred from contracting with Zimmer Biomet. Therefore, IMSS relied on Zimmer
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`Biomet’s representations when approving contracts for the purchase of Zimmer Biomet products well
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`after the expressly illicit conduct set out above.
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`34.
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`Pursuant to Mexican law, Zimmer Biomet’s fraud and its breaches of the Mexican
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`government procurement procedures voids Zimmer Biomet’s contracts, and therefore, Zimmer
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`IMSS’ ORIGINAL COMPLAINT—~page 6
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`USDC IN/ND case 3:20-cv-00099-DRL-MGG document 1
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`Biomet should be required to return all proceeds received from IMSS, retaining at most the actual
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`production cost of the equipment it sold.
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`CLAIMS FOR RELIEF
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`35.
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`Based on the foregoing facts, IMSS raises the following claims for relief:
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`First C/czinifor Reiicf— Franc!
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`36.
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`‘ Zinimer Biomet’s false, material statements and omissions to IMSS were fraudulent.
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`37.
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`IMSS relied on Zimrner Biomet’s false, material statements and omissions in order to
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`consummate business transactions with Zimmer Biomet. Absent the false claims, IMSS would have
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`been barred from contracting with Zimmer Biomet.
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`38.
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`IMSS is entitled to avoidance of all contracts tainted by the fraud and a recovery of all
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`payments made pursuant to those contracts. This relief is the same whether this claim is made pursuant
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`to United States or Mexican law.
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`Second C/cziinfor Reiief— Violation ofAriic/es 50 and 60 of i/oc Law ofAcquisiiions, Loom and
`Sonoices off/ac Pnlo/ic Sector (cinder Mexican low)
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`39.
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`Articles 50 and 60 of the Mexican Law of Acquisitions, Leases and Services of the
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`Public Sector prohibit bribes to public sector officials and misrepresentation made to induce issuance
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`of government contracts.
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`40.
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`IMSS is entitled to avoidance of the underlying contracts and return of all
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`compensation paid to Zimmer Biomet.
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`T/oirci CZaiInfor Reinf— Brooc/o of Contract (nncler Mexican low)
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`41.
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`Zimmer Biomet breached its contractual duties to IMSS by failing to disclose its
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`corrupt payments. Specifically, Zimmer Biomet contractually represented that it was in compliance
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`‘IMSS’ ORIGINAL COMPLAINT—page 7
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`USDC IN/ND case 3:20-cv-00099-DRL-MGG document 1
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`with Mexican law; namely, Articles 50 and 60 of the Law of Acquisitions, Leases and Services of the
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`Public Sector.
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`42.
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`Zimmer Biomet independently breached the terms of the IMSS contracts by paying
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`bribes to corrupt officials.
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`43.
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`Further, by bribing IMSS officials and misrepresenting that activity in its contracts and
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`invoicing practices, Zimmer Biomet violated Article 8 of the Mexican Civil Code, which expressly
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`prohibits fraud in business contracts.
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`JURY TRIAL DEMAND
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`44.
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`IMSS requests a trial by jury.
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`PRAYER FOR RELIEF
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`45.
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`IMSS prays that this Court award it all the relief to which it is entitled under law or
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`equity.
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`Dated: January 30, 2020
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`Respectfully su
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`.tte
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`By:
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`Mark Maney
`Attorney—in—Charge
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`Maney & Gonzalez—Felix PC
`Texas Bar NO. 12898200
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`Federal ID: 11815
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`712 Main Street
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`Suite 2100
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`Houston, Texas 77002
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`Telephone: 71380625300
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`mmaney@maneylaw. com
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`ATTORNEYS FOR IMSS
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`IMSS’ ORIGINAL COMPLAINT—page 8
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