No Evidence of Bribery, Lawyer Says in Retaliation Trial

SAN FRANCISCO (CN) – Patrick Norton saw several red flags as Bio-Rad Laboratories’ lead anti-corruption investigator in China, but in the end found no evidence of bribes being paid to foreign public officials.

His suspicions were raised by the almost-guaranteed difficulty in obtaining documents related to the biotech’s business dealings in a notoriously corrupt market for the medical products it sells. “This could reflect an element of skullduggery and an attempt to hide something,” Norton wrote, after a day spent reviewing Bio-Rad’s files in Hong Kong.

Bio-Rad had hired Norton, then a partner at the law firm Steptoe and Johnson, to look into possible violations of U.S. anti-corruption laws in its offices around the globe; including China, Russia, Thailand and Vietnam. Norton’s team ultimately uncovered wrongdoing in Thailand and Vietnam and some record keeping issues in Russia, but mostly poor management in China.

Nothing he uncovered in China, Norton said Wednesday, amounted to actual violations of the Foreign Corrupt Practices Act.

“There were no smoking guns,” Norton testified.

Norton gave his report to Bio-Rad’s audit committee in 2011. Almost two years later, Bio-Rad fired Sanford Wadler, who had been its general counsel for nearly 25 years.

Norton is now testifying in Wadler’s retaliation trial. Wadler, who was terminated in June 2013, sued the company and its CEO Norman Schwartz in May 2015, claiming he was fired “abruptly” for reporting potential Foreign Corrupt Practices Act breaches to the company’s audit committee in 2013.

Bio-Rad maintains the quality of Wadler’s work had been deteriorating, as had his attitude and behavior toward colleagues.

Ivo Labar, a lawyer on Wadler’s legal team, questioned Norton about red flags in China during testimony Wednesday.

“Would you call it no guns or no smoke?” Labar asked.

“I would say there was some smoke but no fire,” Norton said.

But Wadler wasn’t satisfied, Norton said, claiming there were discrepancies between Bio-Rad’s Chinese distributor agreements that left out certain clauses requiring pledges not to violate the act and asserting Bio-Rad’s audit rights. While this could suggest that Bio-Rad China was trying to get around the act, Norton said he found Wadler’s office simply hadn’t sent over a copy of the new agreement translated from English to Chinese.

“In large part it seemed to be a mix-up in which Mr. Wadler’s office failed to provide what was necessary,” Norton said. “I told the audit committee that the email records indicated very clearly that the legal department had the translation and for some reason hadn’t sent it to China.”

Under cross-examination from Labar, Norton added that Wadler “didn’t seem to understand what an FCPA violation was.”

Labar said, “You knew Mr. Wadler thought the investigation you did in China and these other places were seriously deficient.”

Norton replied, “That was the most remarkable part of this entire business. He was not privy to what had been investigated and what had been found. He didn’t know what issues had been looked at.”

While Wadler claims in his lawsuit he was shut out of the investigation, Norton explained that it was standard practice for management to be asked not to interfere.

“You don’t give them details on exactly what you’re looking at or how you’re handling the investigation. Mr. Wadler was a part of management and he did not get those documents. It’s standard practice,” Norton said.

At Wadler’s urging in 2013, the audit committee launched another probe into China, hiring law firm Davis Polk for the job.

Norton also assisted in that investigation. Bio-Rad attorney James Asperger asked him why, if he felt so strongly that Wadler’s allegations had no merit.

Norton said he agreed to help because the company was currently under investigation by the federal government for Foreign Corrupt Practices Act violations in Russia, Thailand and Vietnam – an investigation that concluded in 2014 with a $55 million fine.

In 2013, just as the government was set to meet with Wadler, Schwartz and other Bio-Rad executives about their efforts to bring the company into compliance with the law, Wadler announced additional potential Foreign Corrupt Practices Act breaches in China.

Wadler’s new allegations, Norton said, “required us to put those issues to rest before the whole case could be resolved.”

The Davis Polk report, which came out around the time Wadler was fired, backed up Norton’s earlier conclusions. “We have found no evidence to date of any violations or attempted violation of the FCPA,” the report said.

Labar pressed Norton on another red flag Norton had noted – that Bio-Rad China’s business managers had requested “specific intentional changes to some of the terms in the English agreements and signed them in Chinese without reporting the change in the U.S.” Norton said the clause was related to bonuses for selling Bio-Rad products.

“They had added one clause related to bonus provisions but it had nothing to do with the FCPA. It was a management problem,” Norton said, adding that Wadler’s office had failed to provide the document that would have explained this.

“You would agree, though, that the facts are suspicious,” Labar said.

Norton said, “The circumstances were suspicious, but only if you didn’t have all the documentation that explained what was going on.”

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