OSI Systems Inc.
OSI Systems Accused of Obtaining Major Contract Through Corruption
According to the complaint, on August 21, 2013, OSI Systems, Inc. (NasdaqGS: OSIS). announced that it had entered into a 15-year agreement to provide turnkey cargo and vehicle security screening services in Albania. However, OSI officials failed to disclose that OSI transferred 49% of its project company associated with the Albania contract—the entity to which all rights and obligations under the contract belong and therefore worth millions—to a holding company owned by an Albanian doctor for consideration of less than $5.00. Muddy Waters Research brought this information to light on December 6, 2017, when it reported that OSI obtained the contract in Albania through corruption. Immediately following the Muddy Waters report, OSI emphatically denied Muddy Waters’ claims, calling them misleading.
OSI stunned investors on February 1, 2018, when the company effectively admitted that the Muddy Waters report was accurate, disclosing that the SEC had commenced an investigation into the company’s compliance with the Foreign Corrupt Practices Act (“FCPA”) and the U.S. Department of Justice, through the U.S. Attorney’s Office for the Central District of California (“DOJ”), had also announced its intention to request information from the company regarding FCPA compliance matters. OSI further revealed that the SEC and DOJ were investigating possible insider trading at the company and had subpoenaed information regarding trading by certain executives, directors, and employees. On this news, OSI’s stock fell $12.00 per share, or 18%, to close at $54.60 per share on February 2, 2018.