The bomb was dropped shortly before 7 pm. The healthcare giant issued a three-paragraph press release announcing a “voluntary disclosure” to U.S. authorities about improper payments, which were made by unspecified foreign subsidiaries in connection with the sale of medical devices in a pair of unnamed countries.

Serious stuff, folks. J&J acknowledged that the payments may fall within the jurisdiction of the Foreign Corrupt Practices Act, and so the Department of Justice and the Securities and Exchange Commission were notified.

And there was more: Mike Dormer, who’s formal title is worldwide chairman of medical devices and diagnostics, has retired. He wrote a letter citing an internal review of the faux pas and that he had “ultimate responsibility by virtue of my position” for those subsidiaries. The letter wasn’t made available and there was no indication whether he was actually involved in this mess.

In its dispatch, The Wall Street Journal wrote that “the disclosures are a bitter pill for a company that prides itself on its clean corporate image.”

Well, hold on there. True, there was a public announcement. But the news was released late - markets were closed and media deadlines were nearing. Sure, there are Internet sites, but bad news gets less attention overnight. To be truly forthright, J&J could’ve released this stunner during the middle of the day, or waited til morning.

More important, the episode is going to distract J&J management; probably tarnish its reputation and cause enormous tumult inside the company, particularly the $20 billlion diagnostic and device unit. What if anything did Dormer know? Is it more extensive than the disclosure indicates? How much money was involved? Who got it? Who resigns next?

As the device turns……

[tags]Foreign Corrupt Practices Act, Johnson & Johnson[/tags]