Olympus Coughs Up a Record $646 Million to Settle Kickback Charges
Published: Mar 02, 2016
PHILADELPHIA, March 1, 2016 /PRNewswire/ -- In yet another historic achievement under the False Claims Act ("FCA"), medical device titan Olympus Corporation of the Americas ("Olympus") announced today it has agreed to pay $623 million to resolve a civil whistleblower suit and companion criminal charges that the company gained market share dominance for its medical products through systemic violations of the US Anti-Kickback Statute ("AKS"). The settlement is the largest total amount paid in U.S. history for violations of the AKS and the largest amount ever paid by medical device company.
First-hand details of Olympus's pay to play kickback scheme were brought to the Government's attention by the company's former corporate Compliance Officer, who brought a federal lawsuit under the qui tam or "whistleblower" provisions of the False Claim Act. Kenney McCafferty attorneys Tavy Deming and Kathryn Schilling represent the whistleblower. The whistleblower filings unsealed today make the startling revelation that Olympus management could have, and should have, avoided the expensive US investigation that resulted in the $623 million pay out.
The whistleblower became Olympus's first Compliance Officer in company history in 2009. The newly-minted Compliance Officer quickly discovered that kickbacks formed the fabric from which Olympus's sales and marketing success was woven. "For most tenured executives entering the prime of their career, this discovery would have presented a serious quandary, but not for our client," said Tavy Deming. "Our client boldly put aside self-interest and took swift action to let the truth be known. He immediately put Olympus's top brass on notice of the full nature and scope of the company's non-compliance with the US Anti-Kickback Statute and international anti-bribery laws. He then worked tirelessly to implement a comprehensive compliance program he designed to stop the fraud in its tracks. Our client offered Olympus the chance for redemption by reporting internally first. Unfortunately, Olympus chose to elevate profits above corporate responsibility."
Court filings reveal that a corporate culture of fraud and herd mentality beset Olympus. Whistleblowers that fight the tide are ostracized, invalidated and ultimately capitulate under the unrelenting pressure, or are fired. "As is the case for many whistleblowers who report fraud internally, our client's inconvenient truth rendered him a casualty," said Tavy Deming.
Olympus fired the whistleblower in 2010. In 2011, Olympus's Japanese corporate parent, Olympus Corp., ousted the second executive whistleblower in as many years: President and CEO Michael Woodford. According to court documents, the Olympus Corp. Board discharged Woodford after he refused to perpetuate the cover up of a massive accounting scandal. "It was fascinating to watch Woodford's story unfold because it so closely tracked that of our client, and it was extremely gratifying to see him vindicated," remarked Kathryn Schilling.
The New Jersey U.S. Attorney's Office, in collaboration with the Department of Justice, led the federal investigation that corroborated the whistleblower's allegations of an elaborate, international kickback scheme, which includes:
- Providing key accounts with "permanent loans" of Olympus medical equipment virtually whenever requested by Olympus sales and marketing personnel to maintain customer loyalty to the Olympus brand and to secure purchases of Olympus products;
- Funneling cash payments of as much as $100,000 annually to reward "VIP" and "KOL" physicians for ostensible "consulting services" at the discretion of Olympus sales and marketing representatives, with the knowledge and endorsement of senior management, based on sales potential;
- Annual cash payments of hundreds of thousands of dollars masquerading as "grants" to fund educational or research programs made at the discretion of a grant committee comprised solely of Olympus sales and marketing personnel, based on sales potential; and
- Funding luxury, all-expense paid vacations to Japan and other exotic international destinations for "VIP physicians," and sometimes their spouses, in exchange for purchases and promotion of Olympus medical products.
According to Kathryn Schilling, "our client is the only person to ever step forward and alert corporate executives, and then the Government, to the kickback schemes Olympus commenced a decade ago. These schemes, as pervasive as they were, went undetected for many years and most likely would have continued unabated had our client not alerted the New Jersey U.S. Attorney's Office and DOJ to all he knew. His information and evidence was abundant, compelling and unassailable. Moreover, his cooperation with criminal and civil prosecutors sparked a robust Government investigation that halted Olympus's misconduct within a year. But for the confluence of our client's integrity and the platform afforded him by the False Claims Act, Olympus would not have been held accountable to make this landmark $623 million repayment to the Government and the U.S. Taxpayer."
"This case is testament to the fact that without external fraud reporting avenues afforded by current whistleblower laws, corporate greed will go unchecked," added Tavy Deming.
The False Claims Act is widely heralded as the Government's most effective weapon to combat corporate schemes that generate profit from bilking Government programs funded with hard-earned taxpayer dollars. Whistleblower-initiated lawsuits under the False Claims Act have recovered over $18 billion dollars since Congress strengthened the whistleblower provisions in 1986. Even so, the law has its detractors, which criticize the size of whistleblower awards, a proposition Tavy Deming calls out as "tiresome propaganda of the purveyors of fraud, or their proxies." She continued, "when the False Claims Act was divested of strong whistleblower incentives, Government fraud experienced a meteoric rise. Without whistleblowers, the Government is outmanned and outmatched in the effort to identify and prosecute fraud successfully. In most cases, to blow the whistle requires our clients to make the penultimate personal sacrifice, their careers. They endure years earning no salary while the Government investigates their allegations. By tying the award provisions to the largess of the fraud and the extent to which relators assist the Government, whistleblowers are justly compensated. Today, thanks to Congress's recognition of the fundamental importance of whistleblowers, the Government was able to recover $623 million for the American taxpayer."
In addition to payment of the $623 million settlement, Olympus has admitted facts attested to
in connection with a deferred prosecution agreement, and the company agreed to be bound by a
Corporate Integrity Agreement.
Assistant U.S. Attorneys for the District of New Jersey David Dauenheimer, David Walk and Deborah Gannett spearheaded the investigation for the United States. California Assistant Attorney General Raymond Liddy lead the investigation for the states, through the National Association of Medicaid Fraud Control Units. Both the whistleblower and Kenney McCafferty laud the "impressive and irrepressible" work of the Government prosecutors. Under the direction of Jake Elberg, Chief of the Health Care and Government Fraud Government & Health Care Fraud Unit, the New Jersey U.S. Attorney's Office embraces the whistleblower process, the lawyers said.
The case is captioned as United States ex rel. John Slowik et al. v. Olympus Corporation of the Americas, et al., Civ. No. 10-cv-5994 (D. N.J.)
Read the Whistleblower Complaint.
Read the Settlement Agreement.
ABOUT KENNEY McCAFFERTY
Kenney & McCafferty, PC is the one of the most successful national law firms specializing in representing qui tam whistleblowers, tax fraud whistleblowers and SEC whistleblowers. Kenney McCafferty has helped to recover billions of dollars back to the U.S Treasury in massive whistleblower-initiated cases filed against GlaxoSmithKline, Amgen, Amedisys, Johnson & Johnson, Omnicare, CareSource, Cephalon, and AstraZeneca, among others.
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