Olympus Corp. of the Americas, the largest distributor of endoscopes and related equipment will pay $623.2 million to resolve criminal charges and civil claims relating to a scheme to pay kickbacks to doctors and hospitals.
A subsidiary of the distributor will pay $22.8 million to resolve criminal charges relating to the Foreign Corrupt Practices Act (FCPA) in Latin America.
Olympus was represented by Thomas Gallagher of Pepper Hamilton in Philadelphia.
The civil settlement resolves a lawsuit filed by John Slowik, the former chief compliance officer of Olympus under the federal and various state False Claims Acts.
The acts permit whistleblowers to file suit for false claims against the government entities and to share in any recovery.
Slowik will receive $44,102,573 million from the federal share and $7 million from the state share of the civil settlement amount.
Slowik was represented by Kenney McCafferty in Philadelphia.
Olympus was charged in a criminal complaint filed today in Newark, New Jersey, federal court with conspiracy to violate the Anti-Kickback Statute, which prohibits payments to induce purchases paid for by federal healthcare programs.
Olympus entered into a three-year deferred prosecution agreement that will allow it to avoid conviction if it complies with the reform and compliance requirements outlined in the agreement.
“For years, Olympus Corporation of the Americas (OCA) and Olympus Latin America (OLA) dropped the compliance ball and failed to have in place policies and practices that would have prevented the substantial kickbacks and bribes they paid,” said U.S. Attorney Paul Fishman. “It is appropriate that they be punished for that. At the same time, the deferred prosecution agreement takes into account the company’s cooperation and commitment to fully functional corporate compliance.”
Olympus will pay a $312.4 million criminal penalty and an additional $310.8 million to settle civil claims under the federal and various state False Claims Acts, the largest total amount paid in U.S. history for violations involving the AKS by a medical device company.
In a separate deferred prosecution agreement, Olympus Latin America Inc. (OLA), a subsidiary of OCA, will pay a $22.8 million criminal penalty for violations of the FCPA.
The criminal complaint against OCA charges that OCA won new business and rewarded sales by giving doctors and hospitals kickbacks, including consulting payments, foreign travel, lavish meals, millions of dollars in grants and free endoscopes.
The complaint alleges that OCA gave a hospital a $5,000 grant to facilitate a $750,000 sale, OCA held up a $50,000 research grant until a second hospital signed a deal to purchase Olympus equipment,OCA paid for a trip for three doctors to travel to Japan in 2007 as a quid pro quo for their hospital’s decision to switch from a competitor to Olympus and that a doctor with a major role in a New York medical center’s buying decisions received free use of $400,000 in equipment for his private practice.
These and other kickbacks helped OCA obtain more than $600 million in sales and realize gross profits of more than $230 million.
The criminal complaint alleges that the improper payments happened while Olympus lacked training and compliance programs.
Unlike other medical and surgical products companies, Olympus did not create the position of compliance officer until 2009 and did not hire an experienced compliance professional until August 2010.
Larry Mackey, a partner at Barnes & Thornburg in Indianapolis and a former federal prosecutor best known for trying the Oklahoma City bombing cases, has been selected as an independent monitor to evaluate and oversee Olympus’ compliance with the DPA.
He was selected by U.S. Attorney Fishman under department guidelines and approved by the Deputy Attorney General.
The deferred prosecution agreement and monitor will remain in place for three years and can be extended for another two years if Olympus violates the DPA.
In the civil settlement, Olympus agrees to pay $310.8 million to the federal government and the states to resolve claims that Olympus’s payment of kickbacks caused false claims to be submitted to federal health care programs Medicare, Medicaid and TRICARE, and thus violated not only the AKS but also the federal and various state False Claims Acts.
The federal share of the civil settlement is $267,288,323, and Olympus will pay $43,512,053 million to participating states that contributed to the falsely claimed Medicaid payments at issue.
In a separate criminal complaint filed in Newark federal court, OCA’s Miami-based subsidiary OLA was charged with FCPA violations in connection with improper payments to health officials in Central and South America, and OLA entered into a separate three-year DPA.
According to court documents, from 2006 until August 2011, OLA implemented a plan to increase medical equipment sales in Central and South America by providing payments to health care practitioners at government-owned health care facilities.
These payments included cash, money transfers, personal grants, personal travel and free or heavily discounted equipment.
The primary method to deliver these illicit benefits was through “training centers,” nominally set up to educate and train doctors, but which OLA used to provide benefits to pre-selected practitioners. OLA and its conspirators paid nearly $3 million to practitioners to induce the purchase of Olympus products and recognized more than $7.5 million in profits as a result.