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Orthofix International NV, a company that produces bone repair and other sports medicine products, agreed to pay out a $42 million settlement to resolve claims against it filed by a whistleblower under the False Claims Act (“FCA”). The settlement would also bring to an end a six-year criminal investigation by the Justice Department.

The company will plead guilty in federal district court in Massachusetts to a single felony count of obstructing a U.S. government audit and will pay a $7.8 million criminal fine. In addition, the company will pay $34.2 million in exchange for a settlement of the whisleblower’s claims under the FCA. The whistleblower’s complaint alleged that Orthofix officials improperly waived patient co-payments, and thus misstated the true cost of its bone stimulators. The fraud resulted in Medicare overpayments. The company also paid kickbacks to doctors in the guise of “fitter fees” and referral fees, according to a Justice Department official.

Five Orthofix employees have pleaded guilty to charges in connection with the federal investigative probe, including Thomas Guerrieri, an Orthofix VP, who pleaded guilty to violating a federal anti-kickback statute by drawing up fake consulting agreements with doctors who used the company’s products. The company has set aside $43 million to dispose of the FCA complaint.

The False Claims Act is a federal statute which dates back to 1863. The law’s qui tam provisions enable private whistleblowers (also known as relators) to sue individuals and contractors who have allegedly defrauded the government by making false claims in order to obtain payment, or in order to avoid liability. While the government may elect to intervene in a claim initiated under the FCA, it does not always do so, and relators may proceed with their claims even if no government intervention takes place. Victorious whistleblowers may recover between 15% and 30% of any final judgment or settlement. Additionally, the law provides protections against retaliation for employees who engage in protected activities; protected activities include filing a complaint under the FCA or otherwise making efforts to stop violations of the statute.

 

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