September 5, 2014

DOJ Catch of the Week — Smith & Nephew

By the C|C Whistleblower Lawyer Team

This week’s Department of Justice “catch of the week” goes to Smith & Nephew. On Wednesday, the London-based medical device maker agreed to pay $11.3 million to settle charges it sold the U.S. government orthopaedic products it claimed were US-made but actually came from Malaysia. The settlement ends a whistleblower lawsuit brought in 2008 under the qui tam provisions of the False Claims Act by former Smith & Nephew information technology manager Samuel Cox. According to Cox’s attorneys, this is the first whistleblower settlement involving false country of origin claims for medical devices.

Cox alleged Smith & Nephew sold the Department of Veterans Affairs orthopaedic devices claiming they were made in the US when they were actually purchased from Malaysia-based Straits Orthopaedics. Since Malaysia does not have a trade agreement with the US, this allegedly violate Trade Agreements Act which requires government contractors to sell the US only products made in the US or in countries with which the US has signed a trade agreement. Under the settlement, the government will receive $6 million and Cox will receive a whistleblower reward of $2.3 million and $3 million for attorneys’ fees. The US government did not intervene in the suit but joined in negotiating the settlement. In a press release announcing the settlement, one of Cox’s attorneys, H. Vincent McKnight of Sanford Heisler, stated: “This is another example of the private-public partnership created by the False Claims Act working together to redress fraud.  The government team was essential in securing this result.”

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