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Medtronic Settles False Claims Act Case for $4.41 Million

The Justice Department announced that Medtronic plc and its affiliates, Medtronic, Inc., Medtronic USA Inc., and Medtronic Sofamor Danek USA Inc. (collectively “Medtronic”) have agreed to settle three whistleblowers’ qui tam complaint alleging Medtronic violated the False Claims Act.

Medtronic is a global healthcare company based in Minneapolis, Minnesota.  According to its website, Medtronic’s business units collectively employ approximately 85,000 people, operate in more than 160 countries, and serve over 53,000 patients.

The complaint filed by three whistleblowers alleged that Medtronic knowingly made false claims to the Veterans Administration and the Department of Defense concerning the country of origin of medical-surgical products sold to the United States through the VA Federal Supply Schedule Program.  Specifically, it was alleged that Medtronic certified that certain medical-surgical products were eligible for federal procurement under the Trade Agreements Act (“TAA”) because the products were either manufactured or “substantially transformed” in the United States.  The whistleblowers claimed that, in reality, the products were manufactured in China, India, Malaysia, or other “non-designated countries” and were not eligible for federal procurement under the TAA.

According to the complaint filed in the United States District Court for the District of Minnesota, whistleblowers Sonia Adams and Meayna Phanthavong were employees of Medtronic.  Ms. Adams worked in human resources at the Medtronic distribution facility in Memphis, Tennessee.  Ms. Phanthavong was a shipping and receiving clerk at the Memphis distribution facility.  Samuel Adam Cox III was as an information-technology consultant and executive in the medical device industry in 2007 and 2008. Mr. Cox began investigating country-of-origin violations by medical-surgical-supply companies with operations in Memphis after blowing the whistle on such violations by his former employer, Smith & Nephew Inc.

According to the Justice Department, the Medtronic products at issue were anchoring sleeves used to secure cardiac leads to patients, devices used in spinal surgeries, and a handheld device used in conjunction with wireless cardiac devices.  The allegations cover the period between 2007 and 2014.

The Justice Department stated that Medtronic will pay $4.41 million to settle the allegations.  The whistleblowers will share in $749,700 of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.