Olympus Corporation of the Americas, the largest U.S. distributor of scopes commonly used in medical procedures, has agreed to pay $623.2 million to resolve criminal and civil claims that its agents paid bribes and kickbacks to boost sales. A subsidiary also will pay $22.8 million to resolve charges stemming from similar acts in Latin America. 

The company's agents paid bribes and made kickbacks to doctors and hospitals between 2006 and 2011 — a period during which the company mostly operated without a single compliance officer to guard against illegal behavior, U.S. Attorney Paul J. Fishman said.

During that period, court records claim, some of the company's sales force doled out cash, paid for overseas trips, expensive meals and events, and provided spa treatments to doctors, hospital officials and other medical professionals in return for purchasing Olympus' equipment. It also offered research grants to hospitals in return for purchases, federal court records show. The questionable practices only came to light after the company's first compliance officer, John Slowik, filed a whistleblower suit in 2010 in New Jersey federal court, Fishman said.

“For years, Olympus Corporation of the Americas 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 Fishman. “It is appropriate that they be punished for that.  At the same time, the deferred prosecution agreement takes into account the companies’ cooperation and commitment to fully functional corporate compliance.”

The $623 million that Olympus will pay is the largest total amount paid in U.S. history by a medical device firm for violations of the Anti-Kickback Statute, which prohibits payments to induce purchases paid for by federal health care programs such as Medicare and Medicaid, according to the U.S. Attorney's Office in New Jersey. The fines and penalties dwarf the gross profits of $230 million that Olympus realized from the improper sales, Fishman noted.

In a letter posted on its website, Olympus Corporation of the Americas President/CEO Nacho Abia acknowledges the company's past wrongdoing and assures stakeholders that a "robust compliance program" has been implemented. "Olympus is committed to complying with all laws and regulations and to adhering to our own rigorous Code of Conduct, which guides our business processes, decisions and behavior," Abia's letter stated.

Federal prosecutors formally charged Olympus Corp. of the Americas (OCA) with conspiracy to violate the Anti-Kickback Statute, which prohibits payments to induce purchases paid for by federal healthcare programs. The criminal complaint against OCA accuses the company of winning 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. Some specific examples include:

• Giving a hospital a $5,000 grant to facilitate a $750,000 sale;
• Delaying a $50,000 research grant until a second hospital signed a deal to purchase Olympus equipment;
• Paying 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
• Giving a doctor free use of $400,000 in equipment for his private practice. This doctor had a major role in a New York medical center’s buying decisions.
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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.

“The Department of Justice has longstanding concerns about improper financial relationships between medical device manufacturers and the health care providers who prescribe or use their products,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer.  “Such relationships can improperly influence a provider’s judgment about a patient’s health care needs, result in the use of inferior or overpriced equipment, and drive up health care costs for everybody.  In addition to yielding a substantial recovery for taxpayers, this settlement should send a clear message that we will not tolerate these types of abusive arrangements, and the pernicious effects they can have on our health care system.”

Olympus has entered into a three-year deferred prosecution agreement (DPA) that will allow it to avoid conviction if it complies with the reform and compliance requirements outlined in the agreement. The DPA requires the company to adopt several compliance measures to remedy its problems:

• Olympus must enhance its compliance training and maintain an effective compliance program;
• Olympus must maintain a confidential hotline and website for OCA employees and customers to report wrongdoing;
• The company’s CEO and board of directors must certify annually that the program is effective; and
• Olympus must adopt an executive financial recoupment program requiring executives who engage in misconduct or fail to promote compliance to forfeit up to three years of performance pay.

OCA has agreed to 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. In a separate DPA, Olympus Latin America Inc. (OLA), a subsidiary of OCA, will pay a $22.8 million criminal penalty for violations of the Foreign Corrupt Practices Act (FCPA).

Larry Mackey, 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 Fishman under department guidelines and approved by the Deputy Attorney General. The DPA and monitor will remain in place for three years and can be extended for another two years if Olympus violates the DPA, the U.S. Justice Department said.. 

In the civil settlement, Olympus agreed to pay $310.8 million to the federal government and the states to settle the case.  The federal share of the civil settlement is $267.2 million and Olympus will pay $43.5 million to participating states that contributed to the falsely claimed Medicaid payments.

A separate criminal complaint charges OCA’s Miami-based subsidiary OLA with FCPA violations in connection with improper payments to health officials in Central and South America. 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 healthcare 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, the U.S. government alleged.

“Olympus Latin America admitted to bribing publicly employed health care providers and hospital officials across Central and South America so that it could illegally win business and sell its products,” said Principal Deputy Assistant Attorney General David Bitkower. “OLA’s illegal tactics in Central and South America mirrored Olympus’s conduct in the United States. The FCPA resolution demonstrates the department’s commitment to ensuring the integrity of the healthcare equipment market, regardless whether the illegal bribes occur in the U.S. or abroad.” 

OLA entered into the DPA with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the District of New Jersey.  The agreement requires OLA to pay a criminal penalty of $22.8 million, retain the same compliance monitor as for OLA (Mackey) for a period of three years and implement a number of compliance measures. The department reached this resolution based on a number of factors, including that OLA did not voluntarily disclose the misconduct in a timely manner, but OLA did receive credit of a 20 percent reduction on its penalty for its cooperation, including its extensive internal investigation, translation of numerous foreign language documents and collecting, analyzing and organizing voluminous evidence.

In addition to the criminal and civil resolutions, Olympus executed a corporate integrity agreement (CIA) with the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG). The CIA details the compliance program OCA must maintain, which must include:

• compliance responsibilities for OCA management and the board of directors;
• a health care compliance code of conduct that includes certain standards;
• training and education that includes specified standards;
• requirements for consulting arrangements, grants and charitable contributions, management of field assets and review of travel expenses;
• risk assessment and mitigation process; and
• review procedures for testing the compliance program.
   

“Olympus Corp. of the Americas’ and its subsidiaries’ greed-fueled kickback scheme threatened the impartiality of medical decision-making and the financial integrity of Medicare and Medicaid,” said Special Agent in Charge Scott J. Lampert of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “Working with our law enforcement partners, we remain vigilant and committed to protecting beneficiaries and taxpayers from those seeking to unlawfully enrich themselves.”