Medtronic to Pay $4.41 Million in USDOJ-CIV Case

The Justice Department announced today that Medtronic plc and affiliated Medtronic companies, Medtronic Inc., Medtronic USA Inc., and Medtronic Sofamor Danek USA Inc., have agreed to pay $4.41 million to the United States to resolve allegations that they violated the False Claims Act by making false statements to the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Defense (DoD) regarding the country of origin of certain Medtronic products sold to the United States.

“Today’s settlement demonstrates our commitment to ensure that our service members and our veterans receive medical products that are manufactured in the United States and other countries that trade fairly with us,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will take action to hold medical device companies to the terms of their government contracts.”

“Domestic manufacture is a required component of many military and Veterans Administration contracts,” said U.S. Attorney Andrew M. Luger of the District of Minnesota.  “Congress has mandated that the United States use its purchasing power to buy goods made in the United States or in designated countries.  We take that mandate seriously and will not hesitate to take appropriate legal action to ensure compliance.”

According to the settlement agreement, between 2007 and 2014, Medtronic sold to the VA and DoD products it certified would be made in the United States or other designated countries.  The Trade Agreements Act of 1979 (TAA) generally requires companies selling products to the United States to manufacture them in the United States or in another designated country.  The United States alleged that Medtronic sold to the United States products manufactured in China and Malaysia, which are prohibited countries under the TAA.

The specific Medtronic products at issue included anchoring sleeves sold with cardiac leads and used to secure the leads to patients, certain instruments and devices used in spine surgeries, and a handheld patient assistant used with a wireless cardiac device.  The agreement covers the period from Jan. 1, 2007, to Dec. 31, 2013, and for one device (the handheld patient assistant), the period from Jan. 1, 2014, to Sept. 30, 2014.

The settlement resolves allegations originally brought in a lawsuit filed by three whistleblowers under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and share in any recovery. The relators will receive a total of $749,700 of the recovered funds.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.9 billion through False Claims Act cases, with more than $15.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The case was handled by the U.S. Attorney’s Office of the District of Minnesota with assistance from the Civil Division, DoD, Defense Logistics Agency and Defense Criminal Investigative Service and the VA’s Office of General Counsel.

The underlying case is United States of America ex rel. Samuel Adam Cox, III, Meayna Phanthavong, and Sonia Adams v. Medtronic, Inc., Medtronic USA, Inc., and Medtronic Sofamor Danek USA, Inc., Civil No. 12-cv-2562 (PAM/JSM).

The claims resolved by the settlement are allegations only; there has been no determination of liability.

Former Trader Pleads Guilty for Scheme to Falsify Records

A former trader at ConvergEx Global Markets Limited (CGM Limited) pleaded guilty this morning in federal court in New Jersey for his role in a scheme to falsify the books and records of a registered U.S. broker-dealer.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Paul J. Fishman of the District of New Jersey, Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office and Inspector in Charge Philip R. Bartlett of the U.S. Postal Inspection Service (USPIS) made the announcement.

Michael Craig Marshall, 47, of Bermuda, pleaded guilty before U.S. District Judge Jose L. Linares of the District of New Jersey, to one count of conspiracy to falsify the books and records of a broker-dealer.

According to court documents, CGM Limited and G-Trade Services, LLC (G-Trade) were both wholly owned subsidiaries of ConvergEx Group LLC (ConvergEx Group).  G-Trade was a registered U.S. broker-dealer.  As part of his plea today, Marshall admitted that clients placed orders to buy or sell securities with G-Trade, and G-Trade then routed the orders to CGM Limited.  Marshall further admitted that traders at CGM Limited regularly added a mark-up (an additional amount paid for the purchase of a security) or mark-down (a reduction of the amount received for the sale of a security) when executing the orders.  Employees of CGM Limited, G-Trade and other ConvergEx Group entities referred to mark-ups and mark-downs as “spread,” “trading profits” or “TP.”

At his plea hearing today, Marshall admitted that he and the other coconspirators falsified G-Trade’s books and records.  In particular, Marshall admitted that he reviewed falsified transaction reports for two trades executed in August 2009 to verify that the falsified data regarding the quantities, prices and times of the purchases reflected on the report matched actual trades that had been executed on the market on Aug. 7, 2009, by both G-Trade’s client and other market participants.  The reports hid the fact that spread had been taken on the brokerage orders, Marshall admitted.  These reports were later provided to G-Trade’s client.

On Dec. 18, 2013, Jonathan Daspin, the head trader at CGM Limited, Thomas Lekargeren, a sales trader at a different ConvergEx subsidiary, and CGM Limited each pleaded guilty to conspiracy to commit securities and wire fraud.  On the same day, ConvergEx Group entered into a deferred prosecution agreement.  Collectively, the two ConvergEx entities paid $43.8 million in criminal penalties and restitution.

The case is being investigated by the FBI’s Washington Field Office and the USPIS offices in Washington, D.C. and New York.  The case is being prosecuted by Senior Trial Attorneys Jason Linder and Patrick Pericak of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Leslie Schwartz of the District of New Jersey.  Fraud Section Assistant Chief Robert Zink and Trial Attorney Justin Goodyear also assisted with the investigation.  The Department appreciates the substantial assistance of the Securities and Exchange Commission.

3C’s: Anti-Cartel Day in Canada

Anti-Cartel Day in Canada

The Canadian Competition Bureau is celebrating “Anti-cartel Day: Helping businesses detect and prevent price-fixing and bid-rigging.” The press release is available here.

Below are some experts where the Commission provides many useful links:

 “The Bureau has developed resources to assist businesses and trade associations in recognizing and preventing cartel activity. The videos were made available on the Bureau’s Facebook page, YouTube channel and its website earlier this week, and include:


The press release has this quote from John Pecman, Commissioner of Competition:  “Cartels are corrosive to a healthy marketplace. Anti-cartel Day is a way for us to raise awareness as to the devastating effects of anti-competitive conduct but also to highlight the benefits of compliance for companies and the individuals managing them.”

The following helpful links are also in the press release:

Kudos to Commissioner Pecman and the Canadian Competition Bureau for their efforts in publicizing broadly the benefits of competition/compliance and providing resources to support the effort.

Happy Anti-Cartel Day!

3C’s: Recommended Article on the Auto Parts Cartel

Recommended Article on the Auto Parts Cartel

I am passing on this feature article by Dan Gearino of the Columbus Dispatch published on Sunday, March 22, 2015: Massive Price-Fixing Among Auto-Parts Manufacturers Hurt U.S. Car Buyers.  The article goes beyond the numbers of the record-breaking prosecutions and looks at some of the reasons the cartel flourished for so long and what the executives were (or weren’t) thinking.  First some familiar stats cited in the article:

  • So far, 33 companies have pleaded guilty and agreed to pay $2.4 billion in fines, and the investigation is ongoing.
  • In addition to company sanctions, 28 executives pleaded guilty to individual charges and most of them went to federal prison.  An additional 26 executives have been indicted but have not surrendered to authorities.

The following quotes are all excerpts from the article:

  • The prison sentences were a surprise, he said, because many executives considered this conduct to be merely an “administrative offense.”
  • “Some of the people who (received leniency) were some of the evil, evil people in this thing,” said a midlevel manager for one of the companies that pleaded guilty, a U.S. citizen, speaking on condition of anonymity because he was not authorized to comment.
  • He described a culture in which decisions were made by Japanese executives, often working with Japanese executives at other companies, and in which competitors were used to working together.
  • Meanwhile, the many American employees of the companies, even high-level employees, felt shut out from big decisions. In the price-fixing cases, this turned out to be a good thing. All but one of the 54 people charged are Japanese.
  • “Certainly one of the options we will consider will be extraditing them [indicted foreign defendants] from the country where they are located,” said [Marvin] Price, criminal director of the department’s antitrust division.

There are many lessons to be learned from the auto parts cartel capers.  I’ll be writing on some of my thoughts in the future, as I’m sure many others will.