By Sue Reisinger, From Corporate Counsel

When John Slowik, the new chief compliance officer at Olympus America Inc., discovered the company was paying bribes to win business, he reported it to his bosses. Their way of fixing the problem: they fired him.

So Slowik blew the whistle. The outcome: Tuesday Olympus agreed to pay $646 million to settle three separate cases involving illegal payments to doctors and hospitals in the U.S. and Latin America. And Slowik, who filed a so-called qui tam suit under state and federal false claim acts, was awarded $51 million for his efforts.

The overall settlement is the largest total amount ever paid for violations of the anti-kickback statute and the largest amount ever paid by a medical device company, according to Slowik’s lawyers at Kenney McCafferty in Philadelphia.

Olympus, based in Central Valley, Pennsylvania, is the largest distributor of endoscopes and related medical equipment in the U.S. Its parent company is based in Tokyo, Japan.

U.S. Attorney Paul Fishman in New Jersey charged the company with violating the False Claims Act in a criminal complaint in U.S. District Court in Newark. Olympus’ Latin America unit was charged with violating the Foreign Corrupt Practices Act.

The U.S. company entered a three-year deferred prosecution agreement (DPA) that will allow it to avoid conviction if it fulfills compliance requirements. The subsidiary, Olympus Latin America Inc., entered a separate DPA.

In a statement Tuesday Nacho Abia, Olympus Corp. of the Americas president and CEO, said, “Olympus leadership acknowledges the company’s responsibility for the past conduct, which does not represent the values of Olympus or its employees. Olympus is committed to complying with all laws and regulations.”

Slowik’s civil suit and the criminal complaints describe how Olympus gave away medical equipment, paid for luxury vacations for physicians, made hundreds of thousands of dollars in cash payments masquerading as educational grants, lavishly wined and dined physicians, and paid exorbitant speaker and consulting fees to gain market share at inflated prices and to induce hospitals and physicians to purchase additional equipment and supplies. Many of these costs were passed on to Medicare, Medicaid and other publicly funded insurance units.

Slowik could not be reached for comment, but his complaint says he had worked at Olympus for 18 years, receiving good evaluations and several promotions. He began as a finance manager, worked his way up to vice president of treasury and in February 2009 became the company’s first chief compliance officer. He was fired in September 2010.

He is not a lawyer and had no health care compliance background. He had one employee, who also had no legal or compliance background. They were offered no training and little funding for programs, the complaint states.

Slowik’s complaint says when he “attempted to eliminate the illegal and systemic practices” at Olympus, he was “retaliated against, harassed and met severe resistance during his tenure.”

As he pressed on for reforms, Slowik’s supervisor stripped him of his authority, the complaint states. He retained his title, but could only report violations to the Olympus ethics department, where his complaints “fell on deaf ears.”

Slowik says his supervisor told him to figure out how to “work around the rules” so as to “not impact the business.” And finally Slowik was dismissed for “non-performance.”

In the DPA, Olympus acknowledges its behavior and accepts responsibility for it. Under the deal, Olympus must hire an independent monitor within 60 days, who will be chosen by the government.

Among a long list of reforms listed in the DPA, Olympus also:

• Must hire an experienced chief compliance officer, who will be a member of senior management and report directly to the board of directors and the chief executive officer, “and shall not be subordinate in function or position to the general counsel or the legal department.”

• Will expand the compliance department from one to 19 full-time employees and fund it appropriately.

• Will engage third parties to conduct risk assessment activities targeted to compliance risks, establish a compliance committee, implement an anonymous reporting hotline, and begin compliance training for employees.

Benjamin Mizer, the principal deputy assistant attorney general in the U.S. Department of Justice who handled the civil settlement, said in a statement that DOJ has long-standing concerns about improper financial relationships between medical device manufacturers and health care providers.

“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,” Mizer explained. “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.”

For more on this story go to: http://www.corpcounsel.com/id=1202751236181/Whistleblower-Gets-RedemptionmdashAnd-a-Fortunemdashin-Olympus-Bribery-Case#ixzz42PmX8I4y