Wright Medical Group Inc. (NSDQ:WMGI) announced a surprise shakeup of its executive team today, firing its chief technology officer and accepting the resignation of CEO Gary Henley.
The Arlington, Tenn.-based maker of orthopedic devices for the foot and ankle market said in a regulatory filing that Henley resigned prior to a board meeting yesterday.
“Mr. Henley’s resignation is considered to be without ‘good reason’ under the terms of his employment agreement, and he therefore is not entitled to severance,” according to a press release.
Henley, who was at the helm of the company for nearly five years, will be replaced immediately by chairman David Stevens.
Company officials also said that CTO Frank Bono was fired “for cause for failing to exhibit appropriate regard for the company’s ongoing compliance program.”
Rick Wise, an analyst with Leerink Swann, speculated that the shakeup may be related to “WMGI’s deferred prosecution agreement with the U.S. Attorney’s Office for the District of N.J., which was announced in September, 2010,” Wise wrote in a note to investors.
“We are inclined to think Gary Henley’s departure and WMGI’s CTO termination are linked. We also suspect both are in some way tied to the company’s ongoing compliance issues,” he added.
Wright Medical agreed in October 2010 to pay nearly $8 million to settle charges that it ran a kickbacks scheme to drive up sales of its hip and knee implants. The feds charged Wright with using consulting gigs with physicians to funnel alleged kickbacks to the docs. The settlement (PDF) also includes a year-long probation of sorts, during which the AG agrees not to prosecute as long as Wright "satisfies its obligations," according to the release. Those obligations include making changes to its consulting arrangements with doctors. An independent monitor will keep tabs on the company during its 12-month probation.
It wasn’t the first concession that New Jersey feds have wrung from orthopedic device makers. Last year, four orthopedic device makers cleared federal criminal charges and a fifth “satisfactorily completed” its non-prosecution agreement with the U.S. Attorney’s office in Newark.
Shares of Wright Medical dropped nearly 10 percent on The Street after news of the shakeup broke today.