Cardiovascular Systems to pay $25m in whistleblower, wrongful termination suit

Cardiovascular Systems (NSDQ:CSII) said today it was found liable for approximately $25.1 million in damages in a whistleblower and wrongful termination suit involving a former regional sales manager.

The suit, filed by Steven Babyak in Nov. 16, 2015, alleged that the company engaged in retaliation and the eventual discharge of Babyak in response to his expressed concerns over issues relating to patient safety and violations of state and federal laws. Babyak worked for the company for 3 years, and was fired on June 1, 2015.

A jury in the Superior Court of California for the County of Los Angeles on April 24 found in favor of the plaintiff, and awarded Babyak $2.7 in compensatory damages in respect to claims of whistleblower retaliation and wrongful termination.

Yesterday, the jury awarded Babyak an additional $22.4 million in punitive damages, according to an SEC filing.

“The large verdict by the jury is complete vindication for our client, Steven Babyak. CSI fired our client after he alerted upper management of an illegal scheme of kickbacks to doctors as well as violations of the Sarbanes Oxley Act. We hope that CSI’s Board of Directors will take decisive action against the executives who terminated Mr. Babyak and then tried to cover it up. What they did was outrageous and the jury unanimously agreed,” Babyak’s attorneys Tamara Freeze and Robert Odell said in a press release.

The St. Paul, Minn.-based company said that it “strongly believes that this case was incorrectly decided as to liability, the amount of compensatory damages, and the appropriateness and amount of punitive damages,” according to the SEC filing.

Cardiovascular Systems said it intends to “vigorously challenge the verdict in the trial court and appeal,” and that it is assessing the impact of the verdict on its financial results and will update accordingly.

In March, Cardiovascular Systems said it escaped a purported class-action lawsuit brought over allegations that it ran an off-label promotion and kickbacks scheme, but the reprieve could be short-lived because the case was dismissed without prejudice.