A day after firing its top lawyer and two other executives, Wright Medical Group (NSDQ:WMGI) said the federal prosecutor for New Jersey accused it of breaking a deferred prosecution deal Wright struck last year to settle charges that it ran an illegal kickbacks scheme.
The Arlington, Tenn.-based orthopedic device maker also said it hired a new CEO, about a month after its surprise ouster of CEO Gary Henley and CTO Frank Bono.
Wright told the U.S. Attorney’s Office for the District of N.J. Wednesday that an internal probe with outside counsel found "credible evidence of serious wrongdoing," according to regulatory filings. The next day, the company said, the feds sent a reply alleging that Wright "knowingly and willfully committed at least two breaches of material provisions of the DPA."
Wright has three weeks to mount a defense and said it doesn’t think the U.S. attorney will act until it’s had a chance to make its case. The company, which climbed out of the red during the first quarter, also said it tapped a new CEO to replace Henley, naming David Stevens as interim president and CEO for a one-year term.
Yesterday Wright said it had accepted the resignations of senior vice president, general counsel and secretary Raymond Kolls; vice president of clinical & regulatory affairs Alicia Napoli; and senior vice president for EMEA commercial operations Cary Hagan.
All three executives were said to have resigned without “good reason,” according to the filing.
Wright 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.