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Guidant gets probation in defib plea deal

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BSX, Guidant logos

A Minnesota federal judge added three years of probation to a $296 million plea deal between Guidant Corp. and the U.S. Justice Dept. over faulty implantable defibrillators.

Last spring, Judge Donovan Frank spiked a $296 million agreement involving a guilty plea by the now-Boston Scientific Corp. (NYSE:BSX) subsidiary, saying the deal didn’t go far enough to address Guidant’s penchant for concealing problems with the devices.

In February 2002, Guidant discovered a design flaw in the Ventak device, after receiving reports of failures. By April 2002, according to court documents, it had fixed the flaws and begun producing a corrected version of the device — but didn’t recall the defective products.

The company continued to sell the defective devices without revealing their design flaws and malfunctions. Prosecutors allege that the problems with the device killed at least 13 people — including one in 2009 — beginning when 21-year-old Joshua Oukrop’s Ventak Prizm 2 DR short-circuited in March 2005.

In rejecting the plea deal last April, Frank ordered Guidant to detail its efforts to right the ship. After reviewing the company’s submission, he added the three years of probation, saying he might consider a shorter term if Guidant lives up to its pledges.

Guidant LLC must pay fines of $254 million and forfeit $42 million for selling some of the devices after failing to filed a safety report with the Food & Drug Administration. Boston Scientific agreed to those provisions early in April 2009, but Frank, of the U.S. District Court for Minnesota, shot the deal down.

“The judge imposed the penalty in the plea agreement, which we were asking for. And he imposed a further penalty,” assistant U.S. attorney Robert Lewis told the Pioneer Press. “We think justice has been served.”

For its part, Boston Scientific stood up for its errant division in a statement to the newspaper.

“The company is pleased that this issue is now resolved,” BSX said. “We continue to believe that Guidant and its employees acted in good faith and with the intention of complying with applicable laws and regulations.”

Boston Scientific shares were were down slightly to $7.44 in pre-market trading.

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