A federal judge spiked a settlement deal between Orthofix (NSDQ:OFIX) and the U.S. Justice Dept. for the 2nd, time, saying the agreement isn’t in the public’s best interest.
Judge William Young of the U.S. District Court for Massachusetts 1st nixed the deal back in September because it didn’t then give him enough leeway to impose further penalties.
"It seems in this case the court’s hands ought not be tied," Young said at the time. "I have extreme unease of treating corporate criminal conduct like a civil case."
During a Dec. 12 hearing in Boston, Young once again denied the agreement, this time because the deal wouldn’t "ensure the public interest," according to Bloomberg.
The judge declined to give the 2 sides’ lawyers more time to immediately salvage the deal.
"The docket should reflect the plea is withdrawn," Young said, according to the website, despite urging from prosecutor David Schumacher to accept the deal.
He rejected the plea after David Schumacher, another prosecutor, strongly urged him to give final approval to the deal. Schumacher cited Orthofix’s cooperation with the investigation which resulted in felony prosecutions over the Medicare fraud allegations.
Orthofix CEO Robert Vaters said the company is still working with DoJ lawyers to put the case to bed.
"The company and the government stand behind their agreements and continue to discuss a resolution of the matter that will be acceptable to the court," Vaters said in prepared remarks. "We remain confident that this matter will be resolved amicably and in a manner that is in the best interests of our shareholders."
In June, Orthofix and federal prosecutors agreed to the deal, which would have seen the company cop to a felony obstruction charge and fork over $42 million.
The government alleges that Orthofix sales reps falsified the certificates of medical necessity required for Medicare reimbursement for its Spinal-Stim, Cervical-Stim and Physio-Stim bone-growth stimulators.
The company agreed to plead guilty to concealing the scheme during a 2008 Medicare audit. The settlement would have included a criminal fine of nearly $7.7 million and another $34.2 million plus interest, but no admission of wrongdoing in the civil portion of the case.
The whistleblower, Jeffrey Bierman, was slated to pull down a bit more than $9 million from the settlement.
In February, Orthofix said it was close to a deal with the feds over the case. In April, a former sales VP pleaded guilty to helping run a scheme to pay doctors to use the Spinal-Stim and Cervical-Stim devices.
The U.S. attorney’s office said the case resulted in charges against other Orthofix employees and contractors. A former regional sales director, Mitchell Salzman, pleaded guilty to making a false declaration to a federal grand jury in December 2011. Two territory managers, Derrick Field and Michael McKay, pleaded guilty this spring to falsifying patients’ records, and a physician’s assistant named Michael Cobb copped guilty to accepting kickbacks for ordering the stimulators.
