Smith & Nephew plc’s (NYSE:SNN) attempt to derail a former employee’s False Claims Act suit alleging that it lied about the origins of its products was rejected yesterday.
The U.K.-based medical device maker attempted to have the suit dismissed for “lack of subject matter jurisdiction” and “failure to state a claim,” contending that the whistleblower’s case is based on insufficient information.
Judge Bernice Donald of the U.S. District Court for Western Tennessee denied SNN’s motion for dismissal, according to court documents.
Former employee Samuel Adam Cox III sued the British health conglomerate in December 2008, alleging that the company misrepresented the origin of "at least 107" products sold to the Dept. of Veteran’s Affairs and the General Services Administration. Cox was fired from his position as IT global director of enterprise resource planning, allegedly for refusing to participate in and attempting to correct SNN’s alleged illegal conduct. The lawsuit also alleges that CIO Sal Chiovari and vice president of IT Jon Schauber both “recognized the illegality of the company’s sales,” according to court documents.
Under federal procurement laws laid out in the Trade Agreements Act, misrepresenting the country of origin of goods is illegal; the U.S. government is limited to buying products from certain countries. Cox alleges that the products SNN sold to the U.S. government were manufactured by Malaysia-based Straits Orthopaedics, even though Malaysia is not a designated country under the TAA.