Smith & Nephew (FTSE:SN, NYSE:SNN) agreed to pay $8.3 million to settle a whistleblower’s lawsuit accusing it of passing off devices made in Malaysia as manufactured in the U.S., but admitted no liability for the charges, according to court documents.
Samuel Cox III, a former IT director Smith & Nephew’s Tennessee operations, filed the lawsuit in 2008, accusing the firm of breaking the Trade Agreements Act.
Cox worked for Smith & Nephew from mid-December 2007 to September 2008, when the company allegedly fired him "in retaliation for his repeated attempts to bring Smith & Nephew’s illegal activities to the attention of his superiors," according to the documents. The TAA requires goods sold to the U.S. government, as they were under an SNN contract with the U.S. Veterans Administration, to be manufactured in designated nations; Malaysia is not on that list.
In addition to the $8.3 million settlement with the feds, the agreement calls for Smith & Nephew to pay out 28%, or more than $2.3 million, to Cox, plus another $5,000 to resolve his retaliation claim, according to the documents. Smith & Nephew must also pay $3 million to Cox’s lawyers to cover his legal fees, the document show.
Smith & Nephew disclosed in 2008 that some of the components used in its devices and sold to the VA broke the TAA’s country-of-origin rules because they were made in Malaysia, Thailand and China.
