A former sales rep for Covidien‘s vascular business accused the company of wrongful termination after it fired him for blowing the whistle to the FBI on an alleged kickbacks scheme.
Erin Hayes, who started with VNUS Medical Technologies in 2008, about a year before Covidien bought it, alleged that a high-volume vascular surgeon in Southern California tried to shake down the company. The surgeon said Covidien would need to pony up a kickback in order to keep West Coast Vascular’s business, according to the lawsuit, filed Feb. 23 in a California state court. Covidien had the case removed to the U.S. District Court for Northern California May 12, according to court documents.
Covidien, which was acquired for $50 billion by Medtronic (NYSE:MDT) earlier this year, paid $440 million for VNUS in May 2009. West Coast Vascular, which has 5 locations, was a Covidien training center and "among Covidien’s biggest clients in the U.S.," according to the lawsuit. The surgeon accused by Hayes had, in turn, "a significant practice and was a large purchaser of Covidien’s vein and arterial product lines."
After Hayes reported the alleged shakedown attempt, his superiors at Covidien immediately convened a July 2012 meeting at the WCV offices, according to the complaint. There the physician "reiterated his demand for money and stated that his vein screening needed to be promoted and paid for by Covidien."
Hayes alleged that a Covidien executive agreed to have Covidien’s marketing team design, place and pay for a newspaper advertisement, cloaking the payment as compensation for "sham ‘trainings’ purportedly conducted by the physician at WCV’s training center."
After Hayes allegedly questioned his superiors about the legality of the arrangement, he said he was told to "forget the meeting occurred." After learning that the ad payments were made, Hayes sent letters in November 2012 to the FBI and the U.S. Health & Human Services Dept. detailing "Covidien’s business practice of engaging in medical kickback schemes to persuade physicians to purchase and use Covidien’s products," according to the documents.
Hayes also blew the whistle on Covidien’s alleged practice of using temporary staffers called "per diems" to market physicians’ practices, in exchange for using Covidien devices, according to the suit.
The company sacked Hayes Feb 25, 2013, for a "lack of integrity" in improperly recording the sale of catheters to a physician with offices Hayes’ territory and another rep’s area, Hayes claimed. And after his departure, Hayes alleged, Covidien sought to black-ball his name with potential employers by publishing false information about him, including "false accusations that he breached his duties of confidentiality and nondisclosure with Covidien, and false claims that he was terminated for ‘dishonesty.’"
"Defendants also disclosed confidential correspondence between plaintiff Hayes and the California Division of Occupational Safety & Health in which he reported workplace safety and health hazards he witnessed at the offices of certain physicians," the lawsuit alleged. "Specifically, plaintiff Hayes reported what he believed was the illegal re-use of catheters by medical providers at their clinics. Defendants obtained these reports and then circulated them to the physicians named in the reports with the intention of ‘outing’ plaintiff Hayes as the confidential source of the information. The purpose of doing so was to damage plaintiff Hayes’ rapport with his clients, and to create animosity toward him. Defendants also falsely accused plaintiff Hayes of harassing a WCV staff member."
Covidien denied all of the claims in Hayes’ suit, citing the doctrine of unclean hands "by virtue of his unlawful, immoral, negligent, and other wrongful conduct."
"Plaintiff’s claims are barred because all of Covidien’s acts affecting the terms and conditions of his employment were privileged, justified, and done with good cause, and there was a legitimate, nondiscriminatory reason for each employment action and omission," Covidien argued, according to the documents. "Plaintiffs claims are barred in whole or in part as he unreasonably failed to take advantage of the preventative or corrective opportunities provided by Covidien and/or 3rd parties, or to avoid harm otherwise."
Hayes wants a jury trial, compensatory damages including 2 times the amount of back pay plus interest, front pay, pre- and post-judgment interest and damages for "emotional pain and suffering due to retaliation." The suit also seeks punitive damages for alleged "malicious, reckless or callous indifference" and unpaid wages and legal costs.
In February, the Ev3 subsidiary Medtronic acquired along with Covidien agreed to a $1.25 million settlement with U.S. Justice Dept. over another whistleblower lawsuit brought by former sales rep Amanda Cashi.