Wright Medical Group Inc. (NSDQ:WMGI) said it agreed to extend a deferred prosecution agreement with federal prosecutors today, who accused the orthopedic device maker of running a kickbacks scheme drive up implant sales.
Wright agreed in October 2010 to pay nearly $8 million to settle charges that it ran a kickbacks scheme to drive up sales of its hip and knee implants. The feds had charged the Arlington, Tenn.-based company with using consulting gigs for physicians to funnel alleged kickbacks to the docs. The settlement also included a year-long probation of sorts, during which the AG agreed not to prosecute as long as Wright toed the line.
That apparently didn’t happen; in May, prosecutors accused Wright of violating the terms of their deal. Today the company said it agreed to extend its de facto probation for another year, until Sept. 29, 2012, via an addendum to its DPA with the U.S. Attorney’s Office for New Jersey.
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Wright, which earlier today revealed plans to lay off about 6 percent of its workforce, also said federal authorities don’t plan to bar it from federal health care programs unless prosecutors "were to take further action related to an alleged breach of the DPA."
"Wright Medical and our board of directors have taken significant steps to enhance the company’s compliance," chairman and interim CEO David Stevens said in prepared remarks. "We believe that voluntarily extending the term of the DPA will provide the Company with an opportunity to further demonstrate its commitment to the highest standards of ethical conduct. We will continue to work closely with the Monitor, the USAO, the OIG and other regulators to ensure that the Company complies with all laws and regulations that govern our business practices."
"Our Office is pleased with the extensive cooperation from the newly appointed interim senior management team. Today’s extension will allow Wright to make the transition from interim to permanent senior management while still under the terms of the DPA and the surveillance of the federal monitor." First Assistant U.S. Attorney J. Gilmore Childers said.
In April, a surprise shakeup in Arlington saw the abrupt resignation – without severance – of former CEO Gary Henley and the outright firing of CTO Frank Bono, who was discharged “for failing to exhibit appropriate regard for the company’s ongoing compliance program.” Three other senior executives resigned the next month.
Speculation was rife at the time that the shakeup was due to last year’s $8 million settlement and the revelation by Wright of an internal probe that found “credible evidence of serious wrongdoing,” according to regulatory filings. The next day, the company said, the feds sent a reply alleging that Wright “knowingly and willfully committed at least two breaches of material provisions of the DPA.”
