Shares of Wright Medical Group Inc. (NSDQ:WMGI) are up nearly 6 percent today on news that it agreed to extend a deferred prosecution deal with federal authorities.
The Arlington, Tenn.-based orthopedic implant maker announced after market close yesterday that it struck a deal with the U.S. District Attorney’s Office for New Jersey to add a year to its de facto probation, which will now expire Sept. 29, 2012.
The news sent WMGI shares, which closed at $14.96 yesterday, up 4.6 percent to an opening of $15.65 this morning. The stock had ranged between $15.62 and $15.99 as of about 1:20 p.m. today.
In October 2010, Wright agreed 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 the company of violating the terms of their deal. Wright, which also yesterday 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.”
It’s been a turbulent year in Arlington. Last April, a surprise shakeup saw the abrupt resignation – without severance pay – 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.”