Smith & Nephew Pays $11.3 Million in Whistleblower Suit; Jobs in Europe Move to Asia

Reuters reports that London, U.K.-based Smith & Nephew plc has agreed to pay $11.3 million to settle allegations that it sold the U.S. government Malaysia-made devices it fraudulently claimed were manufactured in America.

The settlement was filed Sept. 3 in Tennessee federal court, ending a whistleblower lawsuit brought in 2008 by a former Smith & Nephew information technology manager named Samuel Cox. He will get $2.3 million, the government will collect $6 million, and $3 million will go toward attorneys’ fees, according to the settlement.

Under U.S. law, whistleblowers are entitled to a share of a successful recovery.

Cox claimed that Smith & Nephew violated the federal Trade Agreements Act, which requires contractors to sell the government products made either in the United States or in countries with which it has signed agreements.

In 2007 and 2008, Smith & Nephew sold the U.S. Department of Veterans Affairs orthopedic devices it had bought from Malaysia-based Straits Orthopaedics while claiming they were made in the United States, according to the lawsuit. Malaysia does not have a trade agreement with the United States.
The U.S. government did not intervene in the suit but joined in negotiating the settlement earlier this year, according to H. Vincent McKnight of Sanford Heisler, an attorney for Cox.

The case is the first whistleblower settlement involving false country of origin claims for medical devices, according to a press release from Sanford.

“The settlement sends a clear message to those medical device companies that routinely violate the Trade Agreements Act by misrepresenting the ‘country of origin’ of goods sold under contract to U.S. Government agencies,” McKnight said.

Smith & Nephew declined to comment on the matter.

In other Smith & Nephew news…

Jobs Go From UK to China
The British company also announced plans to move 140 jobs from its Advanced Wound Management business operation located in Hull, the United Kingdom, to China. One of the town’s biggest employers, the company is transferring some of its production operations to the East Asian nation. The move will take place over the next two years.

Noel Waters, senior vice-president of Global Operations at Smith & Nephew, said the main reason for the move was economic and a need to secure the long-term sustainability of its plants in the United Kingdom and China. Despite the jobs move, the company will be investing $16 million in the Hull site and is working on new plans focused on the development and launch of new products. Both voluntary and compulsory redundancies are expected.

“We are very proud of our heritage in Hull and the site remains a major cornerstone of Smith & Nephew,” said Waters. “We are delivering new programs and actively working on bringing new processes to Hull in order to maximize the benefits from our highly skilled workforce and to continue to create a sustainable future for the site.”