First-hand details of the global pay to play kickback scheme at Olympus were brought to the government’s attention by the company’s former corporate compliance officer.
John Slowik filed a federal lawsuit in New Jersey under the qui tam or whistleblower provisions of the False Claim Act and similar state laws.
Lawyers at the Kenney McCafferty law firm represented the whistleblower.
Slowik’s court filings were unsealed Tuesday.
He was awarded $51 million as part of the settlement of his qui tam action under the False Claims Act. The FCA permits private parties to sue for false claims against government entities and to share in any recovery.
“The whistleblower became Olympus’s first compliance officer in company history in 2009,” Slowik’s lawyers said.
“The newly-minted compliance officer quickly discovered that kickbacks formed the fabric from which Olympus’s sales and marketing success was woven,” they said.
Olympus settled three separate bribery-related federal cases Tuesday.
In the first case, the company’s Latin America unit paid a criminal fine of $22.8 million for FCPA violations. The DOJ said Olympus employees bribed doctors across Latin America to buy Olympus endoscopes, a device usually used to examine the digestive tract.
In the second case, Olympus Corporation of the Americas or OCA paid a $312.4 million criminal penalty for violating the federal Anti-Kickback Statute. The DOJ said the company bribed doctors in the United States to increase sales.
In the third case, based on Slowik’s whistleblower lawsuit, OCA paid an additional $310.8 million to settle civil state and federal charges under the False Claims Act.
For that settlement Slowik was awarded $51 million — $44 million from the federal share of the settlement amount and $7 million from the state share.
“Our client offered Olympus the chance for redemption by reporting internally first,” Slowik’s lawyers said. “Unfortunately, Olympus chose to elevate profits above corporate responsibility.”
They said Slowik’s court filings revealed a corporate culture of fraud and herd mentality at Olympus.
Olympus fired Slowik in 2010.
“In 2011, Olympus’s Japanese corporate parent, Olympus Corporation, ousted the second executive whistleblower in as many years: President and CEO Michael Woodford,” the lawyers said.
According to court documents, the Olympus Corporation board fired Woodford after he refused to perpetuate the cover up of a massive accounting scandal.
Slowik’s allegations included:
Olympus giving key customers “permanent loans” of Olympus medical equipment whenever requested by Olympus sales and marketing personnel to maintain customer loyalty and promote more sales.
Funneling cash payments of up to $100,000 a year to certain “VIP” doctors for “consulting services” at the discretion of Olympus sales and marketing representatives.
Annual cash payments of hundreds of thousands of dollars characterized as “grants” to fund educational or research programs made at the discretion of a grant committee comprised solely of Olympus sales and marketing personnel and based on sales potential.
Funding luxury, all-expense paid vacations to Japan and other international destinations for “VIP” doctors and sometimes their spouses in exchange for purchases and promotion of Olympus medical products.
Olympus admitted the allegations as part of Tuesday’s settlements.
Lawyer Kathryn Schilling said, “Our client is the only person to ever step forward and alert corporate executives, and then the government, to the kickback schemes Olympus commenced a decade ago. These schemes . . . most likely would have continued unabated had our client not alerted the New Jersey U.S. Attorney’s Office and DOJ to all he knew.”
The qui tam case was United States ex rel. John Slowik et al. v. Olympus Corporation of the Americas, et al., Civ. No. 10-cv-5994 (D. N.J.).
John Slowik’s 90-page second amended complaint filed on February 4, 2016 is here (pdf).
The settlement agreement of his action is here (pdf).
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Compliance officers have also become whistleblowers to the U.S. Securities and Exchange Commission.
In April 2015, the SEC awarded about $1.5 million to a compliance professional who provided information for an enforcement action against the whistleblower’s company.
The award went to a compliance officer “who had a reasonable basis to believe that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors,” the SEC said.
The SEC is prohibited by law from identifying whistleblowers.
And in September 2014, the SEC awarded about $300,000 to a company audit and compliance employee who complained to the SEC after the company didn’t act on the same information.
The SEC launched its whistleblower award program in 2011 as part of the Dodd-Frank Wall Street Reform Act.
In cases with financial penalties of more than a $1 million, whistleblower awards can range from 10 percent to 30 percent of the money collected.
The SEC program is separate from the qui tam or whistleblower provisions of the False Claim Act.
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.