U.K.-based medical device manufacturer Smith & Nephew has agreed to settle a whistleblower lawsuit and pay the United States government $8 million. The relator, Sam Cox, sued Smith & Nephew in the U.S. District Court for the Western District of Tennessee under the whistleblower provisions of the False Claims Act for violating the Trade Agreements Act (TAA).
The TAA requires government contractors to certify that they will only sell products to the government that originate in the United States or a country that has signed a trade agreement with the United States. The law gives a preference to companies that sell products manufactured in the United States or in a country that is a trading partner. In this case, Smith & Nephew violated the TAA by selling products that were manufactured in Malaysia, which is a country that has not executed a trade agreement with the United States. This is believed to be the first TAA settlement involving a medical device company.
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. This inaugural settlement will create a ripple effect for other medical device companies that choose to turn a blind eye to their obligations under the Trade Agreement Act. The government has turned its attention to these flagrant violations and is stepping up enforcement.
The United States Government declined to intervene in this case and Mr. Cox litigated the case without the active assistance of the government. But the U.S. Department of Justice was instrumental in helping the parties to reach a settlement at the end of this hard-fought and expensive litigation. This is another example of the private-public partnership created by the False Claims Act working together to redress fraud. I am told that the government team was essential in securing this result.
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