Olympus Corp. of the Americas to pay $646 million over illegal kickbacks in U.S. and Latin America

Olympus Corp. of America, the largest distributor of endoscopes and related equipment has agreed to pay $623.2 million to resolve criminal charges and civil claims stemming from a kickback scheme involving doctors and hospitals. Their Latin America subsidiary, Olympus Latin America, will pay $22.8 million to settle related charges, the U.S. Attorney's Office announced earlier this month.

Authorities say OCA was charged in a criminal complaint filed in Newark, New Jersey federal court with conspiracy to violate the Anti-Kickback Statute, a law that bans "payments to induce purchases paid for by federal healthcare programs".

OCA will pay a $312.4 million criminal penalty, as well as a $310.8 million to settle civil claims under the federal and various state False Claims Acts. The sum represents the largest total amount paid in U.S. history for violations of the Anti-Kickback Statute, and the largest amount ever paid by a medical device company.

According to the criminal complaint against OCA, which the company conceded is true, OCA both gained new business and rewarded business sales through kickbacks paid to doctors and hospitals. Those kickbacks included consultant payments, travel abroad, fancy meals, and millions in grants and free equipment. Examples of the illegal behavior outlined by authorities included: OCA gave a hospital a $5,000 grant to push through a $750,000 sale; OCA stalled a  $50,000 grant until a second hospital signed a purchase deal with the company; OCA paid for a trip to Japan for three doctors in 2007 in exchange for their hospital deciding to leave a competitor for Olympus, the U.S. Attorney's Office said.

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Authorities say these and numerous other illegal kickbacks helped OCA secure more than $600 million in sales and reach gross profits exceeding $230 million.

The criminal complaint also alleges that the illegal payments occurred during a time period in which the company lacked proper training and compliance programs. They did not create a compliance officer position until 2009 and did not hire an "experienced compliance professional" until August 2010.

Under the deferred prosecution agreement OCA has agreed to, the company can avoid conviction if it agrees to certain terms including enhancement of compliance training, maintaining a confidential hotline and website for OCA employees to report wrongdoing, and an annual review and re-certification by OCA's CEO and board of directors that the compliance program is effective, as well as other terms.

Also, an independent monitor has been put in place to oversee the company's compliance with their deferred prosecution agreement, and will be in place for three years, with the possibility of extension if OCA violates the DPA.

"For years, Olympus Corporation of the Americas and Olympus Latin America dropped the compliance ball and failed to have in place policies and practices that would have prevented the substantial kickbacks and bribes they paid. It is appropriate that they be punished for that," U.S. Attorney Fishman said. "At the same time, the deferred prosecution agreement takes into account the companies' cooperation and commitment to fully functional corporate compliance."

The civil settlement resolves a whistleblower lawsuit filed by John Slowik, a former compliance officer with OCA, under both federal and various state False Claims Acts. Mr. Slowik will be paid a total of $51.1 million from the from the OCA settlements.

The investigations were conducted jointly by the FBI Newark Field Office, the Office of the Inspector General of Department of Health and Human Services, and the FBI Allentown, Pennsylvania, Field Office.

Twitter: @BethJSanborn