Manufacturer Berchtold USA has agreed to pay the federal government $3.6 million to settle a whistleblower lawsuit alleging that it overcharged a U.S. Army hospital for OR tables and other medical equipment.
While the company did not admit liability, it and 7 members of its upper management, including CEO Matt Weismiller, may still face criminal charges, according to a published report.
Berchtold sales representative Michael Ward, who arranged the November 2010 deal with Brooke Army Medical Center in San Antonio, Texas, pleaded guilty to providing false pricing information in January and is awaiting sentencing. He may face 5 years' imprisonment.
The matter came to the government's attention through a former employee's lawsuit. Beth Gorawski, a contract administrator, was spurred on by concerns that the company had overcharged the center $736,000 on $2.4 million worth of Operon D 850 surgical tables and other products. She filed the federal complaint in September 2011 after having been terminated for raising these concerns with the company.
Ms. Gorawski's lawsuit revealed an e-mail exchange in which Mr. Ward and company executives bragged about invoicing $36,765 Operon D 850 tables at $54,000, a price that included such fabricated upcharges as a "carbon fiber imaging table top upgrade," which the whistleblower suit says doesn't exist.
Mr. Ward bragged about the sale in an e-mail to Mr. Weismiller and 7 other Berchtold managers, according to the suit. He told one of the recipients to "enjoy the extra $522,000 in gravy" from the carbon fiber charges.
For her role in exposing the matter, Ms. Gorawski will receive $867,000 of the recovered funds. She is currently suing the company for wrongful termination. The company, meanwhile, is reportedly suing the law firm which advised it on the purchase order.
"Berchtold is pleased to have settled the matter with the government," said Mr. Weismiller in an e-mailed statement. "We unfortunately had an employee who engaged in some wrongful conduct with regard to government contracts. We cooperated fully with the government investigation, and we are confident that no criminal charges are going to be filed. Mr. Ward is no longer our employee, and we have strengthened our compliance efforts, improved our system of checks and balances and are confident that this was an incident that could not occur under our present system."