How executive whistleblowers made $8 million by turning in their company

A pair of former executives at Malvern-based BioTelemetry accused their former employer of illegally outsourcing Medicare and military heart-patient reviews to India after they left the company — and now stand to collect millions of dollars as whistleblowers.

Calling themselves “John Doe” and “Jack Doe” in court papers, the former senior officials kept anonymous during five years of litigation — but the settlement agreement posted by the Justice Department on Tuesday identifies them as Philip Leone, who joined BioTelemetry’s CardioNet in 2002, rose to head compliance, payments and other departments, and left back in 2011; and Chris Strasinski, a former head of marketing who departed with Leone and two other CardioNet executives to help run a Massachusetts-based rival, InfoBionic Inc.

After filing a lawsuit that drew from their industry knowledge to accuse the company, the pair are splitting $8 million in whistleblower payments, from the resulting $45 million legal settlement between the Justice Department, other federal agencies, and BioTelemetry and its CardioNet division, which develops and sells heart monitoring systems.

The U.S. Attorney’s Office in Philadelphia and investigators for military and civilian agencies drew on the men’s allegations when they filed a government lawsuit accusing the companies of illegal outsourcing across national borders. More than 20 states (including New Jersey and Delaware, but not Pennsylvania) also alleged the companies had violated their rules about moving information out of the country.

The companies deny wrongdoing; their owner, Dutch medical-equipment maker Philips, which paid $2.4 billion for the businesses in 2020, agreed to the cash settlement to end what a spokesperson called a “legacy” legal complaint filed before the purchase.

BioTelemetry told investors of the complaint in 2019, adding that it believed the accusations had no merit, according to a filing with the Securities and Exchange Commission at that time.

The pair are “courageous,” according to their lawyer, Brian J. McCormick Jr. of the Ross Feller Casey LLP law firm in Philadelphia, who signed the settlement on their behalf. “Their bravery in stepping up deserves all our praise and gratitude,” he said in an interview.

McCormick said the companies did not retaliate against the ex-executives. However, the two sides have had other sources of contention: CardioNet sued InfoBionic in 2017, alleging patent violations by that company, whose six top executives at the time included the whistleblowers and two former CardioNet colleagues.

A federal appeals court ruled in favor of CardioNet last year; the Supreme Court refused to hear an additional appeal. By then, Strasinski had left InfoBionic to work for another device maker, and Leone had set up a consulting firm.

Company records show Leone was a senior officer at CardioNet, planning acquisitions to diversify the company’s product line and accumulating more than 18,000 shares of CardioNet stock as of the year before he left.

Strasinski, among his other duties, recruited scores of salespeople for the company’s heart-monitoring systems and other products.

According to the government lawsuit that ended with the settlement, which was itself based on the whistleblowers’ complaint that they filed in federal court as “John Doe” and “Jack Doe” in 2017, CardioNet in 2013 hired an India-based company, Techindia, to provide diagnostic and analytic services for heart patients served by CardioNet monitoring systems.

Under CardioNet’s contracts with the government, electrocardiogram data for Medicare, veterans, military patients, and other government-insured patients, were to be routed to U.S.-based analysts for review, to comply with rules forbidding such records from leaving the country, as a security and privacy measure.

Yet “with the knowledge of then senior management” company officials “diverted” work to Techindia when the U.S. workflow became backlogged, according to the lawsuit.

In 2014 and 2015, that “backlog” came to account for more than half of CardioNet’s tests on some of its most advanced systems, according to the government lawsuit.

The company added “technological controls” to prevent the cases from piling up in India, but “those controls were insufficient,” and some patient information continued to go to Techindia, and to India-based CHC Healthcare’s Healthwatch Telediagnostics unit, the government added. The India-based companies have not been accused of wrongdoing.

The prosecutor’s office declined to comment about how many records left the country, or whether anyone’s information was accessed by unauthorized people, other than the contractors.

The complaint also said most of the hundreds of technicians working for the India-based contractors were not certified, as required by CardioNet’s agreements with the U.S. government.

Also, by sending the work out of the country, rather than doing it in the United States, the two companies submitted false claims to Medicare, the U.S. military’s Tricare health insurance system, the Veterans Health Administration, and the Veterans Health Administration.

The government may not be done with the case. According to the settlement, prosecutors and agencies who signed off on the payments and agreed to end their civil complaint reserved their right to bring criminal charges, demand damage compensation, or seek bans on federal contracting.