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Endoscope maker admits bribing doctors, hospitals

Weeklong trips to Japan. Winery tours, ballooning excursions, and spa treatments. Unrestricted grants for "research," doled out by sales representatives.

Weeklong trips to Japan. Winery tours, ballooning excursions, and spa treatments. Unrestricted grants for "research," doled out by sales representatives.

Federal prosecutors said Tuesday it was all part of an illegal effort by Olympus Corp. of the Americas, based in Center Valley, Pa., near Allentown, to induce doctors and hospitals to buy its products: the pricey medical devices called endoscopes.

The company, a subsidiary of Tokyo-based Olympus Corp., admitted to making various kickbacks and other improper payments from 2006 to 2011, and agreed to pay $646 million to resolve related criminal and civil complaints.

According to the U.S. Attorney's Office in Newark, N.J., which pursued the case, it all could have been avoided if the company had listened to one of its own employees.

That employee, former compliance officer John Slowik, was fired in 2010 after raising concerns about the payments, said his lawyers, Tavy Deming and Kathryn Schilling in the Philadelphia office of Kenney & McCafferty.

He filed a whistle-blower lawsuit detailing his concerns, and as a result will receive a $51.1 million share of the settlement, prosecutors said.

In a statement, Slowik thanked prosecutors and his lawyers for "bringing justice to both me and the American taxpayers."

His lawyers said he was not available for an interview.

In a letter to employees and customers posted on its website, Olympus said it was committed to ensuring compliance with the law.

"Olympus leadership acknowledges the company's responsibility for the past conduct, which does not represent the values of Olympus or its employees," the letter stated.

U.S. Attorney for New Jersey Paul J. Fishman said that when Slowik was named as compliance officer in 2009, no one had been in the position.

"Without anybody watching, illegal conduct flourished," Fishman said.

Compliance officers commonly have a law degree, whereas Slowik's background was primarily in finance, and he was placed in the job merely to fulfill a requirement by the State of Massachusetts, his lawyers said. Yet he took the job seriously, seeking legal training and raising the alarm internally about the improper payments, his attorneys said.

The settlement includes:

$312.4 million to settle criminal charges brought under the federal anti-kickback statute

$310.8 million to settle civil allegations brought under federal and state false claims acts

A $22.8 million criminal penalty for improper payments made to health officials in Central and South America

The complaint does not identify hospitals by name, but refers to several by geography. For example, the company allowed one doctor at a "leading New York medical center" to use $400,000 worth of its endoscopes and other equipment without charge in his private practice, the complaint states.

Fishman said he had picked Larry Mackey, a former U.S. attorney who helped prosecute the 1995 Oklahoma City bombing cases, to serve as an independent monitor to oversee the company's compliance with the agreement.

The company's corporate parent in Japan had its own whistle-blower the year after Slowik was fired. Chief executive officer Michael C. Woodford was dismissed in 2011 after he questioned accounting irregularities.

Separately, infection-control experts have been raising concerns over the last year about a particular kind of endoscope used to examine and treat conditions in the bile and pancreatic ducts.

These duodenoscopes, made by Olympus as well as two competitors, have intricate mechanisms that make them especially difficult to clean and disinfect.