Michael Cobb, the Rhode Island physician’s assistant who took kickbacks from former Orthofix Inc. managers between 2004 and 2011, has been sentenced to jail.
On July 19, U.S. District Judge George A. O’Toole sentenced Cobb to one year incarceration (six months in prison, six months home confinement), to be followed by two years of supervised release and a $3, 000 fine. Cobb was also ordered to forfeit $10, 000 of proceeds from the offense to the federal government. Cobb pleaded guilty to violating the Anti-Kickback law on April 19, 2012.
Cobb took the kickbacks in return for ordering the company’s bone growth stimulators. Prosecutors said the surgeon on behalf of whom Cobb ordered the stimulators, had no preference for any manufacturer and left the decision of which device to give patients up to Cobb.
According to a July 19 press release from the U.S. Attorney in Boston, between 2004 and 2011, Cobb took cash for each bone growth stimulator that was ordered by the surgeon in payments ranging from $50 to $300. Cobb, say prosecutors, never disclosed to the surgeon that he was taking these payments, and the surgeon would not have authorized the arrangement. Cobb was paid approximately $120, 000 between 2004 and 2011 for the stimulator orders. In return, Cobb steered more than a $1 million of reimbursement from insurance carriers to the company, including approximately $350, 000 in payments from federal insurance carriers.
Cobb also committed perjury when he lied to a grand jury about ever being paid by a company territory manager. He also lied about his surgeon’s knowledge of the financial arrangement.
Bone-Stim Saga
In addition to the Cobb sentence, the investigation concerning Orthofix has to date resulted in a number of felony charges against Orthofix as well as the following former company executives:
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On July 23, 2012, a plea and sentencing hearing is scheduled with respect to Orthofix’s plea to obstructing a federal audit. Orthofix has agreed to pay over $42 million to resolve criminal and civil liability
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On May 11, 2012, Michael McKay pled guilty to health care fraud while he was a Territory Manager
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On April 9, 2012, Thomas Guerrieri pled guilty to paying kickbacks while he was Vice President
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On March 22, 2012, Derrick Field pled guilty to health care fraud while he was a Territory Manager
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On December 14, 2011, Mitchell Salzman, pled guilty to perjury while he was a Regional Manager
Orthofix has settled with the government and paid fines, but a spokesperson for the U.S. Attorney told us that the investigation is ongoing of others involved.
Back to Business
On July 10, the company also settled a case with the Department of Justice and the Securities and Exchange Commission regarding the company’s self-initiated and self-reported internal investigation of its Mexican subsidiary into allegations of non-compliance with the Foreign Corrupt Practices Act (“FCPA”).
July might be the month that Orthofix CEO Bob Vaters can finally put the actions of company activities prior to his arrival to rest and focus on company performance and growth.
