A Medical Device Daily

Siemens Medical Solutions (SMS; Malvern, Pennsylvania) reported that it has reached an agreement with the U.S. Attorney's Office for the Northern District of Illinois to settle allegations made in an indictment filed in January 2006. The agreement resolves all allegations made against SMS in the Indictment.

SMS will plead guilty to a single federal criminal charge of obstruction of justice in connection with civil litigation that followed a competitive bid to provide radiology equipment to Cook County Hospital (Chicago) in 2001. In addition, SMS agreed to pay a fine of $1 million and restitution of about $1.5 million.

According to a report by the Chicago Tribune, Siemens Medical pleaded guilty to obstructing justice by providing false testimony before a federal judge and withholding records and documents in a lawsuit filed by rival GE Medical Systems (Waukesha, Wisconsin) against Cook County.
Siemens was charged with attempting to win a $49 million contract by entering into a sham agreement with minority-owned Faustech Industries, a local consulting firm.

Under the sham venture, Faustech's owner, Faust Villazan, agreed to pose as Siemens' minority business partner to meet the county's requirement that a minority-owned business receive a portion of the work under the contract, the Tribune reported the plea agreement as stating.

In other legalities, a class-action shareholders' suit has been filed against Cyberonics (Houston) by law firm Goldman Scarlato & Karon in Conschohocken, Pennsylvania, the law firm reported Thursday. The lawsuit was filed against Cyberonics and certain officers and directors.

The lawsuit was filed in the U.S. District Court for the Southern District of Texas on behalf of those who purchased or otherwise acquired publicly traded securities of Cyberonics between Feb. 5, 2004, and Aug. 1, 2006.

The complaint alleges that Cyberonics failed to disclose and misrepresented material information known to the company regarding review and approval by the FDA of a new use for the company's Vagus Nerve Stimulation (VNS) device to treat depression; the marketability of the VNS device and medical insurance payers' coverage decisions for the device.

The FDA gave approval of the VNS system for treatment-resistant depression in July 2005, although the device has faced criticism from advocacy groups since that time (Medical Device Daily, July 19, 2005). Earlier this past week, Cyberonics, which has also seen key executives resign from the company under a cloud, reported that the Centers for Medicare and Medicaid Services issued a preliminary ruling rejecting its request to expand coverage for its VNS therapy (MDD, Feb. 7, 2007).

The new legal complaint also alleges "improper conduct" related to the award of stock-option grants to certain Cyberonics officers.

CEO Skip Cummins and CFO Pam Westbrook resigned in November because of errors in the company's stock option practices, (MDD, Nov. 21, 2006). A review by the company's audit committee discovered those flaws and the company must restate results for the fiscal years 2000 through 2005.