Orthofix International Moves to Resolve U.S. Government Legal Matters
LEWISVILLE, Texas--(BUSINESS WIRE)--
Orthofix International N.V., (NASDAQ:OFIX) (the Company) announced today
that it has made significant progress in resolving several outstanding
legal matters with the U.S. Government. These highlights include:
Reaching an agreement in principle to resolve the U.S.
Government investigation of Blackstone Medical, Inc.
Reaching an agreement in principle with the U.S. Department of
Justice to settle violations of the Foreign Corrupt Practices Act.
Finalizing definitive agreements to resolve criminal and civil
matters related to the U.S. Government investigation of its bone
growth stimulation business.
"I am very pleased with the substantial progress made regarding these
three legal matters, which removes a significant amount of risk and
uncertainty for the Company," said President and Chief Executive Officer
Robert Vaters. "Orthofix has made significant improvements to its
compliance practices, personnel, and financial standing to provide a
strong foundation from which to grow. I look forward to a stronger focus
on the Company's operations, including investments in R&D to position
the Company for long-term growth, while maintaining earnings
Agreement in Principle Reached for Blackstone
The Company has reached an agreement in principle with the U.S.
Attorney's Office for the District of Massachusetts to pay $32 million
to resolve matters related to the investigation of the Company's
subsidiary, Blackstone Medical, Inc. ("Blackstone"). The settlement will
be funded by proceeds received by the Company from the escrow fund
established in connection with the agreement and plan of merger between
the Company and Blackstone in 2006 and includes resolution of a qui tam
complaint filed by Susan Hutcheson against Blackstone and the Company in
the U.S. District Court for the District of Massachusetts. In addition,
the Company resolved remaining escrow claims with the former equity
holders of Blackstone. As a result of the settlement, the Company will
receive approximately $9 million in cash and take a charge of
approximately $6.0 million during the fourth quarter 2011 for previously
incurred legal fees. The final settlement is subject to the negotiation
and approval of definitive agreements with the U.S. Attorney's Office,
the U.S. Department of Justice ("DOJ"), and the Office of Inspector
General of the U.S. Department of Health and Human Services ("OIG").
Agreement in Principle Reached with the DOJ for
Foreign Corrupt Practices Act Matter
The Company also reached an agreement in principle with the DOJ to
settle criminal violations of the Foreign Corrupt Practices Act (FCPA)
that it voluntarily reported to the U.S. Government in June 2010
concerning its former Mexican orthopedic distribution entity. In the
first quarter 2011 financial results, the Company reported that it had
recorded a charge of $3.0 million to establish an accrual in connection
with this matter based on the results of its own internal investigation
and an analysis of similar FCPA resolutions. As the result of recent
discussions with the DOJ and staff at the U.S. Securities and Exchange
Commission, the Company plans to take a charge of approximately $4.5
million in the fourth quarter 2011 to establish as an additional accrual
in anticipation of a proposed criminal and civil resolution of this
matter. Final resolution is subject to the negotiation and execution of
definitive agreements with the DOJ.
Finalizing Definitive Agreements for Bone Growth
The Company is also finalizing definitive agreements with the U.S.
Attorney's Office, the DOJ, and the OIG to resolve criminal and civil
matters related to an investigation of its bone growth stimulation
business, which includes resolution of a qui tam lawsuit pending in the
U.S. District Court for the District of Massachusetts. Under the terms
of the agreements, the Company will pay the U.S. Government $43 million,
a charge previously disclosed and already accrued by the Company in the
first quarter 2011. Orthofix Inc., a subsidiary of the Company, expects
to plead to a violation of 18 USC 1516, related to an obstruction of a
June 2008 federal audit. The Company and Orthofix Inc. also expect to
enter into a five-year Corporate Integrity Agreement (CIA) with the OIG
as part of the resolution of these matters.
In summary, as a result of the matters described above, the Company
expects a pre-tax impact of approximately $10.5 million to its fourth
quarter 2011 financial results and expects to receive cash of
approximately $9 million from the Blackstone escrow fund. The Company
had previously obtained an amendment to its current credit facility to
provide additional capacity under the various restrictive covenants for
these charges by the Company.
Orthofix International N.V. is a diversified, global medical device
company focused on developing and delivering innovative repair and
regenerative solutions to the spine and orthopedic markets. Orthofix's
products are widely distributed around the world to orthopedic surgeons
and patients via Orthofix's sales representatives and its subsidiaries,
including BREG, Inc., and via collaborations with other leading
orthopedic product companies. In addition, Orthofix is collaborating on
R&D activities with leading research and clinical organizations such as
the Musculoskeletal Transplant Foundation, the Orthopedic Research and
Education Foundation, Texas Scottish Rite Hospital for Children, and the
Cleveland Clinical Foundation. For more information about Orthofix,
please visit www.orthofix.com.
This communication contains certain forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements, which may include, but are not limited to, statements
concerning the projections, financial condition, results of operations
and businesses of Orthofix and its subsidiaries and are based on
management's current expectations and estimates and involve risks and
uncertainties that could cause actual results or outcomes to differ
materially from those contemplated by the forward-looking statements.
The forward-looking statements in this release do not constitute
guarantees or promises of future performance. Factors that could cause
or contribute to such differences may include, but are not limited to,
risks relating to the expected sales of our products, including recently
launched products, unanticipated expenditures, the resolution of pending
litigation matters (including the government investigation and False
Claims Act matters relating to our bone growth stimulation and spinal
implant businesses, and the possible violations of the FCPA by our
former Mexican orthopedic distribution entity, as well as certain
product liability claims against our sports medicine global business
unit), changing relationships with customers, suppliers, strategic
partners and lenders, changes to and the interpretation of governmental
regulations, risks relating to the protection of intellectual property,
changes to the reimbursement policies of third parties, the impact of
competitive products, changes to the competitive environment, the
acceptance of new products in the market, conditions of the orthopedic
industry, credit markets and the economy, corporate development and
market development activities, including acquisitions or divestitures,
unexpected costs or operating unit performance related to recent
acquisitions, and other factors described in our annual report on Form
10-K and other periodic reports filed by the Company with the Securities
and Exchange Commission (SEC). Existing and prospective investors are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Company
undertakes no obligation to update or revise the information contained
in this press release, whether as a result of new information, future
events or circumstances, or otherwise.
The Company cannot predict the timing or outcome of ongoing litigation
matters and governmental investigations of our businesses which could
result in civil or criminal liability or findings of violations of law
(as further described in the "Legal Proceedings" sections of our annual
report on Form 10-K and quarterly reports on Form 10-Q), that could
materially impact our financial position and/or liquidity.
Orthofix International N.V.
Mark Quick, 214-937-2924
of Investor Relations and Business Development
Source: Orthofix International N.V.
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