Terminated Employee Awarded $25.1M in Cardiovascular Systems Whistleblower Suit
Cardiovascular Systems Inc. said it intends to challenge a verdict handed down Tuesday in a California court where the jury sided with a former salesperson, awarding him $25.1 million in wrongful termination claims.
The plaintiff, Steven Babyak, sued the New Brighton-based heart device company back in November 2015, months after his employment had ended. For nearly three years, Babyak was the regional sales manager for CSI, selling products like the company’s Diamondback 360 device, which is used to shave away plaque in the heart’s coronary arteries.
During his tenure, Babyak claims an illegal kickback scheme was occurring in which salespeople were coaxing physicians to use its devices by offering free, all-expense paid training programs. The company was also accused of giving away free products in exchange for referrals to market to third-party physicians. These claims, if proven, would violate the federal False Claims Act.
Babyak claimed his complaints against the alleged activities resulted in “continual retaliation and harassment from the company and ultimately resulted in disciplinary actions against him, including the reduction of the territory he was responsible for which severely impacted his compensation and bonuses, quota increase and, ultimately, his discharge.”
Babyak’s case piggybacks off a number of related suits against CSI. Last year, the company reached an $8 million settlement with Travis Thams, a former district sales manager, and the U.S. government over similar claims. Twice that same year, the CSI also received separate suits from a shareholder, Caroline Paradis, who accused the company’s executives of misleading investors about the alleged off-label scheme and separately profited from it through artificially inflated share prices.
In an SEC filing, CSI said the latest judgment was “incorrectly decided” and that it “intends to vigorously challenge the verdict in the trial court and appeal.”
In contrast, Babyak’s attorneys, Tamara Freeze and Robert Odell, issued a collective statement calling for repercussions in CSI’s C-suite. “We hope that CSI’s Board of Directors will take decisive action against the executives who terminated Mr. Babyak and then tried to cover it up,” they said. “What they did was outrageous and the jury unanimously agreed.”
Meanwhile, Babyak will continue his employment as regional sales manager for Medtronic, covering roughly the same area he did for CSI.
CSI noted that it was still assessing how the $25.1 million verdict would affect its financial results. In its Q2 report this year, the company posted a profit for the first time in its 28 years of operation.
On top of its successful expansion into Japan — its first international market and one of the largest in the world for its heart products — the company appears primed for growth. How its recent legal battles, if confirmed by the appellate court, would affect its future financial performance remains to be seen.
In the meantime, CSI said it is “assessing the impact of the [most recent] verdict on its financial results and condition and will provide further updates accordingly.”