Smith & Nephew to pay $11 mln in whistleblower suit

By Brendan Pierson

Sept 4 (Reuters) - London-based medical device maker Smith & Nephew PLC has agreed to pay $11.3 million to settle allegations that it sold the U.S. government devices it claimed were U.S.-made but actually came from Malaysia.

The settlement was filed Wednesday in Tennessee federal court, ending a whistleblower lawsuit brought in 2008 by a former Smith & Nephew (LSE: SN.L - news) information technology manager, Samuel Cox. Cox will get $2.3 million, the government $6 million, and $3 million will go toward attorneys' fees, according to the settlement.

Under U.S. law, whistleblowers are entitled to a share of a successful recovery.

Cox claimed that Smith & Nephew violated the federal Trade Agreements Act, which requires contractors to sell the government products made either in the United States or in countries it has signed agreements with.

In 2007 and 2008, Smith & Nephew sold the Department of Veterans Affairs orthopedic devices that it had bought from Malaysia-based Straits Orthopaedics while claiming they were made in the United States, according to the lawsuit. Malaysia does not have a trade agreement with the United States.

The U.S. government did not intervene in the suit but joined in negotiating the settlement earlier this year, according to H. Vincent McKnight of Sanford Heisler, an attorney for Cox.

The case is the first whistleblower settlement involving false country of origin claims for medical devices, according to a press release from Sanford (NZSE: SAN.NZ - news) .

"Today's settlement sends a clear message to those medical device companies that routinely violate the Trade Agreements Act by misrepresenting the 'Country of Origin' of goods sold under contract to U.S. Government agencies," McKnight said in a statement.

Smith & Nephew did not immediately return a request for comment.

The case is United States ex rel. Cox v. Smith & Nephew, U.S. District Court for the Western District of Tennessee, No. 2:08-cv-02832. (Reporting By Brendan Pierson; Editing by Ted Botha, Bernard Orr)