By Editor Filed in News November 30th, 2016 @ 10:21 am Corporate Crime Reporter
In July, the former CEO and the former VP of sales of Johnson & Johnson unit Acclarent, Inc., a medical device company, were convicted by a federal jury in Boston in connection with distributing adulterated and misbranded medical devices.
In the same month, the company paid $18 million to resolve allegations that the company caused health care providers to submit false claims to Medicare and other federal healthcare programs by marketing its sinus spacer product for use as a drug delivery device without U.S. Food and Drug Administration (FDA) approval of that use.
Behind both cases – Melayna Lokosky – a former sales rep for the company.
She blew the whistle on the wrongdoing that led to the $18 million recovery and the criminal prosecutions.
Now she is on a campaign against what she calls the sociopathic business model.
Lokosky was a sales rep for Acclarent and was making $250,000 a year.
In 2011, she decided she would blow the whistle on the company’s fraud.
She laid out the case for the government.
Acclarent sold a variety of medical devices used in sinus surgeries, including a device known as the Relieva Stratus MicroFlow Spacer.
In 2006, Acclarent received FDA clearance to market the Stratus as a spacer to be used only with saline to maintain sinus openings following surgery.
The government alleged that Acclarent intended for the Stratus to be used instead as a drug-delivery device for prescription corticosteroids, including Kenalog-40, and that the device was specifically designed and engineered for this use.
Acclarent marketed the Stratus as a drug delivery device even after the FDA rejected the
company’s 2007 request to expand the approved uses for the Stratus.
Acclarent employees trained physicians using a video that demonstrated the Stratus being used with prescription corticosteroid Kenalog-40 and also used a white, milky substance resembling Kenalog-40 when demonstrating the Stratus.
In 2010, Acclarent added a warning to its label regarding use of active drug substances in the Stratus. The government alleged that Acclarent nonetheless continued to market the Stratus for drug delivery.
By May 2013, Acclarent discontinued all sales of the Stratus and the company agreed to withdraw all FDA marketing clearances for the device, which is no longer commercially available in the United States.
On July 20th, Acclarent’s former Chief Executive Officer, William Facteau, 47, of Atherton, California and former Vice President of Sales, Patrick Fabian, 49, of Lake Elmo, Minnesota were convicted following a six-week jury trial of 10 misdemeanor counts of introducing adulterated and misbranded medical devices into interstate commerce.
As a result of Lokosky’s whistleblowing, the government recovered $18 million. Lokosky’s share — $3.5 million.
“That number is not in my bank account, I can assure you,” Lokosky told Corporate Crime Reporter in an interview last week.
Because of taxes and your lawyer’s fee?
“Correct,” Lokosky said. “Reporters always want to know — what does the whistleblower get? It makes us look like we were greedy. I was making $250,000 a year. I would have made more money if I kept my mouth shut. That’s not why I did this.”
Taxes are 40 percent. The lawyer gets 40 percent. You are down to a couple of years’ salary.
“Less,” she says.”That’s not a complaint. That’s a reality. People should know that if you are going to go forward. The Department of Justice needs to fix it also. You are not talking about pharmaceuticals where you are talking about a billion dollars in damages. It’s not there. The Department of Justice says you are awarded that. That’s bullshit. I earned every penny of that. I was without a job for over three years.”
Facteau and Fabian were convicted at trial.
What was their sentence?
“They haven’t been sentenced yet. That comes January 11, 2017 in Boston.”
Did you know them?
“Yes. I worked with them.”
Did you testify against them?
“I could not because I was the whistleblower. I was in the courtroom every day with the exception of two days for six weeks.”
You were staring them down?
“It was mainly to see that what was being said was accurate. I don’t have an axe to grind with them. They are puppets. They got pinched. They didn’t have enough information to flip on higher ups. That is what happened.”
Was there a criminal case brought against a company?
“No. That’s the other thing wrong with the process. Once you file a whistleblower complaint, it goes behind closed doors. All of those I worked with at the Department of Justice and the FBI worked their asses off to get this done. And then it goes to DC and a settlement is decided on behind closed doors with Covington & Burling — Johnson & Johnson’s attorney — and the Department of Justice. And of course, the lawyers walk from the Department of Justice to Covington for a job afterwards.”
Who was the attorney for Johnson & Johnson?
“Ethan Posner. How many corporate integrity agreements does the company get to sign before the government realizes that the company has no integrity?”
What is your current work?
“I’m starting a consulting company. I’m consulting with companies about how to become more profitable and do it ethically.”
You have created something called the sociopathic business model. What is it?
“It’s a tool or checklist to help people to determine whether or not they are being abused by an institution. Once you see this pattern, you cannot unsee it.”
“Companies are encouraging, replicating and rewarding unethical and illegal behavior and removing those who expose that. The checklist helps people see if you are getting inconsistent and contradictory language to action. Regulatory is telling you one thing. Sales and marketing is telling you another. That’s a trigger for a sociopathic business model.”
“If a company is covering up sexism, retaliation, racism — in 99 percent of the cases it means they are engaged in far greater unethical and illegal activity.”
“This is laid out on my web site — killingmycareer.com. I’m the first whistleblower under seal to start a blog in their own name about their own case without breaking the seal. According to the Department of Justice, I broke the spirit of the seal, but I did not break the seal. They were not happy about my blog. I got called back to the principal’s office in Boston and was told that I needed to take it down. I told them no — I have a First Amendment right. I will not take this down.”
“If the criminals can use the First Amendment, why don’t the people defending this law get to use it?”
[For the complete q/a transcript of the Interview with Melayna Lokosky, see 30 Corporate Crime Reporter 46(12), November 28, 2016, print edition only.]