Cardiovascular Systems Socked with $25M in Whistleblower Verdict

A California jury awarded $25.1 million to a former sales manager who claimed the company gave kickbacks to physicians, promoted off-label products, and retaliated against him for reporting the information to management.

Nancy Crotti

A Los Angeles jury has awarded a former Cardiovascular Systems Inc. (CSI) regional sales manager $25.1 million in damages in a whistleblower retaliation suit.

Steven Babyak, of Irvine, CA, worked for the New Brighton, MN-based company starting in 2012. In the complaint, filed in 2015 in California Superior Court in Los Angeles, Babyak alleged that a supervisor engaged in an illegal marketing program called the Triangle Offense that paid doctors kickbacks for using CSI products. If the physician refused to use the products, the sales rep funneled patient referrals to other doctors, the complaint said.

Babyak also told management about alleged off-label promotion of a company product, retaliation, and a hostile work environment for women, who made up most of his team that covered Southern California, Hawaii, Colorado, Las Vegas, and Utah, according to court filings. Subsequently, the company shrank Babyak's sales area, and fired him in June 2015.

In the trial that began April 17, the jury awarded Babyak $22.4 million in punitive damages and $2.7 million in compensatory damages with respect to his claims for whistleblower retaliation and wrongful termination in violation of public policy.

"CSI fired our client after he alerted upper management of an illegal scheme of kickbacks to doctors," Tamara Freeze and Robert Odell, Babyak's lawyers, said in a statement. "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."

Cardiovascular Solutions sells diamond-coated devices to remove calcified plaque from coronary and peripheral arteries.

"The company strongly believes that this case was incorrectly decided as to liability, the amount of compensatory damages, and the appropriateness and amount of punitive damages," CSI said in a statement. "CSI intends to vigorously challenge the verdict in the trial court and appeal."

The verdict is the latest in a string of setbacks for Cardiovascular Systems. In March 2016, the company agreed to pay the federal government $8 million over three years to settle a False Claims Act suit filed in the Western District of North Carolina. Former sales manager Travis Thams had filed the whistleblower suit in 2013, alleging kickbacks and off-label promotion of medical devices. 

In February 2016, David Martin stepped down as CEO and board director to focus on treating stomach cancer. Martin died in May at age 51.

Nancy Crotti is a contributor to Qmed.

[Image courtesy of Pixabay]