Former Employee Sues Hewlett-Packard for Medical Products Fraud in Multi-Million Dollar Whistleblower Lawsuit on Behalf of State of California

Business Wire, Feb 24, 2005

SAN FRANCISCO -- Former Employee Charges Company Knowingly Sold Defective Medical Devices; New State Legal Filing Follows Successful Federal Government Settlement

Citing a "scheme to defraud its customers by knowingly selling defective and potentially dangerous medical devices," a complaint was filed today against Hewlett-Packard Company (NYSE:HPQ) and a spin-off entity, Agilent Technologies, by a former employee who filed the case of behalf of the State of California and himself. The suit -- charging violation of the California False Claims Act and seeking treble damages estimated in the "tens of millions of dollars" -- was filed in California Superior Court in San Francisco and is being publicly disclosed for the first time today.

The "whistleblower" bringing the qui tam action is Robert Hindin, who worked for Hewlett-Packard (HP) as production manager and manufacturing engineer for eight years before being wrongfully terminated in 1997. The lawsuit states that Hindin first uncovered HP's improper practices and repeated life-threatening failures of HP products in 1996 and attempted to persuade HP management to respond to the problems, even going so far as to write to HP's president. Being met with "nothing but hostility and threats," Hindin reported HP's conduct to the Food and Drug Administration, after which he was fired.

The medical devices cited in the suit include Anesthesia Gas Monitors, which are utilized in surgery to deliver anesthetic agents and to monitor anesthesia and respiratory gases; Pulse Oximeters, which are used in operating rooms, intensive care units, and patients' bedsides to measure and monitor an individual's arterial oxygen saturation level; and Ultrasound Imaging Transducers used to produce images of structures, organs and blood flow inside the body. According to the lawsuit, HP had falsely certified to the government that it had complied with FDA requirements, including reporting each product failure, investigating these failures, and addressing the problems.

Hindin initially filed a federal lawsuit in 1997 on behalf of himself and the U.S. government under the Federal False Claims Act, charging HP fraudulently induced government and private purchasers to buy its defective products through both misstatements and material omissions. Like the U.S. government, California was a large customer of HP, acquiring thousands of medical devices for its hospitals and reimbursing private hospitals for the purchase and use of these defective devices through the MediCal program, according to the lawsuit.

Hindin's fraud charges were validated by a settlement in July 2002, in which HP/Agilent agreed to pay $7 million to the federal government. The company also settled Hindin's wrongful termination claim. Announcing the settlement, U.S. Attorney Michael J. Sullivan in Boston, who prosecuted the case, described HP's conduct as "unconscionable" (www.usdoj.gov/usao/ma/presspage). During the government investigation, Hindin filed a parallel lawsuit in California (under seal as required by law) that was recently served on Defendants. Today's filing amends that complaint.

Pierce O'Donnell, lead plaintiff's counsel with O'Donnell Shaeffer Mortimer LLP in Los Angeles, stated: "HP's reckless conduct in knowingly selling defective products is egregious under any circumstances. Here the conduct is particularly conscience shocking because these are medical products that can make a life or death difference for a patient. We intend to expose at trial that at the highest levels, HP had a conscious disregard for public health and safety in the craven pursuit of profits."

Today's amended legal action charges, among other things, that HP performed sham quality tests and "willfully concealed the existence, frequency and severity of the products' defects," with "grossly inadequate testing procedures" that violated government-prescribed standards. It also charges that the defendants caused private health care providers participating in the MediCal program to pass on a portion of the costs, both for the purchase, as well as services rendered from use, of the substandard medical equipment to the State of California. Over a six year-period from 1991 to 1997, it is estimated that HP distributed -- and allowed to remain in use -- thousands of such inferior medical devices, according to the lawsuit.

According to the lawsuit, these products were manufactured and distributed by HP prior to November 1999, when it spun off these and other divisions to create Agilent Technologies Inc. Agilent's Healthcare Solutions group alone reported revenues the following year of $1.4 billion. That group was acquired by Royal Philips Electronics NV in 2001 and was subsequently integrated into Philips Medical Systems North America.

O'Donnell added: "Since the U.S. government's settlement did not include any formal cease-and-desist directives regarding these products beyond 2002, we want to ascertain whether these defective products are still in the marketplace and if they are causing patient injuries."