Federal jury returns $43M judgment against Precision Lens for illegal kickbacks

A federal jury on Tuesday found a Bloomington-based distributor of lenses used in cataract surgeries and its majority owner liable for tens of millions of dollars in illegal kickbacks used to induce surgeons into using its products.

After determining that Paul Ehlen and his Cameron-Ehlen Group Inc., which does business as Precision Lens, violated the federal anti-kickback statute and False Claims Act, the jury returned a $43 million judgment against the defendants to cap a six-week trial before U.S. District Judge Wilhelmina Wright in St. Paul.

The jury concluded that such kickbacks — spanning from luxury hunting and fishing outings to travel to major sporting events — helped win Precision Lens millions of dollars of business and caused the submission of 64,575 false claims to the Medicare program between 2006 and 2015.

"The jury's verdict protects the integrity of the Medicare system for patients and those healthcare providers who operate fairly and legally," Assistant U.S. Attorney Chad Blumenfield said in a statement Tuesday. "Companies may not use expensive trips and other items of value to persuade physicians to use their products, and physicians may not accept that remuneration."

Precision Lens and Ehlen, through a statement provided by their attorneys to the Star Tribune after Tuesday's verdict, maintained their innocence and expressed disappointment over the outcome.

"We will continue to defend ourselves and our wholly appropriate actions as we navigate the appeals process," the statement continued. "We are grateful for the continued support of our partners, employees, and customers, all of whom have been extremely supportive to us throughout these proceedings. We remain focused on our mission and commitment to the doctors, facilities, and manufacturers who place their trust in us each day."

The U.S. Attorney's Office for Minnesota first filed its lawsuit against Precision Lens and Ehlen in 2018. For violating the False Claims Act, defendants are liable for triple the amount of damages in the case. That could bring the jury's $43 million judgement to well in excess of $120 million. The government is expected to file a motion seeking treble damages and statutory penalties for each false claim.

The federal government's involvement spawned from allegations made from a company whistleblower who filed a broader lawsuit in 2013. The whistleblower, Kipp Fesenmaier, will receive a percentage of the amounts awarded at trial, according to the U.S. Attorney's Office.

Previously, Sightpath Medical and its former CEO, James Tiffany, agreed to pay $12 million in 2017 to resolve similar allegations of illegally providing luxury trips and consulting agreements to induce the use of specific eye-surgery products in Medicare surgeries. Precision Lens and Sightpath Medical were "corporate partners" at one time, according to the federal lawsuit, but they are legally separate entities.

A year later, as the U.S. Attorney's Office filed its own allegations against Ehlen and Precision Lens, North Carolina ophthalmologist Dr. Jitendra Swarup agreed to pay $2.9 million to settle allegations about participation in a related payment scheme.

For many trips, the government said, Ehlen shuttled the physicians on private jets. Precision Lens and Ehlen were also accused of selling frequent flyer miles to physicians at a big discount that allowed them to take personal and business trips far below fair market value.

The government also presented evidence at trial that Precision Lens used a "secret" or "slush" fund to help carry out its kickback scheme.

Attorneys for Precision Lens and Ehlen argued that, from 2006 to 2015, the company was "effectively the exclusive distributor in the Midwest region" for the products in question and that most of the 52 physicians who allegedly received kickbacks already had "long-standing brand preferences" for the products they used.