Former Cardiovascular Systems Inc. employee awarded $25 million in whistleblower lawsuit

A Los Angeles jury has awarded more than $25 million to a whistleblower who was fired for reporting what he considered illegal sales tactics and surgeon kickbacks by a Minnesota medical device company.

Steven Babyak won his lawsuit against former employer, St. Paul-based Cardiovascular Systems Inc., for both whistleblower retaliation and wrongful termination in Los Angeles Superior Court. The jury on Monday awarded $2.7 million for past and future wage loss, and $22.4 million in punitive damages on Tuesday.

"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."

The company plans to appeal.

"CSI is committed to ethical business practices throughout the organization," the company responded in a statement. "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 manufactures and markets products that treat peripheral and coronary vascular disease, and Babyak was a regional sales manager in the southwest United States, with five sales representatives who reported to him.

In mid-2014, his supervisor — area sales director Todd Goldberg — introduced a new concept to his team called the "Triangle Offense," according to the suit. The first step in the strategy was for CSI sales reps to gain patient information through their relationships with referring providers. The sales reps would then go to their network of surgeons, promising a connection with these providers and patients, but only if the surgeons agreed to use CSI's device.

Babyak raised concerns to Goldberg, the company's legal counsel and the human resources department on multiple occasions.

CSI acknowledged the complaints and conducted an internal investigation, interviewing several sales representatives on Babyak's team who corroborated his testimony and claimed Goldberg was retaliating against them, according to the suit. The company's investigation found no evidence of retaliation and his complaint without merit.

Nonetheless, a month later, CSI issued a written warning to Goldberg for violating the company's policies for interacting with health care professionals and for intimidating sales personnel who feared his reaction.

Babyak was transferred under a new supervisor and was never given written or verbal warnings, according to the trial brief. His required sales quota was increased and his geographic territory diminished. He was fired without warning on June 1, 2015. The company cited a delay in filing paperwork.

This is not the first whistleblower case brought against CSI alleging bribes for doctors who used its products.

In 2013, former employee Travis Thams accused CSI of engaging in "a fraudulent marketing scheme … to maximize its profits through an ongoing pattern of fraud and deception involving illegal kickbacks, off-label promotion, and violations of [federal] laws and regulations," according to court documents unsealed in 2015.

The company agreed to pay $8 million last June to settle the False Claims Act lawsuit. At the same time and following a federal investigation, CSI entered into a "corporate integrity agreement" with the U.S. Department of Health and Human Services' Office of Inspector General. This agreement required the company to undergo compliance efforts for the next five years.

Kristen Leigh Painter • 612-673-4767