Boston Sci division has DoJ, IRS woes

The U.S. government has changed its mind about a potential whistleblower case against Guidant, a division of Boston Scientific ($BSX). After refusing to step into a New York suit accusing Guidant of selling defective products paid for by government programs, the Department of Justice had decided it will intervene in that case.

James Allen, who brought the case two years ago, claims that since Medicare and other government programs covered the faulty devices, Guidant defrauded the government. But Boston Sci, which bought Guidant in 2006, doesn't believe Allen qualifies as a whistleblower because he was a patient, and whistleblowers must have original information. The DoJ has motioned to move the case from New York to Minnesota, where Guidant is based and the majority of witnesses are located, and the New York judge has agreed.

"We will continue to vigorously defend the case because we believe the government and plaintiff are not entitled to the recovery they seek," Boston Sci said. The company agreed to pay $296 million last year to settle claims with the FDA; however, a federal judge rejected the proposed settlement in April. The judge left room for a modified deal, but expressed concern because the pact didn't include such items as probation for Guidant. So far, a new agreement has not been proposed.

ALSO: Guidant has been informed it owes $525.1 million plus interest for unpaid taxes from 2001 to 2003. But according to Boston Sci, the numbers are wrong, and it plans to fight the IRS charges. The unpaid taxes stem from transfer pricing for Guidant's licensing agreements. Article

- check out the WSJ piece