Smith & Nephew ($SNN) reports Q3 results, gets rebuffed in whistleblower suit

Smith & Nephew ($SNN) beat Q3 expectations after stepping up marketing to U.S. consumers, as Reuters notes. "We generated revenues of $941 million, compared to $915 million in the same period last year. This represents an underlying growth of 4%, after adjusting for adverse currency movement of 1%," the company says in a statement.

Smith & Nephew's orthopedics division grew revenues by two percent in the quarter to $510 million, while its arthroscopy (sports medicine) unit grew by eight percent. The company's advanced wound management unit grew revenues by seven percent to $230 million, outperforming the estimated global market growth rate at four percent.

"This has been a solid quarter for the business, contrasting with the cries of woe from its U.S. peers, and management is maintaining its full-year outlook from the second quarter," says Seymour Pierce analyst Mike Mitchell, as quoted by Reuters.

Seperately, Judge Bernice Donald of the U.S. District Court for Western Tennessee last week denied the company's motion for dismissal of a whistleblower lawsuit. Samuel Adam Cox III, who used to work for the company, sued his former employer in December 2008, alleging that the company misrepresented the origin of "at least 107" products sold to the Department of Veteran's Affairs and the General Services Administration. He maintains he was fired after allegedly refusing to go along with the illegal conduct.

According to Cox, Smith & Nephew repeatedly sold and continues to sell products to the government in violation of the Federal TradeAgreements Act by misrepresenting the items' country of manufacture. Cox alleges Smith & Nephew imports products from Strait Orthopaedics in Malaysia. Straits ships the products to a facility in Memphis, TN, where the items are cleaned, sterilized, packaged and stored until being shipped to Smith & Nephew's customers. "As a result of the repackaging in Memphis, the products are never again identified as being of Malaysian origin; instead they are placed in boxes that bear Smith & Nephew's name and its addresses in Memphis and Tübingen, Germany," according to court documents. This results in the improper sale of foreign-made goods to the federal government, as the company falsely certifies its compliance with the TAA and federal procurement law, Cox alleges.

Cox was fired from his position as IT global director of enterprise resource planning, allegedly for refusing to participate in the scheme. Furthermore, when he refused to go along with the company's illegal activities, Cox alleges he was "berated and cursed" by Sal Chiovari, Smith & Nephew's chief information officer, and "threatened" by Jon Schauber, the company's global VP of IT, according to court documents.

Smith & Nephew had attempted to have the suit dismissed for "lack of subject matter jurisdiction" and "failure to state a claim." contending that the whistleblower's case is based on insufficient information.

- read Smith & Nephew's earnings release
- see the Reuters story
- check out Judge Donald's decision (posted by Justia)
- get more from MassDevice