Wright Medical replaces 3 more execs as USAO puts co. on notice

Wright Medical saw three more executives resign "without good reason" this week and announced the receipt of a letter from the U.S. Attorney's Office for the District of New Jersey stating the company "has knowingly and willfully committed at least two breaches of material provisions" of a deferred prosecution agreement (DPA).

On Wednesday, Wright reported Raymond Kolls, senior VP, general counsel and secretary; Cary Hagan, senior VP, EMEA Commercial Operations; and Alicia Napoli, VP, Clinical & Regulatory Affairs, were no longer with the company. Wright said that these management changes are not related to the company's operational performance, financial condition or financial reporting. They were replaced by Thomas McAllister, Aurelio Sahagun and Max Mortensen, respectively.

Last month, the company announced that both CEO Gary Henley and CTO Frank Bono were no longer with the orthopedic device company. Henley tendered his resignation prior to a board meeting held to address management's oversight of Wright's ongoing compliance program. The board accepted his resignation, but because the company has determined it is without "good reason" under the terms of his employment agreement, he will not receive a severance package. 

Wright agreed last September to pay $7.9 million to settle a federal probe alleging it had conspired to violate anti-kickback laws by paying consulting fees to convince orthopedic surgeons to use certain Wright products from 2002 through 2007. As part of the settlement, the U.S. Attorney in New Jersey agreed to defer criminal prosecution for 12 months as long as the company met certain obligations.

The company said on Wednesday it had conducted an internal investigation with the assistance of outside counsel, and the board had received a report on the investigation and notified the independent monitor and the USAO, as required by the DPA. But on Thursday, the company acknowledged receipt of the letter from the USAO. In a conference call, company chairman and interim CEO David Stevens declined to elaborate on the compliance issues, the Memphis Commercial Appeal reports.

As required by the terms of the DPA, the letter provides the company with an opportunity to make a presentation within three weeks its receipt. Wright says it intends to make a presentation to address whether any breach has occurred, whether it was knowing or willful, materiality, and whether it has been cured, according to an SEC filing. Pursuant to the DPA, Wright expects the USAO will not take any further action until consideration of the company's presentation.

- see the Wright Medical release on the executive changes
- check out the SEC filing on the investigation
- get more from the Memphis Commercial Appeal