Whistleblower lawsuit against HP allowed to proceed

In a significant ruling, the California Court of Appeal has revived a whistleblower lawsuit against Hewlett-Packard Company and a spin-off entity, Agilent Technologies, for knowingly selling defective, life-threatening medical devices used by many California hospitals. Brought by a former Hewlett-Packard employee named Robert Hindin on behalf of the State of California and himself, the complaint cites the company’s “scheme to defraud its customers by knowingly selling defective and potentially dangerous medical devices” in violation of the California False Claims Act.

According to Hindin’s legal counsel, O’Donnell & Associates, the lawsuit — which has the potential damages to be one of the largest false claims actions in California history — seeks treble damages estimated in the hundreds of millions of dollars.

On July 13, 2007, the California Court of Appeal, First Appellate District, unanimously reversed an earlier San Francisco Superior Court decision that found the legal action was barred by a three-year statute of limitations. In its decision, the appellate court held that the three-year deadline for filing did not apply to a private individual but rather to public officials whose knowledge was the trigger for the running of the three-year filing period. “The plain and commonsense reading of the statutory language contains no ambiguity, and it must govern the case,” the court’s decision stated. The plaintiff’s brief was supported by the California Attorney General’s Office and Taxpayers Against Fraud, a Washington, D.C.-based public interest group.

The “whistleblower” bringing the qui tam action is Robert Hindin, who worked for Hewlett-Packard (HP) as production manager and manufacturing engineer for eight years before being wrongfully terminated in 1997. Hindin first uncovered HP’s improper practices and repeated life-threatening failures of HP products in 1996 and attempted to persuade HP management to respond to the problems, even going so far as to write to HP’s president. After being met with “nothing but hostility and threats,” Hindin reported HP’s conduct to the Food and Drug Administration, after which he was fired by the company.

Hindin initially filed a federal lawsuit in 1997 on behalf of himself and the U.S. government under the Federal False Claims Act, charging HP fraudulently induced the federal government (including the Department of Defense and Veterans Administration) to buy its defective products through both misstatements and material omissions. Like the U.S. government, California was a large customer of HP, acquiring thousands of medical devices for its hospitals and reimbursing private hospitals for the purchase and use of these defective devices through the MediCal program.

“Each of us has the right to expect any medical equipment used for our medical care to be safe and effective, but we are all placed at great risk when medical equipment companies violate our trust and knowingly sell equipment that is defective,” said Hindin. “Hewlett-Packard, in my estimation, sold hundreds of millions, if not billons, of dollars worth of adulterated medical equipment, a substantial portion of which went to the State of California. My objective in pursuing this is to prevent such reprehensible — in fact, life threatening — behavior from ever happening again, and to seek reimbursement for the citizens of California.”

The lawsuit alleges that HP falsely certified to the government that it had complied with FDA requirements regarding the products, including reporting each product failure, investigating these failures, and addressing the problems. The medical devices cited in the suit include Cardiac Defibrillators; Anesthesia Gas Monitors, which are utilized in surgery to deliver anesthetic agents and to monitor anesthesia and respiratory gases; Pulse Oximeters, which are used in operating rooms, intensive care units, and patients’ bedsides to measure and monitor an individual’s arterial oxygen saturation level; and Ultrasound Imaging Transducers used to produce images of structures, organs and blood flow inside the body.

Pierce O'Donnell, lead plaintiff’s counsel with O'Donnell & Associates in Los Angeles, stated: "Sadly, the evidence shows HP’s callous disregard for the fact that these defective products — which they consciously sold after notice of defects — could mean life or death for unsuspecting patients. This case is not just about recouping money for California taxpayers; it is an indictment of a company that placed a higher premium on profits than public health and safety.”

Hindin’s fraud charges were validated by a settlement in July 2002, in which HP/Agilent agreed to pay $7 million to the federal government which had taken over prosecution of Hindin’s Federal False Claims Act suit. The company also settled Hindin’s wrongful termination claim. Announcing the settlement, the U.S. Attorney in Boston, Michael J. Sullivan, stated publicly: “These medical products were critical to the care of the hospital patients, including armed services personnel and veterans, and failed to perform at an acceptable level. The fact that the defective nature of these products was not disclosed is unconscionable.”

During the government investigation, Hindin filed a parallel lawsuit in California, under seal as required by law, that became public in 2005. It was the dismissal of this state lawsuit in 2006 which was reversed by the Court of Appeal last Friday.

The legal action charges, among other things, that HP performed sham quality tests and “willfully concealed the existence, frequency and severity of the products’ defects,” with “grossly inadequate testing procedures” that violated government-prescribed standards. It also charges that the defendants caused private health care providers participating in the MediCal program to pass on a portion of the costs, both for the purchase, as well as services rendered from use, of the substandard medical equipment to the State of California. Over a six-year period from 1991 to 1997, it is estimated that HP distributed – and allowed to remain in use – thousands of such inferior medical devices.

These products were manufactured and distributed by HP prior to November 1999, when it spun off these and other divisions to create Agilent Technologies Inc. Agilent’s Healthcare Solutions group alone reported revenues the following year of $1.4 billion. That group was acquired by Royal Philips Electronics NV in 2001 and was subsequently integrated into Philips Medical Systems North America.

O’Donnell added: “The U.S. government’s condemnation underscores the egregious behavior of HP, but it left unanswered and unresolved key issues — namely, how many of these defective products are still being used to treat patients in hospitals, and how many injuries can we ascribe to their continued use?”

The filing cites examples of the abusive treatment that Hindin had to endure as a whistleblower. Once a quality control audit by the FDA confirmed Hindin’s compliance complaints, he was harassed and wrongly accused of insubordination and incompetence at HP. He was also ostracized and marginalized by HP management. “HP even went so far as to install a hidden camera above Hindin’s desk,” the filing states.

Hewlett-Packard Company is a major manufacturer of computers, printers, software and related products based in Palo Alto, Calif.

For a copy of the Court of Appeals ruling, go to the court Web site at http://appellatecases.courtinfo.ca.gov (Case #A114629).