Current reports

Settlement reached regarding the federal False Claims Act

Acting on the basis of Article 17(1) of the Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC (Official Journal of the EU L 2014 No 173, p. 1), the Management Board of Medicalgorithmics S.A. with its registered office in Warsaw (“Company” or “Issuer”) hereby discloses that as a result of the negotiations of which the Company advised in current report No 18/2017 of 26 June 2017, a settlement was reached on 26 June 2017 (“Settlement”) between the Unites States of America (“US”) acting through the US Department of Justice (“DOJ”) and Medi-Lynx Cardiac Monitoring, LLC (“ML LLC”) and the Company (collectively: “ML LLC/MDG”).


The settlement concerns allegations of violation of the provisions of the federal False Claims Act (“FCA”) filed by DOJ against ML LLC/MDG. DOJ claimed that in the period from 1 January 2014 to 30 September 2016 ML LLC/MDG designed the Medi-Lynx online registration process in a way that was supposed to steer clients (physicians) to choose the telemetry that provided the highest refund for Medi-Lynx patients covered by the Medicare programme, regardless of their willingness to choose one of the cheaper cardiac monitoring services (“Allegations”).


The settlement is not tantamount to ML LLC/MDG recognising the Allegations or the US admitting that the Allegations are unfounded. The settlement aims at avoiding costly, multi-month proceedings between the Parties, in which such matters would have to be resolved in court.


Under the settlement, ML LLC/MDG agreed to pay US USD 2,887,215 (say: two million eight hundred eighty-seven thousand two hundred fifteen dollars) plus interest at the annual rate of 2.375% charged from 6 May 2017 to 23 June 2017.


The amount of USD 2,887,215 resulting from the settlement has been recognised in the annual consolidated financial statements for 2016 and, therefore, will not affect the financial performance of the Medicalgorithmics Group in subsequent reporting periods. The amount of USD 2,362,267 corresponding to the period from 1 January 2014 to 30 March 2016 (up until the acquisition of 75% of shares in ML LLC by MDG) decreased the fair value of the acquired net assets of ML LLC, thus increasing the goodwill of ML LLC as at the acquisition day. The remaining portion, i.e. USD 524,948, was provided for, and the cost of the provision was charged to the net profit/loss of the Medicalgorithmics S.A. Group for 2016.


The US released ML LLC/MDG from liability for any civil law and administrative law monetary claims that the US could raise against ML LLC/MDG in connection with the Allegations, on condition of LLC/MDG paying the amount specified in the Settlement, subject to the exceptions indicated therein.


Furthermore, ML LLC/MDG undertook not to appeal against the negative decisions concerning requests for refund payments under the Medicare programme or from State payers in connection with the Allegations and to withdraw the appeals lodged so far.