On February 28, 2023, a federal jury in the District of Minnesota found the Cameron-Ehlen Group, d/b/a Precision Lens, and its founder and owner Paul Ehlen (the “Defendants”) guilty of paying kickbacks to ophthalmic surgeons in violation of the False Claims Act, 31 U.S.C. 3729 (“FCA”) and Federal Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b) (“AKS”) between 2006 and 2015. This case serves as an excellent example of the risks that medical device manufacturers and distributors incur by not having an effective compliance program that identifies and corrects compliance issues.
The Government alleged in the Complaint that Precision Lens, a distributor of medical devices including cataract surgery products, and Ehlen took physicians on high-end skiing, fishing, golfing, hunting, sporting, and entertainment vacations to induce them to purchase and use Precision Lens’ products in violation of the AKS. The Complaint also alleged that the Defendants sold frequent flyer miles to the physicians at a significant discount and flew physicians on private jets to lavish locations. The Government contended that, in many instances the physicians were allowed to take the trips free of charge or were charged a nominal amount that was well below the fair market value of the trips. Further, in order to fund these lavish trips, Precision Lens allegedly created a “slush fund” that was used to hide over $100,000 in “marketing rebates.”
As alleged, the Defendants’ ultimate goal was to curry favor with the physicians so that they would order and use Defendants’ ophthalmic supplies and equipment in cataract-related surgeries covered by Medicare. The Government argued that after the trips, physicians ordered supplies from Precision Lens—a departure from their prior practice of buying supplies directly from the manufacturer—while Precision Lens argued these were repeat, consistent customers who already purchased from Precision Lens.
The Department of Justice (“DOJ”) intervened in whistleblower Kipp Fesenmaier’s qui tam complaint in 2018. Following a six-week trial, the jury found the Defendants’ kickbacks caused the submission of 64,575 false claims to Medicare in the relevant time period and assessed $43,694,641 in single damages. The jury’s verdict was a result of the Government’s aggressive application of the taint principal, which provides that claims for payment submitted to Medicare or Medicaid that included items impacted by an AKS violation should be considered false claims under the FCA, regardless of (1) whether the goods or services at issue were reasonable and medically necessary and (2) the value conveyed to the beneficiary.
False Claims Act trials are rare. Typically, when facing FCA liability, manufacturers, distributors, or providers settle before trial due to the specter of treble damages and significant mandatory monetary penalties if found guilty. In this case, the minimum penalties for the vast majority of each of the 64,575 false claims ranges from $5,500 to $11,000, with treble damages ultimately placing the final judgment amount between $489 million to $848 million.
This verdict highlights why trials are so rare in the FCA space, particularly when potential AKS or Stark Law violations are involved: Several hundred thousand dollars of kickbacks can transmogrify into an almost billion-dollar judgment. Faced with such outsized risks, defendants will often settle an FCA suit, even where they have viable defenses. This judgment and the heightened risk of going to trial also accentuate the importance of the new September 15, 2022 DOJ cooperation guidelines and February 23, 2022 voluntary disclosure program, which provide clarifying guidance and new incentives for entities to self-disclose wrongdoing and cooperate with investigators. The DOJ is clearly invested in a carrot and stick approach to compliance and enforcement to reduce fraud and abuse. This verdict serves as an example of the tools and significant penalties that prosecutors can bring to bear and provides FCA defendants with further incentives to self-disclose, cooperate, and settle for a manageable sum. Moreover, this case demonstrates the importance of having an effective compliance program that identifies and addresses issues at an early stage in order to minimize the risk of a near billion-dollar verdict under the FCA.
 The case is United States, ex rel. Kipp Fesenmaier v. Cameron-Ehlen Group, Inc., No. 0:13-cv-3003 (D. Minn.).
 Id. at ¶ 56(a).
 Id. at ¶¶ 67-69, 71.
 See 42 U.S.C. 1320a-7b(g).
 As of January 30, 2023, the FCA penalties range from a minimum of $13,508 to a maximum of $27,018 per claim for claims that occurred after November 2, 2015. As 64,165 claims in this case occurred between Sept. 30, 1999 and Nov. 2, 2015, the penalty range applicable is $5,500 to $11,000 per claim; for the 410 claims occurring in December 2015, the applicable penalty range is $13,508 to $27,018.
 On Friday, March 17, 2023, the United States filed a Motion for Judgment seeking $489,529,705.13, “representing treble damages and the minimum penalty per claim based on the statutory penalties during the Relevant Time Period.” See Motion for Judgment.
 See New DOJ Guidance on Corporate Criminal Enforcement (Sept. 16, 2022).