Etek court judgment against Picker prompts inquiry a Veterans Affairs

August 26, 1992

The U.S. Department of Veterans Affairs this month confirmed thatit is conducting an investigation of medical imaging vendor PickerInternational. The probe could lead to Picker's debarment fromfederal contracts for up to three years if investigators

The U.S. Department of Veterans Affairs this month confirmed thatit is conducting an investigation of medical imaging vendor PickerInternational. The probe could lead to Picker's debarment fromfederal contracts for up to three years if investigators determinethat Picker interfered with government contracts.

The investigation was triggered by a civil judgment againstPicker in March, according to the VA. In that case, a U.S. DistrictCourt jury in Houston awarded third-party maintenance companyElectronics in Medicine (Etek) $2.1 million. The jury found Pickerguilty of unfair competition and malicious interference in oneor more CT service contracts between Etek and hospital ownersof Picker scanners (SCAN 4/8/92).

Picker appealed the verdict, but the motion was dropped aspart of a settlement several months later that also closed a statecourt case involving similar claims filed by Etek. Picker paidEtek an undisclosed sum in excess of $2.1 million to settle bothcases, according to Anthony Montgomery, an Etek attorney.

The case aroused the VA's interest because Etek held a numberof service contracts with VA hospitals, which were among the contractsinvolved in the independent service organization's claim. Thejury verdict, however, did not specifically mention the contractswith which it found Picker guilty of tampering. Picker representativeshave been quick to seize upon that omission.

"Nothing in the Etek judgment indicated that Picker interferedwith VA contracts," said Rob Spademan, a Picker spokesperson.

Picker is cooperating fully with the VA investigation and expectsto be cleared of any wrongdoing, Spademan said.

Debarment excludes a firm from contracting with federal agenciesfor a "reasonable, specified period," according to theVA. The period should be proportional to the seriousness of thecause for debarment and should not exceed three years.

According to federal acquisition regulations, a contractorcan be debarred following a conviction or civil judgment for severalviolations. Those violations include:

  • commission of fraud or a criminal offense in connectionwith obtaining, attempting to obtain or performing a public contract;

  • commission of an offense that indicates "a lackof business integrity or business honesty that seriously and directlyaffects the present responsibility of a government contractor";and

  • commission of embezzlement, theft, forgery, bribery,falsification or destruction of records, making false statementsor receiving stolen property.

A company could also be debarred for serious violation of agovernment contract.

The investigation is being conducted by the VA Office of theInspector General, according to VA spokesperson Donna St. John.

The Department of Defense is also reportedly investigatingPicker, according to the VA. A DOD spokesperson would not confirmor deny the existence of a DOD inquiry.

Government contracts amount to about 25% of Picker's equipmentbusiness, which itself is a portion of the company's total revenuesof $900 million, according to Spademan. Reports that half of Picker'stotal revenues derive from government contracts are untrue, Spademansaid.

A VA investigation last year found that bid specificationsfor maintenance contracts on Picker CT scanners contained restrictivewording that favored the vendor (SCAN 7/31/91). The probe didnot assign blame for the manner in which the specifications werewritten.

If the current VA investigation absolves Picker, the vendorcould face additional problems in the near future as anothercivil case filed against the company by an ISO works its way throughthe legal system.

In that case, Pittsburgh-based Imaging Equipment Services chargesthat Picker interfered with its service contracts, many of whichwere with VA hospitals. Those government contracts will be anissue in the case, according to IES president Thomas Quinn.

Picker initiated litigation with IES five years ago when itfiled charges against the ISO on issues related to the use ofPicker service software and manuals. The scanner vendor also chargedthat IES had hired a former Picker service employee in violationof a non-compete contractual clause (SCAN 3/16/88). IES latercountered with its own claims.

"If Picker should escape debarment on (the Etek case),our case comes around," Quinn said. "Etek had five governmentcontracts. We have over 30. And we will make sure in our case,if we should win it, that it's more specific as to what thosecontractual interferences were."

The IES case, filed in U.S. District Court in Boston, is abouta year away from trial, according to Quinn.