Romney, Damon Corporation and a $119 Million Medicare Fraud Settlement

According to a cited Forbes report, in 1989, Bain Capital purchased controlling interest in Damon Clinical Laboratories Corporation, a medical testing company located in Needham, Massachusetts.

In 1996, Damon admitted that from 1988 to 1993 it had shored up its earnings by submitting false claims to Medicare and other federal programs, and had agreed to pay , after being found guilty, a $35.3 million criminal fine — one of the largest corporate fines in U.S. history — and an additional $83.7 million to settle the lawsuits..

The company, then owned by Corning, ended the scheme after it had acquired Damon from Bain Capital in 1993, according to company and prosecutors’ statements.

Mitt Romney claimed Bain Capital never worked with any company that worked with the government—like Medicare or Medicaid. Even when asked directly by Newt Gingrich at one debate, Romney responded, “We didn’t do any work with the government. I didn’t have an office on K Street. I didn’t—had never worked—I’ve never worked in Washington.”

Let’s look at the facts:

In 1993, Romney claimed he was unaware of any investigation — quoted in the Boston Globe on Oct. 10, 1993.  When the Globe revisited the case during Romney’s run for governor in 2002, his story was different. Romney’s story changed about his knowledge of the investigation.

The Globe, disclosing that Romney had earned $473,000 from the sale, reported on Oct. 10, 2002:

“Romney said yesterday he was a proactive board member who helped to uncover the fraud. Romney said the board used its New York law firm to investigate, and as a result, the board took ‘corrective action’ months before Damon was sold to Corning.”

But as the Globe reported, court records — including statements from prosecutors and Damon’s own admissions — told a different story, and reveal that the fraudulent activity occurred right up until the time Bain and other owners sold the company to Corning. Prosecutors also gave sole credit to Corning for cleaning up the fraud after it purchased the company from Bain and other owners.

Romney later admitted that the board did not report to federal investigators any findings from the alleged internal inquiry.

Romney was never charged with any wrongdoing. The fraud apparently began in 1988, one year before Bain Capital invested in the company. In the end, four Damon officials were charged with Medicare fraud, including President Joseph Isola, who pleaded no contest to fraud charges and was placed on three years’ probation.

The Damon case is certainly a valid subject for scrutiny of Romney’s business record. This is not about questioning ‘free market’ or ‘capitalism’; this is about questioning fraud and truthfulness of a Presidential candidate.

To sum up, Romney was a director of the firm while the fraud took place and earned $473,000 from the sale of the company. The fraud appears to have ended only after Bain sold the firm and Romney’s statements about what he knew and when he knew it have been inconsistent.

As a voter I would like to know more about Mr. Romney’s involvement in the Damon Corporation case and how he would explain his inconsistent statements. But of course, I am certain FOX News would find a way to spin this one around too, like in the cases of Romney’s Taxes, Romney’s job creation record, Romney’s abortion stance, Romney’s “blind trust”, ad infinitum.