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The founder and former CEO of Stimwave was arrested and charged with creating and selling nerve stimulation devices with a non-functioning component that was implanted into chronic pain patients for profit, announced.

Laura Perryman's alleged scheme, the DOJ said, resulted in the loss of millions of dollars for federal healthcare programs. Perryman has been charged with one count of conspiracy to commit healthcare fraud and wire fraud and one count of healthcare fraud.

Stimwave, a Florida-based medical device company, admitted wrongdoing in the case and reached a settlement with the DOJ in October 2022 for a $10 million penalty, agreeing to ongoing compliance measures as well, the release noted.

"As alleged, at the direction of its founder and CEO Laura Perryman, Stimwave created a dummy medical device component -- made entirely of plastic -- designed to be implanted in patients for the sole purpose of causing doctors to unwittingly bill Medicare and private insurance companies more than $16,000 for each implantation of the piece of plastic," Damian Williams, the U.S. Attorney for the Southern District of New York, said in the announcement.

Perryman's role in the alleged scheme arose from a technical issue related to an implanted receiver, known as the pink stylet, according to the DOJ. After Stimwave began selling the stimulation device along with the pink stylet in 2017, physicians informed the company that this receiver was too long to properly implant in some patients.

The DOJ alleged that Stimwave and Perryman knew that the stylet could not be cut down in length without affecting its functionality, and without the ability to implant the receiver, physicians would suffer a financial loss for purchasing the device, according to the DOJ.

Rather than refund physicians for the unusable devices or lower the cost, Perryman allegedly devised a scheme to develop a white stylet, made entirely of plastic, said to be modifiable as needed. But that stylet was just "a dummy component" designed to "serve no medical purpose," according to the DOJ.

The DOJ alleged that the scheme was designed to continue to sell the device at the same price, which caused physicians "to unwittingly implant the non-functional white stylet into patients and submit fraudulent reimbursement claims" to Medicare.

"The defendant and Stimwave did this so that they could charge medical providers many thousands of dollars for purchasing their medical device," Williams said. "Our office will continue to do everything in its power to bring to justice anyone responsible for perpetuating healthcare fraud, which in this case led to patients being used as nothing more than tools for financial enrichment."

The alleged scheme was initially brought to the attention of the government by a whistleblower in 2018.

In addition to accepting responsibility for the scheme and paying the financial penalty, Stimwave has also agreed to hire a chief compliance officer and hold regular compliance committee meetings. The company has also agreed to cooperate with the government's investigation. The company must abide by these requirement for 3 years from the date of the agreement, according to the DOJ.

A civil fraud lawsuit was also filed against Stimwave and Perryman under the False Claims Act, the DOJ said. The company reached a settlement agreement on that lawsuit, which has been submitted to a U.S. district judge for approval. That settlement requires Stimwave to admit responsibility for the alleged scheme detailed in the government's civil complaint. It must also agree to pay $8.6 million to the government, credited toward the $10 million penalty, according to the DOJ.

The DOJ investigation was joined by representatives the FBI and the FDA.

Stimwave filed for bankruptcy in June 2022 and reached an agreement to sell nearly all of its assets to another entity for $40 million, according to . The agreement will allow Stimwave to continue operating without interruption to its business, according to the announcement.

Perryman was fired from her position at Stimwave in 2019. The civil complaints against her are still pending.

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