Saturday, June 18, 2011

OFIX CEO RESIGNS


It was announced on Friday, June 17th, 2011, a day that will live in on in Orthofix lore, that Alan Milanazzo, the current CEO, will resign effective August 1, 2011. The press release did not specify the primary reason for the resignation, but, the company lauded him as "a tireless worker and terrific leader." But it does make one wonder, with the black cloud that has followed Orthofix since the time of the Ramius’ brouhaha over Board members being replaced, the cluster f*&k over the Blackstone Medical acquisition, the DOJ penalty for bone stim improprieties and an employee exodus, could it be that with the appellate court's decision to overturn the lower court's decision in the Blackstone Medical/Orthofix whistleblower case, was this the straw that finally broke the camel’s back?

If one looks at chronological events, it seems that once things started to cascade at OFIX, it was one issue after another that led to Milanazzo’s demise.  As recent as December of 2008, Ramius, LLC, a hedge fund, threatened the stability at Orthofix by calling for a special meeting of the shareholders, with the intent to overthrow, or more aptly described, to replace four of the ten then current board members. Ramius wanted to remove Milanazzo, Gero, Hewett, and Von Wartburg, replacing them with a fresh set of eyes and ears.

In March of 2009, Milanazzo was able to rebuke Ramius' attempt, publicly stating that Orthofix was headed in the right direction. Milanazzo believed that the Ramius candidates were duplicative of expertise as the current board members.  What Milanazzo failed to understand or knew in hindsight was that  the potential existed that Ramius did understand what was going on, and that a new set of eyes and ears were desperately needed to right the ship.  In addition to this argument, Milanazzo espoused that OFIX had improved its core business of Sports Medicine, Bone Stimulators, and Orthopedics. Milanazzo was intent on defending his decision and the Boards to acquired Blackstone.  Considering that everyone in the industry knew of the nefarious schemes that had been going on at Blackstone, one must ask the question, wasn’t there a better deal to be had?  If one considers the unforeseen challenges of a major whistleblower case looming over Blackstone, where was the due diligence?  Milanazzo and the Board's rationale for acquiring this albatross was based on price ($330M), technology (what technology) and distribution.  The $50 million that was placed in escrow upon completion of the deal may not be enough to cover the potential settlement in the whistleblower litigation.  In addition to these decision, Milanazzo never secured the relationship that Blackstone had with Osteocel/Osiris.  As Milanazzo claimed Osteocel was less than $3 million of Blackstone's revenue prior to the acquisition.  The question must then be posed, "what was OFIX paying $330 million dollars for," a house of cards?  Those of us in the industry know that Blackstone had nothing more than a "ME2" portfolio.  How many of our readers have argued, why does our industry love to bring industry outsiders (Boston Scientific) to run an orthopaedic operation only to have them step on their own d*#ks. 

In May of 2009, upon Jeff Yielding of Little Rock, Arkansas plead guilty to two counts stemming from a healthcare kickback scheme in the Dr. Chan case. Another in the long list of famous Blackstone consultants. Though OFIX was implicated in the scheme, no allegations or wrongdoing were noted by U.S. Attorney Jane Duke.  But anyone that follows corporate litigation understands that where there’s smoke, there’s fire.  In addition, one must wonder what ever happened to the investigation surrounding the mysterious death of Kelly Yielding?  Mrs. Yielding was a distributor for OFIX Bone Stimulators and mysteriously died days before her testimony in front of a Grand Jury.  One must wonder was this coincidence, and if so, what's the statistical probability of something this rare happening to someone involved in a case involving so many scandalous characters.

In December of 2010, OFIX announced on behalf of itself and Musculoskeletal Tissue Foundation that they had reached a comprehensive settlement with NuVasive and Osiris Therapeutics regarding Trinity Evolution.  Though the specific terms of the settlement were confidential, one must wonder was this just another nail in the coffin for Milanazzo?  In addition to the settlement, during this process, OFIX announced a major reorganization related to employee termination benefits resulting in a charge of $ 4 million in the fourth quarter of 2010, but claiming that the reorganization was expected to save the company $6-$7 million dollars per year beginning in 2011 in operating profits.  One must love the pretzel logic of the accounting world, addition by subtraction all for the love of its shareholders.

In May of 2011, it was reported that OFIX had settled with the DOJ for an estimated $43 million pertaining to improprieties regarding the sale of Bone Growth Stimulators, and as reported on TSB the Appellate Court over turned a Lower Court's decision to allow the civil action in the whistleblower court to move forward.  In all likelihood, whether the powers to be admit ir or not, it will probably be in their best interest to resolve this matter in an amicable way, rather than potentially test the uncertainty of the Supreme Court, would they even want to adjudicate this matter, or risk going to trial?  In the end, Milanazzo was a terrific leaders and tireless worker, unfortunately, he may not have been leading and working on the things that mattered most.  TSB wants to know what our bloggers think?  

51 comments:

  1. Just can't wait for Orthofix and Blackstones buddy Robin Young's take on this announcement this should be beautiful

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  2. hmm, a Vincent Foster situation. They play hardball at OFIX. You can check out any time you like , but you can never leave

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  3. http://www.fcaalert.com/uploads/file/09513766904.pdf

    Fascinating read. With this sort of stuff going on at Orthofix, it's easy to question the leadership.

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  4. Funny how all anyone in the investment community just worry about the stock, rather than commenting about how crappy of a job he has done in keeping Ofix out of the legal limelight. TSB, is he another one of the usual suspects?

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  5. With Nuvasive in position to pay out tens of millions in there "Neurovision" lawsuit, as well as their ongoing litigation w/ Medtronic, add in a stock price that continues to underperform and perhaps it's only a matter of time before Lukianov follows Milanazzo's lead?

    TSB thoughts?

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  6. This industry is so fricking boring! Same ole story at every company. Joke!

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  7. 9:15...
    So why do you spend your time reading and posting on this blog? I hope you are looking to get in another industry or maybe switch careers. Have you thought about working for a POD?

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  8. Amen 9:15

    Total joke! It's sad what it takes for ALL of us to survive

    This industry has an identity crisis

    Reps pretending to be surgeons

    and surgeons wanting to be in business versus medicine

    Female staff members really think the surgeons will leave their wife for them..."it's lust girls, not love"

    And the management at most of these companies couldn't figure out how to get 5 teams of people for a pickup basketball game if they had 25 people at their feet(ahhhh, I need a spreadsheet to figure this out)

    Keep feeding the "heffer gatekeepers" in clinic lunch too...maybe you'd get access to the docs if you gave them a gift card to Lane Bryant.

    When will the spine industry hit rock bottom? Will we even know it?

    Happy Father's Day

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  9. 5:04

    Could you please elaborate on the Nuvasive legal issues.

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  10. 2:11 great post!! Don't forget the endless conference calls to discuss those spreadsheets....what a bunch a useless idiots the management is these days. Brokers period and zero hands on experience and interaction to the people on the ground actually building or nurturing the business.

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  11. I met Milanazzo once and was not impressed.

    What were they buying Blackstone for? They wanted to make a move into the metal market - there were tons of companies with me2 portfolios that could have been picked up for far less. They couldn't have wanted the name - it was stigma and they dropped it right away anyway. If they were buying revenue they had to know through their diligence efforts the basis for the Blackstone revenue was questionable and likely to wilt under the DOJ scrutiny that was in fever pitch back then. There wasn't anything interesting in the pipeline either - dynamic fixation and lateral cages ala XLIF.

    It remains a puzzling decision. Once the purchase was made, there was no lemonade made either.

    Whatever their reasons for buying Blackstone the end result speaks for itself.

    Everyone can point their finger at the CEO, and certainly a lot of the blame should go there, but am I the only one who wonders about the board members at these companies? When are they going to wake up - or at least when are the shareholders going to wake up and hold them accountable?

    All of the top tier companies are raking in lots of cash and aren't doing anything useful with it. Now that VC activity in spine is completely dead are any of them smart enough to jump in the mix and try and foster some innovation? And don't tell me about JJDC - they aren't investing in anything right now, just like a real VC firm. Nice job guys. In three years they will have Fort Knox but will be left with nothing to buy. That would be OK, except that the increasing price pressures, CMS decisions and PODs are eating away at their existing revenue with no end in sight. How about a genius move like buying Synthes - a fading old dog with no new tricks? For the same money they could have fostered 25 spine startups with innovative technology, but I guess they needed another pedicle screw system.

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  12. 10:24 Great observation, but I must dissent with your opinion that they acquired Synthes for another pedicle screw. Strategically on the surface JNJ acquired Synthes for the Trauma division. GVU head of DePuy Trauma had no Trauma experience indicative of his lack of leadership in terms of getting that division to identify new technologies. When he took over, he surrounded himself with all the kings horses and all the kings men from Howmedica resulting in a Humpty Dumpty division. Acquiring Hand Innovations was buying into a market segment to generate new revenue, outside of that, have they built upon that platform? As for trauma products, another Recon Nail, big shit, how many of them had already existed? All they brought to JNJ was an old and tired Howmedica model. Considering that word in the pipeline has been that Synthes and Lily have been working on some interesting technology with drug coated implants and the fact that Wyss built state of the art manufacturing, there's more to the Synthes deal than meets the eye. As to your observation about Board Members, how do you hold a Board accountable when its made up of people that approved the hiring of the CEO, the CEO usually has a seat on the Board, and their all patting themselves on the back while giving each other a hand job under the table? Go figure.

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  13. ***Looks like a final judgement in January occured and in May NV Medical Products was awarded attorney fees too...***

    May 5, 2011 228 ORDER AWARDING ATTORNEYS FEES by Judge Manuel L. Real. Fees awarded in favor of Neurovision Medical Products Inc. against Nuvasive Inc. in the amount ofPlaintiff is awarded attorneys fees in the amount of $1,132,899 and additional costs in the amount of $55,151. The clerk previously awarded taxable costs to Plaintiff in the amount of $29,179.70. (Doc. No. 214.) Therefore, the Court hereby orders the clerk to fill in the amount of $1,217,229.70 on the blank line on page 2, line 25 of the Judgment (Doc No. 187). (lc)
    January 6, 2011 187 JUDGMENT by Judge Manuel L. Real: IT IS HEREBY ORDERED, ADJUDGED AND DECREED that Judgment is entered in favor of the plaintiff and counter-defendant Neurovision Medical Products, Inc., and against defendant and counter-claimant NuVasive, Inc. Neurov ision Medical shall have and recover against NuVasive $60,000,000. Neurovision Medical shall have and recover its fees and costs in the amount of $___. The judgment shall bear post-judgment interest at the legal rate until paid. NuVasive and each of its officers, agents, servants and employees, and all those persons in active concert or participation with them are hereby forever enjoined. (MD JS-6, Case Terminated). (jp)





    Trademark
    NuVasive Loses $60 Million Trademark Infringement Verdict

    NuVasive Inc., a medical-device company based in San Diego, was ordered to pay a competitor $60 million in a trademark- infringement case.

    A jury in federal court in Los Angeles awarded the damages to Neurovision Medical Products Inc. on Oct. 25.

    Neurovision, based in Ventura, California, filed the lawsuit in September 2009, claiming NuVasive began infringing its trademark after discussions about a long-term contract between the two companies ended without an agreement.

    The jury found that NuVasive deliberately infringed the mark and concealed that it knew of Neurovision’s prior use of the mark when it filed trademark applications at the patent office.

    NuVasive said in a statement that it will appeal the verdict, which had ‘no bearing on our proprietary technology or product platform” and wouldn’t affect sales.

    The case is Neurovision Medical Products Inc. v. NuVasive Inc., 2:09-cv-06988-R-JEM, U.S. District Court, Central District of California (Los Angeles).

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  14. Just read OTW's take on AM, that guy Mike Matson is a complete joker. The Board wanted to get rid of AM three years ago.

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  15. R.I.P Ryan Dunn of Jackass fame.

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  16. 9:11

    They paid Alan a retention bonus so he would stay on board through these past couple of troubled years. He wanted to leave a while ago.

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  17. I left OFIX last month and nobody said shit about it!

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  18. POD's, pricing pressure, Me2's around every corner....seems like a tough time to be in SPINE. I already tire of the phrase "back in the good old days..."

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  19. Milanazo had an opportunity to leave a while ago so he stayed. The Blackstone deal was the kiss of death a bad deal. Guarantee that ofix attempts to settle the whistleblower suit stat, that hemorrhoid has been a real pain in the ass. With free time on his hands, maybe Milanazo can visit the Brothers at the Federal Prison in Otisville when they are finally convicted.

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  20. 2:11, you really are quite a _____. Fill in that blank, you know what you are.

    Love,

    The Female Rep, Manager, or VP (maybe even your "Boss")

    Keep looking over your very slouched shoulders, and keep driving your tacky, "small member" car...right behind you, dumb ass! But really, ahead of you, in so very many ways.

    I could care less about landing an MD, much less sleeping with your sorry, overweight, sweaty, drunk ass at a National Sales meeting behind your beautiful wife's back. You are a legend in your own mind, and most of all you are so small. Peace.

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  21. This comment has been removed by a blog administrator.

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  22. Was this self imposed or was he asked to leave. I love the old corporate propaganda machine, he wanted to spend more time with his family, he was tireless, he gave us leadership. Orthofix is an attorneys dream pouring money down a bottomless pit all for the love of spine.

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  23. Every Orthofix/Blackstone user in my territory has a "consultancy" agreement or is "developing a product" for the company. Compared to PODs this is not the same with the slight of hand indirect payments vs. the private surgeon owned organizations. While the POD model may return more money to the surgeon, this pay to play business has to be investigated. Anyone else out there dealing with similar situations and if so are they next on the government hit list? Obviously Milanazo resigning isn't because he wants to golf and fish...thoughts?

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  24. How about the surgeons on there payroll in Chicago? Are they still collecting fees for product use? I guess if you didn't pay them they wouldn't use that crap.

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  25. The next in line of FIRED CEO/CFO's/CWO/COO's...whatever they want to call themselves, should be David D. from Zimmer. This guy has his head so far up his spine ass. He, along with all the "others" over at Zimmer Spine have virtualy ran that company into the ground. This is a classic example of why Ortho companies should leave Spine alone. I

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  26. Maybe when this case is settled there will be non of that legal BS that either company does not admit to any wrong doing and they throw their asses into jail.
    Only then will Justice be served.

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  27. 11:59... You sound like another angry former Zimmer guy. Maybe you would not be a former Zimmer guy if you spent more time selling and less time bitching. No company is perfect and no line is without holes... It is the artist, not the paint brush... Maybe you should look into a pharma gig...

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  28. 3:41 Love the Zig Zigler commentary, the product line is weak, the management team is weak and the leadership is pathetic. If you're a Zimmer manager, maybe you should spend a little more time coming up with a better strategy and driving R&D.

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  29. D wants to sale the spine division and invest in dental....good luck ! And bye bye Z spine

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  30. Good god, 2:11 you are a pig. Heffers? Lane Bryant? Your world view is what I envision Hell to be all about. If I woke up one morning with your psyche, I would off myself, plain and simple.

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  31. Zimmer Spine is a dead place. Everybody is jumping out of this train...for whatever reason. Real Zimmer Spine folks: What is going on? Why is there mass exodus? I know that the management is horrible & incompetent at best. But, there are still few good products and people. What say?

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  32. Bull shit post 8:12! Anyone "looking" to gain more share of this market in an honest way is going to have a tough road. People with experience, will to succeed, momentum and a little luck, will survive. Those focused on what will my company do for me, well, time will tell. Notice I haven't yet mentioned a manufacturer. For those considering bashing the company your selling, think again. Your competitor may be reading this....

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  33. OOOOOOOOH 3:28, should we do shake in our boots, what's amazing is how a post about Milanazzo turned into some half-assed commentary about how crappy ZSpine really is. Don't have to worry 3:28 we know how mediocre your products really are.

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  34. 11:59 not "virtually" Dvorak really did kill that division. Whether it was through his action/inaction as group president or in his current role as CEO. The Abbott Spine purchase was the death blow. Z Spine should have closed either Austin or MSP, cleaned house, and kept the best ... But it was and still is politics and quarter after quarter of declining sales and market share (yet many sales "leaders" are still employed?)

    Sales reps feel the impact of bad decisions. Zimmer distributors, AVPs, and corporate types seem to get more security amd perks with every horrible decision they make.

    Say what you want but the quarter after quarter sales decline is a FACT you can't run away from.

    Here's a fun game ... Respond if you have a Zimmer Spine AVP resume on your desk? I have two!

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  35. Hey 7:42, I can already tell that you are a solid 3 on a scale of 10...

    The only dudes you can attract are the sweaty slobs who would take anything at that hour of the night. We called it "hoggin" in college. I think you were a participant without knowing it

    ...odds are you are well dressed, put together, probably have an MBA in business from Tinker Toy Tech in the Kumkwat Conference. You look somewhat decent with a mask on and a hair net, you probably have hi priced clog shoes to wear if/when you are invited to cover a 1 level acdf. The nurses really enjoy the 18 different cool pens that you carry in your Tumi Bag. You talk too much and after all these years, you still can't figure out why you can't see C7

    You probably are my manager! The one who I will never let back into my OR because my surgeons have NO use for you. I'm running out of excuses to let you know you are not wanted nor needed.

    Keep looking over your very slouched shoulders, maybe go out and buy another cat and keep driving your volkswagon while listening to Madonna. I'm right in front of you, crop dusting you trying to make you look and smell better.

    Go back to school and get another MBA. Or better yet, leave the company I work for. Isn't your 2-3 years up as AVP

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  36. wow I am really enjoying the banter back and forth between what sounds like a rep that slept with his AVP at their National sales meeting? OMG like that's never happend before!!!
    But keep it coming, I enjoy reading it, takes my mind off all this POD talk bullshit away.

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  37. 12:07...maybe the best thought out, best constructed, most creative slam that I have seen on here. Probably way too many grains of truth in the description, but it is still a work of art. Priceless!

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  38. 12:07 Well played, sir! Dispicable, but well played...

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  39. That was hilarious and yes, too many grains of truth in that post...well said 12:07

    Funny how this banter IS more exciting than most of the POD talk

    Crop dusting? Hehehe, lmao

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  40. 7:42 here...

    was waiting for that...12:07.You are scared. And so predictable.

    You are right, I am well dressed, and put together. This is an anonymous blog, so there is no way you can "rate" me on a scale of 1-10...but it might surprise you that it was probably you, or someone like you, that would be the first to try and impress me with your $$ instead of class. No clogs.

    You are also correct in your assesment that all I attract at meetings rates in the sweaty slob category (usually smelling of last night's / this morning's booze). Quality male and female co-workers, or employees, don't go there. They have better things to do. It's called a life. You don't have one.

    Fortunately, the quality bunch is in the majority in my experience. And then there are slugs like you, who make a bad name for the rest of them.

    You seem oddly versed in regard to the sweaty slob lot. No surprise. The ones that assume that no one ( male or female) is as smart as you because of your self recognized deficiencies. You and your best friend, Rolex. Cannot buy friends, I guess you must buy something, but it certainly isn't class!

    Let me assure you, I can whip your ass in a clinical fashion - all day long. Let me assure you again, your good ole boy mentality is losing its steam. You just have a problem with the very fact that your ignorant ass is being called out.

    No matter what you post...you know this.

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  41. Oh, and 12:07....

    Try not to take so long responding this time.

    It was three long days of sharpening those crayons, I know. Write, sharpen, rewrite. Type TSB post with index fingers only upon final approval from your 5 year old.

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  42. Not taking sides here, but 7:42, you got served fair and square. Move on. Your attempt at trying to have the last word is hard to watch/read...if you are THAT great at your job, you'll win in the end.

    If I were a betting man, I wouldn't bet on either of you. You both come across as TOO important

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  43. Agree with 7:44. After Round 1: Dispicable rep 12:07 - 1, Homely AVP 7:42 - 0. Go back to your corners, dust yourselves off, and come out swinging for Round 2 at the bell....

    Ding, ding!

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  44. I have heard twice that Z-Spine is for sale? Has anyone else heard that?

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  45. It is for sale and it comes with dirty Koehler and a rusty sewer brush

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  46. Holy Cow! Maybe I should become a Spine Rep. or batter yet a mgr. NFW. I think I will stick to selling what's needed in surgery for other specialties. I'm all about making $$$ and being successful but seriously this banter is crazy.
    Anything longer than s few sentences is probably a mgr. that has time to sit and think about how he wants to comeback. I agree with the person who is shows up! That is in surgery...The Outsider

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  47. Does Anyone know what is going on with Nuvasive lawsuit with Neurovision Medical? The poor, crooked saps from Nuvasive/upper mgmnt. perjurred themselves how many times during this trial. How did these guys get into their upper level positions? I was reading about how much they each lied on the stand and how ignorant they were throughout the trial. The prosecutors stopped the trial because these guys were getting caught up in their own lies and they didn't even believe their own lies.

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  48. would anyone like to comment on K2Ms recent push to recruit veteran reps from other companies with big books of business with the allure of 35 points and a funded sub rep? I understand they have an improved financial situation with a pile of VC money. The last I checked VC groups flip companies to make cash on the re-sale, can we expect K2M to sell in a year or two?

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  49. Eric Hansen may FINALLY be getting his reward for being a thief!

    http://law.justia.com/cases/federal/district-courts/california/cacdce/2:2011cv00198/491651/

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  50. In case you wondered....Eric Hansen was the Regional Manager responsible for creating the elusive contracts that surgeons got paid on for doing nothing constructive (except using Blackstone Implants). His wonderful results got him promoted to the VP of Sales for Blackstone. Now he is being sued for who knows what!!!

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