On Verge of Omeros IPO, Former Finance Chief Accuses Company of Filing False Records with NIH

10/2/09Follow @xconomy

Seattle-based Omeros, the biotech company attempting to raise as much as $80 million in an initial public offering slated for next week, has been accused of submitting false timekeeping records to the National Institutes of Health for grant work, according to a federal lawsuit filed by the company’s former chief financial officer.

Richard J. Klein has accused Omeros of wrongfully terminating him from his job in January after he allegedly discovered false record-keeping on a federal grant and reported it to the board’s audit committee under the company’s whistleblower policy, according to a complaint filed in U.S. District Court in Seattle. That allegation arose in December, when Klein informed the audit committee that CEO Greg Demopulos and George Gaitanaris, the vice president of R&D, instructed several employees “to falsely record time on an NIH grant even though they were not actually working on the grant project for the recorded period of time,” according to Klein’s lawsuit.

Omeros, in a separate legal response to the complaint, denies that Demopulos instructed scientists to falsely record their work time. The company did admit that Gaitanaris provided instructions on time keeping practices that were later corrected, but the previous practices were based on Gaitanaris’ belief that they would end up billing the NIH for less time than was actually spent by Omeros staff doing the work, according to Omeros’s response. The company said it didn’t overbill the NIH for its work, and actually charged the government for less than all the time its people spent working on the grant.

Neither Klein’s complaint nor the Omeros legal response states how much the NIH grant was worth, or what specific work it required of the company. Klein’s complaint notes that Omeros “has been awarded millions of dollars” of such federal research grants.

A spokeswoman for Omeros said the company is unable to comment on the lawsuit because it is in the middle of a “quiet period” imposed by the Securities and Exchange Commission for companies that are seeking to go public. Two attorneys who are representing Klein didn’t immediately respond to e-mailed requests for comment.

Omeros, in a disclosure within its IPO prospectus, said its audit committee and outside legal counsel investigated Klein’s charges and discovered the company hadn’t submitted false claims to the NIH. It terminated Klein one month after he raised those accusations, although the company says … Next Page »

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