Nov. 6 (Bloomberg) -- Boston Scientific Corp. agreed to pay $296 million to settle a U.S. Justice Department investigation into its Guidant unit’s handling of heart devices and restated third-quarter results to show a loss.

Guidant will plead to two criminal misdemeanors for failing to properly alert the U.S. Food and Drug Administration about problems with some of its implantable defibrillators, Boston Scientific said today in a statement. The probe concerned product advisories sent by Guidant before its acquisition by Boston Scientific in April 2006, the parent company said.

The $296 million is equal to about one-fifth of Boston Scientific’s cash on hand. Because of the settlement, Boston Scientific said it had a third-quarter net loss of $94 million, or 6 cents a share, compared with net income of $200 million, or 13 cents, reported in October. Adjusted earnings remained 19 cents a share.

“Guidant is finally being held accountable by the government for withholding information that hurt a lot of people,” Hunter Shkolnik, a New York-based lawyer who represented consumers who sued the company over the defibrillators, said in an interview.

Boston Scientific, based in Natick, Massachusetts, cut its 2009 forecast of net income to 23 cents to 28 cents a share, from 43 cents to 48 cents. The forecast for earnings excluding some costs was unchanged, at 75 cents to 79 cents.

‘Good Faith’

“Guidant and its employees acted in good faith and believed they complied with applicable laws and regulations,” Boston Scientific Chief Executive Officer Ray Elliott said in the company’s statement. “We elected to resolve this matter so we could put it behind us and devote our full energies and resources to developing our innovative technologies.”

Boston Scientific rose 3 cents, or less than 1 percent, to $8.08 at 4 p.m. in New York Stock Exchange composite trading.

Boston Scientific agreed in 2007 to pay $240 million to settle more than 8,000 lawsuits claiming that Guidant hid defects in its defibrillators. The devices deliver an electrical jolt to restore the heart’s normal rhythm.

Guidant issued a recall in June 2005 that was eventually expanded to 109,000 defibrillators. Lawyers for patients contend the company knew as early as June 2002 that the devices were flawed and hid the defects to protect sales.

Product Recalls

After defects prompted recalls by Guidant and its biggest rivals, Medtronic Inc. and St. Jude Medical Inc., global annual sales of the devices fell to $5.6 billion in 2006 from $6 billion the previous year.

Federal prosecutors in Minneapolis began probing whether Guidant’s handling of the defibrillators violated the Food, Drug, and Cosmetic Act in October 2005 when issued subpoenas for information about the devices. The violations involved the Ventak Prizm, Contak Renewal and Contak Renewal 2 defibrillators.

Under the deal with the government, Guidant will plead to two misdemeanor charges over failure to include information about the defibrillators’ problems in reports to the FDA, Boston Scientific said in the statement.

Boston Scientific officials also said today that the company received a subpoena from the U.S. Department of Health and Human Services’ Office of Inspector General on Sept. 25.

The subpoena requested information about contributions to charities with ties to physicians or their families. Boston Scientific is “currently working with the government to understand the scope of the subpoena,” the company said in a regulatory filing today.

To contact the reporters on this story: Elizabeth Lopatto in New York at elopatto@bloomberg.net; Jef Feeley in Wilmington, Delaware jfeeley@bloomberg.net.

Last Updated: November 6, 2009 16:07 EST