US multinational says it was entitled to copy Israeli supplier's machine in Ireland to protect itself from any possible future production failure, write Colm Keena and Seán O'Driscoll in New York

The Galway-based US engineer who acted as manager of the "secret" Dublin Boston Scientific company at the heart of a multi-million law suit has said the multinational has done nothing wrong.

"I am happy I did not do anything wrong and that the company [ Boston Scientific] did not do anything wrong," Mr Eric Stenzel, who lives in Tuam, told The Irish Times.

Mr Stenzel was a director of a Dublin company named Forwich Ltd, which was a front for a Boston Scientific operation that copied a supplier's machinery. The supplier, Israeli company Medinol, is suing Boston Scientific in the US, seeking damages of hundreds of millions of dollars.

Both sides agree most of the detail of what happened but disagree over the purpose of the Boston Scientific operation. The Israeli company is alleging theft by the US multinational and an attempt to replace it, while the US multinational is saying it was entitled to protect itself against any future failure of Medinol to produce supplies.

Mr Stenzel said that he was looking forward to the outcome of the court case which, he said, would confirm that he and Boston Scientific did nothing wrong.

The machine copied in Dublin was one used in the production of stents - small devices inserted in blood vessels and used for the delivery of medication.

Boston Scientific, which has become very successful through the marketing of stents and related medications, employs some 3,000 staff in the Republic, mostly in Galway. It was during a visit to the Galway plant by officials from the US Department of Justice, as part of an unrelated inquiry involving Boston Scientific's affairs, that the secret operation was discovered.

Medinol agreed to have one of its machines delivered to Galway so an independent production line would be available in the event of something occurring to prevent production in Israel.

Mr Aidan Flanagan, from the R&D section in Boston Scientific Ireland, was enlisted in July 1997 to assist with the Forwich project. In a deposition given as part of the US courts process, he said that he was told, prior to a visit to Israel, that Boston Scientific wanted to copy the Medinol machine. He was told "not to say anything about it at that stage", even to people within Boston Scientific.

Around July/August 1997 the Medinol machine arrived in a crate in Dublin and was brought to Galway. "It was delivered to the Ballybrit facility. It was still in its crate and we reloaded it onto another lorry. A courier brought it to Dublin."

Only two people in Galway knew the machine had ever arrived there.

The machine was "reverse engineered" and then returned to Galway. The information gleaned from the Medinol machine was then used to set about building a copy.

A new company, Forwich Ltd, had been registered in Dublin to trade as BBD. It was to be used to "shield Boston Scientific from being associated with the project", according to a Boston Scientific chronology of events. The company leased premises at the Sandyford Industrial Estate and began to source the various materials it needed to build a copy machine. Suppliers believed they were dealing with an obscure company called BBD or Forwich.

A "ghost office with phone receptionist [ was] enlisted as registered office for tax purposes and another level of security", according to the Boston Scientific chronology.

The operation was set up in Dublin rather than Galway so it would be further from the Galway employees and in a larger, more anonymous city.

Within a year the job was done and the copy machine was moved to Galway to a "confidential location" within the Ballybrit plant. The location is understood to have been a room with restricted access and blocked out windows. The company says the machine was never used to produce product for sale.

Emails released by the US courts show the concern that existed within Boston Scientific amongst those who knew about the clandestine operation. As more and more people in Galway began asking questions, some of those in the know found themselves having to tell more and more "white lies", according to one memo.

False names were also suggested. On February 11th, 1998, Mr Stephen Paidosh emailed Mr Flanagan, Mr Stenzel and Ms Denise Heneghan: "Guys. I think we should false sign these prints. Eric, you should sign your name but we should use aliases for the rest of us. Can you send new copies and everyone pick a new name to sign them with."

A June 26th, 1998 email from Mr Stenzel to Mr Paidosh, concerning the move from Dublin to Galway, suggested that "BBD" should keep the ghost office in Dublin for the receiving of supplies, and that deliveries could be repacked by the ghost office and couriered to an address in Galway.

"From an accounts and companies registration point of view, the company would still exist with the registered office of the Dublin ghost office."

One of the issues that arose was the Forwich accounts. Anyone who had bothered to look at them would have noted a link with Boston Scientific. The shares in Forwich were held by its two directors. The original directors were: Mr Richard Gahan, Howth Road, Dublin 5; and Mr Charles Patrick Mulligan, Salthill, Galway. In August 1999 the shares were transferred to Mr Stenzel and Mr Tim McSweeney, Barna, Galway.

Notes to the accounts said that, "in the opinion of the directors, the company is a wholly owned subsidiary of Boston Scientific Corporation" of the US.

Ernst & Young, Galway, audited the accounts of Forwich and of the various Irish-registered companies that form part of Boston Scientific's global structure. In April 2000, in an email, an auditor with that firm noted that Forwich was a 100 per cent subsidiary of (Galway-based) Boston Scientific Ltd. The shares at issue were held in trust by the directors. "The client's rationale in relation to same was to break the relationship between both companies."

The client asked the auditors to reconsider a disclosure in the draft accounts stating that the company was a 100 per cent subsidiary of Boston Scientific Ltd.

"Is there any way we can avoid the disclosure in our audit report if the client insists on the removal of the note from the accounts?" the auditor asked a colleague. The reply was: "There is no way that disclosure can be avoided in the financial statements."

The cover was blown on the secret operation when it was noted by US officials conducting an inquiry into an aspect of Boston Scientific's affairs. The company decided to inform Medinol before it heard from other channels.