Osbon is accused of using Augusta Medical Systems to bill Medicare for thousands of "vacuum erection devices" for over a year when the company did not have a valid Medicare billing number, according to a statement from the U.S. Attorney's Office for the Southern District of Georgia.
Osbon "opened Augusta Medical and had hoped to obtain the necessary authorizations from Medicare," according to the statement. "However, Osbon allegedly disregarded the law and the advice of his own executive team and proceeded to bill Medicare for thousands of erection devices without having a valid billing number."
"Frankly, I'm dumbfounded," Osbon said Wednesday evening in response to the allegations. "I'm not guilty of anything."
Osbon said he has not seen an official notice of the lawsuit yet, but has been cooperating "fully" with the Justice Department during the investigation.
Osbon made his fortune with the vacuum devices in the years before pills to treat erectile dysfunction became widely available in the 1990s. He sold the rights to the pioneer medical device in 1995. He also sold Augusta Medical Systems and is no longer involved with the company.
Osbon said Wednesday that he has provided all the necessary documentation to prove that his former business was operating legally and ethically. He said his attorney told him this is "one of the most ridiculous cases ever seen."
A call seeking comment from the U.S. Attorney's office was not returned Wednesday.
The suit was filed under the False Claims Act, which allows the government to recoup triple damages and impose a fine of up to $11,000 per claim, according to the statement.
"The U.S. Attorney's Office will stand vigilant to protect federal health care programs from fraudulent practices," U.S. Attorney Edward J. Tarver said in the statement.
Business Editor Tim Rausch and Staff Writer Kyle Martin contributed to this report.