Merge Healthcare says ex-employee fabricated contracts

Jan 8 (Reuters) - Merge Healthcare Inc, a medical imaging software provider, said a former employee falsified contracts, forcing it to cut its backlog of orders by more than $15 million.

The employee falsified the existence or value of contracts in the company's data and analytics business for six quarters through Sept. 30, 2013, according to an independent investigation authorized by Merge Healthcare.

The company cut the adjusted backlog at the business by about $5.8 million for 2012 and $9.4 million for 2013, but said it would not need to restate prior results as it had not billed customers or recognized revenue from the falsified contracts.

The company said the employee, who acknowledged that the contracts were invalid, was paid commissions worth about $250,000 due to the falsified contracts before resigning in September last year.

The independent investigation did not find any evidence that other employees were a part of or aware of this improper conduct, Merge Healthcare said.

The company said it has referred the matter to the U.S. Attorney's Office for the Northern District of Illinois, and will consider other legal action.

Merge Healthcare also said sales in the data and analytics business grew by about 30 percent last year and is expected to grow at least another 20 percent this year.

Shares of the company closed at $2.52 on the Nasdaq on Tuesday.