Alabama Real Estate Investor Pleads Guilty to Conspiracy to Commit Mail Fraud

An Alabama real estate investor pleaded guilty yesterday for his role in a conspiracy to commit mail fraud related to public real estate foreclosure auctions held in southern Alabama, the Department of Justice announced today.  To date, 10 individuals and two companies have pleaded guilty in connection with the department’s ongoing investigation into bid rigging and fraudulent schemes in the Alabama real estate foreclosure auction industry.

Chad E. Foster, a resident of Theodore, Alabama, pleaded guilty yesterday to an indictment filed in the U.S. District Court for the Southern District of Alabama, charging him with one count of conspiracy to commit mail fraud affecting a financial institution.  According to court documents, Foster knowingly joined a conspiracy with others to, among other things, fraudulently acquire title to selected properties at artificially suppressed prices, to conduct secret, second auctions open only to members of the conspiracy, to make payoffs to and receive payoffs from co-conspirators, and to divert money away from financial institutions, homeowners and others with a legal interest in selected properties.

“This guilty plea demonstrates the Antitrust Division’s resolve to pursue those who conspire to defraud distressed homeowners and financial institutions,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “The division will continue to hold accountable individuals who subvert the competitive process for their own gains.”

“We are committed to partnering with the Antitrust Division,” said FBI Special Agent in Charge Robert F. Lasky of the Mobile Field Office.  “And we will hold accountable those individuals who profited illegally at the expense of financial institutions and struggling homeowners.”

The charge of conspiracy to commit mail fraud affecting a financial institution carries a maximum penalty of 30 years in prison and a $1 million fine.

Yesterday’s charge stems from an ongoing investigation being conducted by the Antitrust Division’s Washington Criminal II Section and the FBI’s Mobile Field Office, with the assistance of the U.S. Attorney’s Office for the Southern District of Alabama.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions in Alabama should call the Antitrust Division at 202-598-4000, or visit www.justice.gov/atr/contact/newcase.htm.

Yesterday’s charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants.  For more information on the task force, please visit www.StopFraud.gov.

Owner and Patient Recruiter Sentenced to Prison for Their Roles in $258.5 Million Medicare Fraud Scheme

An owner and operator of two community mental health centers in Baton Rouge, Louisiana, and a patient recruiter for a community mental health center in Houston, Texas, were sentenced  to prison today for their involvement in a $258.5 million Medicare fraud scheme involving partial hospitalization psychiatric (PHP) services.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney J. Walter Green of the Middle District of Louisiana, Special Agent in Charge Mike Fields of the U.S. Department of Health and Human Services Office of the Inspector General’s (HHS-OIG) Dallas Office, Special Agent in Charge Michael Anderson of the FBI’s New Orleans Division, and Louisiana State Attorney General James D. “Buddy” Caldwell made the announcement.

Roslyn F. Dogan, 53, of Baton Rouge, Louisiana, and James R. Hunter, 48, of Houston, Texas, were sentenced by U.S. District Court Chief Judge Brian A. Jackson in the Middle District of Louisiana to 90 months in prison and 60 months in prison, respectively.  In addition to the prison sentences, Dogan was ordered to pay $43.5 million and Hunter was ordered to pay $3.2 million in restitution.

After six days of trial, on May 21, 2014, a federal jury found Dogan guilty of conspiracy to commit health care fraud, and two counts of health care fraud, and also found Hunter guilty of conspiracy to commit health care fraud and conspiracy to pay and receive kickbacks.

According to evidence presented at trial, Dogan was a co-owner of Serenity Center of Baton Rouge, and a manager and marketer for both Serenity Center and Shifa Community Mental Health Center of Baton Rouge.  Dogan recruited Medicare beneficiaries who were living in nursing homes and assisted living facilities to attend the PHP programs at Shifa and Serenity, knowing the individuals did not need the psychotherapy programs.  She then devised methods to keep the patients at the facilities for as long as possible without invoking scrutiny from Medicare, including by having patients involuntarily committed to local inpatient psychiatric hospitals and then discharged and re-admitted to one of the Shifa facilities.  Additionally, Dogan directed administrators and therapists at the Shifa Baton Rouge facilities to falsify treatment records indicating that patients had received psychotherapy treatment when, in fact, the patients had not received such treatment.  She further concealed the fraud by directing that patient billing statements be intercepted from the mail to prevent the patients from seeing the services that had been billed in their names, and by stealing incriminating documents seized pursuant to a search warrant from federal custody.

Evidence at trial demonstrated that Hunter agreed to recruit Medicare beneficiaries to attend the PHP program at Shifa Community Mental Health Center of Texas in Houston in exchange for $1,500 per week in cash.  Hunter recruited Medicare recipients from group homes who were not appropriate for the PHP services, but who agreed to attend the program in exchange for $75 cash per week.  To ensure their admittance to the program, Hunter instructed each beneficiary as what to say to physicians regarding their supposed psychiatric symptoms.  As a result of the kickback scheme with Hunter, the Houston facility billed Medicare approximately $16.5 million.

According to court documents, the investigation into the three community mental health centers has resulted in the conviction of seventeen individuals, including therapists, marketers, administrators, owners and a medical director.  The companies collectively submitted more than $258 million in claims to Medicare for PHP services over a period of seven years.  Medicare paid approximately $43.5 million on those claims.

The case is being investigated by HHS-OIG, the FBI, and the Medicaid Fraud Control Unit of the Louisiana Attorney General’s Office, and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Middle District of Louisiana.  The case is being prosecuted by Trial Attorneys Abigail Taylor and Dustin M. Davis of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Shubhra Shivpuri of the Middle District of Louisiana.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

HITACHI METALS LTD. AGREES TO PLEAD GUILTY FOR FIXING PRICES AND

WASHINGTON — Hitachi Metals Ltd., an automotive parts manufacturer based in Tokyo, Japan, and successor in interest to Hitachi Cable Ltd. (collectively Hitachi), has agreed to plead guilty and to pay a $1.25 million criminal fine for its role in a conspiracy to fix prices and rig bids for automotive brake hose installed in cars sold in the United States and elsewhere, the Department of Justice announced today.

According to the one-count felony charge filed today in the U.S. District Court for the Northern District of Ohio in Toledo, Hitachi conspired to fix the prices of automotive brake hose sold to Toyota Motor Corporation and certain of its subsidiaries, affiliates and suppliers, in the United States and elsewhere (collectively Toyota).  In addition to the criminal fine, Hitachi has agreed to cooperate in the department’s ongoing investigation.  The plea agreement will be subject to court approval.

“Today’s guilty plea demonstrates the Antitrust Division’s commitment to hold companies accountable for engaging in illegal anticompetitive conduct,” said Brent Snyder, Deputy Assistant Attorney General for the Antitrust Division’s criminal enforcement program.  “The division is dedicated to its mission to protect U.S. consumers and businesses.”

According to the charge, Hitachi and its co–conspirators conspired through meetings and conversations in which they discussed and agreed upon bids and price quotations to be submitted to Toyota, and to allocate the supply of automotive brake hose to Toyota.  In furtherance of the agreement, Hitachi sold automotive brake hose at non–competitive prices to Toyota in the United States and elsewhere.  Hitachi’s involvement in the automotive brake hose conspiracy lasted from at least as early as November 2005 until at least September 2009.

Hitachi manufactures and sells a variety of automotive parts, including automotive brake hoses, which are flexible hoses that carry brake fluid through the hydraulic brake system of automobiles.  The charges against Hitachi are the latest in the department’s on-going investigation into anticompetitive conduct in the automotive parts industry.  These are the first charges filed relating to automotive brake hose sold to automobile manufacturers.

To date, 44 individuals have been charged in the government’s ongoing investigation into price fixing and bid rigging in the auto parts industry.  Including Hitachi, 30 companies have pleaded guilty or agreed to plead guilty and have agreed to pay a total of nearly $2.4 billion in fines.

Hitachi is charged with price fixing and bid rigging in violation of the Sherman Act, which carries a maximum penalty for corporations of a $100 million criminal fine for each violation.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

Today’s charge is the result of an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the automotive parts industry, which is being conducted by the Antitrust Division’s criminal enforcement sections and the FBI.  Today’s charge was brought by the Antitrust Division’s Chicago Office and the FBI’s Cleveland Field Office, Lima Resident Agency, with the assistance of the FBI headquarters’ International Corruption Unit and the U.S. Attorney’s Office for the Northern District of Ohio.  Anyone with information on price fixing, bid rigging and other anticompetitive conduct related to other products in the automotive parts industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647–3258, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Cleveland Field Office at 216-522-1400.

Dignity Health Agrees to Pay $37 Million to Settle False Claims Act Allegations

Dignity Health has agreed to pay the United States $37 million to settle allegations that 13 of its hospitals in California, Nevada and Arizona knowingly submitted false claims to Medicare and TRICARE by admitting patients who could have been treated on a less costly, outpatient basis, the Justice Department announced today.  Dignity, formerly known as Catholic Healthcare West, is based in San Francisco and is one of the five largest hospital systems in the nation with 39 hospitals in three states.

“Charging the government for higher cost inpatient services that patients do not need wastes the country’s vital health care dollars,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “This department will continue its work to stop abuses of the nation’s health care resources and to ensure patients receive the most appropriate care.”

The settlement resolves allegations that 13 Dignity Health hospitals knowingly overcharged Medicare and TRICARE, part of the military health care program, for inpatient services for patients who should have been treated on a less costly, outpatient basis.  Because hospitals generally receive significantly higher payments from federal health care programs for inpatient admissions as opposed to outpatient treatment, the admission of numerous patients who do not need inpatient care, as alleged here, can result in substantial financial harm to federal health care programs.

The United States alleged that from 2006 through 2010, 13 Dignity hospitals billed Medicare and TRICARE for inpatient care for certain patients who underwent elective cardiovascular procedures (e.g., stents, pacemakers) in scheduled surgeries when the claims should have been billed as outpatient surgeries.  In addition, the government alleged that from 2000 through 2008, four of the hospitals billed Medicare for beneficiaries undergoing elective kyphoplasty procedures, which are minimally-invasive and performed to treat certain spinal compression fractures that should have been billed as less costly outpatient procedures.  Lastly, the government alleged that from 2006 through 2010, 13 hospitals admitted patients for certain common medical diagnoses where admission as an inpatient was medically unnecessary and appropriate care could have been provided in a less costly outpatient or observation setting.

“This settlement demonstrates this office’s commitment to protecting our federal health care programs,” said U.S. Attorney Melinda Haag for the Northern District of California.  “We will continue to aggressively and appropriately pursue False Claims Act allegations of wrongdoing in the health care industry.”

As part of today’s agreement, Dignity entered into a corporate integrity agreement with the U.S. Department of Health and Human Services – Office of Inspector General (HHS-OIG) requiring the company to engage in significant compliance efforts over the next five years.  Under the agreement, Dignity is required to retain independent review organizations to review the accuracy of the company’s claims for services furnished to federal health care program beneficiaries.

“Hospitals that attempt to boost profits by admitting patients for expensive and unnecessary inpatient hospital stays will be held accountable,” said Special Agent in Charge Ivan Negroni of HHS-OIG’s San Francisco Office.  “Both patients and taxpayers deserve to have medical decisions made solely on what is best for the patient based on medical necessity.”

This settlement resolves a lawsuit filed in the U.S. District Court for the Northern District of California by Kathleen Hawkins, a former employee of Dignity, under the qui tam or whistleblower provisions of the False Claims Act, which permit private citizens to bring lawsuits on behalf of the United States and obtain a portion of the government’s recovery.  Hawkins will receive approximately $6.25 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23 billion through False Claims Act cases, with more than $14.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was a result of a coordinated effort by the Civil Division, the U.S. Attorneys’ Offices for the Northern District of California and the Western District of New York and the HHS-OIG.

The case is captioned United States ex rel. Hawkins v. Catholic Healthcare West, et al., CV C 09-5604 JCS.  The claims resolved by this settlement are allegations only and there has been no determination of liability.

Biomet Companies to Pay Over $6 Million to Resolve False Claims Act Allegations Concerning Bone Growth Stimulators

EBI LLC, doing business as Biomet Spine and Bone Healing Technologies and Biomet Inc. have agreed to pay $6.07 million to resolve allegations that EBI violated the False Claims Act by paying kickbacks to induce use of its bone growth stimulators and billing federal health care programs for refurbished stimulators, the Department of Justice announced today.  EBI is a medical device company located in Parsippany, New Jersey, that sells bone growth stimulators, which are used to repair fractures that are slow to heal.  It is a subsidiary of Biomet, which is based in Warsaw, Indiana.

“Medical device companies must not use improper financial incentives to influence the decision to use their products,” said Acting Deputy Assistant Attorney General August Flentje of the Justice Department’s Civil Division.  “This settlement demonstrates the department’s commitment to protect patients, and the taxpayers who fund their care, by ensuring that medical decisions are based on the patients’ medical needs rather than the financial interests of others.”

The United States alleged that, from 2001 to 2008, EBI paid staff at doctors’ offices to influence doctors to order its bone growth stimulators.  These payments were allegedly provided pursuant to personal service agreements with staff members. The United States concluded that these payments violated the Anti-Kickback Act and resulted in false billings to various federal health care programs, including Medicare.  The settlement also resolves EBI’s disclosure that it received federal reimbursements for bone growth stimulators that had been refurbished.

“This settlement demonstrates our resolve in ensuring that patients receive, and the government pays for, health care that is based on sound medical judgment, and not compromised by kickbacks,” said U.S. Attorney Carmen M. Ortiz of the District of Massachusetts.

“Kickbacks taint medical decision-making, cause overutilization of services, and lead to increased taxpayer and patient costs,” said Special Agent in Charge Phillip Coyne of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “These improper inducements have no place in government health programs relied on by millions of Americans.”

The settlement resolves in part an allegation filed in a lawsuit by Yu Yue, a former product manager for EBI, in federal court in New Jersey.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  Yu’s share has not yet been determined.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23 billion through False Claims Act cases, with more than $14.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was the result of a coordinated effort by the Commercial Litigation Branch of the Civil Division; the U.S. Attorney’s Office for the District of Massachusetts; HHS-OIG; the U.S. Postal Service Office of Inspector General; the Defense Criminal Investigative Service; the U.S. Department of Veterans Affairs, Office of Inspector General and the U.S. Food and Drug Administration, Office of Criminal Investigations.

Ms. Yu’s case is captioned United States ex rel. Yu v. Biomet, Inc., Civil Action No. 09-1731 (D.N.J.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.

North Florida Shipyards to Pay $1 Million to Resolve False Claims Allegations

North Florida Shipyards and its president, Matt Self, will pay the United States $1 million to resolve allegations that they violated the False Claims Act by creating a front company, Ind-Mar Services Inc., in order to be awarded Coast Guard contracts that were designated for Service Disabled Veteran Owned Small Businesses (SDVOSBs), the Justice Department announced today.  North Florida Shipyards has facilities in Jacksonville, Florida.

“Those who expect to do business with the government must do so fairly and honestly,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “We will not tolerate contractors who seek to profit at the expense of our veterans and taxpayers.”

To qualify as a SDVOSB on Coast Guard ship repair contracts, a company must be operated and managed by service disabled veterans and must perform at least 51 percent of the labor.  The government alleged that North Florida created Ind-Mar merely as a contracting vehicle and that North Florida performed all the work and received all the profits.  The government further alleged that if the Coast Guard and the Small Business Administration (SBA) had known that Ind-Mar was nothing but a front company, the Coast Guard would not have awarded it contracts to repair five ships.

In December 2013, the SBA suspended North Florida, Matt Self, Ind-Mar and three others from all government contracting.  In April 2014, North Florida and Matt Self entered into an administrative agreement with the SBA in which they admitted to having created and operated Ind-Mar in violation of its Coast Guard contracts and SBA statutes and regulations.

“Special programs to assist service disabled veterans are an important part of the SBA’s business development initiative,” said U.S. Attorney A. Lee Bentley III for the Middle District of Florida.  “False claims such as this undermine the integrity of this vital program and, where found, will be vigorously pursued by our Office.”

“This settlement sends a strong message to those driven by greed to fraudulently obtain access to contracting opportunities set-aside for deserving small businesses owned and operated by service disabled veterans,” said Inspector General Peggy E. Gustafson for the SBA.  “We are committed to helping ensure that only eligible service disabled veteran owned small businesses benefit from that SBA program.”

The settlement resolves allegations originally filed in a lawsuit by Robert Hallstein and Earle Yerger under the qui tam, or whistleblower provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The act also allows the government to intervene and take over the action, as it did in this case.  Hallstein and Yerger will receive $180,000.

The investigation was a coordinated effort by the Civil Division, the U.S. Attorney’s Office for the Middle District of Florida, the Department of Homeland Security’s-Office of Inspector General and the SBA Office of Inspector General.

The claims resolved by the settlement are allegations only, except to the extent that North Florida and Matt Self have admitted to the conduct in their agreement with the SBA.

The case is captioned United States ex rel. Yerger, et al, v. North Florida Shipyards, et al., Case No. 3:11-cv-464J-32 MCR (M.D. Fla.).

Detroit-Area Home Health Care Assistant Sentenced for Scheme to Bill Medicare Nearly $15 Million for Services Never Provided

A physical therapist assistant was sentenced today to serve 50 months in prison for his role in a $14.9 million fraud scheme, through which he and others billed Medicare for home health services that they never provided, and provided beneficiaries with prescriptions for unnecessary painkillers and other narcotics to induce them to sign false medical documents to support the fraudulent billings.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office and Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Detroit Office made the announcement.

Jigar Patel, 31, a physical therapist assistant from Madison Heights, Michigan, was sentenced by U.S. District Judge Terrence G. Berg in the Eastern District of Michigan.  In addition to his prison term, Patel was ordered to pay $1.9 million in restitution.

Patel, along with co-defendants Srinivas Reddy, 38, an unlicensed doctor from Bloomfield Hills, Michigan, and Shahzad Mirza, 43, a physical therapist from Canton, Michigan, were each convicted by a federal jury on April 30, 2014, of one count of conspiracy to commit health care fraud.  In addition, Mirza and Patel were each found guilty of two counts of health care fraud, and Reddy was found guilty of three counts of health care fraud.  Patel was also found guilty of one count of money laundering.  Reddy and Mirza will be sentenced at a later date.

According to evidence presented at trial, between July 2008 and September 2011, the defendants used four home health care companies – Physicians Choice Home Health Care LLC, Quantum Home Care Inc., First Care Home Health Care LLC, and Moonlite Home Care Inc. – to fraudulently bill Medicare for home health care services that were never provided.  Through those companies, the defendants paid kickbacks to recruiters for the referral of Medicare beneficiaries.  In turn, the recruiters paid the beneficiaries cash and promised them access to unnecessary prescriptions for painkillers and other narcotics.  Through a fifth company, Phoenix Visiting Physicians, the defendants employed unlicensed individuals, including Reddy, to provide the beneficiaries with the promised prescriptions and to obtain the necessary information to complete the referrals for medically unnecessary home health care services.

Evidence presented at trial showed that beneficiaries signed blank medical paperwork that Patel and others then completed with false information purporting to show that care was provided, when it was not.  Patel, Mirza and others signed this paperwork, certifying that they had provided the services.  In the course of the conspiracy, Patel incorporated his own staffing company, MI Healthcare Staffing, through which he laundered proceeds of the fraud.

As a result of the defendants’ fraudulent conduct, Medicare paid nearly $15 million.

The defendants were charged in a superseding indictment on Feb. 6, 2012.  Three other individuals charged in the indictment remain fugitives.  The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.

The case is being investigated by HHS-OIG and the FBI and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.  The case is being prosecuted by Assistant Chief Catherine K. Dick and Trial Attorneys Matthew C. Thuesen and Rohan A. Virginkar of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

FIVE NORTHERN CALIFORNIA REAL ESTATE INVESTORS INDICTED FOR BID

WASHINGTON — A federal grand jury in San Francisco returned an eight-count indictment against five real estate investors for their role in bid rigging and fraud schemes at foreclosure auctions in Northern California, the Department of Justice announced.

The indictment, filed today in U.S. District Court for the Northern District of California in San Francisco, California, charges Northern California real estate investors Joseph Giraudo, Raymond Grinsell, Kevin Cullinane, James Appenrodt and Abraham Farag with participating in conspiracies to rig bids and schemes to defraud mortgage holders and others.  The indictment alleges that the defendants agreed to stop bidding or to refrain from bidding for properties at public foreclosure auctions in San Mateo County, California, in return for payoffs and concealing the fact that monies were diverted from mortgage holders, homeowners and others to co-schemers.  Additionally, Giraudo, Grinsell and Appenrodt were charged with bid rigging and fraud in San Francisco County, California.  To date, 47 individuals have agreed to plead or have pleaded guilty, as a result of the department’s ongoing antitrust investigations into bid rigging and fraud at public real estate foreclosure auctions in Northern California.

“These defendants corrupted the public foreclosure auctions in San Mateo and San Francisco counties, and they did so to line their pockets with money that rightfully belonged to mortgage holders and others,” said Brent Snyder, Deputy Assistant Attorney for the Antitrust Division’s criminal enforcement program.  “As these charges demonstrate, the Antitrust Division will continue to pursue bidders at foreclosure auctions who violated the Sherman Act and defrauded mortgage holders and others.”

The indictment alleges, among other things, that beginning no later than August 2008 and continuing until January 2011, the defendants conspired to rig bids to obtain numerous properties sold at foreclosure auctions in San Mateo and San Francisco counties, paid others not to bid, accepted payoffs not to bid and, in the process, defrauded mortgage holders, other holders of debt secured by the auctioned properties and, in some cases, the defaulting homeowners.

“These charges demonstrate our continued commitment to investigate and prosecute individuals and organizations responsible for the corruption of the public foreclosure auction process,” said David J. Johnson, FBI Special Agent in Charge of the San Francisco Field Office.  “The FBI is committed to work these important cases and remains unwavering in our dedication to bring the members of these illegal conspiracies to justice.”

Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.  Each count of mail fraud carries a maximum sentence of 20 years in prison and a $1 million fine.  The government can also seek to forfeit the proceeds earned from participating in the mail fraud schemes.  The maximum fine for the Sherman Act charges may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than $1 million.

Today’s charges are the latest filed by the department in its ongoing investigation into bid rigging and fraud at public real estate foreclosure auctions in San Francisco, San Mateo, Contra Costa, and Alameda counties, California.  These investigations are being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Office.  Anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-934-5300, or call the FBI tip line at 415-553-7400.

Today’s charges were brought in connection with the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 93 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,900 mortgage fraud defendants.  For more information on the task force, please visit www.StopFraud.gov.

FOUNDER OF DETROIT-AREA HOME HEALTH AGENCIES PLEADS GUILTY TO HEALTH CARE FRAUD CONSPIRACY

The founder of three Detroit-area home health agencies pleaded guilty today in federal court for his role in a $22 million home health care fraud scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Chicago Regional Office and Special Agent in Charge Jarod Koopman of the Internal Revenue Service Criminal Investigation (IRS-CI) Detroit Field Office made the announcement.

Tayyab Aziz, 45, of Homer Glen, Illinois, pleaded guilty today before U.S. District Judge Bernard A. Friedman in the Eastern District of Michigan to one count of conspiracy to commit health care fraud.  His sentencing is scheduled for March 3, 2015.

According to admissions in his plea agreement, Aziz founded three Detroit-area home health care agencies, Prestige Home Health Services Inc. (Prestige), Royal Home Health Care Inc., and Platinum Home Health Services Inc. (Platinum).  Using these companies, Aziz admitted that he orchestrated a conspiracy to defraud Medicare through fraudulent billings for home health care services.

Specifically, Aziz admitted that he and his co-conspirators submitted fraudulent claims to Medicare for services that were medically unnecessary or never performed.  They also submitted claims for services purportedly provided to Medicare beneficiaries who were recruited through illegal kickbacks paid to the patients and recruiters.  To conceal the fraud, Aziz admitted that he and his co-conspirators created fictitious physical therapy files to document physical therapy and other services that had not actually been provided and were not medically necessary.  Aziz also created and submitted falsified records to the Michigan Community Health Accreditation Program (CHAP) in order for Prestige and Platinum to remain accredited Medicare providers.

As a result of Aziz’s fraudulent conduct, Medicare paid approximately $1,915,513.  Five of six other defendants in this case have also previously pleaded guilty.

This case was investigated by the FBI, HHS-OIG and IRS-CI and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.  This case is being prosecuted by Trial Attorneys Niall M. O’Donnell and James P. McDonald of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.

DaVita to Pay $350 Million to Resolve Allegations of Illegal Kickbacks

DaVita Healthcare Partners, Inc., one of the leading providers of dialysis services in the United States, has agreed to pay $350 million to resolve claims that it violated the False Claims Act by paying kickbacks to induce the referral of patients to its dialysis clinics, the Justice Department announced today. DaVita is headquartered in Denver, Colorado and has dialysis clinics in 46 states and the District of Columbia.

The settlement today resolves allegations that, between March 1, 2005 and February 1, 2014, DaVita identified physicians or physician groups that had significant patient populations suffering renal disease and offered them lucrative opportunities to partner with DaVita by acquiring and/or selling an interest in dialysis clinics to which their patients would be referred for dialysis treatment. DaVita further ensured referrals of these patients to the clinics through a series of secondary agreements with the physicians, including  entering into agreements in which the physician agreed not to compete with the DaVita clinic and non-disparagement agreements that would have prevented the physicians from referring their patients to other dialysis providers.

“Health care providers should generate business by offering their patients superior quality services or more convenient options, not by entering into contractual agreements designed to induce physicians to provide referrals,” said Deputy Assistant Attorney General for the Justice Department’s Civil Division Jonathan F. Olin. “The Justice Department is committed to protecting the integrity of our healthcare system and ensuring that financial arrangements in the healthcare marketplace comply with the law.”

The government alleged that DaVita used a three part joint venture business model to induce patient referrals.  First, using information gathered from numerous sources, DaVita identified physicians or physician groups that had significant patient populations suffering renal disease within a specific geographic area. DaVita would then gather specific information about the physicians or physician group to determine if they would be a “winning practice.” In one transaction, a physician’s group was considered a “winning practice” because the physicians were “young and in debt.”  Based on this careful vetting process, DaVita knew and expected that many, if not most, of the physicians’ patients would be referred to the joint venture dialysis clinics.

Next, DaVita would offer the targeted physician or physician group a lucrative opportunity to enter into a joint venture involving DaVita’s acquisition of an interest in dialysis clinics owned by the physicians, and/or DaVita’s sale of an interest in its dialysis clinics to the physicians. To make the transaction financially attractive to potential physician partners, DaVita would manipulate the financial models used to value the transaction.  For example, to decrease the apparent value of clinics it was selling, DaVita would employ an assumption it referred to as the “HIPPER compression,” which was based on a speculative and arbitrary projection that future payments for dialysis treatments by commercial insurance companies would be cut by as much as half in future years. These manipulations resulted in physicians paying less for their interest in the joint ventures and realizing returns on investment which were extraordinarily high, with pre-tax annual returns exceeding 100 percent in some instances.

Last, DaVita ensured future patient referrals through a series of secondary agreements with their physician partners. These included paying the physicians to serve as medical directors of the joint venture clinics, and entering into agreements in which the physicians agreed not to compete with the clinic. The non-compete agreements were structured so that they bound all physicians in a practice group, even if some of the physicians were not part of the joint venture arrangements. These agreements also included provisions prohibiting the physician partners from inducing or advising a patient to seek treatment at a competing dialysis clinic. These agreements were of such importance to DaVita that it would not conclude a joint venture transaction without them.

The Government’s complaint identifies a joint venture with a physicians’ group in central Florida as one of several examples illustrating DaVita’s scheme to improperly induce patient referrals. The group had previously been in a joint venture arrangement involving dialysis clinics with Gambro, Inc., a dialysis company acquired by DaVita in 2005. Prior to the acquisition, Gambro had entered into a settlement with the United States to resolve alleged kickback allegations that, among other things, required Gambro to unwind its joint venture agreements. As a consequence, Gambro purchased the group’s interest in the joint venture clinics and agreed to a “carve-out” of the associated non-competition agreement which allowed the group to open its own dialysis clinic nearby, which it did. After acquiring Gambro, DaVita bought a majority position in the group’s newly established dialysis clinic, and sold a minority position in three DaVita-owned clinics. Despite the fact that each of the clinics involved were roughly comparable in terms of size and profits, DaVita agreed to pay $5,975,000 to acquire a 60 percent interest in the group’s clinic, while selling a 40 percent interest in the three clinics it owned for a total of $3,075,000. As part of this joint venture, the group agreed to enter into new non-compete agreements.

“This case involved a sophisticated scheme to compensate doctors illegally for referring patients to DaVita’s dialysis centers.   Federal law protects patients by making buying and selling patient referrals illegal, so as to ensure that the interest of the patient is the exclusive factor in the referral decision,” said U.S. Attorney John Walsh.  “When a company pays doctors and/or their practice groups for patient referrals, the company’s focus is not on the patient, but on the profit to be extracted from providing services to the patient.”

In conjunction with today’s announcement, the U.S. Attorney’s Office noted that after extensive review, it is closing its criminal investigation of two specific joint ventures.

As part of the settlement announced today, DaVita has also agreed to a Civil Forfeiture in the amount of $39 million based upon conduct related to two specific joint venture transactions entered into in Denver, Colorado.   Additionally, DaVita has entered into a Corporate Integrity Agreement with the Office of Counsel to the Inspector General of the Department of Health and Human Services which requires it to unwind some of its business arrangements and restructure others, and includes the appointment of an Independent Monitor to prospectively review DaVita’s arrangements with nephrologists and other health care providers for compliance with the Anti-Kickback Statute.

“Companies seeking to boost profits by paying physician kickbacks for patient referrals – as the government contended in this case – undermine impartial medical judgment at the expense of patients and taxpayers,” said Daniel R. Levinson, Inspector General for the U.S. Department of Health and Human Services.  “Expect significant settlements and our continued investigation of such wasteful business arrangements.”

The settlement resolves allegations originally brought in a lawsuit filed under the qui tam or whistleblower provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The suit was filed by David Barbetta, who was previously employed by DaVita as a Senior Financial Analyst in DaVita’s Mergers and Acquisitions Department. Mr. Barbetta’s share of the recovery has yet to be determined.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $22.4 billion through False Claims Act cases, with more than $14.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The case was handled by the United States Attorney’s Office for the District of Colorado, the Civil Division of the United States Department of Justice, and the U.S. Department of Health and Human Services, Office of Inspector General.

The lawsuit is captioned United States ex rel. David Barbetta v. DaVita, Inc. et al., No. 09-cv-02175-WJM-KMT (D. Colo.).  The claims settled by this agreement are allegations only; there has been no determination of liability.