Connecticut Substance Abuse Treatment Provider Pays $627K to Settle False Claims Act Allegations

Thursday, September 7, 2017

United States Attorney Deirdre M. Daly and Connecticut Attorney General George Jepsen today announced that a Connecticut substance abuse treatment provider and its former CEO will pay $627,000 to resolve allegations that they violated the federal and state False Claims Acts.

THE HARTFORD DISPENSARY and THE HARTFORD DISPENSARY ENDOWMENT CORPORATION (collectively, “Hartford Dispensary”) is a healthcare organization that provides behavioral health and substance use disorder treatment services. It operates various outpatient treatment programs through its nine clinics located in Connecticut. PAUL McLAUGHLIN is the former President and Chief Executive Officer of Hartford Dispensary.

To be certified as an opioid treatment provider (OTP), the OTP must formally designate a medical director, who assumes responsibility for administering all medical services performed by the OTP. The medical director is also responsible for ensuring that the OTP is in compliance with all applicable federal, state, and local laws and regulations.

The government alleges that Hartford Dispensary and McLaughlin made repeated false representations and false certifications to federal and state authorities that Hartford Dispensary had a medical director, as defined by relevant regulations, who was performing the duties and responsibilities required by federal and state law. The government further alleges that these false representations and certifications were material to false or fraudulent claims submitted to the Medicaid program.

To resolve the government’s allegations under the federal and state False Claims Acts, Hartford Dispensary and McLaughlin have agreed to pay $627,000, which covers conduct occurring from January 1, 2009 through November 20, 2015.

A complaint against Hartford Dispensary was filed in the U.S. District Court in Connecticut under the qui tam, or whistleblower, provisions of the both the federal and state False Claims Acts. The relators (whistleblowers), Russell Buchner and Charles Hatheway, former employees of Hartford Dispensary, will receive a share of the proceeds of the settlement in the amount of $112,860. The whistleblower provisions of both the federal and state False Claims Acts provide that the whistleblower is entitled to receive a percentage of the proceeds of any judgment or settlement recovered by the government.

“Health care providers must be completely honest when certifying information to the government, and the failure to do so will have serious consequences,” stated U.S. Attorney Daly. “The U.S. Attorney’s office is committed to vigorously pursuing health care providers who make false representations to federal health care programs.”

“Medicaid providers are required to comply with the applicable rules of the program and to certify honestly their compliance,” said Attorney General Jepsen. “I’m grateful to our state and federal partners for their continued cooperation and coordination as we work to protect our taxpayer-funded healthcare programs.”

This matter was investigated by the Office of Inspector General for the U.S. Department of Health and Human Services. The case is being prosecuted by Assistant U.S. Attorney Richard M. Molot and Auditor Kevin Saunders, and by Assistant Attorneys General Michael Cole and Gregory O’Connell of the Connecticut Office of the Attorney General.

People who suspect health care fraud are encouraged to report it by calling 1-800-HHS-TIPS or the Health Care Fraud Task Force at (203) 777-6311.

Former Virtual Currency CEO Pleads Guilty to $9 Million Fraud Scheme

Thursday, July 20, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, and Patricia M. Ferrick, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that HOMERO JOSHUA GARZA, 32, of Texas, formerly of Somers, Conn., waived his right to be indicted and pleaded guilty today in Hartford federal court to one count of wire fraud related to his role in his companies’ purported generation and sale of virtual currency.

According to court documents and statements made in court, “virtual currency” is a digital representation of a value that can be traded and functions as a medium of exchange. Virtual currency generally is not issued or guaranteed by any jurisdiction or government, and its value is decided by consensus within the community of users of the virtual currency. A virtual currency generally self-generates units of currency through a process called “mining.” A virtual currency “miner” is computer hardware that runs special computer software to solve complex algorithms that validate groups of transactions in that virtual currency. Once a complex algorithm is solved, a unit of currency, such as a bitcoin, is awarded to the individual operating the miner. This process is known as “mining.”

Between approximately May 2014 and January 2016, GARZA, through GAW, GAW Miners, ZenMiner, and ZenCloud, companies he founded and operated, defrauded victims out of money in connection with the procurement of virtual currency on their behalf. The companies sold miners, access to miners, and the right to purchase a virtual currency called “paycoin,” as well as “hashlets.” A hashlet entitled an investor to a share of the profits that GAW Miners or ZenMiner would purportedly earn by mining virtual currencies using the computers that were maintained in their data centers. In other words, hashlet customers, or investors, were buying the rights to profit from a slice of the computing power owned by GAW Miners and ZenMiner.

To generate business and attract customers and investors, GARZA made multiple false statements related to the scheme, including stating that GAW Miners’ parent company purchased a controlling stake in ZenMiner for $8 million and that ZenMiner became a division of GAW Miners. In fact, there was no such transaction. GARZA also stated that the hashlets GARZA’s companies sold engaged in the mining of virtual currency. In fact, GARZA’s companies sold more hashlets than was supported by the computing power maintained in their data centers. Stated differently, GARZA’s companies sold the customers the right to more virtual currency than the companies’ computing power could generate. GARZA also stated that the market value of a single paycoin would not fall below $20 per unit because GARZA’s companies had a reserve of $100 million that the companies would use to purchase paycoins to drive up its price. In fact, no such reserve existed.

During the scheme, GARZA, through his companies, used money his companies had made from new hashlet investors to pay older hashlet investors. The payments were money that the companies owed the older investors based on the purported mining GAW Miners and ZenMiner had done on the investors’ behalf.

The loss attributable to GARZA from the scheme was $9,182,000.

GARZA is scheduled to be sentenced by U.S. District Judge Robert N. Chatigny on October 12, 2017, at which time he faces a maximum term of imprisonment of 20 years.

This matter is being investigated by the Federal Bureau of Investigation and is being prosecuted by Assistant U.S. Attorneys John T. Pierpont, Jr. and Jonathan Francis.

Drug Company Sales Rep Admits Role in Kickback Scheme Related to Fentanyl Spray Prescriptions

Tuesday, July 11, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, announced that NATALIE LEVINE, 33, of Scottsdale, Arizona, waived her right to be indicted and pleaded guilty today before U.S. District Judge Michael P. Shea in Hartford to one count of engaging in a kickback scheme that defrauded federal healthcare programs.

According to court documents and statements made in court, from approximately March 2013 to October 2014, LEVINE was employed by Insys Therapeutics, an Arizona-based pharmaceutical company that manufactured and sold Subsys, a fentanyl-based sublingual spray that was approved by the Food and Drug Administration solely for the management of breakthrough pain in cancer patients. LEVINE was a sales representative for the company and was responsible for covering the territories that included Connecticut, New Hampshire and Rhode Island.

In pleading guilty, LEVINE admitted that she induced certain medical practitioners, including an advanced practice registered nurse (APRN) in Connecticut, a physician’s assistant (PA) in New Hampshire, and a physician in Rhode Island, to prescribe Subsys by paying them to participate in hundreds of sham “Speaker Programs.” The Speaker Programs, which were typically held at high-end restaurants, were ostensibly designed to gather licensed healthcare professionals who had the capacity to prescribe Subsys and educate them about the drug. In truth, the events were usually just a gathering of friends and co-workers, most of whom did not have the ability to prescribe Subsys, and no educational component took place. “Speakers” were paid a fee that ranged from $1,000 to several thousand dollars for attending these dinners. At times, the sign-in sheets for the Speaker Programs were forged so as to make it appear that the programs had an appropriate audience of healthcare professionals.

The medical practitioners were paid thousands of dollars in illegal kickbacks in order to prescribe Subsys, and induce others to prescribe Subsys, over similar medications. Medicare Part D plans authorized payment for hundreds of Subsys prescriptions written by the three medical practitioners, resulting in a loss of approximately $4.5 million.

LEVINE pleaded guilty to one count of conspiracy to violate the anti-kickback law, an offense that carries a maximum term of imprisonment of five years and a fine of up to $250,000. Judge Shea scheduled sentencing for October 5, 2017.

This investigation is being conducted by the U.S. Department of Health and Human Services Office of the Inspector General and the Federal Bureau of Investigation, with the assistance of the Drug Enforcement Administration’s Tactical Diversion Squad. The case is being prosecuted by Assistant U.S. Attorneys Douglas P. Morabito and Richard M. Molot.

Several other individuals affiliated with Insys Therapeutics, and medical practitioners involved in this kickback scheme, have been charged in the District of Connecticut and in other Districts across the United States.

U.S. Attorney Daly encouraged individuals who suspect health care fraud to report it by calling the Health Care Fraud Task Force (203) 785-9270 or 1-800-HHS-TIPS.

Virginia Man Admits to Falsely Certifying Bridge Inspection Vehicles

Friday, May 26, 2017

Deirdre M. Daly, United States Attorney for the District of Connecticut, today announced that CAROL “CASEY” SMITH, 56, of Chester, Virginia, waived his right to be indicted and pleaded guilty yesterday before U.S. District Judge Stefan R. Underhill in Bridgeport to a federal charge related to his false certification of bridge inspection vehicles.

According to court documents and statements made in court, Under Bridge Inspection (“UBI”) vehicles are vehicles that contain a moveable boom with a platform. The vehicles are used to conduct inspections of bridges by positioning the vehicle on top of the bridge and, using the boom, lifting a platform carrying inspectors alongside or beneath a bridge deck. “Company A” rents or leases bridge access equipment, including UBI vehicles, to engineering companies and government agencies for use on bridge inspection and bridge maintenance projects. Company A’s UBI vehicles travel on interstate highways to job locations throughout the U.S. Company A has several locations, including one in Connecticut.

SMITH was the president and chief surveyor for Virginia-based Martin Enterprizes, Inc. (“MEI”). Between January 2012 and January 2015, SMITH falsely represented that he, as the chief surveyor for MEI, examined the UBI vehicles in Company A’s fleet on an annual basis. During that time, SMITH created 165 Certificates of Unit Text/Examination of Material Handling Device (the “Certificate of Inspection”) for UBI vehicles in Company A’s fleet. As part of the Certificate of Inspection, SMITH verified that he personally examined the specified UBI vehicle and that the UBI vehicle met federal requirements. SMITH also issued 165 annual stickers representing that he had inspected the UBI Vehicles, and he knew that an employee or employees of Company A would affix the stickers to the UBI vehicles, and that those UBI vehicles would be driven on interstate highways and used on jobs throughout the U.S., including Connecticut.

Between 2012 and 2015, in exchange for the Certificates of Inspection for the UBI vehicles, as well as other vehicles in its fleet, Company A paid SMITH a total of $76,400.

SMITH pleaded guilty to one count of making a false statement, which carries a maximum term of imprisonment of five years. A sentencing date is not scheduled.

This matter is being investigated by the U.S. Department of Transportation – Office of Inspector General and the U.S. Department of Labor – Office of Inspector General. The case is being prosecuted by Assistant U.S. Attorney Nancy V. Gifford.