Monthly Archives: March 2014

Two Ocean Shipping Companies to Pay $3.4 Million to Settle Claims of Price Fixing Government Cargo Transportation Contracts

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Sea Star Line LLC and Horizon Lines LLC have agreed to resolve allegations that they violated the False Claims Act by fixing the price of government cargo transportation contracts between the continental United States and Puerto Rico, the Department of Justice announced today.   Under the settlement agreements, Sea Star Line has agreed to pay $1.9 million, and Horizon Lines has agreed to pay $1.5 million.

“Today’s civil settlements demonstrate our continuing vigilance to ensure that those doing business with the government do not engage in anticompetitive conduct,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.   “Government contractors who seek to profit at the expense of taxpayers will face serious consequences.”

The government alleged that former executives of the defendant ocean shippers used personal email accounts to communicate confidential bidding information, thereby enabling each of the shippers to know the transportation rates that its competitor intended to submit to federal agencies for specific routes.   This information allowed the shippers to allocate specific routes between themselves at predetermined rates.   Among the contracts affected were U.S. Postal Service contracts to transport mail and Department of Agriculture contracts to ship food.   Both Sea Star Line and Horizon Lines previously pleaded guilty, in related criminal proceedings, to anticompetitive conduct in violation of the Sherman Act.

“Postal Service contractors must understand and know that actions that undermine the contracting process, such as conspiring to suppress and eliminate competition, will not be tolerated and will be aggressively investigated,” said Tom Frost, Special Agent in Charge of the Major Fraud Investigations Division (MFID) with the Postal Service Office of Inspector General.   “MFID will continue to work with DOJ, both criminally and civilly, to bring those individuals and companies to justice.”

The civil settlements resolve allegations in a lawsuit filed in federal court in Jacksonville, Fla., by former Sea Star Line executive William B. Stallings.   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.   The Act also allows the government to intervene and take over the action, as it did in this case.   Stallings will receive $512,719 of the recovered funds.

The settlements were the result of a coordinated effort by the Civil Division of the Department of Justice and the U.S. Postal Service Office of Inspector General.

The case is captioned United States ex rel. Stallings v. Sea Star Line LLC, et al., Case No. 3:13-cv-152-J-12JBT (M.D. Fla.).   The claims resolved by the settlements are allegations only, except to the extent the conduct was admitted as part of the defendants’ prior guilty pleas, and there has been no determination of liability.

Physician Pleads Guilty for Role in Detroit-Area Medicare Fraud Scheme

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A former Detroit-area physician pleaded guilty today for his role in an $11.5 million health care fraud scheme.
Acting Assistant Attorney General Mythili Raman 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 (HHS-OIG) Chicago Regional Office made the announcement.
Jose Mercado-Francis, 60, formerly of Brownstown Township, Mich., pleaded guilty before U.S. District Judge Nancy G. Edmunds in the Eastern District of Michigan to one count of conspiracy to commit health care fraud.
According to court documents, Mercado-Francis admitted that, beginning in approximately September 2009 and continuing through February 2012, he held himself out as a licensed physician and purported to provide physician home services to Medicare beneficiaries, when actually his medical license had been revoked and he was not licensed to practice medicine in Michigan.
Court documents allege that Mercado-Francis operated his scheme out of a medical practice known as House Calls Physicians P.L.L.C., which was located in Allen Park, Mich., and owned by a co-conspirator.   Mercado-Francis prepared medical documentation that licensed physicians signed as if they had provided services to Medicare beneficiaries, when, in fact, they had not.   The services were then billed to Medicare as if the licensed physicians had performed them.
Court documents further allege that, between approximately May 2008 and October 2012, House Calls Physicians billed Medicare more than $11.5 million for the cost of physician home services.   Of that amount, Dr. Mercado-Francis caused the submission of approximately $1.1 million in false and fraudulent physician services claims.
At sentencing, which will be scheduled at a later date, Mercado-Francis faces a maximum penalty of 10 years in prison and a $250,000 fine.
This case is being investigated by the FBI and HHS-OIG 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 Attorney Matthew C. Thuesen of the Fraud Section.
Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,700 defendants who have collectively billed the Medicare program for more than $5.5 billion.   In addition, the HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

Former Owner of Florida Airline Fuel Supply Company Pleads Guilty in Scheme to Defraud Illinois-Based Ryan International Airlines

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A former owner and operator of a Florida-based airline fuel supply service company pleaded guilty today to participating in a kickback scheme to defraud Illinois-based Ryan International Airlines, a charter airline company located in Rockford, Ill., the Department of Justice announced.

  Sean E. Wagner, the former owner and operator of Aviation Fuel International Inc. (AFI), pleaded guilty in the U.S. District Court for the Southern District of Florida in West Palm Beach to one count of conspiracy to commit honest services wire fraud.  On Aug. 13, 2013, a grand jury returned an indictment against Wagner and AFI, charging them for their roles in a conspiracy to defraud Ryan International Airlines.  According to the indictment, Wagner and AFI made kickback payments to Wayne Kepple, a former vice president of ground operations for Ryan, in exchange for awarding business to AFI.  According to court documents, from at least as early as December 2005 through at least August 2009, Wagner and others at AFI made kickback payments to Kepple totaling more than $200,000 in the form of checks, wire transfers, cash and gift cards.  The charges against AFI were dismissed on Feb. 21, 2014.

Ryan provided air passenger and cargo services for corporations, private individuals and the U.S. government – including the U.S. Department of Defense and the U.S. Department of Homeland Security.

“These types of kickback schemes subvert the competitive process and increase costs to American consumers,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division.  “The Antitrust Division will vigorously prosecute individuals who defraud American taxpayers and businesses.”

Wagner pleaded guilty to one count of conspiracy to commit honest services wire fraud.  The count carries a maximum sentence of 20 years in prison and a $250,000 criminal fine for individuals.  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 amount is greater than the statutory maximum fine.

As a result of the ongoing investigation, four other individuals have pleaded guilty and have been ordered to serve sentences ranging from 16 to 87 months in prison and to pay more than $580,000 in restitution.
The investigation is being conducted by the Antitrust Division’s National Criminal Enforcement Section and the U.S. Department of Defense’s Office of Inspector General’s Defense Criminal Investigative Service, Southeast Field Office, headed by Special Agent in Charge John F. Khin, with assistance from the U.S. Attorney’s Office for the Southern District of Florida.  Anyone with information concerning anticompetitive conduct in the airline charter services industry is urged to call the Antitrust Division’s National Criminal Enforcement Section at 202-307-6694 or visit  www.justice.gov/atr/contact/newcase.htm.