Monthly Archives: July 2015

Former Owner of Medical Equipment Supply Company Sentenced for $3.5 Million Medicare and Medi-Cal Fraud Scheme

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The former owner of Ezcor Medical Supply was sentenced today to serve 97 months in prison for her role in a fraud scheme that resulted in $3.5 million in fraudulent claims to Medicare and Medi-Cal.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Eileen M. Deckerof the Central District of California, Special Agent in Charge Glenn R. Ferry of the U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Los Angeles Region, Assistant Director in Charge David Bowdich of the FBI’s Los Angeles Division and Special Agent in Charge Joseph Fendrick of the California Department of Justice’s Bureau of Medi-Cal Fraud and Elder Abuse made the announcement.

Sylvia Walter-Eze, 48, of Stevenson Ranch, California, was found guilty by a federal jury on March 20, 2015, of conspiracy to commit health care fraud, four counts of health care fraud, and one count of conspiracy to pay illegal health care kickbacks.  In addition to imposing the term of imprisonment, U.S District Judge R. Gary Klausner ordered Walter-Eze to pay restitution in the amounts of $1,866,260 to Medicare and $73,268 to Medi-Cal.

The evidence presented at trial showed that Walter-Eze, the former owner of Ezcor, a durable medical equipment (DME) supply company located in Valencia, California, fraudulently billed more than $3.5 million to Medicare and Medi-Cal for DME that was not medically necessary.  The trial evidence also demonstrated that Walter-Eze paid illegal kickbacks to patient recruiters in exchange for patient referrals.  The evidence further showed that Walter-Eze paid kickbacks to physicians for fraudulent prescriptions for medically unnecessary, and expensive, power wheelchairs, which prescriptions Walter-Eze then used to support her fraudulent claims to Medicare and Medi-Cal.  The evidence showed that, between 2007 and 2012, Walter-Eze submitted $3,521,786 in fraudulent claims to Medicare and Medi-Cal, and that she received $1,939,529 in reimbursement for those claims.

The case was investigated by the FBI, HHS-OIG’s Los Angeles Regional Office and the California Department of Justice, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Central District of California.  The case was prosecuted by Trial Attorneys Blanca Quintero and Alexander F. Porter 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 over 2,300 defendants who collectively have billed the Medicare program for over $7 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 Team, go to: www.stopmedicarefraud.gov.

Competition Commission of India fines GSK and Sanofi for Bid Rigging

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Today’s guest post is by Avinash Amarnath ([email protected]) of Vinod Dhall and TT&A.

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CCI fines GSK and Sanofi for bid rigging

It has been quite a while since I posted an India update on Cartel Capers. This was partly due to the fact that the CCI has been relatively quiet on the cartel front for the last few months and partly because I have also been relatively busy with merger control work (which to many often comes across as quite drab compared to a juicy cartel case!).

However, breaking this prolonged silence, the CCI recently published a decision imposing fines on GSK and Sanofi, two major global pharma players as they were found to have rigged bids in a government tender for procurement of meningitis vaccines. Each year, in around May/June, the Government of India floats a tender for the purchase of QMMV (an anti-meningitis vaccine) for the purpose of vaccinating Indian pilgrims visiting Mecca on the ‘Hajj’ pilgrimage. There are only 3 major players supplying QMMV vaccines in India – GSK, Sanofi and Bio-Med (an Indian company). GSK is the largest supplier of this vaccine in the country.

The investigation of the CCI was based on a complaint by Bio-Med and related specifically to the tender floated in 2011 where Bio-Med had not been eligible to participate due to a minimum turnover requirement of the Government of India. In sum, the CCI found that the fact that GSK and Sanofi had each quoted to supply only roughly half of the tender quantity at roughly similar prices (which were significantly higher than the prices in the previous tender) constituted suspicious parallel behaviour for which the parties were unable to offer a rational explanation. The Government had raised the tender for roughly 180,000 doses of the vaccine and GSK had quoted to supply 100,000 doses at a price of INR 3000 per 10 dose vial and Sanofi had quoted to supply 90,000 doses at a price of INR 2899 per 10 dose vial. One common explanation offered by both parties was that the parties had not been able to quote for the entire tender quantity due to the extremely tight delivery schedule set by the Government. The CCI found that this tender being an annual one which was floated by the Government roughly around the same time each year, the parties would be easily able to estimate the delivery timelines in advance. Further, the CCI found that GSK had in fact, been able to supply much larger quantities of the vaccine in relatively short timeframes in previous tenders.

The CCI found that this suspicious parallel behaviour was corroborated by several factors such as the market conditions being conducive to collusion (limited suppliers who are repetitive bidders, homogenous product and fixed demand), no significant increase in cost of production to justify the sudden increase in the quoted price and representatives of both GSK and Sanofi having visited the Government department’s office on the same date.

The CCI imposed a penalty of 3% of the average turnover which resulted in a penalty of USD 9.4 million (approx.) on GSK and USD 0.4 million (approx.) on Sanofi.

I have kept this post purely factual without giving my views as my firm (including me for a very brief period) acted for Sanofi in this case. However, I will raise a couple of questions which come to mind and may be some food for thought:

  1. Can the fact situation described above amount to parallel behaviour at all?
  2. In the absence of any direct evidence, can the CCI simply prove parallel behaviour and shift the burden on the parties to provide a rational explanation, failing which a finding of collusion is to necessarily flow?
  3. What is the strength of the corroborative evidence relied upon by the CCI in this case?

The full order of the CCI is available athttp://www.cci.gov.in/May2011/OrderOfCommission/27/262013.pdf

IAP Worldwide Services Inc. Resolves Foreign Corrupt Practices Act Investigation

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A Florida defense and government contracting company, IAP Worldwide Services Inc. (IAP), entered into a non-prosecution agreement and agreed to pay a $7.1 million penalty to resolve the government’s investigation into whether the company  conspired to bribe Kuwaiti officials in order to secure a government contract.  A former vice president of IAP also pleaded guilty today to conspiracy to violate the Foreign Corrupt Practices Act (FCPA) for his involvement in the bribery scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Dana J. Boente of the Eastern District of Virginia, Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington, D.C., Field Office and Special Agent in Charge Robert E. Craig Jr. of the Defense Criminal Investigative Service (DCIS) Mid-Atlantic Field Office made the announcement.

James Michael Rama, 69, of Lynchburg, Virginia, pleaded guilty before U.S. District Court Judge James C. Cacheris of the Eastern District of Virginia to one count of conspiracy to violate the anti-bribery provisions of the FCPA.  Sentencing is scheduled for Sept. 11, 2015.

In 2004, Kuwait’s Ministry of the Interior (MOI) initiated the Kuwait Security Program (KSP), a project that was intended to provide nationwide surveillance capabilities for several Kuwaiti government agencies primarily through the use of closed-circuit television.  The project was divided into two phases: a planning and feasibility period called “Phase I” and an installation period called “Phase II.”  The MOI was responsible for overseeing the KSP, including selecting contractors to facilitate its implementation.  Revenues from the Phase II contract were expected to be substantially greater than from Phase I.

According to admissions made in connection with both the non-prosecution agreement and Rama’s plea agreement, IAP and Rama schemed to ensure that IAP worked as the consultant for Phase I so that it could tailor the requirements for the Phase II contracts to IAP’s strengths, which would give the company an advantage in the Phase II bidding.  To that end, both IAP and Rama admitted that in February 2006, executives and senior employees of IAP, including Rama, set up a shell company called “Ramaco” to bid on Phase I, in part to conceal IAP’s role in crafting the Phase II requirements and its conflict of interest in connection with securing the Phase II contract.

Ultimately, Ramaco secured the Phase I contract for approximately $4 million.  According to admissions made in connection with both agreements, the Rama and IAP agreed that half of that amount would be diverted to a consultant who would pay bribes to Kuwaiti government officials to assist IAP in obtaining and retaining the Phase I contract and to obtain the Phase II contract.  IAP and Rama admitted that they disguised the payments by transferring funds Ramaco received to an IAP bank account and then to the consultant through a series of accounts and intermediaries.  According to the factual statements incorporated into both the non-prosecution agreement and Rama’s plea agreement, between September 2006 and March 2008, IAP and its co-conspirators paid the consultant approximately $1,783,688 understanding that some or all of the funds would be used to bribe Kuwaiti government officials.

Based on a variety of factors, including but not limited to IAP’s cooperation, the Criminal Division entered into a non-prosecution agreement with the company.  The non-prosecution agreement requires IAP’s continued cooperation.  In addition, the non-prosecution agreement requires IAP to conduct a review of its existing internal controls, policies and procedures, and make any necessary modifications to ensure that the company maintains accurate record keeping and a rigorous anti-corruption compliance program.  The non-prosecution agreement further requires IAP to report periodically to the Criminal Division and to the U.S. Attorney’s Office of the Eastern District of Virginia regarding remediation and implementation of the aforementioned compliance program and internal controls, policies and procedures.

The investigation is being conducted by the FBI’s Washington, D.C., Field Office and the DCIS Mid-Atlantic Field Office.  The case is being prosecuted by Assistant Chief Tarek Helou and Trial Attorney James P. McDonald of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Paul J. Nathanson of the Eastern District of Virginia.  The United Kingdom’s Serious Fraud Office and the Criminal Division’s Office of International Affairs also provided assistance during the investigation.