Category Archives: Civil Division

Two Individuals Plead Guilty to Conspiring to Defraud Consumers through Fraudulent Debt Relief Services Firms

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Two individuals pleaded guilty today for their roles at fraudulent debt relief services companies that offered to settle credit card debts but instead took victims’ payments as undisclosed up-front fees, the Justice Department and U.S. Postal Inspection Service (USPIS) announced.

Athena Maldonado, 30, and Christopher Harati, 31, both of Orange County, California, pleaded guilty to a one-count information alleging conspiracy in connection with debt relief companies known as Nelson Gamble & Associates (Nelson Gamble) and Jackson Hunter Morris & Knight LLP (Jackson Hunter).  According to the information filed in the case, the defendants and their co-conspirators portrayed the debt relief companies as law firms and attorney-based companies that would negotiate favorable settlements with creditors.  Clients made monthly payments expecting the money to go toward settlements.  The companies instead took an amount equal to at least 15 percent of clients’ total debt as company fees, with the first six months of payments going almost entirely toward undisclosed up-front fees.

“Debt relief service scams prey on vulnerable consumers trying to climb out of tough financial situations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will aggressively pursue the criminals who operate these schemes.”

Maldonado admitted that she acted as the “legal department” for both companies, and used multiple aliases when responding to complaints submitted by state attorney general offices, the Better Business Bureau and private attorneys.  Maldonado admitted that, after Nelson Gamble changed its name to Jackson Hunter, she responded to consumer complaints by falsely stating, among other things, that the two companies were not related and that Jackson Hunter could not refund money paid to Nelson Gamble.

Harati admitted that he worked as a client relations manager for the companies and handled complaint calls from clients.  He admitted he told customers that Nelson Gamble and Jackson Hunter were separate companies, falsely stated that Jackson Hunter was a nationwide law firm with years of experience and made other misrepresentations designed to convince customers to stay with the company.

The defendants each face a statutory maximum sentence of five years in prison and a $250,000 fine, or an alternate fine of twice the loss or twice the gain, whichever is greater, along with mandatory restitution.  Their sentencing dates have not been set.

On Dec. 3, 2014, a grand jury in Santa Ana, California, returned a 22-count indictment charging Jeremy Nelson, Elias Ponce and John Vartanian, all of Orange County, for mail fraud, wire fraud, and conspiracy to commit mail and wire fraud in the same fraudulent scheme.  The trial in that case is scheduled to begin on Feb. 16, 2016, in Los Angeles.

The Federal Trade Commission (FTC) brought a civil case against Nelson Gamble, Jackson Hunter and other defendants in September 2012, alleging that the defendants falsely claimed they would reduce consumers’ unsecured debt by 50 percent or more, made unauthorized charges to their bank accounts and called phone numbers listed on the National Do Not Call Registry.  For more information about debt relief firms, the FTC encourages consumers to review this page on their website.

Principal Deputy Assistant Attorney General Mizer commended the USPIS team assigned to the Civil Division’s Consumer Protection Branch for their investigative efforts, and thanked the U.S. Attorney’s Office of the Central District of California for their contributions to the case.  The case is being prosecuted by Trial Attorney Alan Phelps of the Consumer Protection Branch.

Four People Arrested and Charged in Cross-Country Insider Trading Scheme

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The owner and operator of a stock trading operation and three of his associates were arrested today on charges arising from their alleged participation in a multi-year insider trading scheme that netted more than $3.2 million in illicit profits, announced today by U.S. Attorney Paul J. Fishman for the District of New Jersey.

Steven Fishoff, 58, of Westlake Village, California, Ronald Chernin, 66, of Oak Park, California, Steven Costantin aka Steven Constantin, 54, of Farmingdale, New Jersey, and Paul Petrello, 53, of Boca Raton, Florida, are each charged by complaint with one count of conspiracy to commit securities fraud.  Fishoff is charged with four substantive counts of securities fraud, Chernin and Petrello are each charged with two counts of securities fraud and Costantin is charged with one count of securities fraud.

The defendants were arrested by FBI agents this morning at their respective residences.  Costantin is scheduled to appear this afternoon before U.S. Magistrate Judge Joseph A. Dickson in Newark, New Jersey, federal court.  Fishoff is scheduled to appear before U.S. Magistrate Judge Kenly Kiya Kato in Riverside, California, federal court, Chernin is scheduled to appear before U.S. Magistrate Judge Carla Woehrle in Los Angeles, Californina, federal court, and Petrello is expected to appear before U.S. Magistrate Judge Dave Lee Brannon in West Palm Beach, Florida, federal court.

“The defendants and their associates were entrusted with confidential, nonpublic information about companies and time and time again, they allegedly violated that trust by illegally trading the companies’ stock for substantial profits,” said U.S. Attorney Fishman.  “They allegedly rigged the game so they would always win, and their profits came at the expense of legitimate investors, who were not privy to this inside information.”

“Insider trading is an investigative priority of the FBI,” said Special Agent in Charge Richard M. Frankel for the FBI in Newark, New Jersey.  “The FBI is committed to stopping insider trading and will hold those who perpetrate these schemes accountable because their illegal activities undermine the integrity of the U.S. financial markets and weaken investor confidence.”

“We allege an insider trading scheme based on a short-selling business model designed to systematically profit on confidential information obtained under false pretenses,” said Senior Associate Director Sanjay Wadhwa for Enforcement in the SEC’s Regional Office in New York.  “But the defendants’ short selling proved to be short-sighted as they overlooked the fact that their trading patterns would be detected and they would be caught by law enforcement.”

According to the complaint unsealed today, Fishoff, Chernin, Costantin, Petrello and others, acting individually and through their associated trading entities, engaged in an insider trading scheme in which they netted more than $3.2 million in illicit profits over three years by executing illegal trades through trading entities that they controlled.

Fishoff is the president and sole owner of Featherwood Capital Inc. (Featherwood), a trading entity that he operates out of his home.  Featherwood maintained numerous stock trading accounts in its own name and in various additional names under which Featherwood did business (DBAs), including Gold Coast Total Return Inc. (Gold Coast), Seaside Capital Inc. (Seaside) and Data Complete Inc. (Data Complete).

Chernin, an attorney who was disbarred in California for misappropriation of client assets, is a friend and longtime business associate of Fishoff.  Corporate documents list Chernin as the president of Gold Coast and Fishoff as an officer.  Chernin is president of the trading entity Cedar Lane Enterprises Inc. (Cedar Lane) and an officer of Data Complete.

Costantin, a former pipefitter by trade, is Fishoff’s brother-in-law and a friend and business associate of Chernin.  Corporate documents list Costanstin as president of Seaside.  In brokerage account documents, Fishoff identifies himself as Seaside’s owner.  Costanstin is also the vice president and secretary of Cedar Lane.

Petrello is the president and owner of two trading entities, Brielle Properties Inc. and Oceanview Property Management LLC and a friend and longtime business associate of Fishoff.

On numerous occasions, the conspirators obtained material, nonpublic information related to publicly traded companies and traded on that information before it became public.  Between June 2010 and July 2013, Fishoff, Chernin, Costantin and a business associate referred to in the complaint as “Trader A” expressed interest in participating in at least 14 stock offerings by publicly traded companies.  Before providing these individuals with confidential information concerning the companies or the terms of the proposed sales, the investment bankers first required that Fishoff, Chernin, Costantin, Trader A and their associated trading entities, agree to be “brought over the wall,” or “wall-crossed,” standard industry terms which meant that they were required to keep the information disclosed to them confidential and could not buy or sell the stock based on the information.

Fishoff, Chernin, Costantin and Trader A agreed to these disclosure and trading restrictions and then flagrantly breached the agreements.  In instances where Fishoff was not personally wall-crossed in an offering, Chernin and Costantin tipped Fishoff telephonically or by email about the offering prior to the public announcement.  Even where Fishoff ostensibly was a party to the confidentiality agreement, through his affiliation with the wall-crossed trading entity, Fishoff himself breached the agreement by trading on the confidential information and by providing the information to Petrello so that Petrello could engage in parallel trading.  There were also instances where Chernin and Costantin violated the terms of the confidentiality agreements by trading themselves before the offering.  The conspirators traded through the accounts of the trading entities or through related accounts that they controlled.  The conspirators shared the proceeds of the insider trading scheme, with Fishoff wiring money to Chernin and Costantin for their services and Fishoff receiving compensation from Petrello for the offering-related tips that Fishoff provided to him.

The conspiracy count with which each defendant is charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the aggregate loss to victims or gain to the defendants.   Each of the substantive securities fraud charges carry a maximum penalty of 20 years in prison and a $5 million fine.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Frankel, for the investigation leading to today’s arrests and complaint.  He also thanked the U.S. Securities and Exchange Commission’s New York Regional Office under the direction of Andrew Calamari.  He also thanked special agents of the FBI, Los Angeles (Ventura Resident Agency and Riverside Resident Agency) and FBI, Miami (West Palm Beach Resident Agency) for their assistance.

The government is represented by Assistant U.S. Attorneys Shirley U. Emehelu of the Economic Crimes Unit of the U.S. Attorney’s Office in Newark, New Jersey and Acting Chief Barbara Ward for the of the Office’s Asset Forfeiture and Money Laundering Unit.

The charges and allegations contained in the complaint are merely accusations and the defendants are presumed innocent unless and until proven guilty.

This case was brought in coordination with President Barack Obama’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

Seller of “Miracle Mineral Solution” Convicted for Marketing Toxic Chemical as a Miracle Cure

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A federal jury in the Eastern District of Washington returned a guilty verdict yesterday against a Spokane, Washington, man for selling industrial bleach as a miracle cure for numerous diseases and illnesses, including cancer, AIDS, malaria, hepatitis, lyme disease, asthma and the common cold, the Department of Justice announced.

Louis Daniel Smith, 45, was convicted following a seven-day trial of conspiracy, smuggling, selling misbranded drugs and defrauding the United States. Evidence at trial showed that Smith operated a business called “Project GreenLife” (PGL) from 2007 to 2011.  PGL sold a product called “Miracle Mineral Supplement,” or MMS, over the Internet.  MMS is a mixture of sodium chlorite and water.  Sodium chlorite is an industrial chemical used as a pesticide and for hydraulic fracking and wastewater treatment.  Sodium chlorite cannot be sold for human consumption and suppliers of the chemical include a warning sheet stating that it can cause potentially fatal side effects if swallowed.

“This verdict demonstrates that the Department of Justice will prosecute those who sell dangerous chemicals as miracle cures to sick people and their desperate loved ones,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “Consumers have the right to expect that the medicines that they purchase are safe and effective.”  Mizer thanked the jury for its service and its careful consideration of the evidence.

The government presented evidence that Smith instructed consumers to combine MMS with citric acid to create chlorine dioxide, add water and drink the resulting mixture to cure numerous illnesses. Chlorine dioxide is a potent agent used to bleach textiles, among other industrial applications.  Chlorine dioxide is a severe respiratory and eye irritant that can cause nausea, diarrhea and dehydration.  According to the instructions for use that Smith provided with his product, nausea, diarrhea and vomiting were all signs that the miracle cure was working.  The instructions also stated that despite a risk of possible brain damage, the product might still be appropriate for pregnant women or infants who were seriously ill.

According to the evidence presented at trial, Smith created phony “water purification” and “wastewater treatment” businesses in order to obtain sodium chlorite and ship his MMS without being detected by the U.S. Food and Drug Administration (FDA) or U.S. Customs and Border Protection.  The government also presented evidence that Smith hid evidence from FDA inspectors and destroyed evidence while law enforcement agents were executing search warrants on his residence and business.

Before trial, three of Smith’s alleged co-conspirators, Chris Olson, Tammy Olson and Karis DeLong, Smith’s wife, pleaded guilty to introducing misbranded drugs into interstate commerce.  Chris Olson, along with alleged co-conspirators Matthew Darjanny and Joseph Lachnit, testified at trial that Smith was the leader of PGL.

In all, the jury convicted Smith of one count of conspiracy to commit multiple crimes, three counts of introducing misbranded drugs into interstate commerce with intent to defraud or mislead and one count of fraudulently smuggling merchandise into the United States.  The jury found Smith not guilty on one out of four of the misbranded drug counts. He faces a statutory maximum of 34 years in prison at his Sept. 9 sentencing.

The case was investigated by agents of the FDA’s Office of Criminal Investigations and the U.S. Postal Inspection Service.  The case was prosecuted by Christopher E. Parisi and Timothy T. Finley of the Civil Division’s Consumer Protection Branchin Washington, D.C.

United Parcel Service Agrees to Settle Alleged Civil False Claims Act Violations

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United Parcel Service Inc. (UPS) has agreed to pay $25 million to resolve allegations that it submitted false claims to the federal government in connection with its delivery of Next Day Air overnight packages, the Justice Department announced today.  UPS is a package delivery company based in Atlanta.

“Protecting the federal procurement process from false claims is central to the mission of the Department of Justice,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “We will continue to ensure that when federal monies are used to purchase commercial services the government receives the prices and services to which it is entitled.”

“This conduct affected numerous federal agencies,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.  “We place high importance on the integrity of companies that provide services to the government.  Combating all manners of fraud on the government is a high priority in the Eastern District of Virginia.”

UPS provides delivery services to hundreds of federal agencies through contracts with the U.S. General Services Administration (GSA) and U.S. Transportation Command, which provides support to Department of Defense agencies.  Under these contracts, UPS guaranteed delivery of packages by certain specified times the following day.  The settlement announced today resolves allegations that from 2004 to 2014, UPS engaged in practices that concealed its failure to comply with its delivery guarantees, thereby depriving federal customers of the ability to request refunds for the late delivery of packages.  In particular, the government alleged that UPS knowingly recorded inaccurate delivery times on packages to make it appear that the packages were delivered on time, applied inapplicable “exception codes” to excuse late delivery  (such as “security delay,” “customer not in,” or “business closed”), and provided inaccurate “on-time” performance data under the federal contracts.

“The United States should get what it pays for, nothing less,” said Acting Inspector General Robert C. Erickson of the GSA.

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The civil lawsuit was filed in the Eastern District of Virginia by Robert K. Fulk, a former employee of UPS, who will receive $3.75 million.

The resolution in this matter was the result of a coordinated effort between the U.S. Attorney’s Office of the Eastern District of Virginia, the GSA Office of Inspector General (OIG), the Federal Deposit Insurance Corporation OIG, the Defense Criminal Investigative Service, and the Treasury Inspector General for Tax Administration and the Department of Treasury OIG, with assistance from the Department of Veterans Affairs OIG.

The lawsuit is captioned United States ex rel. Fulk v. United Parcel Service, Inc., et al., No. 1:11cv890 (E.D. Va.).  The claims resolved by this settlement are allegations only, and there has been no determination of liability.

US Lender Pays $3.8 Million to Resolve Liability Relating to ExIm Bank Loans

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The Justice Department announced today that Hencorp Becstone Capital L.C. (Hencorp) has agreed to pay $3.8 million to resolve allegations under the False Claims Act that it made false statements and claims to the Export-Import Bank of the United States (Ex-Im Bank) in order to obtain loan guarantees.  Hencorp is a Miami-based lender and financial services company that provides financing and other financial services to Latin American businesses.

“The Ex-Im Bank provides vital support for U.S. manufacturing by enabling foreign businesses to obtain financing to purchase U.S.-made goods and equipment,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will continue to vigorously pursue those who attempt to take advantage of this important program.”

The Ex-Im Bank guarantees loans made by approved lenders to foreign businesses for the purchase of American-made products.  The lender is responsible for performing a credit review of the transaction to ensure that it meets applicable criteria.  The government alleged that Ricardo Maza, a Peruvian-based former Hencorp business agent, created false documentation to obtain Ex-Im Bank guarantees on fictitious transactions on which no products were sold or exported, and that Hencorp acted recklessly by outsourcing key credit review functions to Maza without adequate supervision or oversight.  The government alleged that Maza then diverted the proceeds of the loans to himself and to his friends and business associates in Peru, and that the transactions resulted in losses to the Ex-Im Bank when the loans were not repaid.  In 2012, Mario Mimbella, 64, of Miami, Florida, the purported U.S.-based exporter on three of the fraudulent transactions, pled guilty to making false records for his participation in the scheme and was later sentenced to prison.

“Lenders that use Ex-Im programs have an obligation to prevent and detect fraud,” said Acting Inspector General Michael T. McCarthy for the Ex-Im Bank.  “The Office of Inspector General will pursue accountability for all participants involved in schemes that defraud the Ex-Im Bank.”

This settlement resolves allegations made in a whistleblower lawsuit filed under the False Claims Act by Genaro Benites Caballero, the former owner of one of the purported purchasers who stated that he had no part in the scheme and that his signature was forged on key documents without his knowledge, and Patricia Doris Lee Dominguez, a former attorney for the purported purchaser.  Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery.  The whistleblowers will receive $608,000 of the settlement.

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of Columbia and the Office of Inspector General for the Ex-Im Bank.

The lawsuit is captioned United States ex rel. Benites Caballero, et al. v. Hencorp Becstone Capital, L.C., et al., cv-13-168 (D.D.C.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability with respect to Hencorp.

Florida Home Health Care Company Agrees to Pay $1.1 Million to Resolve False Claims Act Allegations

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Recovery Home Care Inc., Recovery Home Care Services Inc. (collectively Recovery Home Care) and National Home Care Holdings LLC have agreed to pay $1.1 million to resolve allegations that the Recovery Home Care entities violated the False Claims Act by improperly paying doctors for referrals of home health care services provided to Medicare patients, the Department of Justice announced today.  The Recovery Home Care entities provide home health care services to Medicare beneficiaries and were purchased by National Home Care Holdings LLC in 2012, after the conduct addressed by the settlement occurred.

“Health care providers that attempt to profit by providing illegal inducements will be held accountable,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “We will continue to advocate for the appropriate use of Medicare funds and the proper care of our senior citizens.”

From 2009 through 2012, Recovery Home Care, headquartered in West Palm Beach, Florida, allegedly paid dozens of physicians thousands of dollars per month to perform patient chart reviews.  According to the government’s lawsuit, the physicians were over-compensated for any actual work they performed and, in reality, payments to the physicians were used to induce them to refer their patients to Recovery Home Care, in violation of the Anti-Kickback Statute and the Stark Law.

“Inducements of this kind are designed to improperly influence a physician’s independent medical judgment,” said U.S. Attorney A. Lee Bentley III of the Middle District of Florida.  “This lawsuit and today’s settlement attests to our office’s on-going commitment to safeguard federal health care program beneficiaries from the effects of such illegal conduct.”

The Anti-Kickback Statute and the Stark Law are intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives.  The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare.  The Stark Law forbids a home health care provider from billing Medicare for certain services referred by physicians who have a financial relationship with the entity.

The settlement partially resolves allegations made in a lawsuit filed in federal court in Tampa, Florida, by Gregory Simony, a former employee of Recovery Home Care.  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 part in this case.  Simony will receive $198,000 of the recovered funds.  The government continues to litigate this case against Recovery Home Care’s previous owner, Mark Conklin.

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 $23.8 billion through False Claims Act cases, with more than $15.2 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 Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Middle District of Florida and HHS-OIG.

The case is captioned United States ex rel. Simony v. Recovery Home Care, et al., Case No. 8-12-cv-2495-T-36TBM (M.D. Fla.).  The claims resolved by the settlement are allegations only and there has been no determination of liability.

Minnesota-Based ev3 to Pay United States $1.25 Million to Settle False Claims Act Allegations

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Medical device manufacturer ev3 Inc., formerly known as Fox Hollow Technologies Inc., has agreed to pay the United States $1.25 million to resolve allegations under the False Claims Act that Fox Hollow caused certain hospitals to submit false claims to Medicare for unnecessary inpatient admissions related to minimally-invasive atherectomy procedures, the Justice Department announced today.

“Today’s settlement demonstrates our commitment to ensure that the Medicare Trust Fund is used to pay for only necessary medical care,” said Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division.  “Charging the government for higher-cost inpatient services that patients do not need wastes the country’s precious health care resources.”

“It should come as no surprise to anyone that proper health care of a patient includes more than just competence of a provider, it requires accuracy and honesty in billing Medicare for the patient’s treatment,” said U.S. Attorney William J. Hochul Jr. of the Western District of New York.  “In this case, a medical device manufacturer allegedly induced hospitals to admit patients as inpatients for minimally-invasive procedures involving its device, even though many of those patients should have been treated as outpatients at significantly less cost.  This was done in order to collect higher Medicare reimbursements which ultimately drive up costs for all taxpayers and beneficiaries of government health programs.”

The United States alleged that Fox Hollow, which was acquired by ev3 Inc. in late 2007, knowingly caused 12 hospitals located throughout nine states to submit claims to Medicare for medically unnecessary inpatient stays for certain Medicare beneficiaries undergoing elective atherectomy procedures.  Atherectomy is a minimally-invasive surgical procedure that uses a small cutting device to remove atherosclerosis, or hardening of the arteries, from large blood vessels within the body, and it is intended to open up narrowed coronary arteries to increase blood flow and circulation.  One such device used in atherectomy procedures is the Silver Hawk Plaque Excision System sold by Fox Hollow.  The United States alleged that throughout 2006 and 2007, to increase hospital purchases of the Silver Hawk device, Fox Hollow advised hospitals that they should bill Silver Hawk atherectomy procedures as more expensive inpatient claims, as opposed to less costly outpatient claims.  As a result, certain hospitals allegedly claimed greater reimbursement than they were entitled to for treating Medicare beneficiaries who underwent Silver Hawk atherectomy procedures.

“Medical device makers that try to boost their profits by causing patients to be admitted for unnecessary and expensive inpatient hospital stays will be held accountable,” said Special Agent in Charge Thomas O’Donnell of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “Both patients and taxpayers deserve to have medical decisions made based on what is medically appropriate.”

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The lawsuit was filed by Amanda Cashi, who formerly worked as a Fox Hollow sales representative.  Cashi will receive $250,000.

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 $23.5 billion through False Claims Act cases, with more than $15 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with ev3 was the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of New York, the Civil Division’s Commercial Litigation Branch, and HHS-OIG.

The claims resolved by this settlement are allegations only and there has been no determination of liability.

The civil lawsuit is captioned United States ex rel. Cashi v. Fox Hollow Technologies, Inc., et al. Civ. No. 09-CV-01066-S (W.D.N.Y.).

United States Settles False Claims Act Suit Against Good Shepherd Hospice Inc. and Related Entities

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Midwest Hospice Chain Allegedly Billed Medicare for Ineligible Patients

Today, Good Shepherd Hospice Inc., Good Shepherd Hospice of Mid America Inc., Good Shepherd Hospice, Wichita, L.L.C., Good Shepherd Hospice, Springfield, L.L.C., and Good Shepherd Hospice – Dallas L.L.C. (collectively Good Shepherd) agreed to pay $4 million to resolve allegations that Good Shepherd submitted false claims for hospice patients who were not terminally ill.  Good Shepherd is a for-profit hospice headquartered in Oklahoma City which provides hospice services in Oklahoma, Missouri, Kansas and Texas.

“The Medicare hospice benefit is intended to provide comfort and care to patients nearing the end of life,” said Acting Assistant Attorney General Joyce R. Branda of the Justice Department’s Civil Division.  “We will continue to aggressively pursue companies that abuse the hospice benefit to improperly inflate their profits.”

The Medicare hospice benefit is available for patients who elect palliative treatment (medical care focused on providing patients with relief from pain, symptoms or stress) for a terminal illness and have a life expectancy of six months or less if their illness runs its normal course.  When a Medicare patient receives hospice services, that individual is no longer entitled to Medicare coverage for care designed to cure his or her illness.

The government alleged that Good Shepherd knowingly submitted or caused the submission of false claims for hospice care for patients who were not terminally ill.  Specifically, the United States contended that Good Shepherd engaged in certain business practices that contributed to claims being submitted for patients who did not have a terminal prognosis of six months or less, by pressuring staff to meet admissions and census targets and paying bonuses to staff, including hospice marketers, admissions nurses and executive directors, based on the number of patients enrolled.  The United States further alleged that Good Shepherd hired medical directors based on their ability to refer patients, focusing particularly on medical directors with ties to nursing homes, which were seen as an easy source of patient referrals.  The United States also alleged that Good Shepherd failed to properly train staff on the hospice eligibility criteria.

“Health care fraud puts profits above patients, and steals from taxpayers,” said U.S. Attorney Tammy Dickinson of the Western District of Missouri.  “In this case, company whistleblowers alleged that patients received unnecessary hospice care while Good Shepherd engaged in illicit business practices to enrich itself at the public’s expense.  Today’s settlement fairly resolves those issues and puts measures in place to prevent similar conduct in the future.”

In addition, as part of the settlement, each Good Shepherd entity agreed to enter into a corporate integrity agreement with the U.S. Department of Health and Human Services-Office of the Inspector General (HHS-OIG), which will provide for procedures and reviews to be put into place to avoid and promptly detect conduct similar to that which gave rise to the settlement.

“Being a hospice provider in the Medicare program is a privilege, not a right,” said Special Agent in Charge Mike Fields of the HHS-OIG Dallas Region.  “Hospice providers that seek to boost profits by providing hospice services to Medicare beneficiaries who are not terminally ill compromise both the health of its patients as well as the integrity of Medicare.  Our agency will continue to hold such hospice providers accountable for their actions.”

The settlement resolves allegations filed by relators Kathi Cordingley and Tracy Jones, former employees of Good Shepherd, under the qui tam or whistleblower provisions of the False Claims Act, which authorize private parties to sue for fraud on behalf of the United States and share in the recovery.  The relators will receive approximately $680,000.

This suit is part of 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 $23.5 billion through False Claims Act cases, with more than $15 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Missouri and HHS-OIG.  The claims asserted against defendants are allegations only and there has been no determination of liability.

The lawsuit is captioned United States ex rel. Cordingley and Jones v. Good Shepherd Hospice, Mid America, Inc., No. 4:11-cv-1087 (W.D. Mo.).

Daiichi Sankyo Inc. Agrees to Pay $39 Million to Settle Kickback Allegations Under the False Claims Act

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Daiichi Sankyo Inc., a global pharmaceutical company with its U.S. headquarters in New Jersey, has agreed to pay the United States and state Medicaid programs $39 million to resolve allegations that it violated the False Claims Act by paying kickbacks to induce physicians to prescribe Daiichi drugs, including Azor, Benicar, Tribenzor and Welchol, the Justice Department announced today.

“The Anti-Kickback Statute prohibits payments intended to influence a physician’s ordering or prescribing decisions,” said Acting Assistant Attorney General Joyce R. Branda for the Civil Division.  “The Department of Justice is committed to preserving the independence and objectivity of those decisions, which are cornerstones of our public health programs.”

The Anti-Kickback Statute was enacted to ensure that physicians’ medical judgment is not compromised by improper payments and gifts by other health care providers.  The statute generally prohibits anyone from offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare and Medicaid.

In this case, the government alleged that Daiichi paid physicians improper kickbacks in the form of speaker fees as part of Daiichi’s Physician Organization and Discussion programs, known as “PODs,” which were run from Jan. 1, 2005, through March 31, 2011, as well as other speaker programs that were run from Jan. 1, 2004, through Feb. 4, 2011.  Allegedly, payments were made to physicians even when physician participants in PODs took turns “speaking” on duplicative topics over Daiichi-paid dinners, the recipient spoke only to members of his or her own staff in his or her own office, or the associated dinner was so lavish that its cost exceeded Daiichi’s own internal cost limitation of $140 per person.

“Drug companies are prohibited from using lavish entertainment and padded speaker program payments to induce physicians to prescribe their drugs for beneficiaries of federal health care programs,” said U.S. Attorney Carmen Ortiz for the District of Massachusetts.  “Settlements like this one show that the government will continue to pursue health care companies that use kickbacks to promote their products.”

As part of the settlement, Daiichi has agreed to enter into a corporate integrity agreement with the Department of Health and Human Services-Office of Inspector General (HHS-OIG), which obligates the defendants to undertake substantial internal compliance reforms for the next five years.

“Schemes such as this are particularly abhorrent,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services.  “Manufacturers and physicians who engage in them are cheating Medicare and Medicaid out of millions of dollars and threatening programs upon which many elderly and disabled Americans rely.  My office will take whatever steps necessary to guard against improper alliances between manufacturers of drugs and those who prescribe them.  Through our corporate integrity agreement we will be closely monitoring Daiichi.”

The settlement announced today stems from a complaint filed by Kathy Fragoules, a former Daiichi sales representative, under the whistleblower provisions of the False Claims Act, which authorize private parties to sue on behalf of the United States, and to receive a portion of any recovery.  Fragoules will receive $6.1 million of the federal recovery.

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 $23.3 billion through False Claims Act cases, with more than $14.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The investigation and litigation was conducted by the Civil Division, the U.S. Attorney’s Office for the District of Massachusetts, the U.S. Department of Veterans Affairs, the Department of Defense Criminal Investigative Service, HHS-OIG and the FBI.  The claims settled by this agreement are allegations only and there has been no determination of liability.

The case is captioned U.S. ex rel. Fragoules v. Daiichi Sankyo, Inc., Civil Action No. 10-10420 (D. Mass.).

15-017

United States Files Suit Against Omnicare Inc. for Accepting Kickbacks from Drug Manufacturer to Promote an Anti-Epileptic Drug in Nursing Homes

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The United States has filed a civil False Claims Act complaint against Omnicare Inc. alleging that it solicited and received millions of dollars in kickbacks from pharmaceutical manufacturer Abbott Laboratories, the Justice Department announced today.  Omnicare is the nation’s largest provider of pharmaceuticals and pharmacy consulting services to nursing homes.  Federal regulations designed to protect nursing home residents from unnecessary drugs require nursing homes to retain consulting pharmacists such as those provided by Omnicare to ensure that residents’ drug prescriptions are appropriate.

In its complaint, the United States alleges that Omnicare solicited and received kickbacks from Abbott in exchange for purchasing and recommending the prescription drug Depakote for controlling behavioral disturbances exhibited by dementia patients residing in nursing homes serviced by Omnicare.  According to the complaint, Omnicare’s pharmacists reviewed nursing home patients’ charts at least monthly and made recommendations to physicians on what drugs should be prescribed for those patients.  The government alleges that Omnicare touted its influence over physicians in nursing homes in order to secure kickbacks from pharmaceutical companies such as Abbott.

“Elderly nursing home residents suffering from dementia are among our nation’s most vulnerable patient populations, and they depend on the independent judgment of healthcare professionals for their daily care,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “Kickbacks to consulting pharmacists compromise their independence and undermine their role in protecting nursing home residents from the use of unnecessary drugs.”

The United States alleges that Omnicare disguised the kickbacks it received from Abbott in a variety of ways.  Abbott allegedly made payments to Omnicare described as “grants” and “educational funding,” even though their true purpose was to induce Omnicare to recommend Depakote.  For example, according to the complaint, Omnicare solicited substantial contributions from Abbott and other pharmaceutical manufacturers to its “Re*View” program.  Although Omnicare claimed that Re*View was a “health management” and “educational” program, the complaint alleges that it was simply a means by which Omnicare solicited kickbacks from pharmaceutical manufacturers in exchange for increasing the utilization of their drugs on elderly nursing home residents.  In internal documents, Omnicare allegedly referred to Re*View as its “one extra script per patient” program.  The complaint also alleges that Omnicare entered into agreements with Abbott by which Omnicare was entitled to increasing levels of rebates from Abbott based on the number of nursing home residents serviced and the amount of Depakote prescribed per resident.  Finally, the complaint alleges that Abbott funded Omnicare management meetings on Amelia Island, Florida, offered tickets to sporting events to Omnicare management, and made other payments to local Omnicare pharmacies.

“Although the United States Attorney’s Office for the Western District of Virginia is small, we will not waver in our pursuit of the largest corporations, like Omnicare and Abbott, who illegally raid the coffers of Medicaid, Medicare, and other healthcare benefit programs,” said Acting U.S. Attorney Anthony P. Giorno for the Western District of Virginia.

“Kickback allegations place elderly nursing home residents at risk that treatment decisions are influenced by improper financial incentives,” said Special Agent in Charge Nicholas DiGiulio for the Department of Health and Human Services’ Office of Inspector General (HHS-OIG) region including Virginia. “We will continually guard government health programs and taxpayers from companies more intent on their bottom lines than on patient care.”

In May 2012, the United States, numerous individual states, and Abbott entered into a $1.5 billion global civil and criminal resolution that, among other things, resolved Abbott’s civil liability under the False Claims Act for paying kickbacks to nursing home pharmacies.

The United States filed its complaint against Omnicare in two consolidated whistleblower lawsuits filed under the False Claims Act in the Western District of Virginia.  The whistleblower provisions of the False Claims Act authorize private parties to sue for fraud on behalf of the United States and share in any recovery.  The United States is entitled to intervene and take over such lawsuits, as it has done here.

This case 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 $23.2 billion through False Claims Act cases, with more than $14.9 billion of that amount recovered in cases involving fraud against federal health care programs.

This investigation was jointly handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Virginia, HHS-OIG, the Office of the Attorney General for the Commonwealth of Virginia and the National Association of Medicaid Fraud Control Units.

The cases are captioned United States ex rel. Spetter v. Abbott Labs., et al., Case No. 10-cv-00006 (W.D. Va.) and United States ex rel. McCoyd v. Abbott Labs., et al., Case No. 07-cv-00081 (W.D. Va.).  The claims asserted in the government’s complaint are allegations only and there has been no determination of liability.