Category Archives: Civil Division

Nationwide Contract Therapy Providers to Pay $30 Million to Resolve False Claims Act Allegations

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Contract therapy providers RehabCare Group Inc., RehabCare Group East Inc. and Rehab Systems of Missouri and management company Health Systems Inc. have agreed to pay $30 million to resolve claims that they violated the False Claims Act by engaging in a kickback scheme related to the referral of nursing home business, the Justice Department announced today.   Additionally, as part of this settlement, the entities have agreed to restructure their business arrangement.

“Health care providers that attempt to profit from illegal kickbacks will be held accountable,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “We will continue to advocate for the appropriate use of Medicare funds and the proper care of our senior citizens.”

Between March 1, 2006, and Dec. 31, 2011, RehabCare allegedly arranged with Rehab Systems of Missouri to obtain Rehab Systems of Missouri ’s contracts to provide therapy to patients residing in 60 nursing homes controlled by Rehab Systems  majority-owner James Lincoln.   In exchange for this stream of referrals, RehabCare allegedly paid Rehab Systems  a $400,000 to $600,000 upfront payment and allowed Rehab Systems to retain a percentage of the revenue generated by each referral.

“The Anti-Kickback Statute is intended to protect patients and federal health care programs from fraud and abuse,” said Acting U.S. Attorney for the District of Minnesota John Marti.   “We will remain vigilant in pursuing entities that improperly further their financial interest at the expense of the Medicare Trust Fund.”

“This settlement sends a message to those who seek to improperly take advantage of the Medicare program,” said U.S. Department of Health and Human Services Office of Inspector General Special Agent in Charge Gerald T. Roy.   “The Office of the Inspector General, Kansas City Regional Office will continue to work aggressively to eliminate this type of misconduct from our health care system.”

“The FBI will continue to work with its partners to combat this type of abuse,” said Special Agent in Charge of the FBI’s Minneapolis Office J. Chris Warrener.   “It remains committed to the elimination of fraud to ensure the integrity of federal health care programs.”

This civil 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 Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  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 more than $17.1 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement resolves allegations originally brought in a lawsuit filed by a whistleblower under the qui tam 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 whistleblower will receive $700,000 as its share of the recovery in this case.                

The case was handled by the U.S. Attorney’s Office for the District of Minnesota with assistance from the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Eastern District of Missouri, the Federal Bureau of Investigation and the U.S. Department of Health and Human Services Office of Inspector General.  This action was supported by the Elder Justice and Nursing Home Initiative that coordinates the department’s activities combating elder abuse, neglect and financial exploitation, especially as they impact beneficiaries of Medicare, Medicaid and other federal health care programs.

The lawsuit is captioned U.S. ex rel. Health Dimensions Rehabilitation Inc. v. RehabCare Group Inc., et. al., Case No. 4:12-cv-00848 AGF (E.D. Mo.).   The claims settled by this agreement are allegations only; there has been no determination of liability.

Former HealthEssentials Solutions Inc. Executives to Pay More Than $1 Million to Resolve Allegations of Submitting False Claims to Federal Health Care Program

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Michael R. Barr, former chief executive officer of Louisville, Kentucky-based HealthEssentials Solutions Inc., has agreed to pay $1 million to resolve allegations that he knowingly caused HealthEssentials to submit false claims to Medicare between 1999 and 2004, the Justice Department announced today.  Norman J. Pfaadt, HealthEssentials’ former chief financial officer, also agreed to pay $20,000 to resolve similar allegations.   H ea lt h E s s e nt i a ls  p r o vi d ed  p r i m a ry  m e di c al  c a re  to  p a ti e nts  in nursing fa  cilit  ies, assisted living  facilities and other settings from 1998 until it filed for bankruptcy and ceased operations in 2005.  Barr founded HealthEssentials and served as its president, chief executive and board chairman.  Pfaadt served as HealthEssentials’ senior vice president and chief financial officer.

  “Healthcare executives should lead by example and create cultures of compliance within their companies, not pressure their employees to cheat the taxpayers,” said Assistant Attorney General for the Civil Division Stuart F. Delery.  “We will continue to hold health care executives personally accountable for their dealings with Medicare.”

“Pursuing health care fraud is a priority of this office and the Department of Justice,” said U.S. Attorney for the Western District of Kentucky David J. Hale.  “We will continue to work with the Department of Health and Human Services and the public to ensure that fraudulent claims are investigated and those responsible are required to pay.”

In March 2008, HealthEssentials pleaded guilty to submitting false statements to Medicare relating to services it provided to patients in assisted living facilities and entered into a civil settlement with the government.  In May 2011, HealthEssentials’ former director of billing, Karen Stone, pleaded guilty for her role in the company’s billing scheme.

The settlement announced today resolves Barr’s and Pfaadt’s alleged liability under the False Claims Act for their roles in HealthEssentials’ false billings.  The government alleged that, between 1999 and 2004, HealthEssentials billed for services that were inflated or not medically necessary and that Barr and Pfaadt pressured HealthEssentials employees to inflate the company’s billings, despite having been advised by attorneys and others that doing so would be improper.  The government further alleged that Barr pressured HealthEssentials employees to conduct special medical assessments on patients, without regard to whether the patients required the assessments, solely to increase the amount that HealthEssentials could bill for the visits.  As part of the settlement, Barr has agreed to a three-year period of exclusion from participating in federally funded health care programs.

“Executives cheating taxpayers and patients – as alleged in this case – should beware of exclusion from Medicare, Medicaid and all other federal health programs, as well as criminal and civil liability,” said Inspector General of the U.S. Department of Health and Human Services Daniel R. Levinson.  “Vulnerable beneficiaries deserve protection from potentially harmful, medically unnecessary services.”

The allegations that were resolved by the settlement arose in part from a lawsuit filed by former HealthEssentials employees Michael and Leigh RoBards under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring suit on behalf of the government and to share in any recovery.  Mr. and Mrs. RoBards will receive a total of $153,000.

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 Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  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 $17 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The case was handled by the Commercial Litigation Branch, Civil Division, U.S. Department of Justice and the U.S. Attorney’s Office for the Western District of Kentucky, with assistance from the Department of Health and Human Services Office of Inspector General and the Federal Bureau of Investigation.

The claims settled by this agreement are allegations only; there has been no determination of liability.  The case is captioned United States ex rel. Stydinger, et al. v. Michael R. Barr and Norman J. Pfaadt, Civil No. 3:03-cv-00380-TBR (W.D. Ky.).

CareFusion to Pay the Government $40.1 Million to Resolve Allegations That Include More Than $11 Million in Kickbacks to One Doctor

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CareFusion Corp. has agreed to pay the government $40.1 million to settle allegations that it violated the False Claims Act by paying kickbacks and promoting its products for uses that were not approved by the Food and Drug Administration, the Justice Department announced today.  CareFusion, a California-based medical technology company, develops, manufactures and sells pharmaceutical products, including products sold under the trade name ChloraPrep.

“When companies pay kickbacks to doctors, especially doctors involved in setting standards for the health care industry, they undermine the integrity of the health care system,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “Corrupting the standard-setting process through kickbacks can affect the health care treatment choices that doctors and hospitals may make for patients.”

The settlement resolves allegations that, under agreements entered into in 2008 by CareFusion’s predecessor, CareFusion paid $11.6 million in kickbacks to Dr. Charles Denham while Denham served as the co-chair of the Safe Practices Committee at the National Quality Forum, a non-profit organization that reviews, endorses and recommends standardized health care performance measures and practices.  The government contends that the purpose of those payments was to induce Denham to recommend, promote and arrange for the purchase of ChloraPrep by health care providers.  ChloraPrep has been approved by the Food and Drug Administration for the preparation of a patient’s skin prior to surgery or injection.

This settlement also resolves allegations that, during the period between September 2009 and August 2011, CareFusion knowingly promoted the sale of ChloraPrep for uses that were not approved by the Food and Drug Administration, some of which were not medically accepted indications, and made unsubstantiated representations about the appropriate uses of ChloraPrep.

“Health care fraud drives up the cost of health care and jeopardizes the strength of our health care system,” said U.S. Attorney for the District of Kansas Barry Grissom.  “This case demonstrates that our fight against health care fraud is helping to protect all Americans, including the elderly, the disabled and the most vulnerable among us.”

The settlement resolves a lawsuit filed by Dr. Cynthia Kirk, a former vice president of regulatory affairs for the Infection Prevention Business Unit of CareFusion, under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens with knowledge of false claims to file suit on behalf of the government and to share in any recovery.  The whistleblower’s, or relator’s, share in this case is $3.26 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 Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  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 $17 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with CareFusion was the result of a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Kansas, the U.S. Department of Health and Human Services Office of Inspector General and the Food and Drug Administration Office of the Chief Counsel.

The lawsuit is captioned United States ex rel. Kirk v. CareFusion et al., No. 10-2492 (D. Kan.)  The claims resolved by the settlement are allegations only; there has been no determination of liability.

United States Government Settles False Claims Act Allegations Against Florida Vein Clinic and Its Owner

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A Florida-based physician, Dr. Ravi Sharma, has agreed to pay $400,000 to resolve allegations that he and his clinics violated the False Claims Act by knowingly billing Medicare for vein injections and physician office visits performed by unqualified personnel, the Justice Department announced today.

“Vein injections and other invasive procedures should be performed by appropriately qualified personnel,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.   “We will not tolerate those who put patients’ health at risk for their personal gain and convenience.”

The government alleged that, between 2009 and 2010, Sharma owned and operated a clinic in the Tampa area called Premier Vein Centers.   Beginning in 2009, Sharma allegedly sent text messages to his office manager instructing her to perform varicose vein injections on patients when he was not in the office.   The government further alleged that, when Sharma was in the office, he performed unnecessary vein injections and unnecessary ultrasound imaging procedures associated with those vein injections.

Sharma also owned and operated, between 2009 and 2010, a weight loss clinic in the Tampa area called Life’s New Image.   Allegedly, unqualified personnel met with patients of the clinic, but Sharma billed those visits as physician office visits using his own Medicare provider number.   Sharma closed Premier Vein Centers and Life’s New Image in 2010.

“We are pleased to announce this very favorable resolution of our claims against this provider,” said Acting U.S. Attorney for the Middle District of Florida A. Lee Bentley III.   “Again, it demonstrates our commitment to civil health care fraud enforcement in our district.”

The allegations covered by the settlement were originally raised in a lawsuit filed by Patti Lovell, the former office manager for Sharma, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government for the submission of false claims and to receive a share of any recovery.   Lovell will receive $72,000.

As part of the settlement, Sharma entered into a three-year Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services.   The agreement requires Sharma to attend training courses provided by the Centers for Medicare and Medicaid Services and provides for an independent external review of his federal health care program coding and billing procedures.

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 Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  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 $17 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The investigation of this matter reflects a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Middle District of Florida and the Department of Health and Human Services Office of Inspector General.

The lawsuit is captioned U.S. ex rel. Lovell v. Ravi Sharma, M.D. and Premier Vein Centers, 12-CV-133 (M.D. Fla.).   The claims resolved by the settlement are allegations only, and there has been no determination of liability.

 

Abbott Laboratories Pays U.S. $5.475 Million to Settle Claims That Company Paid Kickbacks to Physicians

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Abbott Laboratories has agreed to pay the United States $5.475 million to resolve allegations That it violated the False Claims Act by paying kickbacks to induce doctors to implant the company’s carotid, biliary and peripheral vascular products, the Justice Department announced today.  Abbott is a global pharmaceuticals and health care products company based in Abbott Park, Ill.

“Patients have a right to treatment decisions that are based on their own medical needs, not the personal financial interests of their health care providers,” said Assistant Attorney General Stuart F. Delery of the Civil Division of the Department of Justice.  “Kickbacks undermine the ability of health care providers to objectively evaluate and treat their patients, and will continue to be a primary focus of the Department’s health care enforcement efforts.”

The settlement resolves allegations that Abbott knowingly paid prominent physicians for teaching assignments, speaking engagements and conferences with the expectation that these physicians would arrange for the hospitals with which they were affiliated to purchase Abbott’s carotid, biliary and peripheral vascular products.  As a result, the United States alleged Abbott violated the Anti-Kickback Act and caused the submission of false claims to Medicare for the procedures in which these Abbott products were used.

“Physicians should make decisions regarding medical devices based on what is in the best interest of patients without being induced by payments from manufacturers competing for their business,” said U.S. Attorney Bill Killian of the Eastern District of Tennessee.

“Offering financial inducements can distort health care decision-making,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services, Office of Inspector General in Atlanta.  “OIG and our law enforcement partners vigilantly protect government health programs from such alleged abuses.”

Carotid and peripheral vascular products are used to treat circulatory disorders by increasing blood flow to the head and various parts of the body, respectively.  Biliary products are used to treat obstructions that occur in the bile ducts.

The settlement resolves allegations originally brought in a lawsuit filed by Steven Peters and Douglas Gray, former Abbott employees, under the qui tam provision of the False Claims Act , which allows whistleblowers to file suit on behalf of the United States for false claims and share in any recovery   As part of today’s resolution, Peters and Gray will receive a total payment of morethan $1 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 Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  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 $17 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.

This settlement was the result of an investigation by the Justice Department’s Civil Division, theU.S. Attorney’s Offices for the Eastern District of Tennessee and the Northern District of Californiaand the Office of Inspector General at the U.S. Department of Health and Human Services.

The lawsuit is captioned United States ex rel. Peters et al. v. Abbott Laboratories, Inc., Civil Action No. 3:09-CV-430 (E.D. Tenn.).   The claims settled by this agreement are allegations only, and there has been no determination of liability.

Justice Department Recovers $3.8 Billion from False Claims Act Cases in Fiscal Year 2013

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The Justice Department secured $3. 8 billion in settlements and judgments from civil cases involving fraud against the government in the fiscal year ending Sept. 30, 2013, Assistant Attorney General for the Civil Division Stuart F. Delery announced today.    This dollar amount, which is the second largest annual recovery of its type in history, brings total recoveries under the False Claims Act since January 2009 to $ 17 billion – nearly half the total recoveries since the Act was amended 27 years ago in 1986.

The Justice Department’s fiscal year 2013 efforts recovered more than $3 billion for the fourth year in a row and are surpassed only by last year’s nearly $5 billion in recoveries.    As in previous years, the largest recoveries related to health care fraud, which reached $2. 6  billion.    Procurement fraud (related primarily to defense contracts) accounted for another $ 890  million – a record in that area.

“It has been another banner year for civil fraud recoveries, but more importantly, it has been a great year for the taxpayer and for the millions of Americans, state agencies and organizations that benefit from government programs and contracts,” said Assistant Attorney General Delery.    “The $3. 8 billion in federal False Claims Act recoveries in fiscal year 2013, plus another $443 million in recoveries for state Medicaid programs, restores scarce taxpayer dollars to federal and state governments.    The government’s success in these cases is also a strong deterrent to others who would misuse public funds, which means government programs designed to keep us safer, healthier and economically more prosperous can do so without the corrosive effects of fraud and false claims.”

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans benefits, federally insured loans and mortgages, transportation and research grants, agricultural supports, school lunches and disaster assistance.    In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government, which has led to more investigations and greater recoveries.

Most false claims actions are filed under the Act’s whistleblower, or qui tam, provisions, which allow private citizens to file lawsuits alleging false claims on behalf of the government.  If the government prevails in the action, the whistleblower, known as a relator, receives up to 30 perc  ent of the recovery.    The number of qui tam suits filed in fiscal year 2013 soared to 752 –100 more than the record set the previous fiscal year.    Recoveries in qui tam cases during fiscal year 2013 totaled $2. 9 billion , with whistleblowers recovering $345 million.

Health Care Fraud

The $2. 6 billion in health care fraud recoveries in fiscal year 2013 marks four straight years the department has recovered more than $2 billion in cases involving health care fraud.    This steady, significant and continuing success can be attributed to the high priority the Obama Administration has placed on fighting health care fraud.    In 2009, Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius announced the creation of an interagency task force, the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement.    This coordination has yielded historic results:   From January 2009 through the end of the 2013 fiscal year, the department used the False Claims Act to recover $12 .1 billion in federal health care dollars.    Most of these recoveries relate to fraud against Medicare and Medicaid.    Additional information on the government’s efforts in this area is available at StopMedicareFraud.gov, a webpage jointly established by the Departments of Justice and Health and Human Services.

Some of the largest recoveries this past fiscal year involved allegations of fraud and false claims in the pharmaceutical and medical device industries.    Of the $2. 6 billion in federal health care fraud recoveries, $1.8 billion were from alleged false claims for drugs and medical devices under federally insured health programs that, in addition to Medicare and Medicaid, include TRICARE, which provides benefits for military personnel and their families, veterans’ health care programs and the Federal Employees Health Benefits Program.    The department recovered an additional $443 million for state Medicaid programs.

Many of these settlements involved allegations that pharmaceutical manufacturers improperly promoted their drugs for uses not approved by the Food and Drug Administration (FDA) – a practice known as “off-label marketing.”    For example, drug manufacturer Abbott Laboratories Inc. paid $1.5 billion to resolve allegations that it illegally promoted the drug Depakote to treat agitation and aggression in elderly dementia patients and schizophrenia when neither of these uses was approved as safe and effective by the FDA.    This landmark $1.5 billion settlement included $575 million in federal civil recoveries, $225 million in state civil recoveries and nearly $700 million in criminal fines and forfeitures.    In another major pharmaceutical case, biotech giant Amgen Inc. paid the government $762 million, including $598.5 million in False Claims Act recoveries, to settle allegations that included its illegal promotion of Aranesp, a drug used to treat anemia, in doses not approved by the FDA and for off-label use to treat non-anemia-related conditions.  For details, see Abbott, Abbott sentencing, and Amgen.

The department also settled allegations relating to the manufacture and distribution of adulterated drugs.    For example, generic drug manufacturer Ranbaxy USA Inc. paid $505 million to settle allegations of false claims to federal and state health care programs for adulterated drugs distributed from its facilities in India.  The settlement included $237 million in federal civil claims, $118 million in state civil claims and $150 million in criminal fines and forfeitures.    For details, see Ranbaxy.

Adding to its successes under the False Claims Act, the Civil Division’s Consumer Protection Branch, together with U.S. Attorneys across the country, obtained 16 criminal convictions and more than $1. 3 billion in criminal fines, forfeitures and disgorgement under the Federal Food, Drug and Cosmetic Act (FDCA).  The FDCA protects the health and safety of the public by ensuring, among other things, that drugs intended for use in humans are safe and effective for their intended uses and that the labeling of such drugs bears true, complete and accurate information.

In other areas of health care fraud, the department obtained a $237 million judgment against South Carolina-based Tuomey Healthcare System Inc., after a four-week trial, for violating the Stark Law and the False Claims Act.  The Stark Law prohibits hospitals from submitting claims to Medicare for patients referred to the hospital by physicians who have a prohibited financial relationship with the hospital.    Tuomey’s appeal of the $237 million judgment is pending.  If the judgment is affirmed on appeal, this will be the largest judgment in the history of the Stark Law.    For the court’s opinion, see Tuomey.

The department also recovered $26.3 million in a settlement with Steven J. Wasserman M.D., a dermatologist practicing in Florida, to resolve allegations that he entered into an illegal kickback arrangement with Tampa Pathology Laboratory that resulted in increased claims to Medicare.    Tampa Pathology Laboratory previously paid the government $950,000 for its role in the alleged scheme.    The $26.3 million settlement is one of the largest with an individual in the history of the False Claims Act.    For details, see Wasserman.

Procurement Fraud

Fiscal year 2013 was a record year for procurement fraud matters.    The department secured more than $887 million in settlements and judgments based on allegations of false claims and corruption involving government contracts.  Prominent among these successes was the department’s $664 million judgment against Connecticut-based defense contractor United Technologies Corp. (UTC).    A federal court found UTC liable for making false statements to the Air Force in negotiating the price of a contract for fighter jet engines.    In 2004, the department had won a smaller judgment after a three-month trial.  Both sides appealed, but the government’s arguments prevailed, resulting in the case being returned to the trial court to reassess damages.   The $664 million judgment, which UTC has appealed, is the largest judgment in the history of the False Claims Act and, if the appellate court affirms, will be the largest procurement recovery in history.    For details, see UTC.

The department also settled allegations of false claims with two companies in connection with their contracts with the General Services Administration (GSA) to market their products through the Multiple Award Schedule (MAS) program.    To be awarded a MAS contract, and thereby gain access to the broad government marketplace, contractors must provide GSA with complete, accurate and current information about their commercial sales practices, including discounts afforded to their commercial customers.    The government alleged that W.W. Grainger Inc., a national hardware distributor headquartered in Illinois, and Ohio-based RPM International Inc. and its subsidiary, Tremco Inc., a roofing supplies and services firm, failed to disclose discounts given to their commercial customers, which resulted in government customers paying higher prices.  The department recovered $70 million from W.W. Grainger in a settlement that also included allegations relating to a U.S. Postal Services contract and $61 million from RPM International Inc. and Tremco.  For details, see Grainger, RPM/Tremco.

Other Fraud Recoveries

A $45 million settlement with Japan-based Toyo Ink S.C. Holdings Co. Ltd. and its Japanese and United States affiliates (collectively Toyo) demonstrates the breadth of cases the department pursues.  This settlement resolved allegations that Toyo misrepresented the country of origin on documents presented to the Department of Homeland Security’s U.S. Customs and Border Protection to evade antidumping and countervailing duties on imports of the colorant carbazole violet pigment into the United States.    These duties protect U.S. businesses by offsetting unfair foreign pricing and foreign government subsidies.    For details, see Toyo.

The False Claims Act also is used to redress grant fraud.    In a significant case involving a grant from the Department of Education, Education Holdings Inc. (formerly The Princeton Review Inc.) paid $10 million to resolve allegations that the company fabricated attendance records for thousands of hours of afterschool tutoring of students that was funded by the federal grant.  For details, see Education Holdings.

Recoveries in Whistleblower Suits

Of the $3. 8 billion the department recovered in fiscal year 2013, $2. 9 billion related to lawsuits filed under the qui tam provisions of the False Claims Act.    During the same period, the department paid out more than $345 million to the courageous individuals who exposed fraud and false claims by filing a qui tam complaint.    (The average share paid to whistleblowers in fiscal year 2013 cannot be determined from these numbers because the awards paid to whistleblowers in one fiscal year do not always coincide with the fiscal year in which the case was resolved, and the fiscal year’s recoveries may include amounts to settle allegations outside the whistleblower’s complaint.)

Whistleblower lawsuits were in the range of three to four hundred per year from 2000 to 2009, when they began their climb from 433 lawsuits in fiscal year 2009 to 752  lawsuits in fiscal year 2013.    Due to the complexity of fraud investigations generally, the outcomes of many of the qui tam cases filed this past fiscal year are not yet known, but the growing number of lawsuits filed since 2009 have led to increased recoveries.    Qui tam recoveries exceeded $2 billion for the first time in fiscal year 2010 and have continued to exceed that amount every year since.    Qui tam recoveries this past fiscal year bring the department’s totals since January 2009 to $13.4 billion.    During the same period, the department paid out $1.98 billion in whistleblower awards.

“These recoveries would not have been possible without the brave contributions made by ordinary men and women who made extraordinary sacrifices to expose fraud and corruption in government programs,” said Assistant Attorney General Delery.    “We are also grateful to Congress and its continued support of strengthening the False Claims Act, including its qui tam provisions, giving the department the tools necessary to pursue false claims.”

In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud.  In 2009, Senator Patrick J. Leahy, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes.    And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute.

Assistant Attorney General Delery also expressed his deep appreciation for the dedicated public servants who investigated and pursued these cases.    These individuals include attorneys, investigators, auditors and other agency personnel throughout the Justice Department’s Civil Division, the U.S. Attorneys’ Offices, the Departments of Defense and Health and Human Services, the various Offices of Inspector General and the many other federal and state agencies that contributed to the department’s recoveries this past fiscal year.

“The department’s continued success in recovering fraudulent claims for taxpayer money this past fiscal year is a product of the tremendous skill and dedication of the people who worked on these cases and investigations and continue to work hard to protect against the misuse of taxpayer dollars,” said Delery.

In Search of Effective Ethics & Compliance Programs; By Professor Maurice Stucke, GeyerGorey LLP

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Maurice E. Stucke

University of Tennessee College of Law
December 10, 2013


Abstract: 

The U.S. Sentencing Commission’s Organizational Guidelines for over twenty years have offered firms a significant financial incentive to develop an ethical organizational culture. Nonetheless, corporate crime persists. Too many ethics programs remain ineffective.As this Article explores, the Guidelines’ current approach is not working. The evidence, including sentencing data over the past twenty years, reveals that few firms have effective ethics and compliance programs. Nor is there much hope that the Guidelines’ incentive will induce companies, after the economic crisis, to become more ethical.The problem is not attributable to several assumptions underlying the Guidelines. The empirical research, while still developing, suggests that compliance efforts can be effective, and that effective compliance is attainable. Instead, this Article explores how the Guidelines’ extrinsic, incentive-based approach to compliance does not cure, and likely contributes to, the problem.

 

 

Government Intervenes in False Claims Lawsuit Against Ipc the Hospitalist Co. Inc. Alleging Overbilling of Physician Services

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The government has intervened in a lawsuit against IPC The Hospitalist Co. Inc., and its subsidiaries (IPC), alleging that IPC submitted false claims to federal health care programs, the Justice Department announced today.  IPC, based in North Hollywood, Calif., is one of the largest providers of hospitalist services in the United States, employing physicians and other health care providers who work in more than 1,300 facilities in 28 states.  Hospitalists are physicians who work only in hospitals and other long-term care facilities, overseeing and coordinating inpatient care from admission to discharge.

The lawsuit alleges that IPC physicians sought payment for higher and more expensive levels of medical service than were actually performed – a practice commonly referred to as “upcoding.”  Specifically, the lawsuit alleges that IPC encouraged its physicians to bill at the highest levels regardless of the level of service provided, trained physicians to use higher level codes and encouraged physicians with lower billing levels to “catch up” to their peers.

“We continue to be vigilant in our enforcement efforts to ensure that health care programs funded by the taxpayers pay only for appropriate costs,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.

The lawsuit was filed by Dr. Bijan Oughatiyan, a former IPC physician, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue for false claims on behalf of the government and to share in any recovery.  The Act also allows the government to intervene or take over the lawsuit, as it has done in this case, and to recover three times its damages plus civil penalties.  The government has asked the U.S. District Court in Chicago for 120 days to file its own complaint stating its allegations.

This intervention 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 Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  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 $17 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The case was investigated by the Commercial Litigation Branch, Civil Division, U.S. Department of Justice and the U.S. Attorney’s Office for the Northern District of Illinois, with assistance from the Department of Health and Human Services Office of Inspector General. The case is captioned United States ex rel. Oughatiyan v. IPC The Hospitalist Company Inc., et al., Civ. No. 09 C 5418 (N.D. Ill.).  The claims asserted against IPC are allegations only; there has been no determination of liability.

US Files Suit Against Canton, Ohio-based Tab Construction and Its Owner for Allegedly Defrauding the Historically Underutilized Business Zone Program

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The government has filed a complaint against Canton, Ohio-based TAB Construction Co. Inc. (TAB) and its owner, William E. Richardson III, for allegedly making false statements to the Small Business Administration (SBA) to obtain certification as a Historically Underutilized Business Zone (HUBZone) company, the Justice Department announced today.

 “The HUBZone program is intended to create jobs in areas that historically have had trouble attracting business,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “The Justice Department will take strong enforcement action when companies obtain contracts to which they are not entitled.”

The government alleges that TAB used its fraudulently procured HUBZone certification to obtain four U.S. Army Corps of Engineers’ construction contracts worth millions of dollars.  Each of those contracts had been set aside for qualified HUBZone companies.  The government’s complaint asserts claims against TAB and Richardson under the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989.

Allegedly, Richardson originally applied to the HUBZone program in 2000 by claiming that TAB’s principal office was located in a designated HUBZone when no TAB employees worked out of the HUBZone office, and TAB actually was located in a non-HUBZone.  Even though Richardson told the SBA that TAB was located in a HUBZone, Richardson consistently used his non-HUBZone address in conducting TAB’s other business affairs, at one point even stating under oath in private litigation that TAB’s office was located in a non-HUBZone.  In 2006, Richardson allegedly applied for re-certification to the HUBZone program, again falsely stating that eight employees worked in the designated HUBZone.  The government alleges that just six weeks after Richardson re-certified its eligibility with the SBA, TAB completed an affidavit in an unrelated matter, which stated that TAB’s principal office was located in a non-HUBZone.

Under the HUBZone program, companies that maintain their principal office in a designated HUBZone, and meet certain other requirements, can apply to the SBA for certification as a HUBZone small business company.  HUBZone companies can then use this certification when bidding on government contracts.  In certain cases, government agencies will restrict competition for a contract to HUBZone-certified companies.

“We will not tolerate fraud in the HUBZone or any other SBA program,” said SBA Inspector General Peggy E. Gustafson.  “With our interagency partners, this office will continue to pursue those who defraud the government by lying to gain access to federal set-aside contracts.”

“SBA’s contracting programs, including the HUBZone program, provide small businesses with the opportunity to grow and create jobs,” said SBA General Counsel Sara D. Lipscomb.  “SBA has no tolerance for waste, fraud or abuse in any government contracting program and is committed to working with our federal partners to ensure the benefits of these programs flow to the intended recipients.”

The government filed its complaint in two consolidated lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act.  Under the Act, a private citizen can sue on behalf of the government and share in any recovery.  The government also is entitled to intervene in the lawsuit, as it has done in this case.

This matter was handled by the Commercial Litigation Branch of the Justice Department’s Civil Division in conjunction with the Small Business Administration’s Office of Inspector General and Office of General Counsel and the Defense Criminal Investigative Service.

The consolidated civil cases are U.S. ex rel. Roy. J. Fairbrother Jr. and Louis Petit v. TAB Construction Co. Inc., et al., No. 5:11-cv-1432 (N.D. Ohio) and U.S. ex rel. Patricia Hopson and Vince Pavkov v. TAB Construction Co. Inc., No. 5:12-cv-135 (N.D. Ohio).  The claims asserted against TAB and Richardson are allegations only, and there has been no determination of liability.

Nursing Home Operator to Pay $48 Million to Resolve Allegations That Six California Facilities Billed for Unnecessary Therapy

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The Ensign Group Inc., a skilled nursing provider based in Mission Viejo, Calif., that operates nursing homes across the western U.S. has agreed to pay $48 million to resolve allegations that it knowingly submitted to Medicare false claims for medically unnecessary rehabilitation therapy services, the Justice Department announced today.  Six of Ensign’s skilled nursing facilities in California allegedly submitted the false claims:  Atlantic Memorial Healthcare Center, located in Long Beach; Panorama Gardens, located in Panorama City; The Orchard Post-Acute Care (a.k.a. Royal Court), located in Whittier; Sea Cliff Healthcare Center, located in Huntington Beach; Southland, located in Norwalk; and Victoria Care Center, located in Ventura.

  “Skilled nursing facilities that place their own financial interests above the needs of their patients will be held accountable,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “We will continue to advocate for the appropriate use of Medicare funds and the proper care of our senior citizens.”

Between January 1, 1999, and August 31, 2011, these six Ensign skilled nursing facilities allegedly submitted false claims to the government for physical, occupational and speech therapy services provided to Medicare beneficiaries that were not medically necessary.  Specifically, Ensign provided therapy to patients whose conditions and diagnoses did not warrant it, solely to increase its reimbursement from Medicare.  The government further alleged that Ensign created a corporate culture that improperly incentivized therapists and others to increase the amount of therapy provided to patients to meet planned targets for Medicare revenue.  These targets were set without regard to patients’ individual therapy needs and could only be achieved by billing at the highest reimbursement levels.  The government also alleged that Ensign billed for inflated amounts of therapy it had not provided and that certain patients were kept in these facilities for periods of time exceeding what was medically necessary for treatment of their conditions.

“The case against The Ensign Group involves a company that regularly bilked Medicare by submitting inflated bills that, in some cases, sought money for services that simply were never provided to patients,” said U.S. Attorney for the Central District of California André Birotte Jr.  “This settlement – one of the largest Medicare fraud cases against a nursing home chain in U.S. history – demonstrates our commitment to protecting taxpayers who fund important programs that benefit millions of Americans, but don’t want to see their hard-earned money wasted on fraud or abuse.”

In addition to paying the settlement amount, Ensign also agreed that each of its skilled nursing facilities across the nation would be bound by the terms of a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG).

“Billing Medicare for costly, unnecessary skilled nursing services — as the government alleged here — inflates health care costs borne by taxpayers,” said Special Agent in Charge for the Los Angeles Region of the HHS-OIG Glenn R. Ferry.  “This settlement again puts on notice those who would consider defrauding federally funded health care programs.”

This civil 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 Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  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 more than $16.7 billion through False Claims Act cases, with more than $11.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The allegations settled today arose from lawsuits filed by two former Ensign therapists under the qui tam, or whistleblower, provisions of the False Claims Act, which allow private citizens to bring suit on behalf of the government and to share in any recovery.  The dollar amount that the whistleblowers in this case, Gloria Patterson and Carol Sanchez, will receive has not been determined.  The lawsuits are captioned as United States of America ex rel. Gloria Patterson v. Ensign Group Inc., Case No. SACV 06-6956 CJC (ANx) (C.D. Calif.) and United States of America ex rel. Carol Sanchez v. Ensign Group Inc., Case No. SACV 06-0643 CJC (ANx) (C.D. Calif.).

The case was handled by the U.S. Attorney’s Office for the Central District of California, with assistance from the Commercial Litigation Branch, Civil Division, U.S. Department of Justice and the U.S. Department of Health and Human Services Office of Inspector General.   This action was supported by the Elder Justice and Nursing Home Initiative, which coordinates the department’s activities combating elder abuse, neglect and financial exploitation, especially as they impact beneficiaries of Medicare, Medicaid and other federal health care programs.