Category Archives: Department of Justice

CCC’s: The Sherman Act is An Unconstitutional Criminal Statute (Part II)

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July 19, 2017 by Robert Connolly 2 Comments

In Part 1 of this article (here), I argued that the Sherman Act was unconstitutional as a criminal statute because it is void for vagueness.  A statute that criminalizes all restraints of trade cannot be saved by the Supreme Court explaining what Congress really must have really meant. What passed constitutional muster when the Sherman Act was a misdemeanor[1] merits another look now that the statute carries a maximum jail time of 10 years in prison.

In Part II I discuss how I think the criminal element of the Sherman Act should be fixed.

 The Heir Locators Criminal Indictment May Make This Issue Topical

I want to explain why this topic has come to mind. The Antitrust Division’s heir locators investigation/prosecution garners little attention in the world of massive international cartel investigations, but an indictment in this investigation could have major implications for criminal antitrust prosecutions.[2]  In a recent development, the trial judge ruled that the criminal case should be tried under the Rule of Reason. It is possible this development will set off a chain of events that leads to the Supreme Court revisiting what is necessary for a criminal conviction under the Sherman Act.

Heir locator firms locate potential heirs to an estate from public records and agree to help with their claim in return for a contingency fee.  The amount of the contingency fee depends on factors such as the complexity of the claim, potential recovery etc.  Since the potential heirs are located from public records, they may be contacted by more than one heir locator firm.  According to the indictment, the defendants agreed to allocate customers on a “first to contact basis.”  The firm to which the customers were allocated would pay the firm that “backed off” a percentage of the contingency recovered.  The Division has obtained two guilty pleas in the investigation but defendants Kemp & Associates and its co-owner Daniel J. Mannix were indicted in August 2016 and have pled not guilty.

The indictment appears to be a straight forward customer allocation scheme—a per seviolation.  The defendants:

  • agreed, during those conversations and other communications, that when both co-conspirator companies contacted the same unsigned heir to an estate, the co-conspirator company that first contacted that heir would be allocated certain remaining heirs to that estate who had yet to sign a contract with an Heir Location Services provider;

  • agreed that the co-conspirator company to which heirs were allocated would pay to the other co-conspirator company a portion of the contingency fees ultimately collected from those allocated heirs;

If anything is a per se violation, customer allocation should earn the title.  It eliminates price competition and it can be an easier agreement to monitor/enforce than price fixing.  If you lose a customer you were supposed to get, you know it.  But, the defendants moved that the case should be tried under the rule of reason.  The briefs in the case were filed under seal so it is impossible at this point to understand the defendants’ argument and the government’s response.  Nonetheless, on June 21, 2017 U.S. District Judge David Sam heard oral argument and then granted the defendants’ motion that the case is subject to the rule of reason. He reserved judgment on the motion to dismiss “for further disposition pending the government’s further evaluation of the case.”

I predict that the Antitrust Division will not try a criminal case under the Rule of Reason.  The government will either seek an interlocutory appeal to reverse the district court’s ruling, or drop the case.  The Division is in a tough position because three defendants have already pled guilty.[3]  The Division will not lightly walk away from a prosecution where others have already taken a plea.  On the other hand, the Antitrust Division will not want a precedent that allows the defendant to raise the reasonableness of the conduct.  Defendants have argued in previous criminal cases that the restraint should be judged under a rule of reason, but the Division has had ample authority to beat that argument back.  But, what if the defendants go for the whole enchilada, and seek not just a rule of reason trial, but a complete dismissal of the charges?   It certainly would be helpful to the defendants to have a criminal case tried under the rule of reason, but it would be a home run, or antitrust Hall of Fame material to get the indictment dismissed in its entirety as unconstitutionally void for vagueness.

A Rule of Reason Criminal Case?

One reason the defendants may have moved for a rule of reason trial is that the Supreme Court has already said that this would be permissible.  In United States v. U.S. Gypsum,[4]the Supreme Court held that in a criminal prosecution under the Sherman Act that was subject to rule of reason analysis, “action undertaken with knowledge of its probable consequences and having the requisite anticompetitive effects can be a sufficient predicate for a finding of criminal liability under the antitrust laws.”[5]  That would seem to settle the question, but the Supreme Court has been rightly flexible with stare decisis in overruling numerous other “conventional wisdom” tenets in the antitrust area.  Think vertical restraints, maximum resale price maintenance and resale price maintenance as examples.[6]  Would the Supreme Court decide that a rule of reason criminal case (or a per se case) is unconstitutional.  Would an after-the-fact rule of reason determination (after a quick look?) (or full blown inquiry?) meet the “notice” standard required for a criminal statute?  But, what about the Gypsum required showing of intent of anticompetitive conduct?  Does that save the statute?  But what does that even mean?  Anticompetitive under the “consumer welfare model?”  Measured by the Chicago School?  Post Chicago School?  School of Rock?

I have a proposal to amend the elements of a Sherman Act criminal conviction that eliminates these questions/issues and is warranted in light of the 10-year maximum jail sentence.  (And not to forget, a corporation has paid a $500 million criminal fine.)

If the Restraint is Fraudulent—It’s Criminal

Every head of the Antitrust Division in recent memory has made statements such as, “price fixing, market allocation and bid rigging steal from, and commit fraud upon, American business and customers.”[7] Similarly, an Antitrust Division official has testified, “the [criminal] cases that we are charging and prosecuting are unmistakable fraud.”[8]  Simply put, the litmus test for criminality should be whether the restraint of trade also involves fraud (i.e. a per se violation).  The substantial hammer of justice –lengthy prison sentences, Red Notices, extradition, should be reserved for when a jury finds the defendant engaged in a restraint of trade that involved fraud.

Today, criminal antitrust indictments contain an element of fraud, because of [wise] prosecutorial discretion, not because of the dictates of the statute.  But, antitrust jurisprudence could have taken the path down a fraud requirement instead of veering off to a per se rule (a conclusive presumption that takes the issue of reasonableness out of the juries’ hand), and found that the criminality in the Sherman Act is confined to those agreements that have an element of fraud. Early cases interpreting what was an unreasonable restraint of trade were heading in that direction.

What we now call per se offenses were originally called fraud.  This was recognized as early as 1875 in Craft v. McConoughy,[9] a case involving a secret scheme to fix prices among four Illinois warehouses. The court stated, “To the public the four houses were held out as competing firms for business. Secretly they had conspired together.”[10]  The scheme enabled the parties “by secret and fraudulent means, to control the price of grain.”[11]  In the seminal antitrust case of United States v. Addyston Pipe,[12] the court found secret agreements to refrain from bidding to be a form of fraud: “It is well settled that an agreement between intending bidders at a public auction or a public letting not to bid against each other, and thus prevent competition, is a fraud.”[13] In McMullen v. Hoffman,[14] the Court refused to enforce a contract when one conspirator sued for his portion of the profits from a successful collusive bidding scheme. The Court explained that the agreement “tend[ed] to induce the belief that there really is competition . . . although the truth is that there is no such competition.”[15] The Court held that “the illegal character of the agreement is founded not alone upon the fact that it tends to lessen competition, but also upon the fact of the commission of a fraud by the parties in combining their interests and concealing the same.”[16] The Court distinguished a secret agreement from a known joint venture, where “[t]he public may obtain at least the benefit of the joint responsibility. . . . The public agents know then all that there is in the transaction, and can more justly estimate the motives of the bidders, and weigh the merits of the bid.”[17]  Over a century later, in response to a question as to whether antitrust crimes are crimes of moral turpitude, Antitrust Division Assistant Attorney General Bill Baer responded that “price-fixing, bid-rigging and market allocation agreements among companies that hold themselves out to the public as competitors are inherently deceptive and defraud consumers who expect the benefit of competition.”[18]

Drawing on the wisdom of early Supreme Court decisions and the recent pronouncements of the Antitrust Division, the demarcation between a restraint of trade that can subject the violator to civil penalties and one that subjects the violator to criminal penalties is whether there was an element of fraud.  The Sherman Act should reflect this, either by amendment in Congress, or by Supreme Court further interpretation of what the government is required to prove to subject the defendant to criminal penalties.   In a criminal case the government’s burden should include proving that the agreement was a restraint of trade where the agreement was actively concealed or where the defendant held him/itself out to the public as a competitor when in fact an agreement not to compete or limit competition had been reached without the knowledge of the customer.  In a previous article, I have labeled this standard Per Se Plus.[19]

How would the heir locators indictment fare under such a standard? It is hard to know for sure but the indictment suggests that customers shopped around or there would have been no need for an agreement at all.  And when customers got quotes from more than one company, the customer would reasonably assume there was competition.  And the fraud would be, as the Supreme Court said long ago, “in [the defendants] combining their interests and concealing the same.”

Conclusion

Would requiring the government to prove an element of fraud to obtain a criminal conviction make obtaining convictions more difficult?  The answer must be yes, but as a former Antitrust Division prosecutor, to convince a jury to convict you must argue that the crime wasn’t an “unreasonable restraint of trade” whatever the heck that is—but it was fraud by the lying cheating defendants.  There are benefits to the Antitrust Division that would flow from having to prove fraud, but that’s for another post. Here, I’ll end with this.  The crime should fit the punishment; and with punishment of up to ten years in prison for an individual and hundreds of millions of dollars for a corporation, the Sherman Act needs to be amended to include an element of fraud for a criminal conviction because it is currently unconstitutional.

Thanks for reading.

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[1] When the per se rule was announced in United States v. Socony-Vacuum Oil Co., 310 U.S 150 (1940). a jail sentence was virtually a non-existent possibility. The maximum sentence imposed on any of the convicted individual defendants in Socony Vacuum was a fine of $1000. See Daniel A. Crane, The Story of United States v. Socony Vacuum: Hot Oil and Antitrust in the Two New Deals, in ANTITRUST STORIES 107 (Eleanor M. Fox & Daniel A. Crane eds., 2007).

[2]  U.S. v. Kemp & Associates, Inc. and Daniel J. Mannix, Case: 2:16-cr-00403, (D. Utah 2016) (DS), available at  https://www.justice.gov/atr/file/887761/download.

[3]  Richard Blake agreed to plead guilty in January 2016 as part of a proposed plea agreement between the Antitrust Division and Blake.  His company was not charged, most likely because it had received leniency. California-based Brandenburger & Davis and its president Bradley Davis agreed to plead guilty in December 2015.

[4]  438 U.S. 422 (1978).

[5]  Gypsum, 438 U.S. at 444. fn 21.

[6] The Supreme Court stated in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 899 (2007).   “Stare decisis is not as significant in this case, however, because the issue before us is the scope of the Sherman Act,” which the Court has treated as a common-law statute.  The Court has been receptive to reviewing the per se rule in light of “new circumstances and new wisdom.”  The severe loss of personal liberty and other consequences now at stake in a Sherman Act criminal case is a new circumstance that warrants an evolution in the application of the per se rule to criminal antitrust cases so that the test for liability will better match the evolution of the law on consequences

[7] Anne K. Bingaman, Assistant Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, The Clinton Administration: Trends in Criminal Antitrust Enforcement, Remarks Before the Corporate Counsel Inst. (Nov. 30, 1995), available at http://www.justice.gov/atr/public/speeches/0471.htm.

[8] Scott D. Hammond, Deputy Assistant Att’y Gen., Antitrust Div., U.S. Dep’t. of Justice, Transcript of Testimony Before the United States Sentencing Commission Concerning Proposed 2005 Amendments to Section 2R1.1 at 3 (Apr. 12, 2005), available at http://www.justice.gov/atr/public testimony/209071.pdf.

[9] 79 Ill. 346 (1875).

[10] Id. at 348.

[11] Id. at 349.

[12] 85 F. 271 (6th Cir. 1898).

[13] Id. at 293 (emphasis added) (citations omitted).

[14] 174 U.S. 639 (1899)

[15] Id. at 646.

[16] Id. at 649.

[17] Id. at 652 (citations omitted).

[18] Letter from Peter J. Kadzik, Principal Deputy Assistant Att’y Gen., U.S. Dep’t of Justice, to Senator Patrick Leahy Attaching Responses of William Baer, Assistant Att’y Gen. Antitrust Div., U.S. Dep’t of Justice to Questions for the Record Arising from the Nov. 14, 2013 Hearing of the Senate Comm. of the Judiciary Regarding Cartel Prosecution: Stopping Price Fixers and Protecting Consumers at 3 (Jan. 24, 2014) (emphasis added), available at http://www.judiciary.senate.gov/imo/media/doc/111413QFRs-Baer.pdf.

[19]  Robert E. Connolly, Per Se “Plus:” A Proposal to Revise the Per se Rule in Criminal Antitrust Cases, Antitrust, Vol. 29, No. 2, Spring 2015, p. 105.

Senior Executives Of Medical Drug Re-Packager Plead Guilty To Defrauding Healthcare Providers

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Friday, July 14, 2017

President and Pharmacist-in-Charge Distributed Cancer Drugs Contaminated With Mold

Earlier today, in federal court in Brooklyn, Gerald Tighe, the president and owner of Med Prep Consulting Inc. (Med Prep), and Stephen Kalinoski, its director of pharmacy and registered pharmacist-in-charge, pleaded guilty to wire fraud conspiracy in connection with their operation of the now-defunct Tinton Falls, New Jersey-based medical drug re-packager and compounding pharmacy. The pleas were entered before United States District Judge I. Leo Glasser.

The guilty pleas were announced by Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York, and Mark McCormack, Special Agent-in-Charge of the U.S. Food and Drug Administration’s Office of Criminal Investigations, Metropolitan Washington Field Office (FDA/OCI).

According to court filings and facts presented during the plea proceeding, Med Prep processed numerous drugs, including oncology and dialysis drugs, pain medications, anesthesia drugs, and operating room drugs, in purportedly aseptic conditions. In an effort to gain market share, Med Prep repeatedly misrepresented to its customers, who consisted of hospitals and other healthcare providers, that it adhered to, and in some areas exceeded, industry standards and laws applicable to sterile drug preparation. In fact, Med Prep produced drugs in a facility that fell far short of basic industry standards of cleanliness, creating a risk to the health of already ill patients. Tighe and Kalinoski lied to healthcare providers about Med Prep’s failures to comply with basic sterility practices. Med Prep halted its production of drug products in the summer of 2013, following an incident in which it had distributed intravenous drugs containing visible mold to a Connecticut hospital.

“Today’s guilty pleas mark an important step in our continuing effort to hold accountable those who pursue corporate profits over the health and safety of vulnerable patients suffering from disease,” said Acting United States Attorney Rohde. In announcing the guilty plea, Ms. Rohde gratefully acknowledged the assistance and cooperation of the United States Department of Health and Human Services, Office of the Inspector General, Office of Investigations; the United States Office of Personnel Management, Office of the Inspector General; the Department of Justice, Civil Division, Consumer Protection Branch and Commercial Litigation Branch; the FDA’s Office of the Chief Counsel; the Office of the Attorney General of New Jersey; and the New Jersey Board of Pharmacy.

“Producing unsafe and contaminated drugs poses a serious threat to the U.S. public health and cannot be tolerated,” stated FDA/OCI Special Agent-in-Charge McCormack. “The FDA remains fully committed to aggressively pursuing those who place unsuspecting American consumers at risk by distributing adulterated drugs.”

The sentencing, Tighe and Kalinoski each face up to five years in prison, a fine and the forfeiture of criminal proceeds. They will also be required to make full restitution to their victims.

The case is being prosecuted by Assistant United States Attorneys Alixandra E. Smith, Ameet B. Kabrawala and Erin E. Argo.

The Defendants:

GERALD TIGHE

Age: 59

West Long Branch, New Jersey

STEPHEN KALINOSKI

Age: 53

Middletown, New Jersey

E.D.N.Y. Docket No. 15-CR-62 (ILG)

As Part of National Health Care Fraud Takedown, Federal Prosecutors in Los Angeles Charge 14 Defendants in Fraud Schemes that Allegedly Cost Public Healthcare Programs nearly $150 Million

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Thursday, July 13, 2017

LOS ANGELES – In the largest-ever health care fraud enforcement action by federal prosecutors, 14 defendants – including doctors, nurses and other licensed medical professionals – have been charged in the Central District of California for allegedly participating in health care fraud schemes that caused approximately $147 million in losses.

The defendants charged locally are among hundreds of people charged across the United States in cases that cumulatively allege approximately $1.3 billion in false billings. The nationwide sweep includes charges against more than 120 defendants – some of whom are doctors – who allegedly prescribed and distributed opioids and other dangerous narcotics.

In the Central District of California, 14 defendants were charged for their roles in schemes to defraud health insurance programs such as Medicare. The cases allege health care fraud and kickback schemes involving compounded drugs, home health services, physical therapy, acupuncture, Medicare Part D prescription drugs, diagnostic sleep studies and hospice care.

“Health care fraud schemes such as these threaten the vital trust between a patient and his or her health care provider, undermine the integrity of our health care system, and cost all Americans billions of dollars,” said Acting United States Attorney Sandra R. Brown. “Today’s announcement serves as a clear warning that we will continue to work with our law enforcement partners to identify and hold accountable health care professionals who commit these crimes.”

The defendants charged locally include four physicians, including Dr. Jeffrey Olsen, who was charged with illegally prescribing controlled substances, including the opiate oxycodone.

The 57-year-old Olsen surrendered to authorities on Tuesday after being indicted last week by a federal grand jury on 34 counts of illegally prescribing controlled drugs, including oxycodone, and one count of false statement on a DEA registration application. Olsen, a resident of Laguna Beach, allegedly sold prescriptions to addicts and drug dealers in exchange for fixed cash fees, without any medical basis for the prescriptions.

During the investigation, Olsen also sold hundreds of prescriptions to addicts in other states, such as Oregon, without ever seeing the “patients” for an in-person examination. In text messages to these out-of-state customers, Olsen allegedly told customers that, in exchange for exorbitant fees as high as $3,000, he would write prescriptions for whatever drug they wanted, and that he would never check whether they were actually taking the prescribed drugs or whether they were getting additional narcotic prescriptions from other doctors. Olsen allegedly sold more than 1.2 million pills of narcotics, which were almost entirely at maximum strength, in addition to hundreds of thousands of pills of other controlled drugs such as the sedatives Xanax and Soma. The case against Olsen is being prosecuted by Assistant United States Attorneys Ben Barron and Bryant Yang.

In another local case involving a physician, Dr. Thomas S. Powers and Anthony Paduano were arrested Tuesday on healthcare fraud charges that allegedly bilked TRICARE.

The indictment in this case alleges that Powers, of Santa Ana, authorized prescriptions for compounded medications for patients he never examined. Under an agreement, Paduano, of Newport Beach, allegedly paid Powers $200 for each prescription. Paduano received approximately $1.2 million for referring the prescriptions to a local pharmacy that billed TRICARE more than $4.8 million and was paid more than $3.1 million. This case is being handled by Assistant United States Attorneys Mark Aveis, Paul Stern and Cassie Palmer.

“Americans already struggling with health care issues and rising premiums are further burdened with each dollar lost to fraud,” said Deirdre Fike, the Assistant Director in Charge of the FBI’s Los Angeles Field Office. “The losses estimated in Los Angeles for this operation alone are staggering as the abundance of health care fraud schemes in southern California adds considerably to this nationwide crime issue. By collaborating with our partners, we will continue to hold accountable those who get rich by targeting federal health care programs with fraud.”

“Those who would enrich themselves through healthcare fraud – including billing for unnecessary services, accepting kickbacks, and billing for prescriptions that were never provided – are putting profits over patients, stealing from government health programs and taxpayers alike,” said Special Agent in Charge Christian Schrank, of the U.S. Department of Health and Human Services Office of Inspector General. “These operations show yet again our commitment to working with our federal and state law enforcement partners. In fighting this epidemic, we must all stand together.”

“IRS Criminal Investigation will not stand still while criminals line their pockets with illicit proceeds obtained from publicly funded health care programs,” said IRS Criminal Investigation Special Agent in Charge R. Damon Rowe. “It depletes scarce taxpayer dollars and will not be tolerated. IRS Criminal Investigation will continue to work with our federal and state law enforcement partners to bring justice to those individuals who prey on the nation’s health care system for their own personal greed.”

“Our office, in partnership with our fellow investigative agencies, will continue to uncompromisingly investigate and bring to justice the people who perpetrate these criminal acts,” said Amtrak Inspector General Tom Howard. We will remain vigilant in protecting Amtrak employees, retirees, and their dependents, by ensuring our health care dollars are not wasted on fraudulent providers,”

“The Department of Labor – Employee Benefits Security Administration will continue to vigorously investigate wrongdoers committing health care fraud against employer sponsored health plans in Southern California which also impact TRICARE, Medicare, Medicaid” said Crisanta Johnson, DOL-EBSA’s Los Angeles Regional Office.

The other cases filed in federal court in Los Angeles as part of the nationwide sweep are:

  • Aniceto Baliton, of Diamond Bar, co-owner and managing employee of Bliss Hospice in Glendora, was charged yesterday with one count of conspiracy to pay and receive illegal remunerations for health care referrals. The charge stems from Baliton’s role in a fraud scheme to pay kickbacks in exchange for Medicare beneficiaries referred to Bliss and billed by Bliss for hospice services. As part of the fraud scheme, Baliton and the co-owners of the hospice also agreed to generate cash for the illegal kickbacks by disguising such monies as payroll expenses. Based on the referrals that Baliton and his co-conspirators obtained through illegal kickbacks, Bliss submitted claims to Medicare and was paid approximately $2.4 million. The case is being handled by DOJ Trial Attorney Claire Yan.
  • Aleksandr Suris and Maxim Sverdlov, co-owners and operators of Royal Care Pharmacy in Los Angeles, were arrested Monday on charges related to a scheme that allegedly brought in more than $41.5 million from Medicare and CIGNA. The indictment in this case charges Suris with two counts of conspiracy to commit health care fraud and 10 counts of health care fraud, and Sverdlov with one count of conspiracy to commit health care fraud and four counts of health care fraud. The defendants allegedly submitted fraudulent bills for prescription drugs that were never filled by the pharmacy or were not provided to the person to whom the drug was prescribed. The case is being handled by DOJ Trial Attorney Robyn N. Pullio.
  • Dr. Kanagasabai Kanakeswaran was indicted late last month on one count of conspiracy to pay and receive kickbacks for health care referrals and four counts of receiving kickbacks for health care referrals. The charges arise from a kickback conspiracy at a home health company called Star Home Health Resources. The owners and operators of Star allegedly paid kickbacks to referring physicians, including Dr. Kanakeswaran, in exchange for the physicians referring Medicare beneficiaries to receive home health services from Star. The indictment alleges that from May 2008 to May 2016, Star was paid $4,157,311 from Medicare based on home health services that Dr. Kanakeswaran referred to Star in exchange for illegal kickbacks. The case is being handled by Assistant United States Attorney Alex Porter and DOJ Trial Attorney Claire Yan.
  • Jamen Oliver Griffith and Damon Glover were charged late last month with conspiring to solicit, receive and pay illegal kickbacks for health care referrals. The charges stem from defendants’ role in a scheme involving undisclosed payments for generating and steering prescriptions of compounded drugs to Valley View Drugs, Inc., a pharmacy located in La Mirada. As set forth in plea agreements that have been filed in court, Griffith and Glover owned and operated Western Medical Solutions, a “marketing” company that paid non-employee “marketers” to generate compounded drug prescription referrals for Valley View. Commission payments to “marketers” for prescription referrals were based on a percentage of the amount insurance companies reimbursed Valley View. Health insurers ultimately reimbursed Valley View $13,860,083 for prescriptions generated by WMS-affiliated marketers. In turn, Valley View paid WMS approximately $7,622,864 for the prescription referrals. The case is being handled by Assistant United States Attorney Ashwin Janakiram.
  • Xiao “Kimi” Gudmundsen, a licensed acupuncturist and the owner of Healthy Life Acupuncture Center, Inc., which operated at two sites in Los Angeles and Riverside, was charged on June 22, with eight counts of health care fraud and three counts of money laundering. The charges arise from allegations that Gudmundsen recruited Amtrak employees to visit Healthy Life and then, among other things, billed the Amtrak health care plan for acupuncture and other services that were not actually provided. The indictment also charges that Gudmundsen laundered payments received from Amtrak for the false bills through various accounts, including accounts held in the names of relatives. Also charged in the indictment are Suzana Cortez, a Healthy Life employee (who faces five counts health care fraud) and Gladys Perez, an Amtrak employee (who faces two counts of health care fraud). This case is being handled by Assistant United States Attorney Poonam Kumar.
  • James Chen pleaded guilty on June 19 to a health care fraud charge related to his pharmacy processing and billing TRICARE for approximately $62 million for fraudulent prescriptions for compounded medications after Chen paid more than 50 percent in referral fees to marketers. The case is being handled by Assistant United States Attorneys Mark Aveis, Paul Stern and Cassie Palmer.

Indictments and criminal informations contain allegations that a defendant has committed a crime. Every defendant is presumed to be innocent until and unless proven guilty in court.

The cases from the Central District of California are the result of investigations conducted by the United States Department of Health and Human Services, Office of Inspector General; the Federal Bureau of Investigation; the Defense Criminal Investigative Service; the Drug Enforcement Administration; IRS Criminal Investigation; the Office of Personnel Management, Office of Inspector General; the Veterans Administration, Office of the Inspector General; the Department of Labor – Employee Benefits Security Administration; the California Department of Insurance, Fraud Division; the United States Postal Service, Office of the Inspector General; Amtrak’s Office of the Inspector General; the California Board of Pharmacy; California’s Department of Health Care Services; and the California Department of Justice.

The local cases were filed by Assistant United States Attorneys and Trial Attorneys with the Justice Department’s Medicare Fraud Strike Force. The Strike Force operations are part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.

Baton Rouge-Based Medicare Fraud Strike Force Announces Charges Against Four More Individuals For Health Care Fraud And Related Offenses

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Thursday, July 13, 2017

BATON ROUGE, LA – Acting United States Attorney Corey R. Amundson announced today the unsealing of two federal grand jury indictments charging four individuals with health care fraud and related offenses. The cases were unsealed as part of the 2017 National Health Care Fraud Takedown, during which federal, state, and local law enforcement partners announced charges of more than 400 defendants across 41 different federal judicial districts.

The Medicare Fraud Strike Force is part of the joint initiative announced in May 2009 between the U.S. Department of Justice and the U.S. Department of Health and Human Services to reduce and prevent Medicare and Medicaid fraud through enhanced cooperation. In December 2009, a Medicare Fraud Strike Force team was deployed in the U.S. Attorney’s Office in Baton Rouge, Louisiana. Strike Force teams bring together the resources of the U.S. Department of Health and Human Services—Office of Inspector General, the Federal Bureau of Investigation, the U.S. Department of Justice’s Criminal Division—Fraud Section, the U.S. Attorneys’ Offices, and other law enforcement agencies, including, in Baton Rouge, the Louisiana Attorney General’s Medicaid Fraud Control Unit. Over the past seven years, the team has continued working in Baton Rouge and expanded across southern Louisiana.

Louisiana Spine & Sports

In the first case, a federal grand jury has returned an indictment charging John Eastham CLARK, M.D., age 65, of Baton Rouge, Louisiana, and Charlene Anita SEVERIO, age 54, of Walker, Louisiana, with conspiracy to commit wire fraud and health care fraud. The charges stem from Dr. CLARK and SEVERIO’s role in a $4.4 million fraud scheme in which Dr. CLARK and SEVERIO allegedly submitted false claims to Medicare and private insurance companies on behalf of Louisiana Spine & Sports LLC, a pain management clinic in Baton Rouge co-owned by Dr. CLARK. Namely, according to the indictment, Dr. CLARK, and SEVERIO, his billing supervisor, falsified claims to indicate that certain minor surgical procedures occurred on separate days as patient visits, and then instructed employees to create false records substantiating those claims. The indictment also alleges that the defendants submitted false claims seeking reimbursement for medically unnecessary quantitative urinalysis tests. The indictment charges both defendants with two counts of conspiracy to commit wire fraud and health care fraud, and charges Dr. CLARK with an additional two counts of health care fraud. This ongoing investigation is being handled by Dustin Davis, who serves as Assistant Chief of the Department of Justice’s Criminal Division—Fraud Section, Assistant U.S. Attorney Adam Ptashkin, and Jared Hasten of the Fraud Section.

Express ACA

In the second case, a federal grand jury has returned an indictment charging Keaton L. COPELAND, age 32, of Miramar, Florida, and Dorothy V. DELIMA, a/k/a Dorothy V. Copeland, age 45, of Davie, Florida, with a scheme to submit fraudulent health insurance applications to Blue Cross/Blue Shield of Louisiana and other private insurers. According to the indictment, the defendants owned and operated Express ACA, LLC, a health insurance brokerage company in Florida, and they devised a scheme to submit fraudulent health insurance applications to various insurers for health insurance plans that would satisfy the Affordable Care Act’s “minimum essential coverage” requirement. Specifically, according to the indictment, the defendants submitted numerous fraudulent applications for so-called “bronze plans,” the premiums for which were fully subsidized by the U.S. Government, without the named applicants’ knowledge, consent, or authorization. The indictment charges both COPELAND and DELIMA with conspiracy to commit wire fraud and five counts of wire fraud, and the indictment also charges COPELAND with additional counts of wire fraud and aggravated identity theft. This ongoing investigation is being handled by Assistant United States Attorneys J. Brady Casey and Ryan R. Crosswell.

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Since its inception, the Baton Rouge-based Medicare Fraud Strike Force has charged more than 80 defendants with health care fraud and related offenses, achieving a 95% conviction rate and sending nearly 50 of those defendants to federal prison.

Acting U.S. Attorney Corey Amundson stated, “Our medical providers spend countless hours caring for our everyday ailments, improving and extending our lives, and often fighting for us in our most desperate hours. They are rightly viewed as some of the most trusted and respected members of our society. Too often, the few dishonest providers hijack this well-earned respect and trust to line their own pockets through fraud. My office, which has sent nearly 50 healthcare fraud defendants to federal prison since the inception of the Medicare Fraud Strike Force, will continue to work tirelessly with our outstanding federal, state, and local partners to root out these bad actors. I greatly appreciate all those who have contributed to this important and successful law enforcement effort.”

“The indictments returned in both of these cases affirm our commitment to protecting the integrity of our nation’s health insurance programs,” said Special Agent-in-Charge C.J. Porter of the United States Department of Health and Human Services, Office of Inspector General’s (OIG) Dallas Regional Office. “These investigations are also indicative of our continuing efforts to work closely with our Federal and State law enforcement partners to identify and bring to justice those who deliberately manipulate health insurance systems to fraudulently obtain money from Medicare, Medicaid and other federally funded health care programs.”

Jeffrey S. Sallet, the Special Agent-in-Charge of the New Orleans Division of the Federal Bureau of Investigation, stated, “Countless Americans rely on the Medicare and Medicaid programs for essential health coverage. The New Orleans Division of the FBI, along with its local, state and federal partners, will continue to identify and pursue any individuals or entities who would seek to harm and diminish these programs through fraud.”

Louisiana Attorney General Jeff Landry stated, “The success of this initiative shows that collaboration between law enforcement agencies at all levels combats crime. Our investigators work around the clock to fight waste, fraud, and abuse in Medicaid. My office and I are committed to doing all we can to save taxpayer money and protect this program for the people in our State that need it the most. I am proud of the results our team achieved during this operation and what we do daily to reduce Medicaid fraud.”

NOTE: An indictment is an accusation by the Grand Jury. The defendants are presumed innocent until and unless adjudicated guilty at trial or through a guilty plea.

U.S. Attorney Charges NW Alabama Compounding Pharmacy Sales Representatives in Prescription Fraud Conspiracy

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Thursday, July 13, 2017

BIRMINGHAM – The U.S. Attorney’s Office on Wednesday charged two sales representatives for a Haleyville, Ala.,-based compounding pharmacy for participating in a conspiracy to generate prescriptions and defraud health care insurers and prescription drug administrators out of tens of millions of dollars in 2015.

Acting U.S. Attorney Robert O. Posey, FBI Acting Special Agent in Charge David W. Archey, U.S. Postal Inspector in Charge, Houston Division, Adrian Gonzalez, U.S. Department of Health and Human Services, Office of Inspector General, Special Agent in Charge Derrick L. Jackson, Defense Criminal Investigative Service Special Agent in Charge John F. Khin, and Internal Revenue Service, Criminal Investigation, Acting Special Agent in Charge James E. Dorsey announced the charges as part of a nationwide Department of Justice Health Care Fraud Takedown.

Attorney General Jeff Sessions and Department of Health and Human Services Secretary Tom Price, M.D., earlier today announced the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force, involving 412 charged defendants across 41 federal districts, including 115 doctors, nurses and other licensed medical professionals, for their alleged participation in health care fraud schemes involving about $1.3 billion in false billings. Of those charged, more than 120 defendants, including doctors, were charged for their roles in prescribing and distributing opioids and other dangerous narcotics. Thirty state Medicaid Fraud Control Units also participated in today’s nationwide arrests. In addition, HHS has initiated suspension actions against 295 providers, including doctors, nurses and pharmacists.

In the Northern District of Alabama, the U.S. Attorney’s Office filed separate informations charging KELLEY NORRIS, also known as KELLEY NORRIS-HARTLEY, 41, of Tuscaloosa, and BRIDGET McCUNE, 41, of Destin, Fla., with conspiracy to commit health care fraud, wire fraud and mail fraud. McCune’s information also charges her with conspiring to solicit and receive kickbacks in return for referring prescriptions under Medicare and TRICARE, a U.S. Department of Defense health care program, and with money laundering for spending proceeds of the crimes. Both women face various counts of health care fraud for submitting fraudulent prescription reimbursement claims to Blue Cross Blue Shield of Alabama.

In conjunction with the charges, prosecutors also filed plea agreements with Norris and McCune.

“In this case, a pharmacy used a marketing scheme that increased sales of expensive medications without regard for patient need or medical necessity,” Posey said. “Schemes like this defraud Medicare and other health insurance systems by pushing unnecessary medications and driving up the costs of health care.”

Norris and McCune both worked for Northside Pharmacy, an Alabama company doing business as Global Compounding Pharmacy. Global’s compounding and shipping facility was in Haleyville. The pharmacy did its prescription processing, billing and customer service at its “call center” in Clearwater, Fla.

Global hired sales representatives, including Norris and McCune, who were located in various states and were responsible for generating prescriptions from physicians and other prescribers. To bill insurance providers, including Blue Cross Blue Shield of Alabama, Medicare and TRICARE, for these prescriptions, Global contracted to enter the pharmacy networks of their third-party administrators, known as “pharmacy benefit managers” or “PBMs. These PBMs included Prime Therapeutics, Express Scripts Incorporated and CVS/Caremark.

The court documents describe a conspiracy at Global that centered on generating and billing PBMs for fraudulent, often high-reimbursement prescriptions. To generate prescriptions, Global hired sales representatives who were married or related to doctors and other prescribers. Global also encouraged sales representatives to volunteer at doctors’ offices where they would review patient files and push Global’s products to patients. Global executives also frequently instructed employees to obtain high-reimbursing prescriptions that Global would fill and bill for reimbursement. Each of the plea agreements describes a Global executive instructing sales representatives to obtain certain prescriptions and, shortly after, Norris and McCune obtained those prescriptions for themselves and their dependents.

When billing, Global engaged in various fraudulent practices, including splitting drug quantities to evade PBM billing safeguards and automatically refilling and billing for prescriptions regardless of patient need. Global routinely waived co-pays to encourage patients to accept unnecessary medications and refills.

As part of their plea agreements, Norris and McCune agree to forfeit money to the government as proceeds of illegal activity. Norris agrees to forfeit $287,698 and McCune $401,628.

Global paid the defendants a base salary plus a monthly commission for prescriptions that they obtained, according to court documents.

Norris worked out of Tuscaloosa as a sales representative for Global’s Alabama region from August 2014 to July 2016. She was closely related to an Alabama physician. That relative and a second physician, described in her plea agreement as a family friend, wrote a significant number of the prescriptions Norris obtained for Global to fill.

McCune began as a sales representative for Global’s Florida region in September 2014, working from Destin. Global promoted her to national field trainer in January 2015, but she also continued to function as a sales representative until she left the company in July 2016. McCune had a “close familial relationship” with a Florida physician, according to her plea agreement. “The overwhelming majority of prescriptions she obtained” were issued under her family member’s signature, her plea agreement states.

The charges against Norris and McCune follow charges brought by the U.S. Attorney’s Office in May against Global sales representative Robin Gary Lowry, 49, of Columbus, Miss. Lowry was charged with conspiracy to defraud BCBS of Alabama and Prime Therapeutics. She also faced three counts of health care fraud for submitting fraudulent claims for payment to BCBS of Alabama.

Lowry pleaded guilty to the charges in June. She is scheduled for sentencing Nov. 7.

FBI, U.S. Postal Inspection Service, U.S. Department of Health and Human Services Office of Inspector General, U.S. Defense Criminal Investigative Service and Internal Revenue Service, Criminal Investigation investigated the cases, which Assistant U.S. Attorneys Chinelo Dike-Minor and Nicole Grosnoff are prosecuting.

CCC’s: For What It’s Worth…..

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Wondering what’s taking Makan so long?  Mr. Delrahim was nominated almost six months ago to head the Antitrust Division of the US Dept. of Justice.  Today, I sent the following email to Senators McConnell and Schumer:

I was sorry to hear of Senator McCain’s health problem but the lull in the health care debate provides an opportunity to hold the vote to get Makan Delrahim confirmed to head the Antitrust Division, US Dept. of Justice. I served 34 years in the Antitrust Division and I know how important Mr. Delrahim’s confirmation is to get matters in the Division moving full speed and to give guidance to the business community. The delay in Mr. Delrahim’s confirmation has generated a lot of concern that has been reported in the press. I have a widely read blog on antitrust matters [OK–that may be puffery] and I have covered also this issue (here).  Mr. Delrahim has strong bipartisan support. It would be great to show the business community that Congress can get some things done. And the dedicated career staff in the Antitrust Division would also greatly appreciate the appointment of a leader of Mr. Delrahim’s qualifications.  Thank you for your consideration.

Robert Connolly

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If you would also like to contact the Senators, they would love to hear from you!

Senator Mitch McConnell

ph: (202) 224-2541

fax: (202) 224-2499

Contact Form here

Senator Chuck Schumer 

Phone: (202) 224-6542
Fax:  (202) 228-3027

Contact Form here

Michigan Real Estate Businessman Sentenced to Prison for Obstructing the Internal Revenue Laws and Bank Fraud

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Thursday, July 13, 2017

A Michigan business owner was sentenced to serve a year and a day in prison today for obstructing and impeding the internal revenue laws and committing bank fraud, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.

According to documents filed with the court, Richard Pierce filed fraudulent 2004 through 2013 individual income tax returns. Those returns failed to report more than $9 million in gross business receipts that several of his real estate businesses earned, including Phoenix Real Estate Company, Phoenix Preferred Properties LLC, Detroit Matrix, First Metro Properties LLC, First Metro Real Estate Services LLC, Phoenix Office Plaza-II LLC, Rosedale/Grandmont Properties LLC, and RFP Ventures LLC. As a result of those fraudulent filings, Pierce caused a tax loss of more than $400,000.

In 2007, Pierce also committed bank fraud by submitting a fraudulent loan application to a mortgage lender on which he failed to disclose that the buyer of a residential property was receiving a kickback from the seller.

In addition to the term of prison imposed, Pierce was ordered to serve two years of supervised release and to pay restitution to the Internal Revenue Service (IRS), the amount of which will be determined at a later date. Pierce pleaded guilty in February 2015.

Acting Deputy Assistant Attorney General Goldberg commended special agents of IRS Criminal Investigation, who conducted the investigation, and Trial Attorneys Mark McDonald and Christopher O’Donnell of the Tax Division, who prosecuted the case. Acting Deputy Assistant Attorney General Goldberg also thanked the U.S. Attorney’s Office for the Eastern District of Michigan for their substantial assistance.

Additional information about the Tax Division’s enforcement efforts can be found on the division’s website.

National Health Care Fraud Takedown Results in Charges Against Over 412 Individuals Responsible for $1.3 Billion in Fraud Losses

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Thursday, July 13, 2017

Largest Health Care Fraud Enforcement Action in Department of Justice History

Attorney General Jeff Sessions and Department of Health and Human Services (HHS) Secretary Tom Price, M.D., announced today the largest ever health care fraud enforcement action by the Medicare Fraud Strike Force, involving 412 charged defendants across 41 federal districts, including 115 doctors, nurses and other licensed medical professionals, for their alleged participation in health care fraud schemes involving approximately $1.3 billion in false billings. Of those charged, over 120 defendants, including doctors, were charged for their roles in prescribing and distributing opioids and other dangerous narcotics. Thirty state Medicaid Fraud Control Units also participated in today’s arrests. In addition, HHS has initiated suspension actions against 295 providers, including doctors, nurses and pharmacists.

Attorney General Sessions and Secretary Price were joined in the announcement by Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting Director Andrew McCabe of the FBI, Acting Administrator Chuck Rosenberg of the Drug Enforcement Administration (DEA), Inspector General Daniel Levinson of the HHS Office of Inspector General (OIG), Chief Don Fort of IRS Criminal Investigation, Administrator Seema Verma of the Centers for Medicare and Medicaid Services (CMS), and Deputy Director Kelly P. Mayo of the Defense Criminal Investigative Service (DCIS).

Today’s enforcement actions were led and coordinated by the Criminal Division, Fraud Section’s Health Care Fraud Unit in conjunction with its Medicare Fraud Strike Force (MFSF) partners, a partnership between the Criminal Division, U.S. Attorney’s Offices, the FBI and HHS-OIG.  In addition, the operation includes the participation of the DEA, DCIS, and State Medicaid Fraud Control Units.

The charges announced today aggressively target schemes billing Medicare, Medicaid, and TRICARE (a health insurance program for members and veterans of the armed forces and their families) for medically unnecessary prescription drugs and compounded medications that often were never even purchased and/or distributed to beneficiaries. The charges also involve individuals contributing to the opioid epidemic, with a particular focus on medical professionals involved in the unlawful distribution of opioids and other prescription narcotics, a particular focus for the Department. According to the CDC, approximately 91 Americans die every day of an opioid related overdose.

“Too many trusted medical professionals like doctors, nurses, and pharmacists have chosen to violate their oaths and put greed ahead of their patients,” said Attorney General Sessions. “Amazingly, some have made their practices into multimillion dollar criminal enterprises. They seem oblivious to the disastrous consequences of their greed. Their actions not only enrich themselves often at the expense of taxpayers but also feed addictions and cause addictions to start. The consequences are real: emergency rooms, jail cells, futures lost, and graveyards.  While today is a historic day, the Department’s work is not finished. In fact, it is just beginning. We will continue to find, arrest, prosecute, convict, and incarcerate fraudsters and drug dealers wherever they are.”

“Healthcare fraud is not only a criminal act that costs billions of taxpayer dollars – it is an affront to all Americans who rely on our national healthcare programs for access to critical healthcare services and a violation of trust,” said Secretary Price. “The United States is home to the world’s best medical professionals, but their ability to provide affordable, high-quality care to their patients is jeopardized every time a criminal commits healthcare fraud. That is why this Administration is committed to bringing these criminals to justice, as President Trump demonstrated in his 2017 budget request calling for a new $70 million investment in the Health Care Fraud and Abuse Control Program. The historic results of this year’s national takedown represent significant progress toward protecting the integrity and sustainability of Medicare and Medicaid, which we will continue to build upon in the years to come.”

According to court documents, the defendants allegedly participated in schemes to submit claims to Medicare, Medicaid and TRICARE for treatments that were medically unnecessary and often never provided. In many cases, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed. The number of medical professionals charged is particularly significant, because virtually every health care fraud scheme requires a corrupt medical professional to be involved in order for Medicare or Medicaid to pay the fraudulent claims.  Aggressively pursuing corrupt medical professionals not only has a deterrent effect on other medical professionals, but also ensures that their licenses can no longer be used to bilk the system.

“This week, thanks to the work of dedicated investigators and analysts, we arrested once-trusted doctors, pharmacists and other medical professionals who were corrupted by greed,” said Acting Director McCabe. “The FBI is committed to working with our partners on the front lines of the fight against heath care fraud to stop those who steal from the government and deceive the American public.”

“Health care fraud is a reprehensible crime.  It not only represents a theft from taxpayers who fund these vital programs, but impacts the millions of Americans who rely on Medicare and Medicaid,” said Inspector General Levinson. “In the worst fraud cases, greed overpowers care, putting patients’ health at risk. OIG will continue to play a vital leadership role in the Medicare Fraud Strike Force to track down those who abuse important federal health care programs.”

“Our enforcement actions underscore the commitment of the Defense Criminal Investigative Service and our partners to vigorously investigate fraud perpetrated against the DoD’s TRICARE Program. We will continue to relentlessly investigate health care fraud, ensure the taxpayers’ health care dollars are properly spent, and endeavor to guarantee our service members, military retirees, and their dependents receive the high standard of care they deserve,” advised Deputy Director Mayo.

“Last year, an estimated 59,000 Americans died from a drug overdose, many linked to the misuse of prescription drugs. This is, quite simply, an epidemic,” said Acting Administrator Rosenberg. “There is a great responsibility that goes along with handling controlled prescription drugs, and DEA and its partners remain absolutely committed to fighting the opioid epidemic using all the tools at our disposal.”

“Every defendant in today’s announcement shares one common trait – greed,” said Chief Fort. “The desire for money and material items drove these individuals to perpetrate crimes against our healthcare system and prey upon many of the vulnerable in our society.  Thanks to the financial expertise and diligence of IRS-CI special agents, who worked side-by-side with other federal, state and local law enforcement officers to uncover these schemes, these criminals are off the street and will now face the consequences of their actions.”

The Medicare Fraud Strike Force operations are part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country. The Medicare Fraud Strike Force operates in nine locations nationwide. Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

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For the Strike Force locations, in the Southern District of Florida, a total of 77 defendants were charged with offenses relating to their participation in various fraud schemes involving over $141 million in false billings for services including home health care, mental health services and pharmacy fraud.  In one case, the owner and operator of a purported addiction treatment center and home for recovering addicts and one other individual were charged in a scheme involving the submission of over $58 million in fraudulent medical insurance claims for purported drug treatment services. The allegations include actively recruiting addicted patients to move to South Florida so that the co-conspirators could bill insurance companies for fraudulent treatment and testing, in return for which, the co-conspirators offered kickbacks to patients in the form of gift cards, free airline travel, trips to casinos and strip clubs, and drugs.

In the Eastern District of Michigan, 32 defendants face charges for their alleged roles in fraud, kickback, money laundering and drug diversion schemes involving approximately $218 million in false claims for services that were medically unnecessary or never rendered. In one case, nine defendants, including six physicians, were charged with prescribing medically unnecessary controlled substances, some of which were sold on the street, and billing Medicare for $164 million in facet joint injections, drug testing, and other procedures that were medically unnecessary and/or not provided.

In the Southern District of Texas, 26 individuals were charged in cases involving over $66 million in alleged fraud. Among these defendants are a physician and a clinic owner who were indicted on one count of conspiracy to distribute and dispense controlled substances and three substantive counts of distribution of controlled substances in connection with a purported pain management clinic that is alleged to have been the highest prescribing hydrocodone clinic in Houston, where approximately 60-70 people were seen daily, and were issued medically unnecessary prescriptions for hydrocodone in exchange for approximately $300 cash per visit.

In the Central District of California, 17 defendants were charged for their roles in schemes to defraud Medicare out of approximately $147 million. Two of these defendants were indicted for their alleged involvement in a $41.5 million scheme to defraud Medicare and a private insurer. This was purportedly done by submitting fraudulent claims, and receiving payments for, prescription drugs that were not filled by the pharmacy nor given to patients.

In the Northern District of Illinois, 15 individuals were charged in cases related to six different schemes concerning home health care services and physical therapy fraud, kickbacks, and mail and wire fraud.  These schemes involved allegedly over $12.7 million in fraudulent billing. One case allegedly involved $7 million in fraudulent billing to Medicare for home health services that were not necessary nor rendered.

In the Middle District of Florida, 10 individuals were charged with participating in a variety of schemes involving almost $14 million in fraudulent billing.  In one case, three defendants were charged in a $4 million scheme to defraud the TRICARE program.  In that case, it is alleged that a defendant falsely represented himself to be a retired Lieutenant Commander of the United States Navy Submarine Service. It is alleged that he did so in order to gain the trust and personal identifying information from TRICARE beneficiaries, many of whom were members and veterans of the armed forces, for use in the scheme.

In the Eastern District of New York, ten individuals were charged with participating in a variety of schemes including kickbacks, services not rendered, and money laundering involving over $151 million in fraudulent billings to Medicare and Medicaid. Approximately $100 million of those fraudulent billings were allegedly part of a scheme in which five health care professionals paid illegal kickbacks in exchange for patient referrals to their own clinics.

In the Southern Louisiana Strike Force, operating in the Middle and Eastern Districts of Louisiana as well as the Southern District of Mississippi, seven defendants were charged in connection with health care fraud, wire fraud, and kickback schemes involving more than $207 million in fraudulent billing. One case involved a pharmacist who was charged with submitting and causing the submission of $192 million in false and fraudulent claims to TRICARE and other health care benefit programs for dispensing compounded medications that were not medically necessary and often based on prescriptions induced by illegal kickback payments.

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In addition to the Strike Force locations, today’s enforcement actions include cases and investigations brought by an additional 31 U.S. Attorney’s Offices, including the execution of search warrants in investigations conducted by the Eastern District of California and the Northern District of Ohio.

In the Northern and Southern Districts of Alabama, three defendants were charged for their roles in two health care fraud schemes involving pharmacy fraud and drug diversion.

In the Eastern District of Arkansas, 24 defendants were charged for their roles in three drug diversion schemes that were all investigated by the DEA.

In the Northern and Southern Districts of California, four defendants, including a physician, were charged for their roles in a drug diversion scheme and a health care fraud scheme involving kickbacks.

In the District of Connecticut, three defendants were charged in two health care fraud schemes, including a scheme involving two physicians who fraudulently billed Medicaid for services that were not rendered and for the provision of oxycodone with knowledge that the prescriptions were not medically necessary.

In the Northern and Southern Districts of Georgia, three defendants were charged in two health care fraud schemes involving nearly $1.5 million in fraudulent billing.

In the Southern District of Illinois, five defendants were charged in five separate schemes to defraud the Medicaid program.

In the Northern and Southern Districts of Indiana, at least five defendants were charged in various health care fraud schemes related to the unlawful distribution and dispensing of controlled substances, kickbacks, and services not rendered.

In the Southern District of Iowa, five defendants were charged in two schemes involving the distribution of opioids.

In the Western District of Kentucky, 11 defendants were charged with defrauding the Medicaid program.  In one case, four defendants, including three medical professionals, were charged with distributing controlled substances and fraudulently billing the Medicaid program.

In the District of Maine, an office manager was charged with embezzling funds from a medical office.

In the Eastern and Western Districts of Missouri, 16 defendants were charged in schemes involving over $16 million in claims, including 10 defendants charged as part of a scheme involving fraudulent lab testing.

In the District of Nebraska, a dentist was charged with defrauding the Medicaid program.

In the District of Nevada, two defendants, including a physician, were charged in a scheme involving false hospice claims.

In the Northern, Southern, and Western Districts of New York, five defendants, including two physicians and two pharmacists, were charged in schemes involving drug diversion and pharmacy fraud.

In the Southern District of Ohio, five defendants, including four physicians, were charged in connection with schemes involving $12 million in claims to the Medicaid program.

In the District of Puerto Rico, 13 defendants, including three physicians and two pharmacists, were charged in four schemes involving drug diversion, Medicaid fraud, and the theft of funds from a health care program.

In the Eastern District of Tennessee, three defendants were charged in a scheme involving fraudulent billings and the distribution of opioids.

In the Eastern, Northern, and Western Districts of Texas, nine defendants were charged in schemes involving over $42 million in fraudulent billing, including a scheme involving false claims for compounded medications.

In the District of Utah, a nurse practitioner was charged in connection with fraudulently obtaining a controlled substance, tampering with a consumer product, and infecting over seven individuals with Hepatitis C.

In the Eastern District of Virginia, a defendant was charged in connection with a scheme involving identify theft and fraudulent billings to the Medicaid program.

In addition, in the states of Arizona, Arkansas, California, Delaware, Illinois, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, New York, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Texas, Utah, Vermont and Washington, 96 defendants have been charged in criminal and civil actions with defrauding the Medicaid program out of over $31 million. These cases were investigated by each state’s respective Medicaid Fraud Control Units. In addition, the Medicaid Fraud Control Units of the states of Alabama, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, New York, North Carolina, Ohio, Texas, and Utah participated in the investigation of many of the federal cases discussed above.

The cases announced today are being prosecuted and investigated by U.S. Attorney’s Offices nationwide, along with Medicare Fraud Strike Force teams from the Criminal Division’s Fraud Section and from the U.S. Attorney’s Offices of the Southern District of Florida, Eastern District of Michigan, Eastern District of New York, Southern District of Texas, Central District of California, Eastern District of Louisiana, Northern District of Texas, Northern District of Illinois and the Middle District of Florida; and agents from the FBI, HHS-OIG, Drug Enforcement Administration, DCIS and state Medicaid Fraud Control Units.

A complaint, information, or indictment is merely an allegation, and all defendants are presumed innocent unless and until proven guilty.

Additional documents related to this announcement will shortly be available here: https://www.justice.gov/opa/documents-and-resources-july-13-2017.

This operation also highlights the great work being done by the Department of Justice’s Civil Division.  In the past fiscal year, the Department of Justice, including the Civil Division, has collectively won or negotiated over $2.5 billion in judgements and settlements related to matters alleging health care fraud.

Seventh Company Agrees to Plead Guilty for Fixing Prices of Electrolytic Capacitors

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Tuesday, July 11, 2017

Nichicon Has Agreed to Pay $42 Million Criminal Fine

Nichicon Corporation will plead guilty for its role in a conspiracy to fix prices for electrolytic capacitors sold to customers in the United States and elsewhere, the Department of Justice announced today.

According to the one-count felony charge filed today in the U.S. District Court for the Northern District of California, Nichicon conspired with others to suppress and eliminate competition for electrolytic capacitors from as early as November 2001 until December 2011. In addition to pleading guilty, Nichicon has agreed to pay a $42 million criminal fine and cooperate with the Antitrust Division’s ongoing investigation. The plea agreement is subject to court approval.

“Including today’s charge, the Antitrust Division has now charged seven companies and ten individuals for participating in a long-running conspiracy to fix the price of a critical component in electronic devices used by millions of American consumers,” said Director of Criminal Enforcement Marvin Price of the Justice Department’s Antitrust Division. “But our investigation is not over. We are continuing to pursue the companies and executives who conspired to undermine competition in this vital industry.”

Electrolytic capacitors store and regulate electrical current in a variety of electronic products, including computers, televisions, car engines and airbag systems, home appliances and office equipment.

Today’s charge results from ongoing federal antitrust investigations being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco Field Office into price fixing, bid rigging and other anticompetitive conduct in the capacitor industry. Anyone with information related to the focus of this investigation should contact the Antitrust Division’s Citizen Complaint Center at 888-647-3258, visit https://www.justice.gov/atr/report-violations, or call the FBI tip line at 415-553-7400.

Hospice Company To Pay $2 Million To Resolve Alleged False Claims Related To Unnecessary Hospice Care

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Thursday, July 6, 2017

NEWARK, N.J. – A hospice company in Bensalem, Pennsylvania, has agreed to pay to the United States $2 million to resolve allegations that it provided unnecessary hospice services, Acting U.S. Attorney William E. Fitzpatrick announced today.

Compassionate Care of Gwynedd Inc. is a hospice provider based in Bensalem and a subsidiary of Compassionate Care Hospice Group Inc., a Florida corporation with its principal place of business in Parsippany, New Jersey. The settlement announced today follows an investigation by the U.S. Attorney’s Office for the District of New Jersey and the Commercial Litigation Branch of the Justice Department’s Civil Division. The allegations arose from a whistle-blower suit filed under the False Claims Act.

The United States alleges that from Jan. 1, 2005, through Nov. 15, 2011, Compassionate Care of Gwynedd admitted patients who did not need hospice care and billed Medicare for these medically unnecessary services. The government alleges that the company admitted these patients by using a diagnosis of “debility” that was not medically justified.

The relators, or whistler-blowers, in the underlying qui tam will receive more than $350,000 as their statutory share of the recovery under the False Claims Act. The civil lawsuit was filed in the District of New Jersey and is captioned United States, et al., ex rel. Jane Doe and Mary Roe v. Compassionate Care Hospice, et al.

Acting U.S. Attorney Fitzpatrick credited special agents from the Department of Health and Human Services, Office of Inspector General, under the direction of Special Agent in Charge Scott J. Lampert, with the investigation leading to the settlement.

The government is represented by Assistant U.S. Attorney Charles Graybow of the Health Care and Government Fraud Unit of the U.S. Attorney’s Office for the District of New Jersey and Trial Attorney Justin Draycott of the Department of Justice’s Civil Division. The Office of Inspector General and the Office of the General Counsel for the Centers for Medicare and Medicaid Services of the Department of Health and Human Services also participated in the investigation and settlement.

The U.S. Attorney’s Office for the District of New Jersey reorganized its health care practice in 2010 and created a stand-alone Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses. Since that time, the office has recovered more than $1.36 billion in health care and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act, and other statutes.

The claims settled by this agreement are allegations only; there have been no admissions of liability.

Counsel for relators: Britton D. Monts Esq., Austin, Texas; Timothy J. McInnis Esq., New York

Counsel for defendant: Sean C. Cenawood Esq., New York