Category Archives: False Claims Act

Astellas Pharma US Inc. to Pay $7.3 Million to Resolve False Claims Act Allegations Relating to Marketing of Drug Mycamine

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Pharmaceutical company Astellas Pharma US Inc. will pay $7.3 million to resolve allegations that it violated the False Claims Act in connection with its marketing and promotion of the drug Mycamine for pediatric use, the Justice Department announced today.  Astellas Pharma US Inc., located in Northbrook, Ill., manufactures and sells pharmaceutical drugs, including Mycamine.

“The FDA’s drug approval process requires companies to demonstrate the safety and efficacy of their products,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “The Justice Department will hold accountable pharmaceutical companies that skirt these rules and seek to bill federal health care programs for uses of drugs that are not reimbursable.”

The settlement resolves allegations that, between 2005 and 2010, Astellas knowingly marketed and promoted the sale of Mycamine for pediatric use, which was not a medically accepted indication and, therefore, not covered by federal health care programs.  During this time period, the FDA approved Mycamine to treat adult patients suffering from serious and invasive infections caused by the fungus Candida, including infections in the esophagus, the blood and the abdomen, and to prevent Candida infections in adults undergoing stem cell transplants.  From 2005 through June 2013, however, Mycamine was not approved to treat pediatric patients for any use.

As a result of today’s $7.3 million settlement, the federal government will receive $4.2 million, and state Medicaid programs will receive $3.1 million.

“The settlement in this case further demonstrates our commitment to hold responsible any pharmaceutical company that disregards the FDA drug approval process and promotes drugs for uses before they have been deemed safe and effective,” said U.S. Attorney for the Eastern District of Pennsylvania Zane David Memeger.  “It’s a message that should resonate with all drug companies: there are consequences for violating the False Claims Act and putting profit ahead of government safeguards.”

The allegations resolved by the settlement arose from a lawsuit filed by Frank Smith, a former Astellas sales representative, under the False Claims Act’s whistleblower provisions, which permit private parties to sue for false claims on behalf of the government and to share in any recovery.  Smith will receive $708,852.

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 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 a total of more than $19.1 billion through False Claims Act cases, with more than $13.6 billion of that amount recovered in cases involving fraud against federal health care programs.

This case was a cooperative effort among the U.S. Attorney’s Office for the Eastern District of Pennsylvania, the Civil Division of the Department of Justice and the Offices of the Inspectors General of the Department of Health and Human Services and Office of Personnel Management.  The lawsuit is captioned United States ex rel. Smith v. Astellas Pharma, US Inc. et al., No. 10-999 (E.D. Pa.).

 

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

Antitrust and White-Collar Defense Luminary, Robert E. Connolly, Joins GeyerGorey LLP

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Robert E. ConnollyGeyerGorey LLP announced today that Robert E. Connolly has joined the firm’s Washington, D.C. office as a partner.  Connolly spent most of his career as a prosecutor with the Middle Atlantic Field Office of the Antitrust Division, Department of Justice.   Connolly joined that office in 1980 and was Chief from 1994 until early 2013.  More recently, Robert E. Connolly has been with DLA Piper in Philadelphia.  Connolly will lead GeyerGorey’s corporate internal investigations practice.  Founding partner Brad Geyer said “Bob is a natural fit for our culture, which requires constant disciplined teamwork and focus on client solutions that spring from the firm’s’ deep prosecutorial experience”
Connolly said: “I am excited to join my former DOJ colleagues.  Collectively we have worked on many of the Division’s most significant criminal and civil matters.  We have unique insights and experience to offer clients. The firm’s unique approach and rapid growth further strengthens our ability to serve clients faced with government investigations.”
“We expect Bob will be involved in much of the firm’s current portfolio of work, in addition to leading the corporate internal investigation practice,” said founding partner Hays Gorey.  “Bob has a notable reputation for his representation in high-stakes matters. He will strengthen our ability to represent multinational clients in complex litigation, as well as in high-profile regulatory and enforcement agency investigations.”  Connolly will be also be part of GeyerGorey’s compliance team, which blends its experience in enforcement, in-house counseling, criminal and civil defense, and qui tam litigation, to help companies efficiently identify, address, and mitigate litigation risks from the onset and develop an organizational culture that encourages ethical conduct and a commitment to comply with the law.
In his career with the Division, Connolly led major national and international white-collar crime investigations in the areas of antitrust, fraud and obstruction of justice.  He is known for innovative investigative and trial strategy and a command presence in the courtroom.  He left the government with one of the, if not the most successful, trial records in Antitrust Division history. Connolly was known for his building and leading effective teams that had an extraordinary commitment to successfully completing the mission.
Notably, Connolly led the international graphite electrodes cartel grand jury investigation, which resulted in seven corporate and three individual convictions and approximately $437 million in fines, including what was then the largest post-trial criminal fine in Antitrust Division history.  The investigation was capped by charging, trying and convicting a foreign corporation of aiding and abetting the cartel.   Connolly, as lead trial attorney, along with GeyerGorey’s Wendy Norman, received the DOJ’s highest litigation honor, the John Marshall Award for Outstanding Legal Achievement for Trial Litigation.  More recently, Connolly’s office led the historic effort to extradite Ian Norris to the United States from Britain to stand trial on obstruction of justice charges, of which Norris was later convicted.
In addition to his prosecutorial experience, Connolly was the Victor Kramer Fellow at Yale University in 1989-1990. He has served as an adjunct professor of antitrust law at Rutgers-Camden Law School and later Drexel School of Law.   He currently serves on the Advisory Board for the ABA Cartel and Criminal Practice committee and since leaving the Antitrust Division in 2013, has authored more than a dozen articles on U.S. and international competition law practice.

Government Settles False Claims Act Allegations Against Kansas Cancer Treatment Facility and Its Owner

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Hope Cancer Institute, a cancer treatment facility in Kansas, and Dr. Raj Sadasivan, the owner of Hope Cancer Institute, have agreed to pay $2.9 million to resolve allegations that they violated the False Claims Act by submitting claims to Medicare, Medicaid and the Federal Employee Health Benefits Program for drugs and services that were not provided to beneficiaries, the Department of Justice announced today.

“Billing Medicare and Medicaid for drugs that are not provided to beneficiaries contributes to the soaring costs of health care,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.   “Providers will be investigated aggressively and held accountable for falsely billing federal health care programs.”

The settlement resolves allegations that, between 2007 and 2011, Sadasivan and Hope Cancer Institute submitted claims to federal health benefit programs for the chemotherapy drugs Rituxan, Avastin and Taxotere that were not provided to federal health care beneficiaries.   Sadasivan allegedly instructed the employees of Hope Cancer Institute to bill for a predetermined amount of cancer drugs at certain dosage levels, when lower dosages of these drugs were actually provided to beneficiaries.   As a result of these instructions, Hope Cancer Institute submitted inflated claims to federal health care programs for drugs that were not actually provided to patients.

“Health care providers that try to make a quick buck by billing taxpayers for services never provided will instead pay a high price for their greed-fueled fraud,” said Gerald T. Roy, Special Agent in Charge, U.S. Department of Health and Human Services Office of Inspector General.   “We are dedicated to investigating and prosecuting these types of deceptive schemes.”

The settlement resolves a lawsuit filed by Krisha Turner, Crystal Dercher and Amanda Reynolds, former employees of Hope Cancer Institute, 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.

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 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 a total of more than $19.1 billion through False Claims Act cases, with more than $13.6 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with Sadasivan and Hope Cancer Institute was the result of a coordinated effort among the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Kansas and the U.S. Department of Health and Human Services Office of Inspector General.   The False Claims Act suit was filed in the U.S. District Court for the District of Kansas and is captioned United States ex rel. Turner et al. v. Hope Cancer Institute, et al.

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

American Family Care Inc. to Pay $1.2 Million to Settle Allegations of Inflated Medicare Claims

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American Family Care Inc. has agreed to pay the government $1.2 million to resolve allegations under the False Claims Act that it knowingly submitted claims to Medicare for outpatient office visits that were billed at a higher rate than was appropriate, the Justice Department announced today.  American Family Care is a network of walk-in medical clinics headquartered in Birmingham, Ala., with offices in Alabama, Tennessee and Georgia.

“Mischarging the government for office visits wastes valuable government resources that could be used to care for other patient needs,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “At a time of increasing concern about the cost of medical care, it is especially important to ensure that health care providers are not overbilling the government by improperly inflating their claims.”

Following guidance adopted by the Centers for Medicare and Medicaid Services, health clinics such as American Family Care bill Medicare for their services by selecting a corresponding Evaluation and Management code.  The codes are divided into five different levels – from basic (level 1) to most complex (level 5).  Higher level codes result in higher reimbursement from Medicare than lower level codes.  The government alleged that American Family Care knowingly selected Evaluation and Management codes for a level of services that exceeded those actually provided in order to artificially increase the amount of reimbursement it received for those visits.

“The False Claims Act is a critical tool for weeding out fraud and protecting the taxpayers,” said U.S. Attorney for the Northern District of Alabama Joyce White Vance.  “My office will continue to return funds, like the $1.2 million in this case, to the taxpayers by proceeding against those who abuse our public health programs.

“Billing the government for services not provided as claimed cheats both taxpayers and patients,” said Derrick L. Jackson, Special Agent in Charge of the Office of Inspector General, U.S. Department of Health and Human Services region including Alabama.  “We will pursue aggressively providers like American Family Care alleged to have improperly maximized reimbursements.”

The civil settlement resolves a lawsuit filed by Anita C. Salters, a former employee of American Family Care, under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the government for false claims and to obtain a portion of the government’s recovery.  Salters’ share has not yet been determined.

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 Secretary of Health and Human Services Kathleen Sebelius.  The partnership between the two departments has focused on 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 $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.

This settlement with American Family Care was the result of a coordinated effort among the U.S. Attorney’s Office for the Northern District of Alabama; the Department of Justice’s Civil Division, Commercial Litigation Branch; the Office of Inspector General of the U.S. Department of Health and Human Services and the Federal Bureau of Investigation.

The lawsuit is captioned United States ex rel. Anita C. Salters v. American Family Care Inc. (N.D. Ala.).  The claims resolved by this settlement are allegations only, and there has been no determination of liability.

Law360: Court Split Likely To Lead To More FCPA Whistleblowing; contributing authors Joan E. Marshall and Phillip C. Zane

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Court Split Likely To Lead To More FCPA Whistleblowing

Law360, New York (February 13, 2014,  1:42 PM ET) — Two burgeoning —  and seemingly disparate — legal trends affecting Foreign Corrupt  Practices Act enforcement have emerged recently. These forces may  presage a marked increase in whistleblower-driven FCPA investigations as well as the shareholder suits such corporate fraud investigations tend  to inspire.
First, federal regulators and prosecutors continue their high-profile  expansion of FCPA enforcement. Federal authorities began to prioritize  such actions in the early 2000s, and the heightened whistleblower  protections afforded FCPA informants under the Dodd-Frank Wall Street  Reform and Consumer Protection Act have contributed to the program’s  ongoing growth in more recent years. Second, a recent divide among  federal courts suggests an erosion of the protections these  whistleblowers can expect to receive under federal law, but  paradoxically, may result in more violations reported within the United  States.
These dual realities suggest that federal authorities will continue to  process FCPA tips at a growing rate, and that this growth may accelerate as more employees report FCPA violations directly to the government.
The FCPA holds liable any company that is based and/or publicly traded  in the United States whose employees or agents engage in acts of bribery with foreign government officials.[1] The act is remarkably broad in  its scope, effectively covering the conduct of all individuals working  for or on behalf of any company based or traded in the United States.  This allows prosecutors to hold companies accountable for, among other  things, acts committed by foreign employees of attenuated subsidiaries  and contractors of the company.
For example, the U.S. Securities and Exchange Commission successfully prosecuted Dow Chemical Company after a fifth-tier Dow subsidiary bribed Indian officials to expedite  the approval of pesticide products in that country.[2] The FCPA also  covers payments to agents of foreign governmental entities — including  employees of companies that are owned or controlled by the foreign  state. This point is particularly salient for companies doing business  in countries like China, where state-controlled companies dominate the  economy.
While Congress enacted the FCPA in 1977, federal enforcement of the act  increased sharply in 2004. In the act’s first 23 years — from 1977 to  2000 — the SEC brought a total of nine FCPA enforcement actions.[3] In  the next three years, that total doubled.[4] In 2010, the SEC created a  new subdivision dedicated exclusively to FCPA prosecution,[5] and  between that year and 2013, the commission averaged almost a dozen new  FCPA actions a year.[6]
These prosecutions have yielded enormous government recoveries. The prosecution of the German manufacturing conglomerate Siemens AG, for example, produced a 2008 settlement under which Siemens agreed to  pay some $800 million in disgorgement and fines to the SEC and the U.S. Department of Justice in addition to more than $850 million to German authorities for bribing government officials on five continents.[7]
This marked increase in FCPA enforcement dovetails with the recent  federal priority of aggressively promoting whistleblowing through the  enforcement of the Dodd-Frank Act. Under Section 922 of Dodd-Frank, the  federal government rewards whistleblowers who report high-stakes[8]  corporate malfeasance implicating America’s securities laws with between 10 to 30 percent[9] of the amount recovered.[10]
In addition to establishing financial incentives, the Dodd-Frank Act  affords whistleblowers certain protections, including the promise of job reinstatement, compensation for legal fees, and the payment of twice  the amount of back pay owed to any whistleblower who has suffered  retaliation from an employer for reporting violations that qualify for  Dodd-Frank protection.[11]
A number of recent federal rulings, however, have conflicted in their  interpretations of the reach of Dodd-Frank’s whistleblower protections  and cast doubt on the certainty of protection for certain types of  whistleblower reports. In mid-October 2013, for example, a Massachusetts district court affirmed that Dodd-Frank protected whistleblowers  regardless of whether they reported the qualifying crime to the SEC, to  any other federal agency, or to their employer.[12]
Less than a week later, however, a Manhattan federal judge rejected this reasoning in Liu v. Siemens AG, and denied whistleblower protections to a Siemens employee who had reported alleged FCPA violations  internally.[13] Four days thereafter, a different judge in the same  court rejected her colleague’s logic and extended whistleblower status  to a different employee who had reported an alleged qualifying  securities crime only to his employer, and not to the government.[14]
The only federal appellate court to address this question has ruled that Dodd-Frank’s whistleblower protections apply narrowly. In July 2013,  the U.S. Fifth Circuit Court of Appeals denied whistleblower status to  the former Iraq country director for GE Energy in Asadi v. GE  Energy.[15] In that decision, the Fifth Circuit scrutinized a perceived  inconsistency between the two definitions of “whistleblower” within  Dodd-Frank’s Section 922 — one defining the term for incentives  purposes, the other to establish protections — and held that the act  provides whistleblower protections only to those who report a violation  to the SEC itself.[16]
Accordingly, the court concluded that the plaintiff — who had reported  potential FCPA violations only to his supervisors — was not a  “whistleblower” entitled to Dodd-Frank retaliation protections.[17] This holding rejected a string of trial-level federal decisions[18] and  dismissed an SEC-promulgated rule specifically designed to harmonize  Section 922’s inconsistent definitions.[19]
Importantly, the Fifth Circuit also declined to reverse the underlying  district court’s ruling that reports of FCPA violations made outside the United States did not qualify for Dodd-Frank whistleblower  protection.[20] Three months thereafter, the Southern District of New  York’s Liu ruling, which drew great inspiration from Asadi, stated  expressly what the Fifth Circuit had implied — that Dodd-Frank protects  only whistleblowers who make their reports while within the United  States.[21]
Together, Liu and Asadi hold that Dodd-Frank protects only those who  report qualifying FCPA violations (1) to the SEC (2) while within the  United States. The Liu court also emphasized the fact that the plaintiff in that case was a “Taiwanese resident,” seemingly suggesting that the  court believes the act protects only whistleblowers residing in  America.[22]
This is a critical shift in the law for FCPA whistleblowers and, where  applicable, their legal representatives. (Whistleblowers who wish to  report violations to the commission anonymously must retain a lawyer in  order to do so.[23])
According to the “2013 Annual Report to Congress on the Dodd-Frank  Whistleblower Program,” which the SEC’s Office of the Whistleblower  released in November 2013, the commission received 30 percent more FCPA  tips during fiscal year 2013 than in 2012.[24] Moreover, the SEC  received more foreign-based whistleblower tips from China than from any  country other than the United Kingdom and Canada.[25] Finally,  California generated the most domestic-based whistleblower tips of any  state by far: 375 whistleblower reports originated in the Golden State,  with the next-highest state — New York — registering only 215.[26]
Considering that the recent federal rulings call into question the  application of Dodd-Frank’s whistleblower protections to FCPA violations reported from outside the United States, one can expect more of these  tips to come from whistleblowers located in America — and particularly  in states like California that enjoy extensive and longstanding ties  with Chinese business interests.[27] One can also expect to see an  increase in employee whistleblowers who report FCPA violations directly  to the SEC in order to ensure their protection under Dodd-Frank. Both  factors should accelerate the growth[28] of the SEC’s whistleblower  program under Dodd-Frank.[29]
Although lawyers should not expect this to automatically translate to an increase in whistleblower representations — again, informants who do  not wish to report violations anonymously are free to proceed without an attorney — the plaintiffs bar should find cause for optimism in one of  the likely collateral effects of increased FCPA enforcement: the  shareholder class suits that will inevitably follow.
—By Fabrice Vincent and Kevin Budner, Lieff Cabraser Heimann and Bernstein LLP, Joan E. Marshall and Phillip C. Zane, GeyerGorey LLP, Archie Grubb, Beasley Allen Crow Methvin Portis & Miles PC, and Ben Fuchs
Fabrice Vincent is a partner and Kevin Budner is an associate in Lieff Cabraser’s San Francisco office.
Joan Marshall is a partner in GeyerGorey’s Dallas office. Phillip Zane is of counsel in the firm’s Washington, D.C., office.
Archie Grubb is a partner with Beasley Allen in Montgomery, Ala.
Ben Fuchs is a third-year law student at Tulane University Law School  and a former print and new media journalist who can be reached at  [email protected].
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their firms, their clients, or Portfolio Media  Inc., or any of its or their respective affiliates. This article is for  general information purposes and is not intended to be and should not be taken as legal advice.
[1] 15 U.S.C. § 78dd-1 et seq. The Act creates an exception, however,  for payments made “to expedite or secure the performance of a routine  governmental action by a foreign official, party, or party official.” 15 U.S.C. § 78dd-1(b) (emphasis added).
[2] Press Release, “SEC Files Settled Enforcement Action Against the Dow Chemical Company for Foreign Corrupt Practices Act Violations,” U.S.  Securities and Exchange Commission (February 13, 2007) (available here:  http://www.sec.gov/litigation/litreleases/2007/lr20000.htm) (last  accessed February 10, 2014).
[3] “SEC Enforcement Actions: FCPA Cases,” U.S. Securities and Exchange  Commission (available here:  http://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml) (last accessed  February 10, 2014).
[4] Id.
[5] Press Release, “SEC Names New Specialized Unit Chiefs and Head of  New Office of Market Intelligence,” U.S. Securities and Exchange  Commission (January 13, 2010) (available here:  http://www.sec.gov/news/press/2010/2010-5.htm) (last accessed February  10, 2014).
[6] “SEC Enforcement Actions: FCPA Cases,” supra, n.3.
[7] See Press Release, “SEC Charges Siemens AG for Engaging in Worldwide Bribery,” U.S. Securities and Exchange Commission (December 15, 2008)  (available here: http://www.sec.gov/news/press/2008/2008-294.htm) (last  accessed February 10, 2014).
[8] The program provides such payments to whistleblowers only when the  government’s total recovery exceeds $1 million. This requirement is  mitigated, however, by the fact that the “total recovery” reflects  recoveries secured through all actions related to the whistleblower’s  provided information. In contrast, the anti-retaliation provision of the Sarbanes-Oxley Act of 2002 only provides for back pay. Compare 15  U.S.C. § 78u-6(h)(1)(C) with 18 U.S.C. § 1514A(c)(2).
[9] The SEC assesses three factors in determining how much to reward  whistleblowers: (1) the significance of the whistleblower-provided  information; (2) the level of assistance the whistleblower has provided  during the investigation and prosecution; and (3) the level of  importance the Commission places on deterring the sort of conduct under  scrutiny in the particular case. 15 U.S.C. § 78u-6.
[10] 15 U.S.C. § 78u-6.
[11] Id.
[12] Ellington v. Giacoumakis, CIV.A. 13-11791-RGS, 2013 WL 5631046, at  *9–10 (D. Mass. Oct. 16, 2013) (holding that a financial planner’s  internal reporting of his employer’s violation of securities laws  covered under the Dodd-Frank whistleblower section constituted a  protected act of whistleblowing).
[13] Liu v. Siemens A.G., 13 CIV. 317 WHP, 2013 WL 5692504, at *4 (S.D.N.Y. Oct. 21, 2013).
[14] Rosenblum v. Thomson Reuters (Mkts.) LLC, 13 CIV. 2219 SAS, 2013 WL 5780775 (S.D.N.Y. Oct. 25,  2013). As with the Ellington whistleblower, the plaintiff in Rosenblum  alleged retaliation for accusing the employer of violating the  Sarbanes-Oxley Act of 2002 rather than the FCPA. Whistleblowers who  report violations of either of these laws, among other securities laws,  qualify for protection under the Dodd-Frank Act so long as the alleged  violator is a publicly held company and the alleged violation meets the  other requirements outlined in Section 922 of the Dodd-Frank Act.
[15] Asadi v. GE Energy (USA), L.L.C., 720 F.3d 620 (5th Cir. 2013).
[16] Id. at 629.
[17] Id.
[18] Id. at 625.
[19] Id. at 630 (justifying its decision to deny Chevron deference to the SEC rule on grounds that since Section 922 “clearly  expresses Congress’s intention to require individuals to report  information to the SEC to qualify as a whistleblower under Dodd-Frank . . . we must reject the SEC’s expansive interpretation of the term  ‘whistleblower’ for purposes of the whistleblower-protection provision”) (emphasis added).
[20] Id. at 621.
[21] Liu v. Siemens A.G., 13 CIV. 317 WHP, 2013 WL 5692504, at *10  (S.D.N.Y. Oct. 21, 2013) (concluding that “[t]here is simply no  indication that Congress intended the Anti–Retaliation Provision to  apply extraterritorially” and warning that “an intrusion into the  employment law of a foreign nation could disrupt the “delicate field of  international relations,” an interest protected by the presumption  against extraterritoriality”).
[22] Id. at *9–10.
[23] 15 U.S.C. § 78u-6.
[24] The Commission received 149 FCPA tips during fiscal year 2013, as  opposed to 115 during fiscal year 2012. “2013 Annual Report to Congress  on the Dodd-Frank Whistleblower Program,” U.S. Securities and Exchange  Commission, pg. 20 (November 2013) (available here:  http://www.sec.gov/about/offices/owb/annual-report-2013.pdf) (last  accessed February, 2014).
[25] Id. at 22. The SEC did not indicate how many of these China-based tips invoked the FCPA.
[26] Id. at 21.
[27] Although the SEC did not provide data on FCPA tips by source  country, one can reasonably expect that a portion of reports originating in nations like China and Russia, where conditions create an inherently high risk of FCPA violations, allege FCPA violations. See, e.g., David  Voreacos, “China’s Bribery Culture Poses Risks for Multinationals,”  Bloomberg (November 21, 2013) (available here:  http://www.businessweek.com/news/2013-11-21/china-s-culture-of-bribery-poses-risk-to-multinational-companies) (last accessed February 10, 2014).
[28] The SEC’s Dodd-Frank whistleblower program reportedly received  3,001 tips in fiscal year 2012—the program’s first full year in  existence—and 3,238 in fiscal year 2013. The tips arrived from all 50  states as well as from 55 countries. “2013 Dodd-Frank Whistleblower  Report,” supra, n.24, at 1.
[29] Id. at 1–2.

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Pharmaceutical Company to Pay $27.6 Million to Settle Allegations Involving False Billings to Federal Health Care Programs

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Pharmaceutical manufacturer Teva Pharmaceuticals USA Inc. and a subsidiary, IVAX LLC, have agreed to pay the government and the state of Illinois $27.6 million for allegedly violating the False Claims Act by making payments to induce prescriptions of an anti-psychotic drug for Medicare and Medicaid beneficiaries .  Teva Pharmaceuticals USA is located in North Wales, Pa., and IVAX LLC is a Florida company.

“The Department of Justice is committed to ensuring that pharmaceutical manufacturers who make payments to doctors to influence prescribing decisions are held accountable,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “Schemes such as the one alleged in this case undermine the health care system and take advantage of vulnerable patients.”

“Pharmaceutical companies must not be allowed to improperly influence physicians’ decisions in prescribing medication for their patients,” said U.S. Attorney Zachary T. Fardon for the Northern District of Illinois.  “Instead, those decisions must be made solely on the basis of the patient’s best medical interests.”

The settlement resolves allegations that Teva and IVAX made payments to an Illinois physician, Dr. Michael J. Reinstein, to induce the prescription of  generic clozapine, an anti-psychotic medication.  Clozapine has serious potential side effects and is generally considered a drug of last resort, particularly for elderly patients.  While clozapine has been approved for treatment-resistant forms of schizophrenia, it is also reported to cause numerous side effects, including a potentially deadly decrease in white blood cells, seizures, inflammation of the heart muscle and increased mortality in elderly patients.  The United States alleged that the payment scheme involving Reinstein began in August 2003, when Reinstein agreed to switch his patients to generic clozapine if IVAX, which was subsequently acquired by Teva Pharmaceuticals’ parent corporation, agreed to pay Reinstein $50,000 under a one-year “consulting agreement” and to provide other benefits to Reinstein, in violation of the federal Medicare and Medicaid Anti-Kickback Statute.  In addition to direct payments to Reinstein, IVAX allegedly also provided all-expenses paid trips to Miami for Reinstein, his wife and several of his employees.  Reinstein quickly became the largest prescriber of generic clozapine in the country, and prescribed the drug for many elderly patients.  Allegedly, the payments and other forms of remuneration from IVAX and later Teva Pharmaceuticals continued for many years, and resulted in the submission of thousands of false claims to the Medicare Part D and Illinois Medicaid programs.

The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federally funded programs.  The Anti-Kickback Statute is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

On Nov. 15, 2012, the United States filed a civil action against Reinstein in United States v. Reinstein , alleging that he violated the False Claims Act as a result of his involvement in the payment scheme with Teva and IVAX.   The civil action against Reinstein remains pending in the Northern District of Illinois.

The government’s settlement of these allegations illustrates its 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 a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with Teva Pharmaceuticals and IVAX was the result of a coordinated effort by the U.S. Attorney’s Office for the Northern District of Illinois, the Commercial Litigation Branch of the Justice Department’s Civil Division, the Department of Health and Human Services Office of Inspector General and the Federal Bureau of Investigation.

 

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

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

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

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

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

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

The civil settlements resolve allegations in a lawsuit filed in federal court in Jacksonville, Fla., by former Sea Star Line executive William B. Stallings.   The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.   The Act also allows the government to intervene and take over the action, as it did in this case.   Stallings will receive $512,719 of the recovered funds.

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

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

Omnicare to Pay Government $4.19 Million to Resolve False Claims Act Allegations of Kickbacks

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Omnicare Inc., an Ohio-based long-term care pharmacy, has agreed to pay the government $4.19 million to settle allegations that it engaged in a kickback scheme in violation of the False Claims Act, the Justice Department announced today.  Omnicare provides pharmaceuticals and services to long-term care facilities and residents and other senior populations.

The settlement resolves allegations that Omnicare solicited and received kickbacks from the drug manufacturer Amgen Inc. in return for implementing “therapeutic interchange” programs that were designed to switch Medicaid beneficiaries from a competitor drug to Amgen’s product Aranesp.  The government alleged that the kickbacks took the form of performance-based rebates that were tied to market-share or volume thresholds, as well as grants, speaker fees, consulting services, data fees, dinners and travel.

“Kickbacks are designed to influence decisions by health care providers, such as which drugs to prescribe,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “Americans who rely on federal health care programs, particularly vulnerable patients in skilled nursing facilities, are entitled to feel confident that decisions about their medical care are not tainted by improper financial arrangements.”

“The District of South Carolina has devoted significant resources over the last three years to pursuing claims under the False Claims Act, and this settlement is the latest example of this office’s successful efforts,” said U.S. Attorney for the District of South Carolina William Nettles.  “I am very proud of the work this office has done in this area.”

This civil settlement resolves a lawsuit filed under the qui tam, or whistleblower, provision of the False Claims Act, which allows private citizens with knowledge of false claims to bring civil actions on behalf of the government and to share in any recovery.  The relator’s share in this case is $397,925.

“Kickbacks corrode our federal health care programs,” said Derrick L. Jackson, Special Agent in Charge of the Office of Inspector General, U.S. Department of Health and Human Services in the region covering South Carolina.  “OIG is committed to unveiling these illegal reciprocal relationships, and companies making or receiving such payments can expect serious consequences.”

The settlement with Omnicare Inc. was the result of a coordinated effort among the Civil Division, the U.S. Attorney’s Office for the District of South Carolina and the U.S. Department of Health and Human Services Office of Inspector General.

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 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 a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.

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

The False Claims Act lawsuit was filed in the U.S. District Court for the District of South Carolina and is captioned United States ex rel. Kurnik v. Amgen Inc., et al.

Diagnostic Imaging Group to Pay $15.5 Million for Allegedly Submitting False Claims to Federal and State Health Care Programs

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Diagnostic Imaging Group (DIG) has agreed to pay a total of $15.5 million to resolve allegations that its diagnostic testing facility falsely billed federal and state health care programs for tests that were not performed or not medically necessary and by paying kickbacks to physicians.  Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery, U.S. Attorney for the District of New Jersey Paul J. Fishman and U.S. Attorney for the Eastern District of New York Loretta E. Lynch announced the settlement today.

DIG has agreed to pay $13.65 million to the federal government and an additional total of $1.85 million to New York and New Jersey.  DIG operates a chain of diagnostic testing facilities through its subsidiary, Doshi Diagnostic Imaging Services, which is headquartered in Hicksville, N.Y.  DIG previously operated chains in New Jersey and Florida through subsidiaries Doshi Diagnostic Imaging Services of New Jersey and Signet Diagnostic Imaging Services.

“When health care providers pay kickbacks and submit false claims to Medicare, they not only deplete the Medicare Trust Fund, they undermine the integrity of the health care system,” said Assistant Attorney General Delery.  “The Justice Department will relentlessly pursue those who misuse federal health care funds for their own profit.”

“Health care providers who make decisions based on profit instead of medical need compromise patient safety and confidence,” said U.S. Attorney Fishman.  “Unnecessary tests and the payment of kickbacks also siphon precious resources from our health care system.  The settlement we’re announcing today is an appropriate response to these unacceptable practices.”

The settlement announced today resolves allegations that DIG submitted claims to Medicare, as well as the New Jersey and New York Medicaid Programs, for 3D reconstructions of CT scans that were never performed or interpreted.  Additionally, DIG allegedly bundled certain tests on its order forms so that physicians could not order other tests without ordering the additional bundled tests, which were not medically necessary.  Today’s settlement also resolves allegations that DIG paid kickbacks to physicians for the referral of diagnostic tests.  According to the government, the kickbacks were in the form of payments that DIG made to physicians ostensibly to supervise patients who underwent nuclear stress testing.  These payments allegedly exceeded fair market value and were, in fact, intended to reward physicians for their referrals.

“Patients deserve testing decisions based solely on medical need, not doctors’ pocketbooks,” said U.S. Attorney Lynch.  “We will continue to work with our federal and state law enforcement partners to investigate vigorously allegations of fraud on federal programs like Medicare and to pursue those who seek to fraudulently deplete the Medicare Trust Fund.”

“Paying physicians for their referrals and submitting false claims to increase Medicare and Medicaid reimbursements – as was alleged in this case – simply cannot be tolerated,” said Inspector General of the U.S. Department of Health and Human Services Daniel R. Levinson.  “Besides levying a hefty penalty, the settlement requires an independent organization to review Diagnostic Imaging Group’s claims for five years and to send reports to the government.”

The allegations resolved by today’s settlement were raised in three lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act.  The Act allows private citizens with knowledge of fraud to bring civil actions on behalf of the government and to share in any recovery.  The three whistleblowers, Mark Novick, M.D., Rey Solano and Richard Steinman, M.D., will receive $ 1.5 million , $ 1.07 million and $ 209,250 , respectively, as part of today’s settlement.

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 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 a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.

This case was handled by the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the District of New Jersey and the U.S. Attorney’s Office for the Eastern District of New York.  The settlement is the culmination of an investigation conducted jointly by special agents of the Department of Health and Human Services Office of Inspector General and the FBI with contributions from the Railroad Retirement Board.

The claims settled by this agreement are allegations only, and there has been no determination of liability.  The three cases are captioned United States ex rel. Mark Novick, M.D. v. Doshi Diagnostic Imaging Services P.C. , Civil Action No. 09-4992 (D.N.J.), United States ex rel. Rey Solano v. Diagnostic Imaging Group et al., Civil Action No. 10-267 (D.N.J.) and United States ex rel. Richard Steinman, M.D. v. Diagnostic Imaging Group, et al., Civil Action No. 10-4161 (E.D.N.Y.).

Government Intervenes in Lawsuit Against Tenet Healthcare Corp. and Georgia Hospital Owned by Health Management Associates Inc. Alleging Payment of Kickbacks

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The government has intervened in a False Claims Act lawsuit against  Tenet Healthcare Corp. (Tenet) and four of its hospitals in Georgia and South Carolina, as well as a hospital in Monroe, Ga., owned by Health Management Associates Inc. (HMA), alleging that the hospitals paid kickbacks to obstetric clinics serving primarily undocumented Hispanic women in return for referral of those patients for labor and delivery at the hospitals.  The hospitals then billed the Medicaid programs in Georgia and South Carolina for the services provided to the referred patients and, in some instances, also obtained additional Medicare reimbursement based on the influx of low-income patients.  Tenet and HMA are two of the largest owner/operators of hospitals in the United States.  HMA was acquired by Community Health Systems last month.  The government also is intervening against the clinics and related entities known as  Hispanic Medical Management d/b/a Clinica de la Mama.

“The Department of Justice is committed to ensuring that health care providers who pay kickbacks in return for patient referrals are held accountable,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “Schemes such as this one corrupt the health care system and take advantage of vulnerable patients.”

“My office has made the investigation of health care fraud a priority,” said U.S. Attorney for the Middle District of Georgia Michael J. Moore.  “In a time when too many people were struggling to get health care for themselves and their children, Tenet and these hospitals plundered a system set up for those truly in need.  This kind of scheme drives up costs for everyone, not just the vulnerable patients and groups like those targeted in this case.”

The lawsuit alleges that four Tenet hospitals, Atlanta Medical Center,  North Fulton Regional Hospital, Spalding Regional Hospital and Hilton Head Hospital in South Carolina, and one HMA facility,  Walton Regional Medical Center (since renamed Clearview Regional Medical Center), paid kickbacks to  Hispanic Medical Management d/b/a Clinica de la Mama (Clinica) and related entities in return for Clinica’s agreement to send pregnant women to their facilities for deliveries paid for by Medicaid, in violation of the federal Medicare and Medicaid Anti-Kickback Statute.  The kickbacks were disguised as payments for a variety of services allegedly provided by Clinica.

The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and other federally funded programs.  The Anti-Kickback Statute is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

“Investigations such as these are a high priority for the FBI, and we are determined to hold accountable providers that enrich themselves at the expense of government programs and damage the public trust,” said FBI Assistant Director Ronald T. Hosko.  “The FBI is dedicated to preventing and combating all forms of health care fraud; working with federal, state and local partners to effectively resolve allegations and engaging with the public to identify potential schemes.”

The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government when they believe that defendants submitted false claims for government funds and to receive a share of any recovery.  The False Claims Act also permits the government to intervene in such lawsuits, as it has done in this case.  The lawsuit is pending in  the Middle District of Georgia .

The government’s intervention in this matter illustrates its 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 a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.

These matters were investigated by the Commercial Litigation Branch of the Justice Department’s Civil Division, the Fraud Section of the department’s Criminal Division, the U.S. Attorney’s Offices for the Middle and Northern Districts of Georgia, the Department of Health and Human Services Office of Inspector General, the Federal Bureau of Investigation and the Office of the Attorney General for the State of Georgia.

The case is captioned United States ex rel. Williams v. Health Mgmt. Assocs. Inc., Tenet Healthcare, et al., No. 3:09-CV-130 (M.D. Ga.).

The claims asserted against Tenet, the HMA facility and Clinica are allegations only, and there has been no determination of liability.