Category Archives: kickbacks

Two New Orleans-Area Psychiatrists and a Health Care Marketer Charged for Roles in Kickback Scheme; Psychiatrists Also Charged With Health Care Fraud

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Thursday, February 8, 2018

Two New Orleans, Louisiana-area psychiatrists and a third individual were charged in an indictment filed today for their alleged participation in a health care kickback scheme.  The two psychiatrists were also charged for their roles in a home health care fraud scheme.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Duane A. Evans of the Eastern District of Louisiana, Special Agent in Charge Eric J. Rommal of the FBI’s New Orleans Field Office and Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Dallas Field Office made the announcement.

Muhammad Kaleem Arshad, M.D., 62, of New Orleans, Louisiana, Padmini Nagaraj, M.D., 60, of Kenner, Louisiana, and Joseph A. Haynes, 61, of New Orleans, were each charged with one count of conspiracy to receive illegal health care kickbacks and three counts of receiving illegal health care kickbacks.  Arshad and Nagaraj were also charged with one count of conspiracy to commit health care fraud and five counts of health care fraud.

The indictment alleges that the defendants, who were affiliated with a company that provides outpatient psychiatric services, conspired with the owner of a New Orleans home health agency to take bribes in exchange for referring psychiatric patients for medically unnecessary home health services. Haynes, who worked at the company as a marketer, allegedly helped to negotiate and enforce the bribes and kickbacks for the doctors.  The indictment further alleges that the New Orleans home health agency then submitted the fraudulent claims to Medicare to receive payment.

An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The case was investigated by the FBI and HHS-OIG.  Trial Attorney Kate Payerle of the Criminal Division’s Fraud Section is prosecuting the case.

The Fraud Section leads the Medicare Fraud Strike Force, which is 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 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

Former Employee of U.S. Government Contractor in Afghanistan Pleads Guilty to Accepting Kickbacks From Subcontractor

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Monday, March 5, 2018

A former employee of a U.S. government contractor in Afghanistan pleaded guilty today to accepting illegal kickbacks from an Afghan subcontractor in return for his assistance in obtaining subcontracts on U.S. government contracts.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division; U.S. Attorney Byung J. Pak of the Northern District of Georgia; Special Agent in Charge John Khin of the Defense Criminal Investigative Service’s (DCIS) Southeast Field Office, Atlanta Resident Agency; Special Inspector General for Afghanistan Reconstruction (SIGAR) John F. Sopko; Director Frank Robey of the U.S. Army Criminal Investigation Command’s (CID) Major Procurement Fraud Unit (MPFU); Special Agent in Charge David J. LeValley of the FBI Atlanta Resident Agency and Special Agent in Charge Wendell W. Palmer of Air Force Office of Special Investigations (OSI), made the announcement.

Christopher McCray, 55, of Jonesboro, Georgia and Chattanooga, Tennessee, pleaded guilty to one count of accepting illegal kickbacks before U.S. District Judge Mark H. Cohen of the Northern District of Georgia.  He is scheduled to be sentenced by Judge Cohen on June 14 at 10:00 a.m. EST.  McCray was charged in an indictment filed on April 25, 2017 in the Northern District of Georgia with one count of conspiracy to accept kickbacks and 14 counts of accepting illegal kickbacks.

As part of his plea, McCray admitted that he was employed as the country manager for a subcontractor of an American company that was moving cargo for the Army and Air Force Exchange Service from Bagram Airfield to military bases through Afghanistan.  When the prime contractor needed McCray’s employer to take a much bigger role in the distribution, McCray had the chance to influence the choice of the necessary Afghan trucking company as a subcontractor to his employer.  McCray’s employer entered into a subcontract with an Afghan company but before the choice of the subcontractor was made, the Afghan trucking company secretly agreed to kick back to McCray 15 percent of the revenues it would receive on the contract, he admitted.  McCray thereafter remained as the only representative of his employer in Afghanistan for the duration of the subcontract and was responsible for checking the accuracy of the invoices submitted to McCray’s employer and the quality of the Afghan company’s work, all while secretly receiving the kickbacks, he admitted.

McCray received the secret payments from December 2012 to May 2014.  He and the Afghan trucking company also maintained a separate set of invoices, which showed the amounts charged to McCray’s employer and the amounts kept by the Afghan company and the amounts sent to McCray.  McCray was first paid in cash, then by wires sent to his bank in Atlanta and then by Western Union payments sent to his mother, who would deposit the funds, mostly in cash, into McCray’s bank accounts, he admitted.

DCIS, SIGAR, Army CID-MPFU, the FBI and Air Force OSI investigated this matter.  Trial Attorney James Gelber of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Brian Pearce of the Northern District of Georgia are prosecuting the case.

Owner of Florida Pharmacy Pleads Guilty in $100 Million Compounding Pharmacy Fraud Scheme; Real Properties, Cars and a 50-Foot Boat Will Be Forfeited

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Monday, November 6, 2017

Seven Others Previously Pleaded Guilty

The president and owner of a Florida pharmacy that was at the center of a massive compounding pharmacy fraud scheme, which impacted private insurance companies, Medicare and TRICARE, pleaded guilty today for his role in the scheme.  Seven other individuals have previously pleaded guilty in connection to the scheme.  Various real properties, cars and a 50-foot boat will be forfeited as part of the guilty pleas.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney W. Stephen Muldrow of the Middle District of Florida, Special Agent in Charge Eric W. Sporre of the FBI’s Tampa Field Office, Special Agent in Charge Robert F. Lasky of the FBI’s Miami Field Office, Special Agent in Charge Shimon Richmond of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Miami Regional Office and Resident Agent in Charge Brooke Harris of the U.S. Defense Criminal Investigative Service’s (DCIS) Tampa Regional Office made the announcement.

Nicholas A. Borgesano Jr., 45, of New Port Richey, Florida, the president and owner of A to Z Pharmacy of New Port Richey, pleaded guilty in the Middle District of Florida to one count of conspiracy to commit health care fraud and one count of conspiracy to engage in monetary transactions involving criminally derived property.  His sentencing will be scheduled before U.S. District Judge James S. Moody Jr of the Middle District of Florida.

According to admissions made as part of his plea agreement, Borgesano owned and operated numerous pharmacies and shell companies that he and his co-conspirators used to execute a fraud scheme involving prescription compounded medications.  The scheme generated over $100 million in fraud proceeds, he admitted.  Borgesano acquired and controlled A to Z Pharmacy in New Port Richey, Havana Pharmacy, Medplus/New Life Pharmacy and Metropolitan Pharmacy, all of Miami; and Jaimy Pharmacy and Prestige Pharmacy, both of Hialeah, Florida.  He admitted using these pharmacies to cause the submission of false and fraudulent reimbursement claims for prescription compounded medications, chiefly pain creams and scar creams, to private insurance companies, Medicare and TRICARE.  Borgesano admitted that he and his co-conspirators manipulated billing codes in the reimbursement claims and submitted reimbursement claims for pharmaceutical ingredients they did not have.  Borgesano and his co-conspirators also paid kickbacks and bribes in exchange for prescriptions and patient identifying information used to further the scheme, including to a physician in exchange for the physician signing prescriptions for patients he never saw.  Borgesano admitted using A to Z Pharmacy as the hub of his operation on behalf of all his pharmacies.  He disbursed proceeds of the fraud scheme through a variety of methods, including by check and wire transfer to co-conspirators’ shell companies and through the purchase of assets, he admitted.

In addition to Borgesano, the following defendants have previously pleaded guilty to conspiracy to commit health care fraud for their roles in the scheme:

  • Bradley Sirkin, 55, of Boca Raton, Florida;
  • Scott P. Piccininni, 49, of Fort Lauderdale, Florida;
  • Edwin Patrick Young, 49, of New Port Richey, Florida;
  • Wayne M. Kreisberg, 40, of Parkland, Florida;
  • Matthew N. Sterner, 48, of New Port Richey, Florida;
  • Peter B. Williams, 57, of New Port Richey, Florida; and
  • Joseph Degregorio, 71, of New Port Richey, Florida

The cars that will be forfeited include a 1936 Ford Deluxe, a 1964 Chevrolet Corvette convertible, a 1967 Chevrolet Camaro, a 1970 Chevrolet Monte Carlo and a 2008 Lamborghini convertible.  The boat that will be forfeited is a 2009 50’7” Cigarette racing boat.   The cars and boat had previously been seized.  The combined equity in the real properties, cars and boat that will be forfeited is over $7.6 million.  The real properties, cars and boat had been purchased with proceeds from the fraud scheme.

This case was investigated by the FBI with support from HHS-OIG and DCIS and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Middle District of Florida.  The case is being prosecuted by Senior Trial Attorney Christopher J. Hunter and Trial Attorney Timothy P. Loper of the Fraud Section.

The Fraud Section leads the Medicare Fraud Strike Force, which is 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 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

Nurse Practitioner and Physician Indicted in Compounding Pharmacy Fraud Schemes

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Tuesday, October 24, 2017

A Mississippi-based nurse practitioner was charged in an indictment unsealed today for her role in a multi-million dollar scheme to defraud TRICARE, the health care benefit program serving U.S. military, veterans and their respective family members.  A Mississippi-based physician was charged in a separate indictment filed last week for his role in a similar scheme.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Mike Hurst of the Southern District of Mississippi, Special Agent in Charge Christopher Freeze of the FBI’s Jackson, Mississippi Field Division and Special Agent in Charge Jerome R. McDuffie of the Internal Revenue Service Criminal Investigation (IRS-CI) New Orleans Field Office made the announcement.

Susan Perry N.P., 58, of Grand Bay, Alabama, and Albert Diaz M.D., 78, of Ocean Springs, Mississippi, were charged in separate indictments returned on Oct. 18, in the Southern District of Mississippi, in Hattiesburg.  Perry’s indictment was unsealed upon her arrest and initial appearance today before U.S. Magistrate Judge John Gargiulo of the Southern District of Mississippi.  Perry is scheduled to be arraigned on Oct. 25, at 10:30 a.m., and Diaz is scheduled to be arraigned on Nov. 1, at 10:30 a.m., both before Judge Gargiulo.

Perry was charged in a 13-count indictment with one count of conspiracy to commit health care fraud and wire fraud, four counts of wire fraud, one count of conspiracy to distribute and dispense a controlled substance, one count of distributing and dispensing of a controlled substance, one count of conspiracy to solicit and receive healthcare kickbacks, four counts of soliciting and receiving healthcare kickbacks and one count of making false statements.  Diaz was charged in a 16-count indictment with one count of conspiracy to commit health care fraud and wire fraud, four counts of wire fraud, one count of conspiracy to distribute and dispense a controlled substance, four counts of distributing and dispensing a controlled substance, one count of conspiracy to falsify records in a federal investigation and five counts of falsification of records in a federal investigation.

The indictments allege that both Perry and Diaz participated in schemes to defraud TRICARE by prescribing medically unnecessary compounded medications, some of which included Ketamine, a controlled substance, to individuals they had not examined, for the purpose of having a Hattiesburg-based compounding pharmacy dispense these medically unnecessary compounded medications and to seek reimbursement from TRICARE.  According to the indictments, between February 2013 and October 2016, TRICARE reimbursed the compounding pharmacy more than $3.3 million for compounded medications prescribed by Perry, and between October 2014 and December 2015, TRICARE reimbursed the compounding pharmacy more than $2.3 million for compounded medications prescribed by Diaz.  Additionally, Perry is alleged to have received more than $50,000 in kickback payments from a marketer for the compounding pharmacy in return for prescribing the compounded medications, as well as having made false statements to the FBI.   Diaz is alleged to have submitted falsified patient records in response to an audit conducted by TRICARE to make it appear as though he had examined patients before prescribing the compounding medications.

An indictment is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The FBI, IRS-CI, the Defense Criminal Investigative Service, the U.S. Department of Health and Human Services Office of Inspector General, the Mississippi Bureau of Narcotics and other government agencies investigated the case.  Trial Attorneys Dustin M. Davis, Katherine Payerle and Jared Hasten of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Mary Helen Wall of the Southern District of Mississippi are prosecuting the case.

The Fraud Section leads the Medicare Fraud Strike Force, which is 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 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion.

Owner of Two New York Medical Clinics Sentenced to 84 Months for Her Role in $55 Million Health Care Fraud Scheme

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Friday, September 15, 2017

The owner of two Brooklyn, New York, medical clinics was sentenced today to 84 months in prison for her role in a $55 million health care fraud scheme.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Bridget M. Rohde of the Eastern District of New York, Special Agent in Charge Scott Lampert of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS OIG) Office of Investigations, Special Agent in Charge James D. Robnett of the IRS Criminal Investigation’s (IRS-CI) New York Field Office and Inspector General Dennis Rosen of the New York State Office of the Medicaid Inspector General (OMIG) made the announcement.

Valentina Kovalienko, 47, of Brooklyn, and the owner of Prime Care on the Bay LLC and Bensonhurst Mega Medical Care P.C., was sentenced by U.S. District Judge Roslynn R. Mauskopf of the Eastern District of New York, who also ordered Kovalienko to forfeit $29,336,497. Kovalienko pleaded guilty in October 2015 to one count of conspiracy to commit health care fraud and one count of conspiracy to commit money laundering.

As part of her guilty plea, Kovalienko acknowledged that her co-conspirators paid cash kickbacks to patients to induce them to attend her two clinics.  Kovalienko also admitted that she submitted false and fraudulent claims to Medicare and Medicaid for services that were induced by prohibited kickback payments to patients or that were unlawfully rendered by unlicensed staff.  Kovalienko also wrote checks from the clinics’ bank accounts to third-party companies, which purported to provide services to the clinics, but which in fact were not providing services, and the payments were instead used to generate the cash needed to pay the illegal kickbacks to patients, she admitted.

Twenty other individuals have pleaded guilty in connection with this case, including the former medical directors of Prime Care on the Bay LLC and Bensonhurst Mega Medical Care P.C., six physical and occupational therapists, three ambulette drivers, the owner of several of the sham companies used to launder the money and a former patient who received illegal kickbacks.

HHS-OIG, IRS-CI and OMIG investigated the case, which was brought as part of the Medicare Fraud Strike Force, under the supervision by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of New York.  Acting Assistant Chief A. Brendan Stewart of the Fraud Section and Assistant U.S. Attorney F. Turner Buford of the Eastern District of New York, formerly a Fraud Section trial attorney, are prosecuting the case.

The Criminal Division’s Fraud Section leads the Medicare Fraud Strike Force.  Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 3,500 defendants who have collectively billed the Medicare program for more than $12.5 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.

New Orleans Woman Convicted of Conspiracy, Identity Theft and False Statement Charges for Role in $2.1 Million Medicare Kickback Scheme

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Thursday, September 14, 2017

On Tuesday, a federal jury found a New Orleans woman guilty of conspiracy, identity theft and false statements charges for her role in an approximately $2.1 million Medicare kickback scheme.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Duane A. Evans of the Eastern District of Louisiana, Special Agent in Charge C.J. Porter of the Office of Inspector General – Health and Human Services Dallas Field Office and Special Agent in Charge Jeff Sallet of the FBI’s New Orleans Field Office made the announcement.

After a two-day trial, Kim Ricard, age 51, of New Orleans, was convicted of one count of conspiracy to pay and receive kickbacks in connection with Medicare beneficiaries.  In addition, Ricard was convicted of three counts of accepting kickbacks, along with three counts of identity theft and one count of making false statements to federal agents.  Sentencing has been scheduled for December 7, before U.S. District Judge Jane Milazzo of the Eastern District of Louisiana, who presided over the trial.

According to evidence presented at trial, from 2008 to 2013, Ricard and others engaged in a scheme to refer mentally ill Medicare patients to home health agencies in and around New Orleans, in exchange for kickbacks.  The evidence further established that Ricard unlawfully used the Medicare identification information of three Medicare beneficiaries in connection with the scheme. Ricard then lied to investigators, the evidence showed.

As a result of the scheme, Ricard’s co-conspirator caused Medicare to pay over $2.1 million based on those illegally-obtained referrals

One other defendant was charged in this matter. Milton Diaz, 65, of Harvey, Louisiana, pleaded guilty and is awaiting sentencing.

This case was investigated by the Office of Inspector General of the Department of Health and Human Services, and the FBI.  Trial Attorneys Claire Yan and Kate Payerle of the Criminal Division’s Fraud Section are prosecuting the case.

The Criminal Division’s Fraud Section leads the Medicare Fraud Strike Force.  Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 3,500 defendants who have collectively billed the Medicare program for more than $12.5 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

To learn more about the Health Care Fraud Prevention and Enforcement Action Team (HEAT), go to: www.stopmedicarefraud.gov.

CCC’s: Antitrust Division DAAG Delivers Remarks at International Conference

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The Antitrust Division’s Deputy Assistant Attorney General for International Affairs, Roger Alford delivered a speech on October 3, 2017 in San Paolo, Brazil. (here).  There were no groundbreaking announcements in the speech, but since it was the first delivered since Makan Delrahim took over as head of the Antitrust Division, I thought it might be of interest.

There were two aspects of the talk worth noting.  First, Mr. Alford highlighted the Division’s longstanding focus on holding individuals accountable:

As my colleagues at the Antitrust Division have explained before, “[h]olding companies accountable and assessing large fines, alone, are not the only means, or even the most effective way, to accomplish our goal of deterring and ending cartels. Individuals commit the crimes for which corporate offenders pay. Every corporate crime involves individual wrongdoing.” For that reason, we at the Antitrust Division have a long history of holding individuals accountable for antitrust crimes, and we have consistently touted prison time for individuals as the single most effective deterrent to criminal collusion.

The other item that caught my eye in the speech was the Mr. Alford’s reference to two Antitrust Division recent prosecutions:

  • In June of this year, Yuval Marshak was sentenced to 30 months in prison for participating in a scheme to defraud the U.S. Department of Defense.
  • In 2016, we tried and obtained the conviction of John Bennett for fraud against the United States as a result of a kickback scheme in the procurement of environmental clean-up services. He was ultimately sentenced to five years in prison.

These examples of “fraud prosecutions” are interesting because there is sometimes an internal debate in the Antitrust Division about whether only Sherman Act, (i.e. price fixing or bid rigging) charges should be brought or whether the Division has a broader mandate to prosecute what is sometimes called “corruption of the bidding process.” A “corruption of the bidding process” example would be bribing a procurement official to tailor bid specifications to favor one company.  In a hybrid case, there may be both a bribe of a procurement official and collusion among the favored bidders.

At times, investigation and prosecution of collusion on public contracts such as defense, roads, and schools has been a priority for the Division.  Public contracts are typically where collusion and bribery turn up–and jail sentences tend to be long.  The Division has limited resources, however, so when international cartels dominate, there may be few resources left to devote to public contracts.

The interesting thing about public contract investigations, is that the Division has some ability to be proactive in generating new investigations (as opposed to being reactive to leads/leniencies that come into the Division.)  When resources are available, the Division will often beat the bushes talking to federal agents and procurement officials looking for tips on possible worthwhile investigations.  It will be worth watching to see if there is any noticeable shift in emphasis under the new Antitrust Division leadership.

Thanks for reading.

California Resident Sentenced for Conspiracy to Commit Healthcare Fraud

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Thursday, September 7, 2017

Acting U.S. Attorney Duane A. Evans announced that SUNYUP KIM, age 41, of Granada Hills, CA, was sentenced today after previously pleading guilty to conspiracy to commit healthcare fraud.

U.S. District Judge Eldon E. Fallon sentenced KIM to 1 year and 1 day in prison along with $93,927 in restitution.

On June 11, 2015, KIM was indicted along with three other defendants in an 8-count indictment charging approximately $38 million in Medicare fraud.

According to court documents, the $38 million fraud scheme centering on the distribution of “talking glucose meters” that were not medically necessary and were often not even requested. KIM, along with the other 3 defendants, operated Care Concepts, LLC, which was based in Metairie, and Choice Home Medical Equipment and Supplies (Choice), which was based in Chatsworth, California. KIM and the other 3 defendants, paid kickbacks to workers at call centers in California and South Carolina, from which operators would cold-call Medicare recipients to convince them to accept talking glucose meters and related supplies. From 2007 through 2015, KIM and the other 3 defendants caused thousands of claims to be submitted to Medicare through Care Concepts and Choice, virtually all of which were fraudulent.

Acting U.S. Attorney Evans praised the work of the Federal Bureau of Investigation and the Office of Inspector General for the United States Department of Health and Human Services in investigating this matter. Assistant U. S. Attorneys Patrice Harris Sullivan and Jordan Ginsberg were in charge of the prosecution.

Galena Biopharma Inc. to Pay More Than $7.55 Million to Resolve Alleged False Claims Related to Opioid Drug

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Friday, September 8, 2017

Galena Biopharma Inc. (Galena) will pay more than $7.55 million to resolve allegations under the civil False Claims Act that it paid kickbacks to doctors to induce them to prescribe its fentanyl-based drug Abstral, the Department of Justice announced today.

“Given the dangers associated with opioids such as Abstral, it is imperative that prescriptions be based on a patient’s medical need rather than a doctor’s financial interests,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “The Department of Justice intends to vigorously pursue those who offer and receive illegal inducements that undermine the integrity of government health care programs.”

“The conduct alleged by the government and resolved by today’s settlement was egregious because it incentivized doctors to over-prescribe highly addictive opioids,” said Acting U.S. Attorney William E. Fitzpatrick for the District of New Jersey. “This settlement constitutes another example of the Department of Justice’s ongoing efforts to battle the opioid epidemic on every front.”

The United States contends that Galena paid multiple types of kickbacks to induce doctors to prescribe Abstral, including providing more than 85 free meals to doctors and staff from a single, high-prescribing practice; paying doctors $5,000, and speakers $6,000, plus expenses, to attend an “advisory board” that was partly planned, and attended, by Galena sales team members and paying approximately $92,000 to a physician-owned pharmacy under a performance-based rebate agreement to induce the owners to prescribe Abstral. The United States also contends that Galena paid doctors to refer patients to the company’s RELIEF patient registry study, which was nominally designed to collect data on patient experiences with Abstral, but acted as a means to induce the doctors to prescribe Abstral. Galena has not marketed any pharmaceutical drug since the end of 2015.

Two of the doctors who received remuneration from Galena were tried, convicted and later sentenced to prison in the U.S. District Court for the Southern District of Alabama following a jury trial of, among other counts, offenses relating to their prescriptions of Abstral. Galena cooperated in that prosecution.

The settlement resolves a lawsuit filed by relator Lynne Dougherty under the whistleblower provisions of the False Claims Act, which permit private parties to file suit on behalf of the United States and obtain a portion of the government’s recovery. As part of today’s resolution, Ms. Dougherty will receive more than $1.2 million. The matter remains under seal as to allegations against entities other than Galena.

The settlement is the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the District of New Jersey, with assistance from the Department of Health and Human Services Office of Counsel to the Inspector General, and the Food and Drug Administration Office of Criminal Investigations’ Metro Washington Field Office.

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

United States Recovers More Than $12 Million In False Claims Act Settlements For Alleged Kickback Scheme

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Monday, August 21, 2017

United States will also pursue claims against Precision Lens, Paul Ehlen and Dr. Jitendra Swarup

Acting United States Attorney Gregory G. Brooker today announced that Sightpath Medical, Inc. (n/k/a Sightpath Medical, LLC) (“Sightpath”), TLC Vision Corporation (n/k/a TLC Vision (USA, LLC)) (“TLC”) (collectively the “Sightpath Entities”) and their former CEO, JAMES TIFFANY, have agreed to pay more than $12 million to the United States to resolve kickback allegations under the False Claims Act (“FCA”). The United States also intervened in an underlying lawsuit against the Cameron-Ehlen Group, Inc. d/b/a Precision Lens (“Precision Lens”), Precision Lens’ owner PAUL EHLEN, and JITENDRA SWARUP.

“Medicare beneficiaries depend on their physicians to make decisions based on sound medical judgment,” said Assistant U.S. Attorney Chad Blumenfield. “Our office will take decisive action to address allegations that medical providers are receiving improper financial benefits that could influence medical decision making. We are grateful to our law enforcement partners for their excellent work in investigating this matter.”

“This settlement is an outstanding result and represents the third major False Claims Act case successfully handled by this Office in the last three months. These types of cases remain a top priority of our Office, I applaud the hard work and dedication of the Civil Frauds Unit and the agencies involved in the case,” said Acting U.S. Attorney Gregory Brooker.

“The FBI together with our law enforcement partners aggressively investigate companies and individuals who engage in kickback schemes at the expense of Medicare and other federal health care programs,” said FBI Special Agent in Charge Richard T. Thornton of the Minneapolis Division. “Those who seek to exploit the nation’s health care system through fraud will be held accountable.”

According to the complaint, brought by a whistleblower, Sightpath and Precision Lens supply intraocular lenses, as well as ophthalmic surgical equipment and services to medical facilities. These products and services are used by ophthalmologists in connection with eye surgeries, including cataract surgeries performed in Ambulatory Surgical Centers and hospitals for which federal payers, such as Medicare, provide reimbursements. The complaint alleges that Precision Lens, EHLEN and the Sightpath Entities paid kickbacks to physicians in various forms, including travel, entertainment and improper consulting agreements. The complaint identifies multiple examples of trips including luxury skiing vacations and high-end fishing, golfing and hunting trips. The complaint also alleges that these various items of value were provided in order to induce the physicians to use Precision Lens’ and the Sightpath Entities’ products and services.

According to the settlement agreements, the United States contends that between January 1, 2006 and January 1, 2015, the Sightpath Entities provided physicians items of value to induce the use of Sightpath Entities’ products and services, which resulted in the submission of false claims to the United States for ophthalmological products and services. These items of value included hunting, skiing, fishing, and golf trips. Additionally, the Sightpath Entities entered into consulting agreements with physicians and physician practices for services that were never performed or not properly tracked, resulting in payments in excess of fair market value.

According to the settlement agreements, the United States further alleged that TIFFANY directed much of the conduct at issue, particularly between 2010 and 2013 when he was CEO of Sightpath and TLC, and that TIFFANY was directly involved in setting up and participating in several of the trips with physicians who were either Sightpath customers or potential customers. In addition, TIFFANY directly participated in establishing and continuing the lucrative consulting agreements with physicians and physician practices. The United States contends that by providing these items of value, the Sightpath Entities and TIFFANY knowingly induced physicians to utilize the Sightpath Entities’ products and services and submit false claims to the federal government. The claims were false because they were tainted by illegal kickbacks to the physicians, in violation of the Anti-Kickback Statute and the False Claims Act.

These settlements resolve allegations filed in a civil lawsuit originally brought by a whistleblower under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government for false claims and to share in any recovery. The government often relies on whistleblowers to bring fraud schemes to light that might otherwise go undetected. The whistleblower in this matter, Kipp Fesenmaier, will receive 19.5 percent of the amounts recovered in connection with the settlement agreements.

As part of the FCA Agreement and in exchange for a release of OIG’s permissive exclusion authority, Sightpath has agreed to enter into a 5-year corporate integrity agreement (CIA) with OIG. Although not a signatory to the CIA, TLC is participating in the CIA as a “covered person.”

The United States has declined to intervene in the case against the other defendants named in the complaint. The claims resolved by these settlements are allegations only; there has been no determination of liability or wrongdoing.

The case was handled by Assistant U.S. Attorney Chad A. Blumenfield of the Civil Frauds Unit of the U.S. Attorney’s Office for the District of Minnesota with assistance from the Office of Inspector General of the U.S. Department of Health and Human Services and the Federal Bureau of Investigation.

The case is United States ex rel. Fesenmaier v. Sightpath Medical, Inc. TLC Vision Corporation, The Cameron Ehlen Group, Inc. dba Precision Lens, et al., Civil No. 13-CV-3003 (RHK/FLN).

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