Category Archives: USDOJ-Civil Division

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Medtronic to Pay $4.41 Million in USDOJ-CIV Case

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The Justice Department announced today that Medtronic plc and affiliated Medtronic companies, Medtronic Inc., Medtronic USA Inc., and Medtronic Sofamor Danek USA Inc., have agreed to pay $4.41 million to the United States to resolve allegations that they violated the False Claims Act by making false statements to the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Defense (DoD) regarding the country of origin of certain Medtronic products sold to the United States.

“Today’s settlement demonstrates our commitment to ensure that our service members and our veterans receive medical products that are manufactured in the United States and other countries that trade fairly with us,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will take action to hold medical device companies to the terms of their government contracts.”

“Domestic manufacture is a required component of many military and Veterans Administration contracts,” said U.S. Attorney Andrew M. Luger of the District of Minnesota.  “Congress has mandated that the United States use its purchasing power to buy goods made in the United States or in designated countries.  We take that mandate seriously and will not hesitate to take appropriate legal action to ensure compliance.”

According to the settlement agreement, between 2007 and 2014, Medtronic sold to the VA and DoD products it certified would be made in the United States or other designated countries.  The Trade Agreements Act of 1979 (TAA) generally requires companies selling products to the United States to manufacture them in the United States or in another designated country.  The United States alleged that Medtronic sold to the United States products manufactured in China and Malaysia, which are prohibited countries under the TAA.

The specific Medtronic products at issue included anchoring sleeves sold with cardiac leads and used to secure the leads to patients, certain instruments and devices used in spine surgeries, and a handheld patient assistant used with a wireless cardiac device.  The agreement covers the period from Jan. 1, 2007, to Dec. 31, 2013, and for one device (the handheld patient assistant), the period from Jan. 1, 2014, to Sept. 30, 2014.

The settlement resolves allegations originally brought in a lawsuit filed by three whistleblowers under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and share in any recovery. The relators will receive a total of $749,700 of the recovered funds.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23.9 billion through False Claims Act cases, with more than $15.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The case was handled by the U.S. Attorney’s Office of the District of Minnesota with assistance from the Civil Division, DoD, Defense Logistics Agency and Defense Criminal Investigative Service and the VA’s Office of General Counsel.

The underlying case is United States of America ex rel. Samuel Adam Cox, III, Meayna Phanthavong, and Sonia Adams v. Medtronic, Inc., Medtronic USA, Inc., and Medtronic Sofamor Danek USA, Inc., Civil No. 12-cv-2562 (PAM/JSM).

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

New Grant Fraud Case Filed (Americorps)

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Maricopa County Community College District Agrees to Pay $4 Million for Alleged False Claims Related to Award of AmeriCorps Education Awards

Maricopa County Community College District (MCCCD) has agreed to pay $4.08 million to resolve allegations under the False Claims Act that it submitted false claims to the Corporation for National and Community Service (CNCS) concerning AmeriCorps state and national grants, the Justice Department announced today.  MCCCD is the entity responsible for operating community colleges in Maricopa County, Arizona, and is based in Phoenix.

“Those who receive federal funds must deal with the government openly and honestly,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “The Department of Justice will ensure that financial assistance provided by the Corporation for National and Community Service is received only by eligible individuals who satisfy CNCS’s mission of promoting service and education.”

CNCS is an independent federal agency that administers AmeriCorps, among other national service programs.  MCCCD obtained AmeriCorps funding for Project Ayuda, a program that proposed to engage students in national service.  In order to receive an AmeriCorps education award, a student had to meet certain service-hour requirements.  MCCCD allegedly improperly certified that students had completed the required number of service hours so that they would earn an education award.  This resulted in CNCS providing education awards to these students.  MCCCD also allegedly improperly received grant funds from CNCS to administer the project.

“Our internal process uncovered MCCCD’s mismanagement, and we worked with the Justice Department to ensure that taxpayer dollars were recovered,” said CNCS’s General Counsel Valerie Green.  “This is an example of how interagency collaboration works.”

“Taxpayers are justifiably outraged when a community fails to receive promised services because national service funds were misused,” said CNCS’s Inspector General Deborah J. Jeffrey.  “We hope that this settlement will deter other grantees from similar misconduct.”

The allegations resolved by this settlement arose from a whistleblower lawsuit filed under the False Claims Act by Christine Hunt, an MCCCD employee.  Under the False Claims Act, private citizens can sue on behalf of the government and share in any recovery.  Hunt’s share of the settlement is $775,827.

This case was handled by the Commercial Litigation Branch of the Civil Division and CNCS’s Office of Inspector General and Office of General Counsel.

The lawsuit is captioned United States ex rel. Hunt v. Maricopa County Community College District; Paula and Richard Vaughn, No. 11-cv-2241 (D. Ariz.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Biotronik Inc. to Pay $4.9 Million to Resolve Claims that Company Paid Kickbacks to Physicians

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Biotronik Inc. of Lake Oswego, Oregon, has agreed to pay the United States $4.9 million to resolve allegations made under the False Claims Act that the company made various improper payments to induce physicians to use devices that it manufactured and sold, the Justice Department announced today.

“When medical device manufacturers make improper payments to physicians, they encourage medical decision-making based on financial gain rather than the best interests of patients,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “Today’s resolution demonstrates the Department of Justice’s continuing commitment to ensuring that beneficiaries of federal health care programs receive appropriate medical care.”

The settlement resolves allegations that Biotronik, through the payment of kickbacks to physicians, caused hospitals and ambulatory surgery centers to submit false claims to Medicare and Medicaid for the implantation of Biotronik pacemakers, defibrillators and cardiac resynchronization therapy devices.  Biotronik allegedly induced electrophysiologists and cardiologists practicing in Nevada and Arizona to continue using Biotronik devices, or to convert to Biotronik devices, by paying the implanting physician in the form of repeated meals at expensive restaurants and inflated payments for membership on a physician advisory board.

“Today’s resolution of claims underscores one of the key purposes of the Anti-Kickback law – to ensure that the judgment exercised by health care providers in treating Medicare and Medicaid patients is not influenced by illegal payments,” said U.S. Attorney Benjamin Wagner for the Eastern District of California.

The settlement announced today stems from a whistleblower complaint filed by a former Biotronik employee, Brian Sant, pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the United States and to share in the proceeds of the suit.  The act permits the United States to intervene and take over the lawsuit, as it did in this case as to some of Sant’s allegations.  Sant will receive approximately $840,000 of the federal 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 the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $23 billion through False Claims Act cases, with more than $14.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with Biotronik Inc. was the result of a coordinated effort among the Civil Division, the U.S. Attorney’s Office for the Eastern District of California, the U.S. Department of Health and Human Services-Office of Inspector General and the FBI.

The lawsuit is captioned United States ex rel. Sant v. Biotronik, Inc., No. 2:09-CV-03617 KJM EFB (E.D. Cal.).  The claims settled by this agreement are allegations only, and there has been no determination of liability.

Minnesota-Based Medtronic Inc. to Pay $9.9 Million to Resolve Claims That Company Paid Kickbacks to Physicians

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Medtronic Inc., of Fridley, Minnesota, has agreed to pay the United States $9.9 million to resolve allegations under the False Claims Act that the company used various types of payments to induce physicians to implant pacemakers and defibrillators manufactured and sold by Medtronic, the Justice Department announced today.

“Improper financial incentives have the potential to compromise physician medical judgment,” said Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division.    “This case demonstrates the Department of Justice’s commitment to pursue medical device manufacturers that use improper financial relationships to influence physician decision-making.”

The United States alleged that Medtronic caused false claims to be submitted to Medicare and Medicaid by using multiple types of illegal kickbacks to induce physicians to implant Medtronic pacemakers and defibrillators.    Specifically, Medtronic allegedly induced physicians to use its products by: 1) paying implanting physicians to speak at events intended to increase the flow of referral business; 2) developing marketing/business development plans for physicians at no cost; and 3) providing tickets to sporting events.    The United States alleged that Medtronic paid the remuneration to persuade the physicians to continue using Medtronic products or to convert their business from a competitor’s products.

“Decisions about devices used to treat cardiac rhythmic disease should be based on the best interests of the patient, not on whether the manufacturer is going to pay a kickback,” said U.S. Attorney Benjamin Wagner of the Eastern District of California.  “These sorts of improper financial incentives not only undermine the integrity of medical decisions, they also waste taxpayer funds and are unfair to competitors who are trying to play by the rules.”

“As this settlement indicates, health care executives who try to boost profits by paying kickbacks to doctors will instead pay the government for their improper conduct,” said Special Agent in Charge Ivan Negroni of the U.S. Department of Health and Human Services Office of Inspector General’s San Francisco Office.  “We will continue to work with the Department of Justice to root out illegal, wasteful business arrangements.”

The settlement announced today stems from a whistleblower complaint filed by a former employee of Medtronic, Adolfo Schroeder, pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the United States and to share in the proceeds of the suit.    Schroeder will receive approximately $1.73 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and 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 $19.2 billion through False Claims Act cases, with more than $13.7 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with Medtronic Inc. was the result of a coordinated effort among the Department of Justice’s Civil Division; the U.S. Attorney’s Office for the Eastern District of California; and the Office of Inspector General of the U.S. Department of Health and Human Services.

The lawsuit is captioned United States ex rel. Schroeder v. Medtronic, Inc., No. 2:09-cv-0279 WBS EJB (E.D. Cal.).    The claims settled by this agreement are allegations only, and there has been no determination of liability.

Government Settles False Claims Act Allegations Against Florida-Based Baptist Health System for $2.5 Million

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Baptist Health System Inc. (Baptist Health), the parent company for a network of affiliated hospitals and medical providers in the Jacksonville, Florida, area, has agreed to pay $2.5 million to settle allegations that its subsidiaries violated the False Claims Act by submitting claims to federal health care programs for medically unnecessary services and drugs, the Department of Justice announced today.  The alleged misconduct involved Medicare, Medicaid, TRICARE and the Federal Employee Health Benefits Program.

“Providers that bill for unnecessary services and drugs contribute to the soaring cost of health care,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “Providers must deal fairly and honestly with federal health care programs, and the Justice Department will investigate aggressively and hold accountable those who do not.”

This settlement resolves allegations that, from September 2009 to October 2011, two neurologists in the Baptist Health network misdiagnosed patients with various neurological disorders, such as multiple sclerosis, which caused Baptist Health to bill for medically unnecessary services.  Although Baptist Health placed one of the physicians at issue on administrative leave in October 2011, it did not disclose any misdiagnoses to the government until September 2012.

“This settlement sends a clear message that health care fraud will not be tolerated in our district, particularly when there is the potential for harm to patients,” said U.S. Attorney A. Lee Bentley III for the Middle District of Florida.

The improper conduct at issue in this case included Medicaid patients.  Medicaid is funded jointly by the states and the federal government.  The state of Florida, which paid for some of the Medicaid claims at issue, will receive $19,024 of the settlement amount.

“ Health care providers will not be permitted to provide patients unnecessary medical services and drugs and then pocket the improper payments they receive as a result,” said Acting Special Agent in Charge Brian Martens, U.S. Department of Health and Human Services Office of Inspector General.  “Our agency is dedicated to investigating health care fraud schemes that divert scarce taxpayer funds meant to provide for legitimate patient care.” 

The government’s investigation was initiated by a qui tam,or whistleblower, lawsuit filed under the False Claims Act by Verchetta Wells, a former Baptist Health employee.  The act allows private citizens to file suit for false claims on behalf of the government and to share in the government’s recovery.  Wells will receive $424,155. 

“These health care providers did not only violate the laws of the United States – they violated the trust placed in them by their patients,” said Inspector General of the U.S. Office of Personnel Management Patrick E. McFarland.  “Federal employees deserve health care providers, including hospitals, that meet the highest standards of ethical and professional behavior.  Today’s settlement reminds all providers that they must observe those standards and reflects the commitment of federal law enforcement organizations to pursue improper and illegal conduct that may put the health and well-being of their patients at risk.” 

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 settlement is the result of a coordinated effort among the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Middle District of Florida, the U.S. Department of Health and Human Services Office of Inspector General, the Defense Health Agency Program Integrity Office and the Office of Personnel Management Office of Inspector General. 

The claims resolved by this settlement are allegations only, and there has been no determination of liability.  The lawsuit against Baptist Health was filed in the U.S. District Court for the Middle District of Florida and is captioned United States ex rel. Wells v. Baptist Health System Inc. et al.

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.

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.).

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

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

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

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

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

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

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

This civil settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered more than $17.1 billion through False Claims Act cases, with more than $12.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement resolves allegations originally brought in a lawsuit filed by a whistleblower under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The whistleblower will receive $700,000 as its share of the recovery in this case.                

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

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