Tag Archives: False Claims Act

Greentech Inc, OSI Pharmaceuticals Face $67 Million Settlement Fine, $10 Million to Whistleblower

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Washington, D.C.-  Whistleblower Brian Shields of Greentech Inc. ignites investigations of Greentech Inc (San Francisco, CA) and OSI Pharmaceuticals LLC (Farmingdale, NY) following exposure of information into False Claims Act violations.  Both companies are alleged to have skewed reports of efficacy for anti-lung cancer drug Tarceva for the sake of kickback profit.  The two companies are now facing a $67 million settlement fee, $10 million of which will be rewarded to whistleblower Shields in accordance to SEC’s whistleblower program.

The original article is reproduced below with its link following.

 

Pharmaceutical Companies to Pay $67 Million To Resolve False Claims Act Allegations Relating to Tarceva

Pharmaceutical companies Genentech Inc. and OSI Pharmaceuticals LLC will pay $67 million to resolve False Claims Act allegations that they made misleading statements about the effectiveness of the drug Tarceva to treat non-small cell lung cancer, the Department of Justice announced today.  Genentech, located in South San Francisco, California, and OSI Pharmaceuticals, located in Farmingdale, New York, co-promote Tarceva, which is approved to treat certain patients with non-small cell lung cancer or pancreatic cancer.  OSI Pharmaceuticals LLC is the successor to OSI Pharmaceuticals Inc., which was acquired by Astellas Holding US Inc. in 2010 and converted to a limited liability company in 2011.

“Pharmaceutical companies have a responsibility to provide accurate information to patients and health care providers about their prescription drugs,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will hold those companies accountable that mislead the public about the efficacy of their products.”

The settlement resolves allegations that, between January 2006 and December 2011,  Genentech and OSI Pharmaceuticals made misleading representations to physicians and other health care providers about the effectiveness of Tarceva to treat certain patients with non-small cell lung cancer, when there was little evidence to show that Tarceva was effective to treat those patients unless they also had never smoked or had a mutation in their epidermal growth factor receptor, which is a protein involved in the growth and spread of cancer cells.

As a result of today’s $67 million settlement, the federal government will receive $62.6 million and state Medicaid programs will receive $4.4 million.  The Medicaid program is funded jointly by the state and federal governments.

“This settlement demonstrates the government’s unwavering commitment to pursue violations of the False Claims Act and recover taxpayer dollars spent as a result of misleading marketing campaigns,” said U.S. Attorney Brian Stretch for the Northern District of California.

“Pharmaceutical companies that make misleading or unsubstantiated statements about their products can put patients at risk,” said Deputy Commissioner Howard R. Sklamberg for FDA’s global regulatory operations and policy. “The FDA will continue to work to protect the public’s health by ensuring that companies do not mislead healthcare providers about their products.”

“Drug manufacturers that make misleading claims about their product’s effectiveness can jeopardize the health of patients – in this case, cancer patients,” said Special Agent in Charge Steven J. Ryan for the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).  “Our agency will continue to protect both patients and taxpayers by holding those who engage in such practices accountable for their actions.”

The settlement resolves allegations filed in a lawsuit by former Genentech employee Brian Shields, in federal court in San Francisco.  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.  Shields will receive approximately $10 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 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 $29.8 billion through False Claims Act cases, with more than $18.2 billion of that amount recovered in cases involving fraud against federal health care programs.

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 Northern District of California, with assistance from the HHS-OIG, the HHS Office of Counsel to the Inspector General, the HHS Office of the General Counsel-CMS Division, the FDA’s Office Chief Counsel, the FDA’s Office of Criminal Investigations, the Office of the Inspector General for the Office of Personnel Management, the FBI, the Department of Defense Office of the Inspector General, the Office of the General Counsel for the Defense Health Agency and the National Association of Medicaid Fraud Control Units.

The case is captioned United States ex rel. Shields v. Genentech, Inc., et al., Case No.  CV 11 0822 MEJ (N.D. Ca.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

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Fifty-One Hospitals Pay United States More Than $23 Million to Resolve False Claims Act Allegations Related to Implantation of Cardiac Devices

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The Department of Justice has reached settlements with 51 hospitals in 15 states for more than $23 million related to cardiac devices that were implanted in Medicare patients in violation of Medicare coverage requirements, the Department of Justice announced today.  These settlements represent the final stage of a nationwide investigation into the practices of hundreds of hospitals improperly billing Medicare for these devices.  With these additional agreements, the Justice Department’s investigation has now yielded settlements with more than 500 hospitals totaling more than $280 million.

“These settlements demonstrate the Department’s continued vigilance in pursuing hospitals and health systems that violate Medicare’s national coverage rules,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will hold accountable those who do not abide by the government’s rules in order to protect the federal fisc and, more importantly, patient health.”

An implantable cardioverter defibrillator, or ICD, is an electronic device that is implanted near and connected to the heart.  It detects and treats chaotic, extremely fast, life-threatening heart rhythms, called fibrillations, by delivering a shock to the heart, restoring the heart’s normal rhythm.  It is similar in function to an external defibrillator (often found in offices and other buildings) except that it is small enough to be implanted in a patient’s chest.  Only patients with certain clinical characteristics and risk factors qualify for an ICD covered by Medicare.

Medicare coverage for the device, which costs approximately $25,000, is governed by a National Coverage Determination (NCD).  The Centers for Medicare and Medicaid Services implemented the NCD based on clinical trials and the guidance and testimony of cardiologists and other health care providers, professional cardiology societies, cardiac device manufacturers and patient advocates.  The NCD provides that ICDs generally should not be implanted in patients who have recently suffered a heart attack or recently had heart bypass surgery or angioplasty.  The medical purpose of a waiting period – 40 days for a heart attack and 90 days for bypass/angioplasty – is to give the heart an opportunity to improve function on its own to the point that an ICD may not be necessary.  The NCD expressly prohibits implantation of ICDs during these waiting periods, with certain exceptions.  The Department of Justice alleged that from 2003 to 2010, each of the settling hospitals implanted ICDs during the periods prohibited by the NCD.

“The settlements announced last October and today demonstrate the Department of Justice’s commitment to protect Medicare dollars and federal health benefits,” said U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida.  “Guided by a panel of leading cardiologists and the review of thousands of patients’ charts, the extensive investigation behind the settlements was heavily influenced by evidence-based medicine.  In terms of the number of defendants, this is one of the largest whistleblower lawsuits in the United States and represents one of this office’s most significant recoveries to date.   Our office will continue to vigilantly protect the Medicare program from potential false billing claims.”

“We will not stand idly by while Medicare coverage rules are ignored,” said Inspector General Daniel R. Levinson of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG).  “OIG worked closely with the Department of Justice to ensure such violators made substantial payments to settle these false billing claims.”

The department previously settled with 457 hospitals for more than $250 million.

The settlements announced today involve 51 hospitals, which are listed on the attached chart.  Most of the settling defendants were named in a qui tam, or whistleblower, lawsuit brought under the False Claims Act, which permits private citizens to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment awarded against a defendant.  The lawsuit was filed in federal district court in the Southern District of Florida by Leatrice Ford Richards, a cardiac nurse and Thomas Schuhmann, a health care reimbursement consultant.  The whistleblowers have received more than $3.5 million from the settlements announced today.

The settlements were the result of a coordinated effort among the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Southern District of Florida and HHS-OIG’s Office of Investigations and Office of Counsel to the 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 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 $27.4 billion through False Claims Act cases, with more than $17.4 billion of that amount recovered in cases involving fraud against federal health care programs.

The claims resolved by these settlements are allegations only and there has been no determination of liability.

Nation’s Largest Nursing Home Therapy Provider, Kindred/Rehabcare, to Pay $125 Million to Resolve False Claims Act Allegations

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Four Nursing Homes Using Kindred/RehabCare to Pay an Additional $8.225 Million

Contract therapy providers RehabCare Group Inc., RehabCare Group East Inc. and their parent, Kindred Healthcare Inc., have agreed to pay $125 million to resolve a government lawsuit alleging that they violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred, the Department of Justice announced today.

RehabCare Group Inc. and RehabCare Group East Inc. were purchased by the Louisville, Kentucky-based Kindred Healthcare Inc. in 2011 and they now operate under the name RehabCare as a division of Kindred.  RehabCare is the largest provider of therapy in the nation, contracting with more than 1,000 SNFs in 44 states to provide rehabilitation therapy to their patients.

“Medicare beneficiaries are entitled to receive care that is dictated by their clinical needs rather than the fiscal interests of healthcare providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “All providers, whether contractors or direct billers of taxpayer-funded federal healthcare programs, will be held accountable when their actions cause false claims for unnecessary services.”

The government’s complaint alleged that RehabCare’s policies and practices, including setting unrealistic financial goals and scheduling therapy to achieve the highest reimbursement level regardless of the clinical needs of its patients, resulted in Rehabcare providing unreasonable and unnecessary services to Medicare patients and led its SNF customers to submit artificially and improperly inflated bills to Medicare that included those services.  Specifically, the government’s complaint alleged that RehabCare’s schemes included the following:

  • Presumptively placing patients in the highest therapy reimbursement level, rather than relying on individualized evaluations to determine the level of care most suitable for each patient’s clinical needs;
  • During the period prior to Oct. 1, 2011, boosting the amount of reported therapy during “assessment reference periods,” thereby causing and enabling SNFs to bill for the care of their Medicare patients at the highest therapy reimbursement level, while providing materially less therapy to those same patients outside the assessment reference periods, when the SNFs were not required to report to Medicare the amount of therapy RehabCare was providing to their patients (a practice known as “ramping”);
  • Scheduling and reporting the provision of therapy to patients even after the patients’ treating therapists had recommended that they be discharged from therapy;
  • Arbitrarily shifting the number of minutes of planned therapy among different therapy disciplines (i.e., physical, occupational and speech therapy) to ensure targeted therapy reimbursement levels were achieved, regardless of the clinical need for the therapy;
  • Especially after Oct. 1, 2011 and continuing through Sept. 30, 2013, providing significantly higher amounts of therapy at the very end of a therapy measurement period not due to medical necessity but rather to reach the minimum time threshold for the highest therapy reimbursement level, to enable SNFs to bill for the care of their Medicare patients accordingly, even though the patients were receiving materially less therapy on preceding days;
  • Inflating initial reimbursement levels by reporting time spent on initial evaluations as therapy time rather than evaluation time;
  • Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy (e.g., when a patient had been transitioned to palliative end-of-life care); and
  • Reporting estimated or rounded minutes instead of reporting the actual minutes of therapy provided.

“This False Claim Act settlement addresses allegations that RehabCare and its nursing facility customers engaged in a systematic and broad-ranging scheme to increase profits by delivering, or purporting to deliver, therapy in a manner that was focused on increasing Medicare reimbursement rather than on the clinical needs of patients,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.  “The complaint outlines the extent and sophistication of this fraud, and the government’s continuing work to ensure that the provision of care in skilled nursing facilities is based on patients’ clinical needs.”

“Health providers seeking to increase Medicare profits, rather than providing suitable, high-quality care, will be investigated and prosecuted,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services (HHS).  “Under our robust compliance agreement, an outside review organization will scrutinize a random sample of medical records annually to assess the medical necessity and reasonableness of therapy services provided by RehabCare.”

In addition to RehabCare, the Department of Justice also announced settlements today with four SNFs for their role in submitting claims to Medicare that were false because they were based in part on therapy provided by RehabCare that was not reasonable, necessary and skilled, or that did not occur.  These settlements include:  A $3.9 million settlement with Wingate Healthcare Inc. and 16 of its facilities in Massachusetts and New York; A $2.2 million settlement with THI of Pennsylvania at Broomall LLC and THI of Texas at Fort Worth LLC; A $1.375 million settlement with Essex Group Management and two of its Massachusetts facilities, Brandon Woods of Dartmouth and Blaire House of Milford and a $750,000 settlement with Frederick County, Maryland, which formerly operated the Citizens Care skilled nursing facility.  The department had previously reached settlements with a number of other SNFs for similar conduct.  See http://www.justice.gov/opa/pr/two-companies-pay-375-million-allegedly-causing-submission-claims-unreasonable-or-unnecessary; http://www.justice.gov/opa/pr/episcopal-ministries-aging-inc-pay-13-million-allegedly-causing-submission-claims; http://www.justice.gov/usao-ma/pr/new-york-catholic-nursing-chain-pay-35-million-resolve-allegations-concerning-claims; http://www.justice.gov/usao-ma/pr/maine-nursing-home-pay-12-million-resolve-allegations-concerning-rehabilitation-therapy.

The settlement with RehabCare resolves allegations originally brought in a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act by Janet Halpin, a physical therapist and former rehabilitation manager for RehabCare and Shawn Fahey, an occupational therapist who worked for RehabCare.  The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery.  The government may intervene and file its own complaint in such a lawsuit, as it has done in this case.  The whistleblowers will receive nearly $24 million as their share of the recovery from RehabCare.

The settlements announced today illustrate 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 $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, including the conduct described in the United States’ complaint, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

This matter was handled by the Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Massachusetts; HHS Office of Inspector General and the FBI.

The case is captioned United States ex rel. Halpin and Fahey v. Kindred Healthcare, Inc., et al., Case No. 1:11cv12139-RGS (D. Mass.).

The claims settled are allegations only, and there has been no determination of liability.

URS E & C Holdings, Inc. Agrees to Pay $9 Million to Resolve False Claims Act Allegations

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URS E & C Holdings Inc., a successor in interest to the global design and construction company Washington Group International Inc. (WGI), has agreed to pay $9 million to settle allegations that WGI submitted false claims in connection with United States Agency for International Development (USAID) contracts, the Justice Department announced today.

“Contractors who misrepresent their eligibility for government contracts undermine the government procurement process,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Justice Department will take action to protect that process and to ensure that taxpayer funds are not misused.”

“Government contractors must be honest and forthright,” said U.S. Attorney Wendy J. Olson for the District of Idaho.  “This settlement protects the integrity of the federal procurement process.  Whether a situation involves procurement fraud, as in this case, or healthcare fraud or any other type of fraud and dishonesty, the U.S. Attorney’s Office for the District of Idaho seeks to hold those obtaining public funds accountable.”

The settlement concerns USAID-funded contracts for the construction of water and wastewater infrastructure projects in the Arab Republic of Egypt in the 1990s.  The contracts were awarded to a joint venture partnership between WGI, Contrack International Inc. (Contrack) and Misr Sons Development S.A.E. (HAS), an Egyptian company.  The United States filed suit under the False Claims Act and the Foreign Assistance Act, alleging that prior to the award of those contracts, the joint venture partners concealed from USAID that Contrack and HAS were partners in the venture, thus preventing USAID from evaluating their qualifications and eligibility, which was a precondition to contract award.  As a result, WGI and its partners allegedly received USAID-funded contracts for which they were ineligible.  The settlement resolves only WGI’s liability.  The United States previously settled with Contrack and is continuing to pursue its claims against HAS.

This settlement was the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Idaho; and the USAID Office of Inspector General.

The case is United States v. Washington Group International Inc. f/k/a/ Morrison Knudsen, Corporation, Contrack International, Inc.; and Misr Sons Development S.A.E. a/k/a Hassan Allam Sons, No. 04-555 (D. Idaho).  The claims resolved by this settlement are allegations only and there has been no determination of liability.

Boeing Pays $18 Million to Settle False Claims Act Allegations

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The Boeing Company has paid the United States $18 million to settle allegations that the company submitted false claims for labor charges on maintenance contracts with the U.S. Air Force for the C-17 Globemaster aircraft, the Justice Department announced today.  Boeing, an aerospace and defense industry giant, is headquartered in Chicago.

“Defense contractors are required to obey the rules when billing for work performed on government contracts,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates that the Justice Department will ensure that government contractors meet their obligations and charge the government appropriately.”

The government alleged that Boeing improperly charged labor costs under contracts with the Air Force for the maintenance and repair of C-17 Globemaster aircraft at Boeing’s Long Beach Depot Center in Long Beach, California.  The C-17 Globemaster aircraft, which is both manufactured and maintained by Boeing, is one of the military’s major systems for transporting troops and cargo throughout the world.  The government alleged that the company knowingly charged the United States for time its mechanics spent on extended breaks and lunch hours, and not on maintenance and repair work properly chargeable to the contracts.

The allegations resolved by the settlement announced today were originally brought by former Boeing employee James Thomas Webb under the qui tam, or whistleblower, provisions of the False Claims Act.  The act permits private individuals to sue on behalf of the government those who falsely claim federal funds, and to share in the recovery.  Mr. Webb’s share of the settlement has not yet been determined.

The case was handled by the Civil Division’s Commercial Litigation Branch, the Defense Criminal Investigative Service, the Air Force Office of Special Investigations, the Defense Contract Audit Agency and the Defense Contract Management Agency.

The False Claims Act lawsuit is captioned United States ex rel. Webb v. The Boeing Company, CV13-000694 (C.D. Cal.).  The claims resolved by today’s civil settlement are allegations only; there has been no determination of liability.

PAE Government Services and RM Asia (HK) Limited to Pay $1.45 Million to Settle Claims in Alleged Bid-Rigging Scheme

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AE Government Services Inc. (PAE) and RM Asia (HK) Limited (RM Asia) have agreed to pay the United States $1.45 million to resolve allegations that they engaged in a bid-rigging scheme that resulted in false claims for payment under a U.S. Army contract for services in Afghanistan, the Justice Department announced today. PAE, headquartered in Arlington, Virginia, provides integrated global mission services. RM Asia, located in Hong Kong, provides motor vehicle parts and supplies.

“Our national security and those of our allies depend on quality goods and services delivered at a fair price,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates our continuing vigilance to ensure that those doing business with the government do not engage in bidrigging or other anticompetitive conduct.”

In 2007, the Army awarded PAE a contract to provide vehicle maintenance capabilities and training services for the Afghanistan National Army at multiple sites across Afghanistan. PAE partnered with RM Asia to supply and warehouse vehicle parts. The government alleged that former managers of PAE and RM Asia funneled subcontracts paid for by the government to companies owned by the former managers and their relatives by using confidential bid information to ensure that their companies would beat out other, honest competitors.

In a related criminal investigation, the U.S. Attorney’s Office of the Eastern District of Virginia previously obtained guilty pleas from former PAE program manager Keith Johnson; Johnson’s wife, Angela Gregory Johnson; and RM Asia’s former project manager, John Eisner, and deputy project manager, Jerry Kieffer, for their roles in the scheme.

“This resolution, following criminal charges that were also brought against the individuals involved, represents the government’s efforts to use all of the criminal and civil tools available to the government to remedy fraudulent conduct,” said U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

The allegations resolved by this settlement arose from a lawsuit filed by Steven D. Walker, a former employee of PAE, 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 share in the recovery. Mr. Walker will receive $261,000.

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Virginia, the Defense Criminal Investigative Service, the U.S. Department of the Army Criminal Investigation Command-Major Procurement Fraud Unit and the Defense Contract Audit Agency.

The lawsuit is captioned United States ex rel. Walker v. PAE, et al., 1:11CV382-LO/TCB (E.D. Va.). The claims resolved by the settlement are allegations only; there has been no determination of liability.

EDF Resources Capital Inc. and CEO Pay $6 Million for Alleged Violations Related to Small Business Administration Loan Program

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EDF Resource Capital Inc. and its CEO, Frank Dinsmore, have agreed to resolve allegations that they violated the False Claims Act and otherwise failed to remit payments owed to the Small Business Administration (SBA) under the 504 loan program, the Department of Justice announced today.  Under the settlement agreement, EDF and Dinsmore have agreed to make payments and turn over certain assets to the United States for a total settlement of approximately $6 million.

“Today’s settlement demonstrates our commitment to ensure that companies and individuals who elect to participate in federal programs live up to their statutory and contractual commitments, play by the rules, and deal honestly and openly with the federal government,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to work side-by-side with the Small Business Administration to ensure that fraud committed by SBA program participants is thoroughly investigated and, where appropriate, vigorously prosecuted.”

The SBA 504 loan program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.  Under the program, local lenders like EDF are responsible for arranging, servicing and collecting on these small business loans, which are guaranteed, in part, by the SBA.  In return for the authority to make determinations on 504 loans without prior SBA approval, EDF was required to bear a share of any losses suffered by the SBA on such loans and to maintain a loan loss reserve fund (LLRF) to help ensure payment of its loss-sharing obligations.

Today’s settlement resolves claims that EDF and Dinsmore violated the False Claims Act in connection with EDF’s failure to maintain adequate reserves in its LLRF.  EDF allegedly was required to fund its LLRF at a level determined by the riskiness of its 504 loan program portfolio yet knowingly concealed from the SBA hundreds of troubled loans to avoid its obligation to fully fund its LLRF.

The settlement also resolves a lawsuit filed by the United States against EDF and a related entity, Redemption Reliance LLC, alleging that EDF failed to remit required payments to the SBA to satisfy its loss-sharing obligations.  The lawsuit also alleges that the SBA agreed to advance funds to EDF in connection with certain defaulted 504 loans but that, after EDF assigned the loan documents for these loans to Redemption Reliance, neither EDF nor Redemption Reliance remitted the monies owed on these loans to the SBA.

“The 504 Loan Program provides small businesses with access to the capital they need to start, grow and succeed,” said General Counsel Melvin F. Williams Jr. of the SBA.  “SBA has no tolerance for fraud, waste, or abuse by participants in the 504 Loan Program.  Working with the attorneys at the Department of Justice and SBA’s Office of Inspector General, this settlement marks the successful conclusion of a major enforcement action.”

“The defendants’ misrepresentations to SBA knowingly put the taxpayer’s money at risk,” said Inspector General Peggy E. Gustafson of the SBA.  “As stewards of the taxpayers’ money, the SBA must guard against losses within its loan portfolios.  In this instance, the actions of the defendants did not allow SBA to protect taxpayers from such losses.  I want to thank the Department of Justice and our investigative partners for achieving this settlement.”

The settlements were the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the SBA’s Office of General Counsel and the SBA’s Office of Inspector General Los Angeles Field Office’s Counsel Division and Investigations Division.

The lawsuit is captioned United States v. EDF Resource Capital, Inc., et al., Case No. 13‑cv-389 (E.D. Cal.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

U.S. Investigations Services Agrees to Forego at Least $30 Million to Settle False Claims Act Allegations

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Contractor Allegedly Failed to Perform Required Quality Control Reviews on Contracts for Background Investigations with the U.S. Office of Personnel Management

The Justice Department announced today that U.S. Investigations Services Inc. (USIS) and its parent company, Altegrity, have agreed to settle allegations that USIS violated the False Claims Act (FCA) for conduct involving a contract for background investigations that USIS held with the U.S. Office of Personnel Management (OPM).  The companies have agreed to forgo their right to collect payments that they claim were owed by OPM, valued at least at $30 million, in exchange for a release of liability under the FCA.  USIS and Altegrity are headquartered in Northern Virginia.

From its privatization in 1996 until September 2014, USIS provided background investigations services for OPM under various fieldwork contracts.  The government alleged that beginning in at least March 2008 and continuing through at least September 2012, USIS deliberately circumvented contractually required quality reviews of completed background investigations in order to increase the company’s revenues and profits.  Specifically, USIS allegedly devised a practice referred to internally as “dumping” or “flushing,” which involved releasing cases to OPM and representing them as complete when, in fact, not all the reports of investigations comprising those cases had received a contractually-required quality review.  The government contended that, relying upon USIS’ false representations, OPM issued payments and contract incentives to USIS that it would not otherwise have issued had OPM been aware that the background investigations had not gone through the quality review process required by the contracts.

“Shortcuts taken by any company that we have entrusted to conduct background investigations of future and current federal employees are unacceptable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Justice Department will ensure that those who do business with the government provide all of the services for which we bargained.”

“Contractors who do business for the federal government have a responsibility to provide the goods and services that they promise,” said Acting U.S. Attorney Vincent H. Cohen Jr. of the District of Columbia.  “This particular company failed to meet its obligations of comprehensively reviewing the backgrounds of current and prospective federal employees.  This settlement demonstrates our commitment to holding government contractors accountable.”

“This case demonstrates my office’s dedication to protecting tax payers’ money,” said U.S. Attorney George L. Beck Jr. of the Middle District of Alabama.  “We will continue to vigorously pursue all fraud against the government in order to restore and safeguard funds paid by our citizens.”

In February 2015, Altegrity, USIS and their affiliates filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code in Delaware.  The settlement of USIS’ FCA liability is part of a broader settlement that also resolves other matters between the United States and USIS/Altegrity that were part of the bankruptcy proceeding.

The FCA lawsuit against USIS was originally filed under the whistleblower provisions of the act by Blake Percival, a former executive at USIS.  The FCA prohibits the submission of false claims for government money or property and, under the act’s whistleblower provisions, a private party may file suit on behalf of the United States and share in any recovery.  The United States may elect to intervene and take over the case, as it did here.  Mr. Percival’s share of the settlement has not yet been determined.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the District of Columbia, the U.S. Attorney’s Office of the Middle District of Alabama, OPM and OPM’s Office of Inspector General.

The claims resolved by the settlement agreement are allegations only and there has been no determination of liability.  The case is United States of America, ex rel., Blake Percival, v. U.S. Investigations Services, LLC, No. 14-cv-00726-RMC (D.D.C.).

Medical Device Manufacturer NuVasive Inc. to Pay $13.5 Million to Settle False Claims Act Allegations

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California-based medical device manufacturer NuVasive Inc. has agreed to pay the United States $13.5 million to resolve allegations that the company caused health care providers to submit false claims to Medicare and other federal health care programs for spine surgeries by marketing the company’s CoRoent System for surgical uses that were not approved by the U.S. Food and Drug Administration (FDA), the Justice Department announced today.  The settlement further resolves allegations that NuVasive caused false claims by paying kickbacks to induce physicians to use the company’s CoRoent System.

“The Justice Department is committed to holding medical device manufacturers accountable, which includes requiring that they follow all laws designed to ensure that medical devices are safe and effective,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “It is also imperative that manufacturers not improperly influence the selection of medical devices in order to ensure that these decisions are based on the needs and interests of patients, not on a physician’s own financial interests.”

The United States alleged that between 2008 and 2013, NuVasive promoted the use of the CoRoent System for surgical uses that were not approved or cleared by the FDA, including for use in treating two complex spine deformities, severe scoliosis and severe spondylolisthesis.  As a result of this conduct, the United States alleged that NuVasive caused physicians and hospitals to submit false claims to federal health care programs for certain spine surgeries that were not eligible for reimbursement.

The settlement agreement also resolves allegations that NuVasive knowingly offered and paid illegal remuneration to certain physicians to induce them to use the CoRoent System in spine fusion surgeries, in violation of the federal Anti-Kickback Statute.  The illegal remuneration consisted of promotional speaker fees, honoraria and expenses relating to physicians’ attendance at events sponsored by a group known as the Society of Lateral Access Surgery (SOLAS).  SOLAS was allegedly created, funded and operated solely by NuVasive, despite its outward appearance of independence.

“Health care providers need to be free to make medical decisions without improper influence by material or incentives from manufacturers,” said U.S. Attorney Rod J. Rosenstein of the District of Maryland.  “A medical device manufacturer violates the law if it knowingly causes physicians to use its products for purposes that are not medically reasonable and necessary and to bill federal health insurance programs.”

“Defrauding Medicare and Medicaid by paying kickbacks to physicians and promoting uses not covered by Federal health care programs will not be tolerated,” said Special Agent in Charge Nick DiGiulio of the U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG).  “Settlements such as the one entered into today by NuVasive send a message to the medical device industry that such practices will be closely monitored.”

The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act by Kevin Ryan, a former NuVasive sales representative.  The act permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  As part of today’s resolution, Mr. Ryan will receive approximately $2.2 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 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 $24.8 billion through False Claims Act cases, with more than $15.9 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement with NuVasive was the result of a coordinated effort among the U.S. Attorney’s Office of the District of Maryland, the Civil Division’s Commercial Litigation Branch and the National Association of Medicaid Fraud Control Units.  This matter was investigated by HHS-OIG, the Department of Defense’s Office of the Inspector General and the Office of Personnel Management’s Office of Inspector General, with assistance from the FDA’s Office of Chief Counsel and Office of Criminal Investigations.

The federal share of the civil settlement is $12,583,413.84, and the state Medicaid share of the civil settlement is $916,586.16.  The claims resolved by this settlement are allegations only, and there has been no determination of liability.

The lawsuit is captioned United States ex rel. Kevin Ryan v. NuVasive, Inc. (D. Md.).   

United States Settles Kickback Allegations with Georgia Hospital

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The Department of Justice announced today that the United States has settled a False Claims Act lawsuit with Health Management Associates (HMA) and Clearview Regional Medical Center for $595,155.  The lawsuit filed in the Middle District of Georgia alleged that from 2008 to 2009 the hospital paid kickbacks to an obstetric clinic that served primarily undocumented Hispanic women, in return for referral of those patients for labor and delivery at the hospital.  The hospital then billed the Medicaid program in Georgia for the services provided to the referred patients.  Clearview, located in Monroe, Georgia, was named Walton Regional Medical Center and was owned by hospital operator HMA during the time period relevant to the lawsuit.  Clearview is now owned by Community Health Systems (CHS), which purchased HMA in January 2014.

“This resolution illustrates our commitment to ensuring that health care providers who pay kickbacks in return for patient referrals are held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “Schemes such as this one corrupt the health care system and take advantage of vulnerable patients.”

“The Medicaid program is a vital part of the government’s efforts to make sure that everyone has access to health care,” said U.S. Attorney Georgia Michael J. Moore of the Middle District of Georgia.  “Instead of providing health care services to expectant mothers in its area and receiving payment for those services from Medicaid, the hospital participated in a scheme to pay kickbacks in exchange for having pregnant women from outside its market funneled to its facility with the goal of increasing the amount of Medicaid money the hospital could claim.”

The United States’ complaint alleges that HMA’s Walton Regional Medical Center paid kickbacks to Hispanic Medical Management doing business as Clinica de la Mama (Clinica) and related entities, in return for Clinica’s agreement to send pregnant women to Walton Regional for deliveries paid for by Medicaid, in violation of the federal 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.

“Hospitals that pay kickbacks to clinics for referrals of undocumented pregnant patients are taking advantage of both these vulnerable women and the taxpayer-funded Medicaid program,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services, Office of Inspector General’s (HHS-OIG) Atlanta Regional Office.  “Our agency is dedicated to investigating such corrosive kickback schemes, which undermine the public’s trust in medical institutions and the financial health of government health care programs.”

“The FBI is proud of the role it played in bringing forward today’s settlement, said Special Agent in Charge J. Britt Johnson of the FBI Atlanta Field Office.  “The FBI will continue to provide significant investigative assets and resources to ensure that the integrity of federally funded health care programs such as Medicaid are protected from providers who would abuse them.”

As part of the settlement, HMA and Clearview will pay the State of Georgia an additional $396,770 to settle Georgia’s claims under the Georgia False Medicaid Claims Act.  The Medicaid program is a jointly funded federal-state program that provides health care to the poor and disabled.  Although undocumented aliens are not eligible for regular Medicaid coverage, the Medicaid program provides coverage for emergency conditions, including childbirth, for undocumented aliens.

The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act.  The Act permits private parties to sue on behalf of the government for 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 did in this case against Walton Regional, as well as several other defendants, including Clinica de la Mama and four hospitals owned by Tenet Healthcare Corporation.  The litigation against the non-settling defendants is ongoing.  The relator, Ralph D. Williams, the chief financial officer of Walton Regional from April 2009 to October 2009, will receive $119,031 from the United States’ portion of the 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 $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Offices for the Middle and Northern Districts of Georgia, HHS-OIG, FBI 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., et al., No. 3:09-CV-130 (M.D. Ga.).

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