Tag Archives: False Claims Act and the Financial Institutions Reform

North Carolina-Based Trans1 to Pay U.S. $6 Million to Settle False Claims Act Allegations

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Medical device manufacturer TranS1 Inc., now known as Baxano Surgical Inc., has agreed to pay the United States $6 million to resolve allegations under the False Claims Act that the company caused health care providers to submit false claims to Medicare and other federal health care programs for minimally-invasive spine surgeries, the Justice Department announced today.
“The Justice Department is committed to ensuring that medical device manufacturers follow the law when providing devices to beneficiaries of federal health care programs,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.  “It is critical that health care providers bill federal health care programs accurately and honestly for the work they perform, and it is imperative that they base their selection of medical devices on the best interests of their patients.”
The United States alleged that TranS1 knowingly caused health care providers to submit claims with incorrect diagnosis or procedure codes for minimally-invasive spine fusion surgeries using Trans1’s AxiaLIF System.  That device was developed as alternative to invasive spine fusion surgeries.  The United States alleges that TranS1 improperly counseled physicians and hospitals to bill for the AxiaLIF System by using incorrect and inaccurate codes intended for more invasive spine fusion surgeries.  The United States alleged that, as a result, health care providers received greater reimbursement than they were entitled to for performing the minimally-invasive AxiaLIF procedures.
The United States further alleged that TranS1 knowingly paid illegal remuneration to certain physicians for participating in speaker programs and consultant meetings intended to induce them to use TranS1 products, in violation of the Federal Anti-Kickback Statute, 42 U.S.C.  § 1320a-7b(b), and thereby caused false claims to be submitted to federal health care programs.  The Anti-Kickback Statute prohibits offering or paying remuneration to induce referrals of items or services covered by federally-funded programs and is intended to ensure that a physician’s medical judgments are not compromised by improper financial incentives and are based solely on the best interests of the patient.
In addition, the United States alleged that TranS1 promoted the sale and use of its AxiaLIF System for uses that were not approved or cleared by the U.S. Food and Drug Administration, including use in certain procedures to treat complex spine deformity, and which were thus not covered by federal health care programs.     

               
“A medical device manufacturer violates the law when it advises physicians and hospitals to report the wrong codes to federal health insurance programs in order to increase reimbursement rates,” said Rod J. Rosenstein, U.S. Attorney for the District of Maryland.  “Health care providers are required to bill federal health care programs truthfully for the work they perform.”
As part of the settlement, TranS1 has agreed to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services.  That agreement provides for procedures and reviews to be put in place to avoid and promptly detect conduct similar to that which gave rise to this matter.
“Using kickbacks to encourage health providers to make false payment claims will not be tolerated,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services.  “TranS1’s agreement to now comply with government health laws is an important step.”
The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government’s recovery.  The civil lawsuit was filed in the District of Maryland and is captioned United States ex rel. Kevin Ryan v. TranS1, Inc.  As part of today’s resolution, Mr. Ryan will receive $1,020,000 from the settlement.
This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009.  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 that effort is the False Claims Act, which the Justice Department has used to recover more than $10.7 billion since January 2009 in cases involving fraud against federal health care programs.  The Justice Department’s total recoveries in False Claims Act cases since January 2009 are over $14.7 billion.
The settlement with TranS1 was the result of a coordinated effort among the U.S. Attorney’s Office for the District of Maryland; the Commercial Litigation Branch of the Justice Department’s Civil Division; the Department of Health and Human Services’ Office of Inspector General; the Department of Defense, Office of the Inspector General; 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.

Kentucky-Based Defense Contractors, Owners Agree to Pay $6.25 Million to Resolve Allegations That They Submitted False Statements and Claims to Obtain Army Contracts Intended for Small Businesses

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Kentucky-Based Defense Contractors, Owners Agree to Pay $6.25 Million to Resolve Allegations That They Submitted False Statements and Claims to Obtain Army Contracts Intended for Small Businesses

Kentucky-based Lusk Mechanical Contractors and Commonwealth Technologies, and their owners, Harry Lusk and Wendell Goodman, have agreed to pay $6.25 million to resolve allegations that they submitted false statements to the Small Business Administration and false claims to the Army, the Justice Department announced today.

 

Congress established the Historically Underutilized Business Zone (HUBZone) program in 1997 to help inner cities and rural counties that have low household income and high unemployment, and whose communities have suffered from a lack of investment.   Under the HUBZone program, small businesses that maintain their principal office in a designated HUBZone, and meet certain other requirements, can apply to the Small Business Administration (SBA) for certification as a HUBZone company.  HUBZone companies can then use this certification to their advantage when bidding on government contracts.

 

Today’s settlement resolves allegations that Lusk Mechanical, Commonwealth Technology and their owners made, or caused to be made, false statements to the SBA to obtain certification as a HUBZone company, and then used this certification to wrongfully obtain Army contracts to build a courthouse in Fort Knox, Ky., and to complete maintenance and other repairs to Army facilities in Fort Knox.   Specifically, the United States alleged that in February 2005, Commonwealth submitted an application to the SBA representing that it was a small business with its principal place of business in a designated HUBZone.   In fact, Commonwealth allegedly operated out of Lusk Mechanical’s headquarters, which was not located in a HUBZone area.  Commonwealth’s business office was identified on the application as 212 East Caroline Street, Irvington, Ky.   The United States alleged that this location was nothing more than a vacant office space with no employees, and that Commonwealth’s application did not disclose that Wendell Goodman and Harry Lusk were, in fact, affiliated with Lusk Mechanical.   At the time, Harry Lusk and his wife were the sole owners of Lusk Mechanical and Wendell Goodman was the chief executive officer of Lusk Mechanical.   According to the United States’ allegations, neither Lusk nor Goodman disclosed in the application to the SBA that Commonwealth did not operate as an independent company, but instead shared facilities, equipment, personnel, insurance and bonding with Lusk Mechanical, nor did they inform the SBA about the financial relationship between Commonwealth and Lusk Mechanical.  The United States alleged that, using the falsely obtained HUBZone certification, the companies obtained contracts from the Army that had been restricted to qualified HUBZone companies, in violation of the False Claims Act and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).

 

Under the terms of the settlement, Commonwealth, Lusk Mechanical, Goodman, and Lusk have agreed to pay $3,741,739.96, and to forfeit $2,506,260.24 seized by federal agents from their bank accounts under a civil forfeiture action.

 

“As our economy continues to improve, the HUBZone program provides a critical lifeline to small businesses that voluntarily choose to locate in areas that often have difficulty attracting business,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division.   “Companies that set up sham offices not only break the law, but deprive the HUBZone communities and legitimate HUBZone businesses of the benefits of the HUBZone program.”

 

“They abused a program meant to assist small businesses located in financially disadvantaged communities,” stated David J. Hale, U.S. Attorney for the Western District of Kentucky. “Today’s multimillion dollar settlement is the result of a successfully coordinated effort among law enforcement agencies and the Department of Justice, working together to hold these business owners accountable.”

 

“The HUBZone Program offers significant benefits to eligible small businesses and is an important tool for unlocking the potential of historically underutilized business zones,” said Inspector General Peggy E. Gustafson of the Small Business Administration. “Preferences for federal contract awards must not be given to persons who lie in order to claim eligibility.   I applaud the dedication and perseverance of our law enforcement partners as justice is served here today on behalf of the American taxpayer”

 

“SBA’s contracting programs, including the HUBZone program, provide small businesses with the opportunity to grow and create jobs,” stated SBA’s General Counsel Sara Lipscomb.  “But, SBA has no tolerance for waste, fraud or abuse in any government contracting program and is committed to ensuring the benefits of these programs flow to the intended recipients.  SBA works closely with our federal partners to prevent bad actors from participating in contracting programs and taking action and holding those accountable when they lie to or mislead the government.”

“This investigation is the result of a highly successful joint effort by the Defense Criminal Investigative Service (DCIS) and one of our key law enforcement partners — the SBA’s Office of Inspector General, in collaboration with the Department of Justice.   Fraud in military contracting undermines the confidence of the American public who demand a military procurement system that spends their tax dollars wisely and responsibly.   This investigation should serve as a warning for those who submit false claims for U.S. military and public funds that DCIS will aggressively investigate these matters,” said Bret Flinn, Resident Agent in Charge of the DCIS Dayton Resident Agency.

 

Principal Deputy Assistant Attorney General Delery thanked the U.S. Attorney’s Office for the Western District of Kentucky, the Office of General Counsel and the Office of the Inspector General for the Small Business Administration, the Defense Criminal Investigative Service, and the Justice Department’s Commercial Litigation Branch for the collaboration that resulted in today’s settlement.   The claims settled by this agreement are allegations only, and there has been no determination of liability.