In The News

Former Tenet Healthcare Corporation Exec Charged for Allegedly Attempting to Defraud the Government of $400 Million

The government, in its pursuit of fraudulent activities committed by private institutions, often encounters executives who are alleged to have violated not just the False Claims Act but also other laws as well. This was shown to be the case when last week the Department announced that a former senior executive of Tenet Healthcare Corporation had been indicted for his alleged role in scheming to defraud the government of $400 million. The Department alleges that the scheme targeted not only the U.S. government but the Georgia and South Carolina Medicaid Programs and prospective patients of Tenet hospitals. The executive – John Holland – was charged in an indictment filed on January 24, 2017 with one count of mail fraud, one count of health care fraud and two counts of major fraud against the United States. His initial appearance on the charges was on Feb 1 before a judge in the Southern District of Florida.

The indictment alleges that from 2000 through 2013, Holland engaged in a plan to defraud the US government and the Georgia and South Carolina Medicaid Programs by causing the payment of bribes and kickbacks to be made in exchange for patient referrals to several Tenet owned facilities. From approximately 2007 through 2013, Tenet maintained billing several centers located in Boca Raton, Florida. These centers processed Medicaid billings for Tenet hospitals. Holland – it is alleged – attempted to conceal the scheme by circumventing internal account controls and by falsifying Tenet’s books, records and reports. As a result of his scheme, Tenet was able to bill Georgia and South Carolina Medicaid Programs over $400 million. Moreover, the indictment alleges that Tenet obtained more than $149 million in Medicare funds based on the patient referrals that came about as a result of kickbacks and bribes.

The indictment also alleges that Holland made false statements to the HHS-OIG in connection with a 2006 Corporate Integrity Agreement (CIA) that Tenet entered into in 2006. The government says that Holland falsely stated that they were in compliance with the CIA when in fact he knew that Tenet was paying for illegal patient referrals. Finally, the indictment alleges that from 2007 through 2011, Tenet received over $10 billion in payment from federal health care programs. These monies would not have been received by Tenet had they been excluded from participation in federal health care programs. “Medicaid patients have the right to seek healthcare without fearing that care is tainted by bribes and illegal kickbacks,” said Special Agent in Charge for FBI’s Atlanta Division LeValley. “Not only did patients suffer because of these alleged actions, but this kind of alleged abuse threatens to drive up the cost of healthcare for everyone.  The FBI is committed to ensuring that federal laws related to the healthcare industry are enforced, and this case is an example of that commitment.”


In late 2016, North Fulton Medical Center Inc. and Atlanta Medical Center Inc. both pleaded guilty to conspiring to defraud the United States in violation of the Anti-Kickback Statute. Tenet and its subsidiary Tenet HealthSystem Medical Inc (THSM) entered into a non-prosecution agreement (NPA) with the government at that time. Under the terms of the agreement, THSM and Tenet will avoid prosecution if they cooperate with the government’s investigation and enhance their compliance with an ethics program and certain internal controls. Tenet agreed to have an independent compliance monitor address and to reduce any reoccurrence of the incidences that are alleged to have occurred in the indictment. Tenet has also agreed to pay over $513 million to resolve the criminal charges and civil claims arising from the matter

Since its inception in March 2007, the Medicare Fraud Strike Force now operates in nine locations across the country. The Strike Force has charged nearly 3,000 defendants who have collectively billed the Medicare program for more than $11 billion. If you know of abuse that has been committed against the government or one of its agencies you are encouraged to report it and to contact a False Claims Act lawyer. A False Claims Act attorney can advise you in such matters and will work to protect your rights under the law.

Princess Cruise Lines Agrees to Pay $40 Million to Resolve Allegations of Deliberate Waste Dumping

The government’s crackdown on fraud and abuse sometimes has international import as was demonstrated last month when a spokesperson for the Department of Justice announced that Princess Cruise Lines Ltd. (Princess) had agreed to plead guilty to seven felony charges that it deliberately polluted the seas and had then intentionally tried to cover it up. The company agreed to pay the largest criminal penalty ever involving deliberate vessel pollution. Princess also pled guilty to charges that it dumped oil and waste from its Caribbean Princess cruise ship into the sea. As part of the plea agreement, cruise ships from eight Carnival cruise line companies are now being held under a court supervised Environmental Compliance Program (ECP) for five years. As a requirement of the ECP, Princess and its eight cruise lines will be required to have an outside entity and a court appointed monitor its compliance with pollution regulations.


An investigation of Princess began when a whistleblower provided information to the U.S. Coast Guard and the British Maritime and Coastguard Agency (MCA), that the Cruise line had hired an engineer who was using a “magic pipe” to illegally discharge oil waste off the coast of England. This whistleblower later quit his job. The chief engineer and senior first officer were ordered to cover-up this illegal dumping and to order subordinates to do the same. The U.S. Coast Guard conducted an investigation of the Caribbean Princess in late September 2013 during which crew members continued to lie in compliance with the instructions they were given by their superiors.


According to court papers, the Caribbean Princess had been engaging in illegal dumping since 2005. Indeed, an August 26, 2013 waste discharge by the ship involved approximately 4,227 gallons, 23 miles off the coast of England. At that time, its engineers ran seawater through its equipment in order to create a false digital record that covered up such activity. Other illegal dumping methods utilized by Caribbean Princess included the use of an unauthorized bypass pipe to discharge waste off the coast of England. When the Justice Department ordered the removal of this valve they found that it contained black oil. A final practice that the Caribbean Princess and its lines used to circumvent pollution regulations was that it opened a salt water valve when bilge waste was being processed by the oily water separator and oil content monitor. This resulted in waste being pumped back into the graywater system rather than being processed as oily bilge waste.


“This shows just how well the U.K. and U.S. can work together on these kinds of cases,” said Jeremy Smart, head of enforcement at the Maritime & Coastguard Agency of the United Kingdom. “It also sends a clear message to the industry that this kind of pollution practice will not be tolerated anywhere in the world.  It also shows that we will always take any information we are given by those who report such practices to us very seriously and will act upon it.”


Princess also admitted – among other violations – to the following:


  • Illegal discharges took place on the Caribbean Princess dating back to 2005
  • Senior ship engineers dismantled the bypass pipe and instructed crew members to lie
  • Prior to the MCA boarding, the chief engineer and senior first engineer ordered crew members to lie


Remedial measures have been taken against Princess as a result of the government’s investigation. Princess must now upgrade its oily water separators and oil content monitors. The cruise line has also instituted many new policies that are designed to help it comply with pollution regulations. The government sought approval that $10 million of the $40 million dollar criminal penalty be devoted to projects that benefit the maritime environment. Parts of the penalty are also scheduled to help other environmental efforts in the UK and in South Florida.


If you know of potential violations of the False Claims Act, you are encouraged to contact a qui tam lawyer. Qui tam lawyers will be able to advise you as to your legal options. They will also be able to further educate you about this Act.

Shire Pharmaceuticals LLC and its Subsidiaries Agree to Pay $350 Million to Settle Alleged False Claims Act Violations

Unfortunately, many of the cases involving fraudulent activities committed against the government by private companies involve kickbacks that have allegedly been made to the guardians of public health – health care providers. This was shown to be the case when earlier this month the Department of Justice announced that Shire Pharmaceuticals LLC and several of its subsidiaries including a company it acquired back in 2011 – Advanced BioHealing (ABH) – will pay $350 million to resolve False Claims Act violations involving kickbacks and other unlawful inducement it made to physicians and clinics. The alleged kickbacks and other unlawful inducements involve its product “Dermagraft,” an FDA approved, bioengineered human skin substitute used to treat diabetic foot ulcers. Shire sold the assets connected with Dermagraft in early 2014. “This settlement represents the largest False Claims Act recovery by the United States in a kickback case involving a medical device,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.


The settlement resolves allegations that Dermagraft salespersons unlawfully induced clinics and physicians with lavish dinners, entertainment and other incentives in an attempt to get them to use their product – Dermagraft. The Anti-Kickback Statue prohibits the payment of remunerations to induce the use of medical devices covered by Medicare, Medicaid and other federally-funded health care programs. Additionally, the Anti-Bribery State and the Federal Acquisition Regulations prohibits bribes to government officials and employees for the purpose of obtaining a contract or favorable treatment under a supply contract. The United State alleges that ABH and Shire submitted hundreds of millions of dollars of false claims for Dermagraft. “Flagrant and systemic kickback activity of the type at issue in this case is designed to impair and undermine a physician’s independent medical judgment, and will not be tolerated,” said U.S. Attorney A. Lee Bentley III for the Middle District of Florida (MDFL). The MDFL has obtained criminal convictions of three high-level executive who supervised the illegal kickback scheme as well as several health care providers who received the kickbacks.


“Giving kickbacks and gratuities to healthcare providers corrupts medical treatment by interjecting personal financial incentives into decisions that should focus on what is best for a particular patient,” said U.S. Attorney Channing D. Phillips for the District of Columbia. In addition to the alleged kickbacks, the settlement also resolved allegations that Shire and ABH unlawfully marketed Dermagraft for uses not approved by the FDA. They were also accused of making false states to inflate the price of Dermagraft. The allegations resolved by this settlement were brought about as the result of six lawsuits that were filed under the qui tam or whistleblower provisions of the False Claims Act. These provisions allow private parties to sue on behalf of the government for false claims and to share in any judgment or settlement. The whistleblower shares in this case remain undetermined. Shire has entered into a Corporate Integrity Agreement (CIA) with the HHS which was implemented in late 2014. If you have knowledge of potential fraud, waste, abuse and mismanagement you are encouraged to contact a qui tam lawyer and the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

Ambulance Company Agrees to Pay $12.7 Million to Resolve False Claims Act Allegations Involving Inflated Medicare Claims and Unnecessary Transport Services

The government’s crackdown on fraud and abuse sometimes leads investigators to defendants who are allegedly more interested in profits than they are with patient health. This was the case when the Department of Justice announced earlier this month that Medstar Ambulance Inc and its four subsidiary companies including its two owners – Nicholas and Gregory Melehov – agreed to pay $12.7 million to resolve allegations that they knowingly violated the False Claims Act. “We expect those who participate in the Medicare program to provide services, including ambulance services, based on the medical needs of patients rather than their desire to maximize profits,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice is committed to ensuring that those who abuse the Medicare program will be held accountable for their actions.”


The government alleges that from January 1, 2011 through Oct. 31. 2014, Medstar violated the False Claims Act by routinely billing for services that did not qualify for reimbursement because the transports were medically unnecessary. This meant that Medstar could bill for higher levels of services than were required by patient conditions and for higher levels of services than were actually provided. “While we recognize that Medicare does and should pay for medically necessary ambulance services, it is our job to ensure that ambulance providers do not take advantage of the system or the patients. This settlement is part of the office’s ongoing effort to eradicate health care fraud, and return money to the taxpayers,” said U.S. Attorney Carmen Ortiz for the District of Massachusetts. As part of the settlement, Medstar agreed to enter into a corporate integrity agreement (CIA) with the U.S. Department of Health and Human Services (HHS).


The settlement came about as the result of a lawsuit that was filed by Dale Meehan, a former employee in Medstar’s billing office, under the whistleblower provisions of the False Claims Act. These provisions allow private individuals to sue on behalf of the government in cases of fraud and to then share in the proceeds of any such settlement or judgment. Meehan is scheduled to receive approximately $3.5 million.


The settlement demonstrates the government’s ongoing efforts at combating health care fraud via its Health Care Fraud Prevention and Enforcement Team (HEAT) which was announced back in May of 2009 by the Attorney General and the Secretary of Health and Human Services. The result is that since January 2009 the Justice Department has recovered more than $31.4 billion through False Claims Act cases. If your firm is accused of False Claims Act violations it is advised that you contact a False Claims Act lawyer. If you have knowledge of potential fraud, waste, abuse and mismanagement you are encouraged to contact the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

Baxter Healthcare Corporation Agrees to Pay the Government More than $18 Million Dollars to Settle Claims that it failed to follow Good Manufacturing Practices

The endangerment of patient health seems to be a recurring theme when it comes to the government’s efforts to crackdown on fraud. An example of this came last week when the Department of Justice announced that Baxter Healthcare Corporation (Baxter) had agreed to pay $18.158 million to resolve criminal and civil violations arising from Baxter’s failure to follow Good Manufacturing Practices (cGMP) with its drugs products. The resolution reached last week includes a deferred prosecution agreement and penalties and forfeiture totaling $16 million plus a civil settlement under the False Claims Act. This civil settlement totals more than $2 million. Baxter is headquartered in Deerfield, Illinois and has facilities all throughout the US and the world.

The criminal charges state that between July 2011 and November 2012, Baxter introduced into the interstate commerce drugs that violated the Federal Food, Drug and Cosmetic Act (FDCA) because the company did not follow cGMP practices when they were being manufactured. At its North Cove facility (Marion, North Carolina), Baxter manufactured sterile intravenous (IV) solutions in a clean room that were exposed to the presence of mold. According to an employee there, this was determined by the presence of mold on a HEPA filter. Baxter is alleged to have continued to manufacture these IV solutions for months after this problem was identified. Testing of the filters by an unannounced inspection from the U.S. Food and Drug Administration (FDA) also confirmed the presence of several mold species on the HEPA filters. The FDA found no proof that the IV solutions themselves were actually contaminated by the mold.

As part of the deferred prosecution agreement, Baxter admitted that it distributed products that were in violation of the FDCA. As a result of this agreement, Baxter will pay a total of $16 million and will implement enhanced compliance provisions. It must, for example, certify to the government periodically that it is implementing these manufacturing provisions. (The deferred prosecution agreement must be accepted by the U.S. District Court in order to become final.) “FDA’s manufacturing standards are designed to ensure the quality, safety, and efficacy of drugs distributed to American consumers, and FDA expects pharmaceutical companies to correct deficiencies in an expedited manner,” said Special Agent in Charge Justin Green of FDA’s Office of Criminal Investigations, Miami Field Office. “We will remain vigilant in our efforts to protect the U.S. public health from potentially dangerous products.” Additionally, Baxter will pay approximately $2.158 million to the Department of Veterans Affairs based on its failure to follow cGMPs and its violations of the False Claims Act.


The civil settlement resolves a lawsuit that was filed by Christopher Wall, an employee of Baxter, under the Whistleblower provisions of the False Claims Act. This provision permits private parties to sue on behalf of the government in cases of false claims and to share in any monetary recovery. Mr. Wall is scheduled to receive $431,535.99 from the proceeds of the civil settlement. The settlement illustrates the government’s ongoing efforts to combat health care fraud which it has accomplished through its Health Care Fraud Prevention and Enforcement Action Team (HEAT). A powerful aid in achieving this goal has been the Whistleblower provisions of the False Claims Act. Whistleblower Medicare cases alone have resulted in millions in payouts to individuals who have reported illegal activities committed by private firms. If you believe you have a qui tam Medicare case, you should contact a Whistleblower law firm for advice.

Justice Department Recovers Billions from False Claims Act Cases in Fiscal Year 2016

Year in Review


2016 turned out to be a very productive year for the government when it comes to settlements and judgments from civil cases involving fraud and False Claims Act allegations. Indeed, according to Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, the amount of money the US recovered during the 2016 fiscal year is the highest annual recovery it has made in the history of the False Claims Act. That figure is $4.7 billion for the 2016 fiscal year ending September 30, 2016. “Americans across the country are healthier, enjoy a better quality of life, and are safer because of our continuing success in protecting taxpayer funds from misuse,” said Mizer back in December of this year.


Of the monies recovered, $2.5 billion came from the health care industry. In many of these cases, the government recovered millions of dollars for state Medicaid programs as well. This is the seventh straight year the Department of Justice’s civil health care fraud recoveries have exceeded $2 billion. Recoveries made in the financial industry accounted for another $1.7 billion in the 2016 fiscal year. (Many of the false claims cases involved incidences of alleged mortgage fraud.) The False Claims Act – amended by Congress to increase incentives for whistleblowers to file suits against those who are accused of defrauding the government – is the primary civil remedy for redressing false claims violations. The Act covers the areas of health care, defense and national security, food safety and inspection, federally insured loans and mortgages, etc. The government awarded the whistleblowers $519 million during the 2016 fiscal year.

Health Care Fraud


The Department of Justice recovered $19.3 billion in health care fraud claims from January 2009 to the end of the 2016 fiscal year. The monies recovered in these cases restored assets to programs such as Medicare, Medicaid and TRICARE, the health care program for service members and their families. The largest of these recoveries – $1.2 billion – came from the drug and medical device industries with drug manufacturers Wyeth and Pfizer, inc. paying $784.6 million to resolve false claims and fraud allegations involving two of its drugs. Wyeth alone paid $413.2 million to the federal government and $371.4 million to state Medicaid programs.

Housing and Mortgage Fraud

The Justice department recovered more than $7 billion in housing and mortgage claims from 2009 to 2016 including $1.6 billion in settlements and judgments it took in just this past year. The most notable settlements involved Wells Fargo for $1.2 billion and Freedom Mortgage Corp. for $113 million. Wells Fargo was accused of originating and endorsing ineligible loans for FHA insurance. This increased the bank’s mortgage profits at the expense of taxpayers.

Other Fraud Recoveries

The government made recoveries in other areas apart from the health care and mortgage sectors. One example is its recovery of $82.6 million in False Claims Act violations from BP Exploration and Production Inc. (BP). The case involved the April 2010 Deepwater Horizon/Macondo Well explosion and oil spill in the Gulf of Mexico. The government alleged that BP provided false reports about its “safe drilling margin” that concealed its improper drilling.


Individuals Held Accountable


The government’s efforts to deter and redress fraud committed against it did not just snare corporations. It also held many individuals accountable as well. This was per a September 9, 2015 memo issued by the Department of Justice. Individuals working for Institute of Cardiovascular Excellence (ICE), Dynasplint Systems Inc., Orbit Medical Inc as well as several other institutions and companies were personally held liable for false claims act violations as well as other crimes and were forced to also pay millions in restitution.

Recoveries in Whistleblower Suits

Another outcome of the government’s crackdown on fraud and abuse has been the increase in the amount of money paid to whistleblowers in these cases. “The qui tam provisions provide a valuable incentive to industry insiders who are uniquely positioned to expose fraud and false claims to come forward despite the risk to their careers,” said Principal Deputy Assistant Attorney General Mizer. “This takes courage, for which they are justly rewarded under the Act.” All in all, it has been an excellent year for the government when it comes to prosecuting cases of fraud. If you know of abuse that has been committed against the government or one of its agencies you are encouraged to report it and to contact a qui tam attorney. A Qui tam lawyer can advise you in such matters and will work to protect your rights under the law.

Three Representatives of the Imperial Petroleum Sentenced for Their Role in Defrauding Biodiesel Purchasers and Shareholders

The government’s prosecution of fraud cases against it sometimes results not only in fines but in prison sentences as well. This was the case when last month two men – Jeffrey Wilson and Craig Ducey – were sentenced to 120 months and 74 months, respectively, for their part in a multi-million dollar fraud scheme involving biodiesel tax credits, renewable fuel credits and shares of Imperial Petroleum, Inc. The defendants were the last to be sentenced from a group of seven charged co-conspirators. The others were sentenced at prior hearings on the same charges. The fraud charges arose from lies the government alleges that the defendants told in the course of their dealings with investors, auditors and the Securities and Exchange Commission (SEC) while working for Imperial Petroleum. Wilson – President and CEO of Imperial Petroleum – was in charge of drafting and certifying the accuracy of Imperial’s quarterly and annual reports. Wilson made those reports available to the public through filings with the SEC. He was also alleged to have lied to the company’s independent auditor in order to keep him from learning of the scheme. Earlier in 2016, he was convicted for his role in the fraud. In 2015, Craig Ducey – his co-conspirator – admitted to committing related crimes. It was through his willingness to cooperate with federal prosecutors that Wilson was indicted. Wilson was given a lower sentence for his cooperation.

“Biodiesel has the potential to make the nation’s transportation sector more sustainable, while decreasing our dependence on foreign energy sources, but only if done right,” said Assistant Attorney General Cruden at the time. “The defendants’ fraud in these cases not only cheated customers, investors and taxpayers; it set renewable fuel efforts back for the entire nation. At a time when Americans should have been working together to have clean, sustainable and safe energy, the defendants chose to line their own pockets.  Prison is the appropriate consequence.” The government showed at Wilson’s trial that the securities fraud began when he learned that e-biofuels LLC – a company Wilson arranged for Imperial Petroleum to buy – was faking paperwork in order to claim incentives for biofuel that it was not making. This resulted in e-biofuel’s managers fraudulently claiming millions in federal tax rebates and other incentives. Despite the fact that their e-biofuels facility was dormant and not actually producing biodiesel fuel, Wilson and Ducey told investors, auditors and the SEC that it was making millions of gallons of raw materials. This action defrauded buyers and investors. Chad Ducey was sentenced on separate charges involving wire, tax fraud and environmental crimes. (He was not charged with securities fraud.)


The government also alleged that Wilson, Ducey and others worked to establish “beachheads” in Texas. These beachheads were fuel transload facilities that would be used to disguise the transfer of biodiesel to e-biofuels customers from Texas fuel terminals where it would be purchased. In other words, a beachhead would be a facility used to disguise the fact that biodiesel fuel was not actually being made at e-biofuels. “Imperial Petroleum’s top executive played a key role in this massive scheme to deceive investors,” said Regional Director David Glockner of the SEC Chicago Regional Office. “The SEC was pleased to participate in a multi-agency effort to hold him accountable.”


The wire fraud, tax fraud, securities fraud and environmental crime investigation was the culmination of hearings begun back in 2012. Agents of the FBI, the Environmental Protection Agency’s (EPA) Criminal Investigation Division, IRS-CI and the SEC began meeting with a whistleblower then. The testimony given by a whistleblower corroborated the government’s evidence against Wilson, Ducey, et al. Special agents from the FBI, EPA and IRS pursued this matter for over a year and interviewed almost 100 witnesses. The government’s strategy was to approach targets of the investigation and to seek pre-indictments plea agreements with them. This strategy resulted in several indictments and convictions against other suspects in the case.

Department of Energy Contractors to Pay the US $125 Million to Resolve False Claims Act Violations

Often, the government’s efforts to crack down on fraud and abuse entail pursuing companies whose activities could negatively impact the safety and security of citizens and even the environment. This was shown to be the case when this past November, the Justice Department announced that two energy department contractors – Bechtel National Inc., Bechtel Corp., URS Corp. and URS Energy and Construction Inc. – had agreed to pay $125 million to resolve False Claims Act allegations that the companies made false statements and claims to the Department of Energy (DOE) by charging it for deficient nuclear quality materials, services and testing. These charges were alleged to have occurred at its Waste Treatment Plant (WTP) at the DOE’s Hanford Site near Richland, Washington. The settlement also resolves allegations that the companies improperly used federal contract funds to pay for a multi-year lobbying campaign of Congress and other federal officials for continued funding at its WTP. Bechtel Corp. and Bechtel National Inc. are Nevada corporations. URS Corp. is headquartered in California, and URS Energy & Construction Inc. is headquartered in Colorado.

“The money allocated by Congress for the Waste Treatment Plant is intended to fund the Department of Energy’s important mission to clean up the contaminated Hanford nuclear site, and this mission is undermined if funds are wasted on goods or services that are not nuclear compliant or to further lobbying activities,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The environmental clean-up and restoration of the land that comprises the Hanford Nuclear Reservation is one of the single most important projects in this region,” said U.S. Attorney Michael C. Ormsby of the Eastern District of Washington.

Between the years 2002 to 2015, DOE paid several billion dollars to the aforementioned companies to design and build the WTP which was intended to be used to treat dangerous radioactive waste at the DOE’s Hanford Site. The government alleged that Bechtel National Inc., Bechtel Corp., URS Corp. and URS Energy and Construction Inc. violated the False Claims Act by charging the government for materials that did not meet the DOE’s standards. The United States also accused Bechtel National Inc. and Bechtel Corp with improperly claiming and receiving government funding that was later used for lobbying activities. This act violates the Byrd Amendment (31 U.S.C. 1352) and other contractual and regulatory requirements all of which prohibit the use of federal funds for lobbying activities.

The allegations resolved by this settlement were brought about as the result of a lawsuit that was filed under the qui tam or whistleblower provisions of the False Claims Act. Gary Brunson, Donna Busche and Walter Tamosaitis – all of whom worked at the WTP – were the plaintiffs in the initial lawsuit. The False Claims Act allows private parties to sue on behalf of the United States when they believe that a party has violated the Act. It also allows them to share in any subsequent recovery. Their share of the reward has not yet been determined. If you are privy to False Claims Act violations you should report them to the proper authorities and consult a qui tam attorney. Qui tam attorneys will be able to advise you as to how to proceed. They can also assess the strength and validity of your case.


Medical Device Maker Agrees to Pay $36 Million to Resolve Criminal Liability and False Claims Act Allegations

The government’s crackdown on fraud often affects companies whose alleged criminal and civil violations impact patient safety. This was demonstrated earlier this month when the Justice Department announced that medical device manufacturer Biocompatibles, Inc., had agreed to plead guilty to mishandling its embolic device LC Bead and had also pay more than $36 million to resolve criminal and civil liability arising out of its illegal conduct. LC Bead is used in the treatment of liver cancer. Under the terms of the plea agreement, Biocompatibles pleaded guilty to a misdemeanor charge in connection with the misbranding of its LC Bead device. This misbranding is in violation of the Food, Drug and Cosmetic Act. LC Bead was cleared by the U.S. Food and Drug Administration (FDA) as an embolization device that can be used to treat certain types of tumors and arteriovenous malformations. LC Bead has never been cleared or approved by the FDA as a drug-device combination product or as a drug-delivery device.

As a part of the criminal resolution, Biocompatibles agreed to pay an $8.75 million fine for misbranding LCB and a criminal forfeiture of $2.25 million. The FDA sought assurances from Biocompatibles in 2004 that it would not market LC Bead as a drug delivery device. Nevertheless, two years later Biocompatibles began marking the device as such through the company it hired to carry out its sales and distribution in the United States. According to the statement of offense, that company said that LC Bead was “a drug-delivery device” and that its sales representatives were trained to market it “aggressively” to the chemoembolization market. Sales representatives told health care providers that the device increased the level of chemotherapy delivered to the liver tumor and that this resulted in “better tumor response rates.” The FDA did not clear the product for this purpose nor did any scientific evidence support this claim.

“The FDA approval process serves an important role in ensuring that federal health care participants receive devices that are safe, effective and medically appropriate,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “We will not permit companies to circumvent that process and put profits over patient safety.” Additionally, Biocompatibles agreed to pay $25 million to resolve False Claims Act violations for submitting false claims to the government healthcare programs for procedures in which LC Bead was loaded with chemotherapy drugs and used as a drug-delivery device. Doing this created a new combination device that was not approved or cleared by the FDA and also not covered by Medicare or other federal health care programs. The federal share of the civil settlement is approximately $23.6 million and the state Medicare share is approximately $1.4 million.

Biocompatibles had filed an application with the FDA for the approval of LC Bead as a drug-eluting bead combination but it was rejected since the company could not provide clinical studies proving that the device provided a genuine therapeutic benefit. Nevertheless, Biocompatibles marketed the product as having such benefits. “The FDA plays a fundamental role in ensuring the safety and efficacy of medical devices and drugs in this country,” said U.S. Attorney Richard L. Durbin Jr. of the Western District of Texas. “The FDA approval process and clinical studies serve to ensure that patients receive devices that meet those standards. We will vigorously pursue those who ignore or seek to circumvent these important patient protections.”

The settlement with Biocompatibles resolved a lawsuit filed under the whistleblower provision of the False Claims Act, with allows private individuals to file suit on behalf of the United States and to share in any recovery. The civil lawsuit was filed by Ryan Bliss who will receive approximately $5.1 million as his part the settlement. If you have knowledge of fraud that has been committed against the government or one of its agencies you are encouraged to report it and to contact a whistleblower law firm. An attorney there can advise you of your rights and determine the strength of your case.



Big Brothers & Big Sisters of America Pay $1.6 Million Settlement to Resolve False Claims Allegation

Back in January of this year, the Big Brothers and Big Sisters of America Corporation agreed to pay the government $1.6 million to resolve false claims allegations for funds that were awarded to it by grants from the Department of Justice. Those grants were intended to help at risk children. “Organizations such as Big Brothers do great work, but in carrying out their mission they also have an obligation to the populations they serve and to the taxpayer to ensure that government grant funds are used responsibly according to the rules,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer at the time. Mizer head’s the Justice Department’s Civil Division.

Since 2004, Big Brothers have received millions of dollars in grants from the Justice Department to help initiatives designed at aiding “at-risk” children. A condition of those grants was that Big Brothers maintain sound accounting and financial management systems that would assure those funds be used for their intended purpose. The government alleged that Big Brothers violated these guidelines with respect to three grants awarded to the organization by the Justice Department from 2009 to 2011. The United States alleged that grant funds were improperly commingled with general operating funds. It was further alleged that by failing to separate these expenditures Big Brothers failed to ensure that the funds were used for these intended purpose. The allegations were the focal point of a 2013 audit of the grants performed by the Department of Justice Office of the Inspector General. Since then, Big Brothers have replaced its management team and begun implementing polices that are in line with government regulations.

“We appreciate the support of the U.S. Attorney for the Eastern District of Pennsylvania and the Civil Division in working with us on these kinds of cases,” said Department of Justice Inspector General Michael E. Horowitz at the time. “The OIG’s auditors and investigators will continue to work with each other closely to uncover misuses of grant funds, and with our law enforcement partners to ensure that justice is served.” As part of the $1.6 million settlement, Big Brothers agreed to institute a compliance program that requires the organization to engage in regular audits, establish a compliance team, an employee code of conduct, whistleblower polices and a disciplinary policy for employees who fail to disclose abuses of federal grant funds. The compliance program also provides for regular employee training on theses polices and risk assessment tools to detect abuses in the system.

If you have knowledge of fraud that has been committed against the government or one of its agencies you are encouraged to report it and to contact a Whistleblower law firm. A qui tam attorney can advise you of your rights and gauge the strength of your case.