Diabetic Medical Equipment Companies Agree to Pay $12.2 Million to Settle False Claims Act Allegations
Two medical companies made some very expensive cold calls as the government announced last week that U.S. Healthcare Supply LLC and Oxford Diabetic Supply Inc. and the two owners/presidents of those companies agreed to pay the government more than $12.2 million to settle allegations that they violated the False Claims Act. The companies and their owner/presidents are accused of creating a fictitious entity to make cold calls to Medicare beneficiaries in order to sell them durable medical equipment. U.S. Healthcare Supply LLC has agreed to pay $5 million and its owner/president, John P. Letko, has agreed to pay more than $1 million. Oxford Diabetic Supply Inc. has agreed to pay $6 million plus interest.
“We will continue to hold health care providers accountable for attempting to circumvent Medicare statutes and regulations that help prevent the submission of claims for medically unnecessary services and supplies,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Arrangements which clearly disregard program requirements in order to enhance the financial interests of health care providers will not be tolerated.”
The government specifically alleges that the companies named in the settlement set up and controlled an entity they named Diabetic Experts Inc., and used said company to make unsolicited calls to Medical beneficiaries with the intent of selling them durable medical equipment. The companies are then said to have submitted clams to Medicare for durable equipment they sold based on these cold calls. Such activity is a violation of the Medicare Anti-Solicitation Statute [42 U.S.C. § 1395m(a)(17)]. The statute in part prohibits suppliers from contacting Medicare beneficiaries by telephone regarding covered items unless:
- Beneficiary has given supplier written permission
- Supplier has previously provided the covered item to the beneficiary and contact relates to such covered item
- Supplier has furnished a covered item to beneficiary in last 15 months, and then contact may relate to any covered item.
The settlement is an example of the government’s emphasis on fighting health care fraud which has been accomplished, in part, by its Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009. Since then several agencies along with the Attorney General and Secretary of Health and Human services, have joined forces in an effort to reduce and prevent Medicare and Medicaid fraud. As an example of its success, the Justice Department has recovered more than $30.5 billion through the False Claims Acts. A valuable tool that has been used in this effort is the Whistleblower (or qui tam) provisions of this act. It allows private citizens to sue on behalf of the government and to recover a portion of any recovery. If you know of fraud that is or has been committed against the government, you are encouraged to contact a qui tam law firm. A qui tam attorney will help you understand your rights.
KMART Pays the Government More than a Million Dollar to Resolve False Claims Act Allegations
Some of the companies the government has targeted for alleged Medicare fraud include some very famous names. This fact was demonstrated when last year the Justice Department announced that Kmart had paid the United States $1.4 million to resolve allegations that it violated the False Claims Act by using drug manufacturer coupon and gas discounts as Medicare beneficiary inducements. “The government will not permit pharmacies to use improper business tactics to solicit business that does nothing to improve the quality of healthcare received by Medicare beneficiaries and increases the costs of the Medicare program,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer at the time.
The government alleged that from June 2011 to June 2014, Kmart improperly influenced Medicare beneficiaries to use coupons in order to reduce or eliminate prescription co-pays that they would otherwise have to pay in full. Federal law prohibits a person or entitie from offering Medicare beneficiaries remuneration that is intended to influence the beneficiary’s choice of provider. Next, the government alleged that this action resulted in beneficiaries choosing more expensive brand name drugs over cheaper generic brands. This action caused the government to increase its costs without any medical advantage to the beneficiary. The government’s final allegation is that Kmart encouraged Medicare beneficiaries to bring in their prescriptions to be used in order to receive gas coupon discounts at participating gas stations.
The settlement – reached in September of 2015 – came about as a result of a lawsuit filed by Joshua Leighr, a former Kmart pharmacist. Mr. Leighr filed his lawsuit under provisions of the False Claim Act which allows whistleblowers to sue on behalf of the United States government. People who sue under the qui tam or whistleblower law are entitled to a share of any recovery awarded to the United States. Leighr received approximately $248,500 of the settlement as his portion of the settlement.
Since 2009 the government has been placing an emphasis on combating health care fraud. As part of this effort the Health Care Fraud Prevention and Enforcement Action Team (HEAT) has been formed and their actions have resulted in the recovery of billions of dollars through the False Claims Act. A key tool used by the government in such cases is the Whistleblower law. If you have knowledge of fraud that is or has been committed against the government you are encouraged to reach out to a qui tam law firm. Qui tam law firms have specialist who can evaluate your case and apprise you of your rights under this law. A qui tam lawyer specializes in False Claims Act cases and all related provisions
Bank to Pay Nearly $400 Million to Settle Allegations of Foreign Currency Exchange Practices Fraud
The government’s crackdown on fraud also includes – from time to time – the involvement of financial institutions. This was demonstrated when last month, the U.S. Attorney for the District of Massachusetts, the Division of Enforcement for the Securities and Exchange Commission (SEC) and the U.S. Department of Labor (DOL) announced that State Street Bank and Trust Company had agreed to pay a total of least $382.4 million, including $155 million to the Department of Justice, $167.4 million to the SEC and at least $60 million to ERISA plan clients to settle charges that it deceived some of its clients when providing them with foreign currency exchange services. As part of the settlement, State Street admitted that its Global Markets (SSGM) division did not price FX transactions at the current interbank market rates. Instead State Street admitted that SSGM added a predetermined mark-up or mark-down to the prevailing interbank rate for FX. (The mark-up or mark-down was determined upon whether or not the custody client was an FX purchaser or seller.) State Street is also alleged to have falsely promoted its FX transactions by guaranteeing that they were at the most competitive rates when indeed they were not. State Street’s prices were drive driven – it is alleged – by hidden mark-ups designed to maximize their profits.
“State Street misled custody clients about how it priced their trades and tucked its hidden markups into a corner where they were unlikely to notice,” said Director Ceresney of the Securities and Exchange Commission (SEC). “Financial institutions cannot mislead their customers about their trading costs.” Pursuant to the settlement, State Street will pay $155 million of the $382.4 million as a civil penalty to the government in order to resolve allegations that the bank violated the Financial Institutions Reform Recovery and Enforcement Act (FIRREA). The investigation arose from whistleblowers, who filed a declaration that the defendant had violated the FIRREA.
Under a settlement agreement between the SEC and State Street’s indirect FX services, an administrative order was entered against the bank. The administrative order sought to find that State Street violated Section 34(b) of the Investment Company Act of 1940 (Investment Company Act) and caused violations of Section 31(a) of the Investment Company Act and Rule 31a-1(b). Under the terms of the order, State Street will be required to disgorge $75 million in ill-gotten gains and $17.4 million in prejudgment interest, to be paid to RIC clients, and also pay the SEC a civil penalty of $75 million.
Per the government’s settlement with State Street, the bank has also agreed to pay at least $60 million to State Street’s Retirement Income Security Act (ERISA) plan customers. The government alleged that State Street made false representations regarding its FX trades to those customers thereby causing them sustained financial losses. State Street has – as a part of the settlement – promised that it will discontinue such conduct in the future. State Street will pay an additional $147.6 million to resolve private class action lawsuits filed by the bank’s customers alleging similar misconduct. Finally, if you know of fraud that has been committed against a government agency you are encouraged to report such conduct. It would also be in your best interest to contact a whistleblower law firm so that you can protect your rights.
Companies Agree to Settle False Claims Act Violations Related to Delivery of Humanitarian Food Aid
Alleged acts of fraud against the US always affect taxpayers dollars and often affects people who are needy. That was demonstrated early this month when the Justice Department announced that Jacintoport International LLC and Seaboard Marine Ltd. had agreed to pay more than a million dollars to settle allegations that the companies violated the False Claims Act in connection with their warehousing and logistics contract for the storage and deliverance of humanitarian food aid. Jacintoport is a cargo company based in Houston and Seaboard Marine is an ocean transportation company based in Miami. The government alleged that Jacintoport violated the terms of a 2007 warehousing and logistics contract with the United States Agency for International Development (USAID) for the storage and re-delivery of humanitarian food aid. According to the complaint, from January 2008 through October 2009 Jacintoport and Seaboard exceeded caps on the rates set out in the contract between the USAID and these two companies. Moreover, the government alleged that these inflated stevedoring charges were lumped with other costs for food aid delivery and then passed on to the United States. “USAID’s humanitarian food aid program provides critical assistance to starving people all over the world,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Justice Department will hold accountable those who seek to abuse this important program.”
“It is unacceptable for companies that do business with the federal government to inflate their costs,” said U.S. Attorney Channing D. Phillips for the District of Columbia. “This settlement demonstrates our determination to protect the taxpayers’ dollars – and humanitarian programs – from abuse.” The allegations that are resolved by this settlement came about as the result of a lawsuit filed under the qui tam provisions of the False Claims Act. John Raggio, a shipping contractor – reported the conduct that is the basis of this lawsuit when he allegedly received an invoice from Jacintoport containing the excessive stevedoring charge. Under the qui tam provisions of the False Claims Act, private citizens are able to bring suit on behalf of the United States government and share in any recovery. For his part, Raggio will receive $215,000. The case is United States ex. rel. Raggio v. Jacintoport International, LLC, et al. Case No. 1:10-cv-01908 (D.D.C.).
Violations of the False Claims Act in Connection with Reconstruction Contracts in Afghanistan and Iraq
Often cases of alleged fraud against the government reaches far beyond US borders. This is the case as just last month the Justice Department announced that it had filed suit under the False Claims Act against two former executives of government contractor Louis Berger Group Inc. (LBG) for conspiring to overbill the U.S. Agency for International Development (USAID) and other companies for costs incurred in performing reconstruction contracts in Afghanistan, Iraq, and other countries. The executives named in the lawsuit are Derish M. Wolff and Salvatore J. Pepe, respectively the former CEO and CFO of LBG. “Those who do business with the U.S. government should expect appropriate consequences if they do not deal fairly,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.
The government is alleging that Wolff and Pepe directed and designed schemes that resulted in their company billing the government for indirect overhead costs at inflated rates. For example, Wolff and Pepe are alleged to have shifted portions of salaries for LBG executives from contracts paid for by foreign contracts and state governments and private entities to contracts paid for by the US. The two men are then alleged to have certified the false rates and submitted them to the government.
This is not the first time the two men have been prosecuted by the government. Previously the US resolved criminal and civil claims against LBG on November 5, 2010. The charges arose from the same kinds of acts that are alleged to have occurred in this complaint. In 2010 LBG entered into a Deferred Prosecution Agreement and paid $50.6 million to resolve False Claims Act allegations. Pepe pleaded guilty to conspiracy to defraud the government as was sentenced to one year probation. Wolff pleaded guilty to the same charge in Dec of 2014 and was sentenced to 12 months of home confinement and was required to pay a $4.5 million fine.
The government’s complaint arises from a lawsuit brought about under the qui tam, or whistleblower, provisions of the False Claims Act, by Harold Salomon, a former accountant of LBG. Under the False Claims Act, private citizens are allowed to sue on behalf of the US government in cases involving False Claims Act violations and are also entitled to share in any subsequent recovery. “I applaud the dedication of USAID-OIG special agents, along with special agents of the FBI and the Defense Criminal Investigative Service,” said USAID Inspector General Ann Calvaresi Barr. If you believe you have knowledge of False Claims Act violations being committed against the government you are encouraged to contact a qui tam law firm. Whistleblower lawyers will help you understand your rights in such cases. This case is United States ex rel. Harold Salomon v. Derish M. Wolff & Salvatore J. Pepe, Civ. No. RWT-06-1970 (D. Md.).
Lexington Medical Center to Pay $17 Million to Resolve Claims that it Violated both the False Claims Act and the Stark Law
Often when the government finds alleged violations of the False Claims Act, it also detects violations of other laws as well. This was the case when late last month the Department of Justice announced that Lexington Medical Center of West Columbia, South Carolina had agreed to pay $17 million to resolve allegations that it violated The Stark Law and the False Claims Act in its financial arrangements with dozens of physicians. The Stark Law’s intent is to ensure that physician referrals are based solely on medical need and not on arrangements with those physicians. (The law is also known as the Physician Self-Referral Law.) It forbids hospitals from billing Medicare for most services that are referred by doctors who have a financial relationship with the hospital unless there are specific exceptions to those arrangements. The rare exceptions are in cases where the financial arrangement does not exceed fair market value. Also, arrangement with doctors who are not hospital employees must be set out in writing so as to satisfy a number of requirements. This is to avoid the establishment of improper financial arrangements.
“This case demonstrates the United States’ commitment to ensuring that doctors who refer Medicare beneficiaries to hospitals for procedures, tests and other health services do so only because they believe the service is in the patient’s best interest, and not because the physician stands to gain financially from the referral,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. Specifically, the government alleged that Lexington Medical Center’s purchase agreements entered into with 28 physicians violated the Stark Law because it took into account the volume or value of physician referrals that were not commercially reasonable and that did not fall under the fair market value exception.
As part of the settlement, Lexington Medical center will have to enter into a Corporate Integrity Agreement with the Department of Health and Human Services-Office of the Inspector General (HHS-OIG). This agreement will require that Lexington implements measures designed to avoid or detect the kinds of conduct that are the basis of this settlement. The settlement came about from a lawsuit by Dr. David Hammett – a former physician employed by Lexington Medical Center – filed in federal court in Columbia, South Carolina. The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act. This provision permits private parties to sue on behalf of the government in cases of involving fraud and it allows citizens to share in a portion of any subsequent recovery. Dr. Hammett’s recovery will amount to approximately $4.5 million.
The settlement comes as part of an initiative begun back in May 2009 by the Attorney General and the Secretary of Health and Human Services. The initiative spawned a unit known as HEAT (Health Care Fraud Prevention and Enforcement Action Team). Since January 2009 the Justice Department through HEAT has recovered more than $30 billion through False Claims Act Cases. If you know of fraud that has been committed against the government or its agencies you are encouraged to report it and to consider researching qui tam law firms so that you can receive counsel.
Hospice Provider to Pay $18 Million for Alleged Medicare Fraud for Patients Who Were Not Terminally Ill
The government’s effort to reign in frau
d(especially Medicare Fraud) committed against its agencies often has the result of protecting people who are particularly vulnerable. This was proven earlier this month when the Justice Department announced that Evercare Hospice and Palliative Care would pay $18 million dollars to settle False Claims Act allegations that they claimed Medicare reimbursement for hospice patients who were ineligible because these patients were not terminally ill. Evercare is based in Minnesota with locations in Arizona, Colorado and other part of the country. Hospice care is a special end-of-life care for the terminally ill. Medicare does not cover traditional medical care designed to improve or heal patients who are utilizing hospice services. Only patients who have a life expectancy of six months are less are eligible for special Medicare hospice benefits.
“Today’s settlement reflects the Justice Department’s continuing efforts to combat health care fraud and protect the nation’s elderly and most vulnerable citizens,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Our seniors rely on the hospice program to provide them with quality care, dignity and respect when they are terminally ill and need end-of-life care. It is, therefore, critically important that we hold accountable those hospice providers that bill for medically unnecessary services in order to get higher reimbursements from the Medicare program.”
The government alleges that Evercare knowingly submitted false claims to Medicare for hospice care from January 1, 2007 through December 31, 2013 for patients who were not entitled to Medicare hospice benefits because they were not terminally ill. Moreover, the government alleged that Evercare’s own records did not show that these patients were terminally ill. The government’s complaint also alleged that Evercare intended to maximize the number of patients for whom it could bill Medicare without regard to whether or not those patients were eligible for Medicare. Next, the government’s complaint alleged that Evercare’s business practices included discouraging doctors from recommending that ineligible patients be discharged from hospice. Finally, Evercare is alleged to have discouraged nurses from accurately and completely documenting patients’ medical conditions in their records.
The allegations resolved by this settlement arose from the whistleblower lawsuits filed by former Evercare employees under the qui tam provisions of the False Claims Act. The Act allows private parties to bring suit against companies on behalf of the government and to share in any recovery. The share to be awarded in this case has not yet been determined. “The decision to put someone into hospice care is an emotionally wrenching one for the patient and the patient’s family,” said U.S. Attorney John Walsh for the District of Colorado. “When hospice companies exploit and overbill Medicare by having people in hospice when they do not belong there, it jeopardizes this important benefit for others. We will not tolerate such conduct.”
This settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of Colorado and HHS-OIG. If you know of fraud that has been committed against the government or one of its agencies, you are encouraged to report it and to contact a qui tam law firm.
IT Companies Pay $5.8 Million for Fraud Relating to Small Business Status and Contract Fee Payments
The government’s effort to crack down on fraud that has been allegedly committed against its agencies sometimes snares a multitude of companies that supposedly acted together. This was illustrated earlier this month, when the Department of Justice announced that En Pointe Gov. Inc., En Pointe Technologies Inc., En Pointe Technologies Sales Inc., Dominguez East Holdings LLC and Din Global Corp had all agreed to pay a combined total of $5.8 million to settle charges that the companies violated the False Claims Act by certifying that En Pointe Gov was a small business. The Government charges that this claim was made in order to obtain contract set asides for small businesses. Moreover, the government alleges that these companies underreported sales under a General Services Administration (GSA) contract in order to avoid paying fees.
“These companies defrauded the government in two ways, each of which cost taxpayers,” said U.S. Attorney Eileen M. Decker for the Central District of California. “Small businesses, in some cases, are eligible to receive a preference when government contracts are issued. Large companies that fraudulently solicit and obtain contracts under small business set-aside programs, like the companies in this case not only abuse the system but also harm legitimate small businesses by taking those contracts away from them.” The government alleged that between 2011 and 2014, the defendants made false claims that En Pointe Gov, Inc (now known as Modern Gov IT Inc) met Small Business Administration (SBA) requirements to obtain work that was set aside for small businesses only. The government’s contention is that En Pointe Gov Inc.’s affiliation with the other defendants in this case rendered it a non-small business thus disqualifying it from small business set-aside contracts.
Additionally, the government alleged that the defendants caused En Pointe Gov. Inc. to file false quarterly reports with the GSA between 2008 and 2015 that underreported sales made under a GSA contract. The contract allowed other federal agencies to purchase from En Pointe which was also obligated to return to GSA a percentage of its sales receipts. Thus, En Pointe underpaid the fees it owed the GSA by allegedly misrepresenting the amount of its sales. “Federal contracts set aside for small businesses are intended to grow the economic base of the nation,” said SBA Inspector General Peggy E. Gustafson. “The Office of Inspector General will aggressively investigate such misrepresentations to ensure only eligible businesses are awarded these contracts.”
The settlement resolves allegations filed in a lawsuit by Minburn Technology Group, LLC (Minburn) and Anthony Colangelo, Minburn’s managing member. 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. Minburn and Mr. Colangelo will receive approximately $1.4 million. If you know of fraud that has been committed against the government or one of its agencies, you are encouraged to report it and to contact a Qui tam law firm. Attorneys there will be able to advise you as to your rights under the laws government False Claims Act violations.
US Postal Service v Lance Armstrong
It was announced back in May of this year that fallen sports icon and winner of six consecutive Tour de France titles, Lance Armstrong and the USPS were both seeking summary judgments in a case that goes back to 2013 and that involves doping incidents admitted to by Armstrong. Armstrong and several other defendants were originally accused of submitting or causing the submission of false claims to the U.S. Postal Service (USPS) in connection with this sponsorship. The basis of the USPS’s request for a summary judgment is that the fact Armstrong admitted to using performance enhancing substances. “Because the factu
al record is undisputed, the United States respectfully requests that this Court enter an order granting partial summary judgment in its favor,” stated the government in the Summary Judgment filing. The discovery of these substances in Armstrong’s test samples were made public in a 2012 report by the U.S. Anti-Doping Agency (USADA). Eventually, Armstrong admitted to using banned substances which the USPS says violated its sponsorship agreement between it and the cyclist.
Armstrong is the sole defendant left in the case since two other defendants – Tailwind Sports and Belgian national, cycling team director Johan Bruyneel – are not based in the US. Armstrong first denied using banned substances which the USPS says constitutes him making false claims. In 2013 Armstrong confessed to taking banned substances.
For Armstrong part, the basis of his side’s request for a summary judgment is that he never personally filed claims under the USPS contract. “Armstrong was never a party to those agreements; he did not read or sign them. He never submitted a claim for payment under either sponsorship agreement,” Armstrong’s lawyers said in their Summary Judgment filing. Moreover, Armstrong’s attorneys claim that because the cyclist’s victories between the years 1999 and 2004 gave the USPS great visibility through their contract with him, their contract was not breached. According to Armstrong’s lawyers, “Although it turns out that Armstrong and other riders on the team used performance enhancing substances and publicly denied doing so, the USPS enjoyed substantial benefits from the sponsorship and never took steps directly to address or prevent the use of performance enhancing substances by team riders.”
The sponsorship agreement between the two parties gave the USPS promotional rights including prominent placement of the USPS logo on the cycling team’s uniform. The agreement also required the team to follow the rules of the cycling governing bodies. These rules prohibited the use of performance enhancing substances and methods. Between 2001 and 2004, the Postal Service paid $31 million in sponsorship fees. The lawsuit originated from claims filed by whistleblower Floyd Landis, who was a member of Armstrong’s team. Under the False Claims Act, Landis could recover a portion of the $32,267,279.85 the USPS is seeking. (Under the False Claims Act, the amount could actually be tripled if Armstrong loses the case making the total he and other defendants would have to pay total $100 million. This is due to the addition of damages.) Armstrong says that he will continue to fight back against all claims against him. “After the dozen previous lawsuits, I’m not in a position to really cut any more checks, so I’m in a position where I have to fight this one out,” he said in an interview from earlier this year.
Defense Contractor to Pay $3 Million to Settle False Claims Allegations
On several occasions, the government’s crackdown on fraud and abuse – which started as a concerted effort back in 2009 – has help to uncover activities that put America’s fighting men and women at risk. This was certainly the case when last March the Justice Department announced that ArmorSource, LLC had agreed to pay $3 million to resolve False Claims Act Allegations in connection with a contract to provide combat helmets to the U.S. Army. ArmorSource is an Ohio-based company that designs, develops and manufactures ballistic helmets for military and law enforcement personnel around the world. The government alleged that from 2006 to 2009. ArmorSource delivered Advanced Combat Helmets (ACH) to the army that were manufactured and tested using methods that did not conform to contract standards and that they also failed to meet performance standards. In May of 2010, the Army began recalling the helmets after several lots failed ballistic safety tests.
“The U.S. government relies on contractors to manufacture equipment that is critical to the safety of our men and women in uniform, and equipment that fails to meet performance standards not only cheats taxpayers, but can put lives at risk,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Today’s settlement demonstrates our commitment to ensuring our military receives products that meet its requirements and for which it has paid.” “Today’s settlement in this important case is a reminder to all government contractors that they must deliver on their promises, especially when the safety and security of our troops is on the line,” said Special Agent in Charge Monte A. Cason of the Department of Justice Office of the Inspector General’s Dallas Field Office.
ArmorSource subcontracted the manufacturing of the helmets to Federal Prison Industries, Inc, (FPI) which operates under the trade name UNICOR. The settlement also resolves a lawsuit filed by Melessa Ponzio and Sharon Clubb, FPI employees, under the qui tam or whistleblower provisions of the False Claims Act. Ms. Ponzio and Ms. Clubb will receive $450,000 as a part of the government’s recovery. If you know of fraud that has been committed against the government and/or any of its agencies then you are encouraged to report it to the proper authorities and to also consult a qui tam law firm. Qui tam law firms specliaze in this area of the False Claims Act and can make a measured assessment of your unique situation while protecting your rights.
