Tennessee and New York-Based Defense Contractors Agree to Pay $8 Million to Settle False Claims Act Allegations
The US government – in its efforts to crack down on fraud – has even encountered companies and individuals whose activities potentially compromise US business interests as well as national security. Last month the Justice Department announced that Kilgore Flares Company and one of its subcontractors – ESM Group Inc., – had agreed to pay $8 million to resolve allegations that they violated the False Claims Act and that, in the case of ESM Group, knowingly evaded customs duties owed to the United States. Kilgore Flares manufactures and sells electronics and energetic products, such as flares, to the U.S. military. ESM Group manufactures magnesium powder supplied to the chemical, welding and pyrotechnics industries. ESM Group imported the magnesium power it used in flares from China (PRC) which it then sold to Kilgore Flares. “The Department of Justice is committed to ensuring that contractors do not cut corners in manufacturing critical items sold to the U.S. military,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “These settlements also show that the department will aggressively pursue those who avoid paying duties to gain an unfair business advantage over competitors who abide by the rules.”
The flares, as well as the magnesium powder, are used by the U.S. Military to protect military aircraft from enemy heat-seeking missiles. Kilgore’s contracts with the army prohibited the use of magnesium powder from foreign countries (except Canada) in order to maintain domestic manufacturing capability in the interest of national defense. The US alleged that from July 2003 through May 2005, ESM Group knowingly misrepresented the content of the magnesium powder it imported from the PRC to avoid anti-dumping duties owed to the US. These duties are put in place to prevent foreign companies from “dumping” products in the US market at a price below cost. At the time of the imports alleged in this case, the magnesium powder from the PRC was subject to a 305% anti-dumping duty.
The government also alleged that from March 2005 through August 2006, Kilgore used the illegally imported magnesium powder he got from the PRC and sold it to the U.S. Army thereby violating both the anti-dumping law and the engineering specifications required by the Army contracts. Kilgore and ESM agreed to pay $6 million and $2 million, respectively, to resolve the government’s allegations. “Our warfighters– along with everyone who relies upon them, including their families – need to know that the equipment they use is of the highest quality and dependability,” said U.S. Attorney William J. Hochul Jr. of the Western District of New York. Prior to the settlements against Kilgore and ESM, fiver former employees and an agent of both companies pleaded guilty to the magnesium importation scheme. The criminal defendants were ordered to pay more than $14 million in restitution.
“Such schemes, perpetrated by dishonest contractors and individuals, place the American Warfighter in danger, erode public confidence and undermine the mission of our military services,” said Special Agent in Charge Craig W. Rupert of the U.S. Department of Defense Inspector General, DCIS. The settlement with ESM resolved a lawsuit filed under the whistleblower provisions of the False Claims Act. The act permits parties to sue on behalf of the US those who falsely claim federal funds. The law also allows whistleblowers to share in any award recovered by any legal action. In this case, Reade Manufacturing – a maker of magnesium powder – received $400,000 from ESM.
The settlements with Kilgore and ESM were a result of a coordinated effort between the Civil Division’s Commercial Litigation Brach and several other agencies including Defense Contract Audit Agency, DCIS. If you are involved in a case involving governmental fraud and the Whistleblower Act, you should consult a whistleblower lawyer and whistleblower law firm to determine what options you have.
Houston Psychiatrist Sentenced to 144 Months in Prison for Role in $158 Million Medicare Fraud Scheme
The government’s crackdown on Medicare fraud has resulted not just in hefty fines for those who have been convicted but it has also resulted in substantial prison sentences as well. This was demonstrated earlier this month, when the US Justice Department – in conjunction with several other agencies – announced that a Houston psychiatrist had been sentenced to 144 months in prison for her role in $158 million scheme to defraud Medicare. The psychiatrist – Sharon Iglehart, a former psychiatrist at Riverside General Hospital – was sentenced by U.S. District Judge Ewing Werlein Jr. In addition to her sentence, Iglehart was also ordered by Werlein to pay $6,363,528.82 in restitution and to forfeit the same amount. On Sept. 10, 2015, following a seven-day trial, a jury convicted Iglehart of one count of conspiracy to commit health care fraud, one count of health care fraud and three counts of making false statements relating to health care.
According to the government from 2006 until 2012, Iglehart, et al., defrauded Medicare by submitting through her hospital, approximately $158 million in false claims. These claims were submitted to Medicare for its partial hospitalization program (PHP) services. (The program treats mentally ill patients on an outpatient basis.) The evidence showed that the beneficiaries, for who Riverside billed Medicare, did not receive PHP services. Moreover, it was proven that most beneficiaries rarely saw, nor did they receive treatment from, a psychiatrist. Additional evidence showed that Iglehart billed Medicare for individual psychotherapy and other treatments for her patients at Riverside that she never provided. Furthermore, Iglehart falsified patient records at Riverside to make it appear as if she had provided treatment to those patients.
To date, twelve other individuals have been convicted based on their roles in the scheme. The persons involved include Riverside’s former president, the operator of one of its satellite locations, a patient file auditor, a patient recruiter and others. The sentences range from 12 to 40 years in prison for each. The FBI, HHS-OIG, IRS-CI and the MFCU investigated the case with assistance from the Railroad Retirement Board’s Office of Inspector General and others. The convictions came about as a result of the government’s crackdown on Medicare Fraud. Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 2,300 defendants who collectively have billed the Medicare program for over $7 billion. The government has aggressively pursued individual and organizations involved in these fraudulent activities. To this end, it has encouraged that any Medicare fraud whistleblowers come forward and report such incidences through its Medicare fraud hotline. The public is also encouraged to report abuse to the Health Care Fraud Prevention and Enforcement Team (HEAT), by going to www.stopmedicarefraud.gov.
Bostwick Laboratories Agrees to Pay Up to $3.75 Million
The Justice Department has racked up another victory in its fight against physicians who are alleged to have defrauded Medicare and Medicaid. Last January, Dr. David G. Bostwick agreed to pay the US government up to $3.75 million to resolve claims that he violated the False Claim Act after billing Medicare and Medicaid for unnecessary cancer detection tests and for offering incentives to other physicians to obtain Medicare and Medicaid business. Dr. Bostwick was the founder, owner and CEO of Bostwick Labs – centered in Virginia – from 1999 – 2011. A spokesperson from the Justice Department – Principal Deputy Assistant Attorney General Benjamin C. Mizer – made the announcement on January 8, 2016. “The Department of Justice is committed to ensuring that every laboratory test ordered is based on the medical needs of the patient and not just to increase physician and laboratory profits.”
The settlement resolved claims that from 2006 – 2011, Dr. Bostwick directed his lab to bill Medicare and Medicaid for expensive cancer detection tests as well as other tests that were medically unnecessary. Moreover, the tests were allegedly performed without the treating physicians’ consent or orders. During the period covered by the settlement, Medicare reimbursement for these particular cancer tests ranged from $456 to $966 per test. The settlement also resolved allegations that Dr. Bostwick – through Bostwick Laboratories – offered discounts and billing arrangements to physicians to induce them to refer business to his laboratories in violation of federal Anti-Kickback Statute. The Anti-Kickback Statute (42 U.S.C. § 1320a-7b), prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federally funded programs. The Statute is intended to ensure that a physician’s medical judgment is not improperly compromised by financial incentives.
“We will continue to combat fraud against federal health care programs through actions against health care providers and by seeking accountability from responsible individuals,” said U.S. Attorney Carter M. Stewart for the Southern District of Ohio. Under the settlement, Dr. Bostwick agreed to pay over $2.6 million plus an additional $1.125 million if certain financial contingencies occurred within the next five years – for a total potential payment of up to $3.75 million. On Aug. 28, 2014, Bostwick Laboratories previously agreed to pay over $6.5 million to resolve the allegations in the lawsuit.
The allegations resolved by the settlement, were originally brought by whistleblower Michael Daughtery under the qui tam provisions of the False Claims Act. The act allows whistleblowers to receive any share of funds recovered from the government’s successful prosecution of entities that falsely claim federal funds. Daughtery – as a Medicare fraud whistleblower – will receive over $2.5 million from the settlement. The act allowed Daughtery to sue on to sue on behalf of the government as a whistleblower. Medicare is a federally funded health insurance program for people aged 65 or older as well as other qualifying individuals. The government’s pursuit of such claims illustrates its emphasis on combating health care fraud via its Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative. The initiative was launched in May of 2009 and since then has recovered a total of more than $27.1 billion through False Claims Act cases.
Last of Five Defendants Pleads Guilty in Multimillion-Dollar Medicare Fraud Scheme involving Detroit-Area Home Health Companies
Late last month, the last of five defendants pleaded guilty for his role in a $33 million Medicare fraud case involving Detroit-area home health care and hospice companies. Four other defendants have pleaded guilty since March 15, 2016. Spokesmen from several agencies including the FBI, The U.S. Department of Health and Human Services and the Justice Department’s Criminal Division and others made the announcement last month. The final defendant, Muhammad Tariq, an owner of several health care and hospice facilities in Detroit, pleaded guilty before a U.S. District Judge to one count of conspiracy to commit health care fraud and wire fraud. Earlier in March, Waseem Alam and Hatem Ataya – two physicians involved in the scheme – pleaded guilty before U.S. District Judge Sean F. Cox on the same charges. Alam also pleaded guilty to an additional count of structuring. All five defendants are scheduled to be sentenced in July of this year.
Tahir, Javed and Tariq admitted to paying kickbacks, bribes and other inducements to Alam, Ataya and other physicians, marketers and recruiters for referrals to hospice and home care companies the men owned. Moreover, Tahir, Javed and Tariq admitted to billing Medicare for services that were either medically unnecessary or that were not provided. Alam admitted to bribing his patients into accepting services from At Home Network – a company he owned – then providing unnecessary controlled substance prescriptions personally and through unlicensed individuals. His co-owner, Tariq, admitted to knowing about these activities. Alam further confessed to instructing others to falsify patient records to hide the fact that the prescriptions were unnecessary. Alam admitted to these instances of misconduct in accordance with a plea agreement.
For his part, Ataya admitted to accepting kickbacks in exchange for home health and hospice referrals and to submitting false billing for services that were neither medically necessary nor provided. Ataya was the second-highest referring physician to At Home Network and the top referring physician to At Home Hospice. This case was jointly investigated by the FBI and the HHS-OIG as part of the Medicare Fraud Strike Force. Trial Attorneys Shubhra Shivpuri, Malisa Dubal and Tom Tynan of the Criminal Division’s Fraud Section prosecuted the case. If you have knowledge of qui tam Medicare fraud you are encouraged to contact the government to report such cases (www.stopmedicarefraud.gov). Qui Tam cases are a helpful tool the government utilizes when prosecuting Medicare Fraud case. If you are someone who is already involved in a case of Medicare Fraud and or are a Whistleblower you are further encouraged to contact a qui tam law firm for guidance.
President of Miami-Based Transportation Company Sentenced to 60 Months in Prison for Role in $70 Million Health Care Fraud Scheme
One thing that the government’s ongoing crackdown on Medicare fraud has demonstrated is that where there is fraud there is often conspiracy to commit fraud. This was demonstrated earlier this month when The U.S. Justice Department announced that – in conjunction with the Miami Division of the FBI – the president of a transportation company based in the city had been sentenced to 60 months in prison for his involvement in a health care fraud scheme. The man, Damian Mayol of Miami, was sentenced by U.S. District Judge Ursula in a scheme involving three mental health centers. Mayol was alleged to have submitted fraudulent claims that cost Medicare $70 million. Judge Ursula, of the Southern District of Florida, ordered that Mayol pay more than twenty-six million dollars in restitution and that he forfeit the same amount. In January of this year, Mayol was also convicted of conspiracy to pay health care kickbacks after a five-day trial. The case is part of the current administration’s aggressive prosecution of Medicare Fraud Cases.
Moreover, the government established that the three health care centers purported to provide mental health services to Medicare beneficiaries. Furthermore, the government presented evidence that these health care providers – R&S, St. Theresa and New Day – billed Medicare for partial hospitalization program services (PHP) that were either not provided or that were medically unnecessary. The evidence at trial also showed that patient records had been falsified in order to support Medicare reimbursement claims. These acts are alleged to have occurred between January 2008 and December 2010 costing Medicare $28 million. (Approximately $70 million in false claims had been submitted.) In December 2015, several co-defendants – Santiago Borges, Erik Alonso and Cristina Alonso – were sentenced to prison terms ranging from 28 months to 120 months on related charges.
The FBI coordinated with The Medicare Strike Force, the US Attorney’s Office and the Southern District of Florida to investigate and prosecute this case. Several trial attorneys of the Criminal Division’s Fraud Section aided in the prosecution of this case. Since it began back in 2007, the Medicare Fraud Strike Force has charged over 2,300 defendants who collectively have billed the Medicare program for over $7 billion. Often cases of this kind involve the Federal Whistleblower Act which grants whistleblowers a certain portion of any award collected by the government. If you have information concerning Medicare fraud then you should consult an attorney who knows and is familiar with whistleblower law and who knows how to handle qui tam law suits.
Doctor Who Falsely Diagnosed Hundreds Of Patients As Part of a Medicare Fraud Scheme Pleads Guilty
Last month, Dr. Isaac Kojo Anakwah Thompson pled guilty to one count of health care fraud. The announcement was made by the US Attorney for the Southern District of Florida and the Federal Bureau of Investigation (FBI) in conjunction with several other agencies. “The Medicare system relies on our nation’s doctors to diagnose and treat our Medicare beneficiaries,” stated U.S. Attorney Ferrer. “When doctors intentionally misdiagnose their patients for personal gain, they betray the trust of the Medicare system and the patients themselves. This case demonstrates our commitment to the investigation and prosecution of Medicare fraud, in all its varieties and against all groups of offenders.”
According to court records, Dr. Thompson engaged in a scheme to defraud Medicare’s Advantage program. The program allows beneficiaries to enroll in plans sponsored by private insurance companies. For each beneficiary who chooses to enroll in a Medicare Advantage plan, Medicare pays the sponsoring insurance company a fixed or monthly fee. Medicare adjusts the fee based on the beneficiary’s medical conditions. For the most part, Medicare determines a beneficiary’s medical conditions using diagnoses submitted by the beneficiary’s Medicare Advantage plan physician.
Between 2006 and 2010, Dr. Thompson defrauded Medicare by diagnosing 387 Medicare Advantage beneficiaries with ankylosing spondylitis, a rare chronic inflammatory disease of the spine. Dr. Thompson reported these diagnoses to Humana, which in turn reported them to Medicare. As a result, Medicare paid approximately $2.1 million in excess capitation fees, approximately 80% of which went to the defendant. Nearly all of the diagnoses were false therefore the defendant did not have a corresponding increase in his cost to treat the patients. “When physicians cheat Medicare by misrepresenting the medical conditions of their patients, our agents will work with our law enforcement partners to hold these individuals accountable for their deceptive schemes,” said Special Agent-in-Charge Shimon R. Richmond, HHS Office of Inspector General.
Richmond – along with Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Assistant Attorney General William J. Baer, George L. Piro, Special Agent in Charge, Federal Bureau of Investigation (FBI), Miami Field Office all participated in the investigation and prosecution of this case. Medicare fraud cases have been a high priority of the Obama administration since 2009. Often cases of this kind involve the Federal Whistleblower Act which grants whistleblowers a certain share in any award granted to the government. If you have information concerning Medicare fraud then you should inform state and federal officials and consult with an attorney who is familiar with whistleblower law and who knows how to handle qui tam law suits.
Rose Radiology Agrees to Plead No Contest to Allegations of Medicare Fraud and Pay Nearly $9 million to settle Alleged False Claims Act Violations
The government’s concerted efforts against companies that are alleged to have defrauded Medicare and Medicaid continues even against companies that steadfastly deny their guilt. As an example of this, last week the government alleged that Rose Radiology had billed for radiological procedures based on referrals that Medicare does not cover. Additionally, the government also alleged that Rose billed for and performed procedures that weren’t ordered by healthcare providers, billed Medicare for services done at non-Medicare approved facilities and that it violated the Anti-Kickback Statue (42 USC § 1320a-7b(b)) by giving referrers kickbacks such as lunches, gift cards and tickets to events.
For their part, officials at Rose have denied all allegations of wrong doing calling the charges “baseless and without merit.” Officials at the company went on to contend that the decision to settle was purely based on practical considerations such as the government’s “limitless” resources it uses in prosecuting such cases. “Faced with a lawsuit that could potentially destroy my practice, I elected to settle so needed radiology services could still be provided to our community. It’s so unfortunate that health care professionals are being targeted, especially if they work hard and have a successful practice,” says the firm’s founder, Dr. Manual Rose. Two Rose-employed physicians filed the suits that lead to the $8.71 million settlement. Their share of the settlement – under the False Claims Act whistleblower portion of the law – is estimated to be $1.7 million. (The law allocates whistleblower rewards that generally range from between 15% – 30% of any settlement.)
The government maintains the validity of the charges against Rose. “Not only do the kinds of frauds that were alleged in this case rob Medicare of needed funds, they threatened the health of elderly and disabled Americans,” said Shimon Richmond, special agent in charge for the Health and Human Services Office of the Inspector General. The investigation of Rose comes on the heels of the government’s crackdown on alleged Medicare fraud cases which began as an initiative back in 2009 under the current Obama administration.
California Hospital to Pay More Than $3.2 Million to Settle Allegations That It Violated the Physician Self-Referral Law
Last month, the Justice Department announced that Tri-City Medical Center (TCMC) agreed to pay more than 3 million dollars to resolve allegations that it violated the Stark Law and the False Claims Act. The government contended that TCMC violated Medicare’s prohibition on maintaining financial arrangements between hospitals and referring physicians. The Stark Law (42 U.S. Code § 1395nn) governs physician self-referral for Medicare and Medicaid patients with several enumerated exceptions.
“The settlement of this matter reflects not only our commitment to protect the integrity of the healthcare system through enforcement of the Stark Law, but also our willingness to work with providers who disclose their own misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. The announced settlement resolved allegations that Tri-City Medical Center maintained 97 financial arrangements with physicians and physician groups in violation of the Stark Law. TCMC identified five arrangements with its former chief of staff from 2008 until 2011 that, in the aggregate, appeared not to be commercially reasonable or for fair market value (two exceptions to the Stark Law). Moreover, TCMC identified 92 financial arrangements with community-based physicians and practice groups from 2009 until 2010 that violated the Stark Law because the written agreements were expired, missing signatures or could not be located.
“Together with our law enforcement partners, our agency’s investigators and attorneys will continue to work with health care providers who use the self-disclosure protocol to resolve their billing misconduct,” said Special Agent in Charge Chris Schrank of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Los Angeles region.” This settlement illustrates the government’s emphasis on combating health care fraud and prosecuting Medicare fraud cases which began as an initiative in 2009. Back then, the government established the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative. The goal of said initiative is to reduce and prevent Medicare and Medicaid financial fraud. 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.
Parties that are reporting Medicare fraud and have evidence of such fraud against federal programs or contracts may file a qui tam lawsuit. They are also entitled to protection under the Whistleblower portions of the False Claims Act and may ultimately be able entitled to a portion of any settlement reached in these cases. This matter was handled by the U.S. Attorney’s Office of the Southern District of California, the Civil Division’s Commercial Litigation Branch and HHS-OIG.
URS E & C Holdings, Inc. Agrees to Pay $9 Million to Resolve False Claims Act Allegations
The Obama administration’s ongoing crackdown against businesses that are alleged to have defrauded governmental agencies continues, even reaching companies that have ties to foreign and international entities. The Justice Department announced earlier this month that URS E & C Holdings Inc., a successor to Washington Group International Inc. (WGI), agreed to pay a $9 million settlement to resolve charges that it submitted false claims related to United States Agency for International (USAID) contracts. “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,” said U.S. Attorney Wendy J. Olson for the District of Ohio.
The settlement involved USAID funded contracts for water and wastewater infrastructure projects in Egypt in the 1990s. The government alleged that a contract awarded between WGI, Contrack International and Misr Sons Development S.A.E. (HAS) – an Egyptian company was – violated the law because the partnership concealed from USAID the fact that these companies were in fact acting as partners. The government went on to allege that since HAS’s involvement in particular was not revealed – as is a precondition for the awarding of this contract – it prevented USAID from evaluating the partnership’s qualifications and eligibility.
As a result of these actions, the Justice Department maintained that WGI and its partners allegedly received USAID-funded contracts for which they were ineligible. The United States filed suit under the False Claims Act and the Foreign Assistance Act alleging that this union filed false claims. The settlement, while it resolved WGI’s liability, does not resolve claims the government has made against HAS. The government continues to pursue charges against HAS. The 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. Persons, who feel they are entitled to whistleblower protection, should seek out the counsel of a qui tam attorney. A False Claims Act lawyer can advise you as to what rights you have under the law, what award you may be entitled to if any and how to protect your interest.
Novum Structures LLC to Plead Guilty and Pay $3 Million to Resolve Criminal and Civil Claims
The US government appears to be resolute in its attempt to protect US economic interest when it comes to the outsourcing of foreign materials for federally funded construction projects. Earlier this month, the Justice Department announced that Novum Structures, LLC (Novum) agreed to plead guilty and to pay $3 million to resolve criminal and civil charges that it improperly used foreign materials on construction projects involving federal funds. Moreover, the government alleged that Novum used these materials in violation of the government’s “Buy America” requirements. (The Wisconsin based company had a contractual obligation to implement various domestic preference re the use of materials on constructions projects.)
The agreement resolved allegations that Novum repackaged materials and falsified documents relating to federally funded construction projects in order to hide the fact that the materials were of foreign origin in violation of the “Buy America” requirements. Novum plead guilty to violating 18 U.S.C. § 1001 and agreed to pay a $500,000 criminal fine. “Domestic preference statutes are designed to promote American businesses and to protect U.S. economic interests,” said Acting U.S. Attorney Gregory J. Haanstad for the Eastern District of Wisconsin. “When companies subvert those interests by violating ‘Buy American’ provisions – and when they undertake efforts to conceal that they have done so – all in an effort to improperly advance their own private financial interests, the U.S. Attorney’s Office will pursue all appropriate criminal and civil sanctions.”
Novum also agreed to pay $2.5 million to solve allegations under the False Claims Act that its conduct caused the submission of false claims regarding the origin of non-compliant construction material to federally funded projects. The activities are alleged to have occurred from Jan. 1, 2004 through July 11, 2013. Construction projects funded by the U.S. government are generally subject to laws requiring the use of domestic materials. (See Buy American Act and § 1605 of the American Recovery and Reinvestment Act.) “Contractors must follow all federal contracting rules when doing business with the United States,” said General Services Administration Inspector General Carol Fortine Ochoa.
The allegations resolved by the civil settlement were brought by whistleblower Brenda King under provision of the False Claims Act. The act permits private parties to file a qui tam lawsuit on behalf of the government against those who falsely try to receive federal funds. King is scheduled to receive a $400,000 award as part of the civil settlement. If you are a whistleblower involved in a False Claims action, you should consult with a False Claims Act attorney who can advise you on your rights under this act and determine if you are entitled to whistleblower rewards. The U.S. Attorney’s Office for the Eastern District of Wisconsin prosecuted the criminal case, and also jointly handled the civil lawsuit with the Civil Division’s Commercial Litigation Branch. The lawsuit is captioned United States ex rel. King v. Novum Structures, LLC, Case No. 12-cv-860 (E.D. Wis.)
