In The News

Justice Department Recovers Over $3.5 Billion from False Claims Act Cases in Fiscal Year 2015

It looks like the government’s crackdown on fraud has been a resounding success this year. According to the Department of Justice, it has obtained more than $3.5 billion in settlements and judgments in cases involving fraud and false claims during the fiscal year, which ended on September 30, 2015. This year’s successful prosecutions are not isolated. According to Deputy Assistant Attorney General Benjamin C. Mizer this is the fourth straight year that the government has exceeded 3.5 billion in cases under the False Claims Act.

The recovered $3.5 billion came from a variety of companies and individuals for offenses ranging from allegedly providing unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid for by Medicare, Medicaid, and other federal health care programs. The largest recovery was in the area of governmental contracts; this amount exceeded $1.1 billion.

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts. In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government. Most false claims actions are filed under the Federal Whistleblower Act, which allows individuals to file lawsuits alleging false claims on behalf of the government. Whistleblowers filed 638 qui tam law suits (also known as The Whistleblower Law) in fiscal year 2015 and were awarded a total of $597 million.

Health Care Fraud

Including this past year’s $1.9 billion, the department has recovered nearly $16.5 billion in health care fraud, including Medicare fraud cases, since January 2009 to the end of fiscal year 2015. The recovery of this money is the result of the government’s crackdown on fraud, which began in 2009.

Money recovered from companies alleged to have committed healthcare fraud includes:

• DaVita Partners, Inc. paid 450 million for allegedly administering the drugs Zemplar and Venofer to dialysis patients and then billing the government for costs that could have been avoided and for violating the False Claims Act by paying for kickbacks.
• A cardiac nurse filed a qui tam lawsuit against 500 Hospitals for implanting cardiac devices in their patients in violation of policies and standards established by Medicare and Medicaid. As a result, $216 million was recovered this year.
• Adventist Health System. North Broward Hospital District and Columbus Regional Healthcare System and Dr. Andrew Pippas were charged with violations of the Stark Law. Recoveries in those cases were $115 million, $69.5 million and $25 million respectively.
• Daiichi Sankyo Inc. paid $39 million to resolve allegations of false claims against the US for paying kickbacks.
• AstraZeneca LP and Cephalon Inc. paid $31 million in settlements.
• PharMerica Corp. paid $9.25 million.
• Extendicare Health Services Inc. paid $32.3 million as a part of the government crackdown on Medicare fraud cases.

• First Tennessee Bank, N.A. $212.5 million settlement. They were alleged to have originated and endorsed mortgages that did not meet eligibility requirements.
• MetLife paid $123.5 million to resolve liability under the False Claims Act arising from its misconduct in endorsing mortgagees for FHA insurance.
• Walter Investment Management Corp. paid a $29.63 million settlement for false claims involving the servicing of reverse mortgages.

Government Contracts

Government contracts and federal procurement accounted for $1.1 billion in fraud settlements and judgments in fiscal year 2015, bringing procurement fraud totals to nearly $4 billion from January 2009 to the end of the fiscal year. Notable recoveries include:

• Supreme Group B.V. paid a $146 million settlement for alleged false claims to the Department of Defense (DoD) for food, water, fuel, and transportation of cargo for American soldiers in Afghanistan
• Lockheed Martin Integrated Systems paid a $27.5 million settlement to resolve allegations that their employees lacked required job qualifications while the companies charged for the higher level, qualified employees required under contracts with U.S. Army Communication
• DRS Technical Services Inc. paid $13.7 million. (See Lockheed)
• VMware Inc. and Carahsoft Technology Corporation paid $75.5 million for violations of the False Claims Act.
• Iron Mountain Companies paid $44.5 million for violations of the False Claims Act.
• U.S. Investigations Services paid $30 million for violations of the False Claims Act.

Other Fraud Recoveries and Actions

The government pursued fraud allegations in a variety of industries during 2015 and made significant recoveries. Notable recoveries include:

• Fireman’s Fund Insurance Company paid a $44 million settlement for alleged fraud under the U.S. Department of Agriculture’s federal crop insurance program.
• Education Affiliates paid a $13 million settlement for alleged false claims it made to the Department of Education for student aid for students whose qualifications for admission were falsified.
• The estate and trusts of the late Layton P. Stuart, former owner and president of One Financial Corporation, and its operating subsidiary, One Bank & Trust N.A., paid $4 million for allegations that it fraudulently secure TARP funds.
• Air Ideal Inc. paid $250,000 plus five percent of Air Ideal’s gross revenues for five years for allegations that it fraudulently-procured HUBZone certification to obtain contracts from the Coast Guard, et al.

Holding Individuals Accountable

On Sept. 9, Deputy Attorney General Sally Quillian Yates issued a memorandum on individual accountability for corporate wrongdoing. These individuals are alleged to have committed offenses in violation of the False Claims Act. Notable recoveries in these cases include:

• Two Florida couples agreed to pay the United States $1.137 million to settle allegations of accepting kickbacks in exchange for home health care referrals to A Plus Home Health Care Inc.
• Dr. Charles Denham agreed to pay $1 million to settle allegations that he solicited and accepted kickbacks from CareFusion.
• Dr. Asad Qamar and his practice, the Institute for Cardiovascular Excellence PLLC, alleging that Qamar and his practice billed Medicare for medically unnecessary peripheral artery procedures and paid kickbacks.
• H. Ted Cain, Julie Cain, Corporate Management Inc. and Stone County Hospital Inc. for false claims for Medicare reimbursement. This case is ongoing.
• Frank Dinsmore, CEO of EDF Resource Capital Inc agreed to pay $200,000 to settle false claims allegations.

Recoveries in Whistleblower Suits

Of the $3.5 billion the government recovered in fiscal year 2015, more than $2.8 billion was related to lawsuits filed under the qui tam provisions of the False Claims Act. “Many of the recoveries obtained under the False Claims Act result from courageous men and women who come forward to blow the whistle on fraud they are often uniquely positioned to expose,” said Principal Deputy Assistant Attorney General Mizer. The government’s claims in the matters described above are allegations only; except where indicated, there has been no determination of liability