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Government Contractor Pays $2.6M to Settle False Claims Act Suit

Triple Canopy, Inc. (Triple Canopy), located in Reston, has agreed to pay $2.6 million to settle civil False Claims Act allegations that the company submitted false claims for payment to the Department of Defense for unqualified security guards stationed in Iraq.

“Contractors must be held accountable for their actions, especially when the safety of government personnel is at stake” said Dana J. Boente, U.S. Attorney for the Eastern District of Virginia. “This settlement should remind contractors of the high value we place on safeguarding our personnel abroad.”

The allegations stem from Triple Canopy’s one-year contract with the Joint Contracting Command in Iraq (JCC-I), an entity established to provide contracting support related to the government’s relief and reconstruction efforts in Iraq. Under the 2009 contract, Triple Canopy was required to perform a variety of security services at Al Asad Airbase, the second largest air base in Iraq.   

The government’s complaint in intervention alleges that Triple Canopy knowingly billed the United States for security guards who could not pass contractually required firearms proficiency tests. The tests were designed by the Army to ensure that the guards hired to protect U.S. and allied personnel were capable of firing their assigned weapons safely and accurately. The government further alleges that Triple Canopy concealed the guards’ inability to satisfy the firearms testing requirements by creating false test scorecards that Triple Canopy was required to maintain for government review, in an effort to induce the government to pay for the unqualified guards.    

The government’s claims are based on a whistleblower suit initially filed by a former employee of Triple Canopy in 2011. The suit was filed in the federal district court for the Eastern District of Virginia under the qui tam provision of the False Claims Act, which allows private persons to file suit on behalf of the United States. Under the False Claims Act, the government has a period of time to investigate the allegations and decide whether to intervene in the action or to decline intervention and allow the whistleblower, also called the relator, to go forward alone. The government intervened in the relator’s suit in June 2012. The False Claims Act also provides the whistleblower a share of the government’s recovery. As part of the resolution, the whistleblower will receive approximately $500,000.

The resolutions obtained in this matter were the result of a coordinated effort between the U.S. Attorney’s Office for the Eastern District of Virginia, the Department of Defense Criminal Investigative Service, and the Army Criminal Investigation Command. The matter was investigated by Assistant U.S. Attorneys Richard Sponseller and Christine Roushdy.

The civil claims settled by this False Claims Act agreement are allegations only; there has been no determination of civil liability.

If you know of or suspect government contractor fraud, contact us now.

Jacksonville Cardiovascular Practice Agrees To Pay More Than $440,000 To Resolve False Claims Act Allegations For Failing To Reimburse Government Health Care Programs

Acting United States Attorney W. Stephen Muldrow announced on Friday that First Coast Cardiovascular Institute, P.A. (“FCCI”) has agreed to pay $448,821.58 to resolve allegations that it violated the False Claims Act by knowingly delaying repayment of more than $175,000 in overpayments owed to Medicare, Medicaid, TRICARE, and the Department of Veterans Affairs.

Specifically, the government alleges that FCCI accrued credit balances or overpayments owed to federal health care programs. These credit balances often occur in a medical practice, for example, when two insurers share responsibility for a payment and one pays too much. In 2009, amendments to the False Claims Act made it a violation to knowingly fail to pay back an obligation owed to the United States and its federal health care programs. Despite repeated warnings, FCCI failed to pay back the money it owed to Medicare, Medicaid, TRICARE, and the VA until being notified that the Department of Justice had opened an investigation into their failure to repay the government.

“When FCCI learned that it had received over $175,000 in potential overpayments to federal health care programs in 2016, it had a legal obligation to return those funds within 60 days,” stated Acting U.S. Attorney Stephen Muldrow. “Instead, they delayed repayment, ultimately retaining thousands of dollars to which they were not entitled. This settlement should send a message that we will aggressively pursue those who seek to unjustly profit from our nation’s federal health care programs.”

“This settlement is the result of successful inter-agency cooperation, resulting in the return of overpayments owed back to the government,” stated Special Agent in Charge Monty Stokes from the Office of Inspector General, U.S. Department of Veterans Affairs. “This settlement will hopefully be a deterrent for others who consider similar practices.”

“Failing to return Medicare overpayments is unacceptable and diverts critical tax dollars from their intended purpose,” said Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services, Office of Inspector General. “The OIG, along with our law enforcement partners, will hold health care companies accountable who knowingly hold onto Medicare funds to which they are not entitled.”

“This settlement demonstrates the ongoing commitment of the Defense Criminal Investigative Service to protect the integrity of the U.S. military health care program, known as TRICARE,” said Special Agent in Charge John F. Khin, Southeast Field Office. Through joint investigations with our investigative partners, DCIS aggressively pursues all remedies against medical providers who fail to deal honestly with the Department of Defense, to preserve our tax dollars where they are needed most.”

The settlement concludes a lawsuit originally filed by a former employee of FCCI, Douglas Malie, in the United States District Court for the Middle District of Florida. 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. The Act also allows the government to intervene and take over the action, as it did in this case. Mr. Malie will receive roughly $90,000 of the proceeds from the settlement with FCCI.

The settlement was the result of a coordinated effort by the U.S. Attorney’s Office for the Middle District of Florida, the State of Florida, the Defense Criminal Investigative Service, the Department of Veterans Affairs, and the U.S. Department of Health and Human Services – Office of Inspector General. It was handled by Assistant U.S. Attorney Shea Gibbons.

The case is captioned United States and the State of Florida ex rel. Malie v. First Coast Cardiovascular Institute, P.A., et al., Case No. 3:16-cv-10548-J-34MCR. The settlement resolves the United States’ claims in that case. The claims resolved by the settlement are allegations only, and there has been no determination of liability.

If you know of or suspect an entity has failed to return a Medicare or Medicaid overpayment, contact us now.

Four Area Hospitals to Pay Millions to Resolve Ambulance Swapping Allegations

Four Houston-area hospitals have agreed to pay $8.6 million to settle allegations they received kickbacks from various ambulance companies in exchange for rights to the hospitals’ more lucrative Medicare and Medicaid transport referrals. The hospitals are all affiliated with Hospital Corporation of America (HCA), which is based in Nashville, Tennessee, and include Bayshore Medical Center, Clear Lake Regional Medical Center, West Houston Medical Center and East Houston Regional Medical Center.

Acting U.S. Attorney Abe Martinez made the announcement along with Chief Counsel Gregory Demske of the Department of Health and Human Services – Office of Inspector General (DHHS-OIG) and Special Agent in Charge CJ Porter of HHS-OIG, Office of Investigations.

“This settlement demonstrates our office’s commitment to combatting health care fraud,” said Martinez. “Ensuring the integrity of our federal health care programs is one of our highest priorities. We will continue to work to protect the public and hold accountable those who attempt to defraud the system.”

This is the second such announcement this office has made holding accountable medical institutions (hospitals and skilled nursing facilities) for these ambulance “swapping” arrangements. The first such settlement – announced in late 2015 and believed at the time to be the first in the nation of its kind – involved another defendant in this same investigation. Prior to these, virtually all cases focused on the actions of the ambulance companies, rather than the medical institutions they serve.

The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare and Medicaid. The settlement announced today resolves allegations that patients at the four hospitals received free or heavily discounted ambulance transports from various ambulance companies in exchange for the hospitals’ referral of other lucrative Medicare and Medicaid business to those same companies. If not for this kickback arrangement, the four hospitals would have been financially responsible for the patient transports at significantly higher rates.

“This settlement emphasizes that both sides of any arrangement where remuneration is paid in exchange for healthcare referrals are responsible for their improper actions – even entities that do not actually bill Medicare or Medicaid for the services,” said Demske.  “Any company or individual receiving anything of value in exchange for referrals should understand that their actions may have serious legal and financial consequences.”

Medicaid is funded jointly by the states and the federal government. The State of Texas paid for some of the Medicaid claims at issue and will receive more than  $300,000 of the settlement amount.

Three whistleblowers, known as “relators,” filed two lawsuits under the qui tam provision of the False Claims Act which permits private parties to file suit on behalf of the government and obtain a portion of the recovery. The relators’ claims are also resolved by this settlement.

Today’s resolution also marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team initiative which the Attorney General and the Secretary of Health and Human Services announced in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.

“This settlement serves as an important reminder to the provider community that arrangements that violate the Anti-Kickback Statute will not be tolerated and provides an outstanding example of how law enforcement is able to use investigative tools,” said Porter.

Among the tools instrumental to the settlement were those provided by HHS-OIG’s Chief Data Office, Consolidated Data Analysis Center (CDAC). CDAC provides HHS-OIG and its law enforcement partners with best practices, consultancy and skills development in data mining, predictive analytics and data management and modeling in support of fraud prevention and recovery.

The settlement was the result of a coordinated effort among U.S. Attorney’s Office, DHHS-OIG and the Texas Attorney General’s Office. Assistant U.S. Attorney Kenneth Shaitelman handled the case.

The claims resolved by this settlement are allegations only, and there has been no determination of liability.

If you know of or suspect Medicare or Medicaid fraud, contact us now.

Western New York Contractors and Two Owners to Pay More Than $3 Million to Settle False Claims Act Allegations

Alden, New York-based contractors, Zoladz Construction Company Inc. (ZCCI), Arsenal Contracting LLC (Arsenal), and Alliance Contracting LLC (Alliance), along with two owners, John Zoladz of Darien, New York, and David Lyons of Grand Island, New York, have agreed to pay the United States more than $3 million to settle allegations that they violated the False Claims Act by improperly obtaining federal set-aside contracts designated for service-disabled veteran-owned (SDVO) small businesses, the Justice Department announced yesterday.    

“Contracts are set aside for service-disabled veteran-owned small businesses so to afford veterans with service-connected disabilities the opportunity to participate in federal contracting and gain valuable experience to help them compete for future economic opportunities,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.  “Every time an ineligible contractor knowingly pursues and obtains such set-aside contracts, they are cheating American taxpayers at the expense of service-disabled veterans.”

To qualify as a SDVO small business, a service-disabled veteran must own and control the company.  The United States alleged that Zoladz recruited a service-disabled veteran to serve as a figurehead for Arsenal, which purported to be a legitimate SDVO small business but which was, in fact, managed and controlled by Zoladz and Lyons, neither of whom is a service-disabled veteran.  The United States alleged that Arsenal was a sham company that had scant employees of its own and instead relied on Alliance and ZCCI employees to function.  After receiving numerous SDVO small business contracts, Arsenal is alleged to have subcontracted nearly all of the work under the contracts to Alliance, which was owned by Zoladz and Lyons, and ZCCI, which was owned by Zoladz.  Neither Alliance nor ZCCI were eligible to participate in SDVO small business contracting programs.  Zoladz and Lyons are alleged to have carried out their scheme by, among other things, making or causing false statements to be made to the U.S. Department of Veterans’ Affairs (VA) regarding Arsenal’s eligibility to participate in the SDVO small business contracting program and the company’s compliance with SDVO small business requirements.

“Detecting and discontinuing fraud, waste, and abuse committed by those who do business with the government remains a core function performed in this Office,” said Acting U.S. Attorney James P. Kennedy, Jr. for the Western District of New York. “That function, however, takes on additional significance when the target of the fraud is a program designed for the benefit of the heroes among us—our disabled veterans.  Although this investigation did not uncover sufficient evidence to establish criminal liability by these entities and individuals, the multi-million dollar civil judgment ensures that those involved pay a heavy price for their decision to divert to themselves resources intended for the benefit of those who have made supreme sacrifices on behalf of all.”

“This settlement demonstrates the commitment of the Department of Veterans Affairs, Office of Inspector General, the Department of Justice, and other law enforcement agencies to aggressively pursue individuals and companies that misrepresent themselves as service-disabled veteran-owned small businesses and deny legitimate disabled veterans the opportunity to obtain VA set-aside contracts,” said Inspector General, Michael J. Missal of U.S. Department of Veterans Affairs, Office of Inspector General (OIG).  “The VA OIG will continue to work diligently to protect the integrity of this important program, which is designed to aid disabled veterans.  I also want to thank the U.S. Attorney’s Office and our law enforcement partners in this effort.”

“The contracting companies and principals allowed greed to corrupt a federal process intended to benefit service-disabled, veteran-owned small businesses,” said Special Agent in Charge Adam S. Cohen of FBI Buffalo Field Office. “The FBI and our partners will continue to identify and investigate companies and individuals who target these types of programs for personal gain.”

The settlement resolves a lawsuit filed under the whisteblower 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.  The civil lawsuit was filed in the Western District of New York and is captioned United States ex rel. Western New York Foundation for Fair Contracting, Inc. v. Arsenal Contracting, LLC, et al., Case No. 11-CV-0821(S) (W.D.N.Y.).  As part of today’s resolution, the whistleblower will receive $450,000.

“This case is yet another example of the tremendous results achieved through the joint efforts of the Small Business Administration (SBA), the Department of Justice, and partner agencies to uncover and forcefully respond to fraud in Federal Government contracting programs, such as the Service Disabled Veteran-Owned Program in this case,” said Christopher M. Pilkerton, General Counsel of the SBA.  “Identifying and aggressively pursuing instances of civil fraud by participants in these procurement programs is one of SBA’s top priorities.”

“Providing false statements to gain access to federal contracts set aside for service-disabled veterans denies the government opportunities to meet its abiding commitment to our nation’s veterans,” said Acting SBA Inspector General Hannibal “Mike” Ware.  “The SBA’s Office of the Inspector General is committed to bringing those that lie to gain access to SBA’s preferential contracting programs to justice.  I want to thank the Department of Justice for its leadership and dedication to serving justice.”

“There is an obvious need and reason for service-disabled, veteran-owned small businesses in the government contracting process,” said Director Frank Robey of the Army Criminal Investigation Command (CID), Major Procurement Fraud Unit.  “Special Agents from Army CID will continue to work closely with our law enforcement partners to make every contribution possible to bring persons to justice who violate that process.”

This matter was investigated by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of New York, the FBI, the VA’s Office of Inspector General, the SBA’s Office of Inspector General, and Army CID.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.

SolarCity Agrees to Resolve Alleged False Claims Act Violations Arising From Renewable Energy Grant Claims to Treasury

The Justice Department recently announced that SolarCity Corporation (SolarCity) has agreed to pay $29.5 million to resolve allegations that it violated the False Claims Act by submitting inflated claims on behalf of itself and affiliated investment funds to the U.S. Department of the Treasury (Treasury) pursuant to Section 1603 of the American Recovery and Reinvestment Act of 2009 (Section 1603).  As part of the settlement, SolarCity and its affiliates will also release all pending and future claims against the United States for additional Section 1603 payments.  SolarCity was purchased by Tesla Motors Inc. in November of 2016, after the alleged conduct at issue in this case.

“The Section 1603 Program subsidized the renewable energy industry through cash grants to cover legitimate costs of renewable energy properties,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.  “This program expired, but this settlement demonstrates that the government will still hold accountable those who sought to take improper advantage of government programs at the expense of American taxpayers.”

Under the Section 1603 Program, the Treasury paid a cash grant equal to 30 percent of the eligible cost basis to construct or acquire qualified renewable solar energy systems placed in service before Dec. 31, 2016.  The Treasury required applicants to certify that each Section 1603 grant application accurately set forth the cost basis of the system, and that all supporting information was true, accurate, and complete.

Beginning in 2009, SolarCity submitted thousands of Section 1603 claims on behalf of itself and affiliated investment funds.  The government alleged that SolarCity falsely overstated the cost bases of its solar energy properties in its certified Section 1603 claims to the Treasury and, as a result, SolarCity and its affiliated investment funds received inflated grant payments from the Treasury.

“Treasury’s Office of Inspector General appreciates the hard work of the Department of the Treasury and the Department of Justice in supporting Treasury OIG’s mission to protect the programs and operations of Treasury from fraud, waste and abuse,” said Inspector General Eric Thorson for the Office of Inspector General (OIG) for the Department of the Treasury.  “Treasury OIG will continue its work to investigate instances of fraud impacting the American Reinvestment and Recovery Act grant programs, that are operated by the Treasury, and paid for by the American taxpayer to ensure that the money distributed by Treasury follows the law and is used for its intended purpose.”

“Treasury appreciates the substantial efforts of the Department of Justice and Treasury’s Office of Inspector General in pursuing this years-long investigation that was initiated following a referral from the Section 1603 Program staff,” said Treasury Fiscal Assistant Secretary David A. Lebryk.  “This settlement sends a clear message that, working with the Department of Justice and the Office of Inspector General, Treasury will pursue any fraud or abuse in programs that it administers in order to protect the taxpayer.”

As part of the settlement, SolarCity has agreed to dismiss a lawsuit filed in the Court of Federal Claims by two investment funds affiliated with SolarCity arising from allegations that Treasury underpaid certain Section 1603 applications, and to release any other potential claims for additional Section 1603 payments.  The lawsuit is captioned Sequoia Pacific Solar I, LLC v. United States, No. 13-139C (Fed. Cl.).

This settlement was the result of a joint investigation conducted by the Treasury, the Treasury OIG, and the Civil Division’s Commercial Litigation Branch.  The claims resolved by the settlement agreement are allegations only and there has been no determination of liability.

If you know of or suspect government grant fraud, contact us now.

AnMed Health Agrees to Pay $7 Million to Settle False Claims Act Allegations

AnMed Health, a South Carolina hospital based in Anderson, South Carolina, has agreed to pay over $7 million to resolve allegations that it violated the False Claims Act by submitting false Medicare claims.  The settlement announced yesterday resolves allegations that AnMed Health knowingly disregarded the statutory conditions for submitting claims to the Medicare program for a variety of services, including radiation oncology services, emergency department services, and clinic services.

Specifically, the United States alleged that AnMed Health billed for radiation oncology services for Medicare patients when a qualified practitioner was not immediately available to provide assistance and direction throughout the radiation procedure, as required by Medicare regulations.  The settlement also resolves allegations that AnMed Health systematically billed a minor care clinic as if it was an Emergency Department, and billed Emergency Department services as if they were provided by a physician when, in fact, the services were rendered by mid-level providers. Each of these billing practices resulted in higher reimbursements to AnMed Health.

“Our goal in pursuing Medicare fraud is not only to protect taxpayers, but also to ensure that Medicare beneficiaries receive the quality care they deserve,” said Barbara Bowens, Civil Chief for the U.S. Attorney’s Office for the District of South Carolina.

“This is another example of how the False Claims Act whistleblower provisions help protect the public’s interest,” said U. S. Attorney John Horn.  “It also reflects our ongoing commitment to safeguard our federal health care programs and the vital care that they provide.”

“Protecting people with Medicare and guarding health resources are top priorities,” said Derrick L. Jackson, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services.  “Provider organizations seeking to increase profits at the expense of patients and taxpayers should expect such plans to be costly.”

The allegations settled today arose from a lawsuit filed in the Northern District of Georgia by a whistleblower formerly employed by AnMed Health, Linda Jainniney, under the whistleblower provisions of the False Claims Act.  Under the Act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.  The lawsuit is captioned United States ex rel. Jainniney v. Anmed Health, et al., 1:12-cv-2941 (N.D. Ga.).  Ms. Jainniney will receive $1,202,500 of the United States’ False Claims Act recovery.  Ms. Jainniney will also receive $850,136.50 from AnMed Health to resolve her wrongful termination claims under the False Claims Act.

This case was investigated by the U.S. Attorney’s Office for the Northern District of Georgia, the U.S. Attorney’s Office for the District of South Carolina, and the Department of Health and Human Services Office of the Inspector General.

The government’s resolution of this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act.

If you know of or suspect Medicare fraud, contact us now.

Adult Daycare Facility Agrees To $2.72 Million Settlement To Resolve Allegations Of Violating False Claims Act

Edison Adult Medical Daycare (Edison), its former owner, Dinesh Patel, and current owners, Daxa Patel and Satish Mehtani, have agreed to pay the United States and the State of New Jersey $2.72 million to resolve allegations that Edison improperly billed and received payments from Medicaid despite Dinesh Patel having been excluded from participating in Medicaid following his 2012 conviction for accepting kickbacks, Acting U.S. Attorney William E. Fitzpatrick announced yesterday.

On Sept. 19, 2012, Dinesh Patel pleaded guilty to accepting cash kickback payments from Orange Community MRI LLC in exchange for patient referrals. He was later sentenced to three months in jail and two years of supervised release.

On March 17, 2012, Dinesh Patel was excluded by the State of New Jersey from participating in any capacity in the Medicaid program. Later, on Feb. 20, 2014, Dinesh Patel was excluded by the U.S. Department of Health and Human Services from participating in Medicare, Medicaid, and all federal health care programs for a period of five years. Five days after Dinesh Patel’s Medicaid exclusion in 2012, he transferred his 50 percent ownership interest in Edison to his wife, Daxa Patel.

The settlement resolves federal and state government allegations that from March 17, 2012, through Aug. 4, 2015, Dinesh Patel violated his exclusion by not ceasing his involvement in the adult daycare facility, and that Edison violated the False Claims Act by submitting claims to and receiving payments from Medicaid while Dinesh Patel directed, managed and supervised activities at Edison. The settlement also resolves allegations that owners Daxa Patel and Satish Mehtani had full knowledge that Dinesh Patel was managing Edison while he was an excluded Medicaid provider.

Dinesh Patel, Daxa Patel, Satish Mehtani, and Edison have agreed to pay $2.72 million plus interest to be split equally between United States and State of New Jersey. Dinesh Patel has also agreed to another five-year exclusion precluding him from participating in all federal health care programs, including Medicaid and Medicare, until 2022.

Acting U.S. Attorney Fitzpatrick credited special agents of the U.S. Department of Health and Human Services – Office of the Inspector General (HHS-OIG), under the direction of Special Agent in Charge Scott J. Lampert, New York Region, and the N.J. Office of the State Comptroller, Medicaid Fraud Division, under the direction of State Comptroller Philip James Degnan, with the investigation leading to the settlement.

The government is represented by Assistant U.S. Attorney Nicole F. Mastropieri of the U.S. Attorney’s Office Health Care and Government Fraud Unit in Newark. David Fuchs of the HHS-OIG negotiated the additional period of exclusion.

The New Jersey U.S. Attorney’s Office reorganized its health care practice in 2010 and created a stand-alone Health Care and Government Fraud Unit to handle both criminal and civil investigations and prosecutions of health care fraud offenses. Since that time, the office has recovered more than $1.37 billion in health care fraud and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act and other statutes.

The claims settled by this agreement are allegations only; there have been no admissions of liability.

If you know of or suspect Medicaid fraud, contact us now.

Drug Maker Aegerion Agrees to Plead Guilty; Will Pay More Than $35 Million to Resolve Criminal Charges and Civil False Claims Allegations

Aegerion Pharmaceuticals Inc., a Cambridge, Massachusetts-based subsidiary of Novelion Therapeutics Inc., has agreed to plead guilty to charges relating to its prescription drug, Juxtapid, the Justice Department announced last week.

As charged in a criminal information filed today, Aegerion introduced Juxtapid into interstate commerce that was misbranded because, among other things, Aegerion failed to comply with a Risk Evaluation and Mitigation Strategy (REMS).  The resolution also includes a deferred prosecution agreement relating to criminal liability under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).  In addition, Aegerion has agreed to settle allegations that it caused false claims to be submitted to federal health care programs for Juxtapid.  Aegerion has agreed to pay more than $35 million to resolve criminal and civil liability arising from these matters.  Aegerion has also agreed to enter into a civil consent decree of permanent injunction aimed at preventing future violations of the Federal Food, Drug, and Cosmetic Act (FDCA).

The government will continue to hold accountable drug companies that violate laws designed to protect the health and safety of patients,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.  “Aegerion has agreed to plead guilty to breaking the law.  The Justice Department will continue to ensure that taxpayers do not foot the bill when such conduct occurs.”

In a criminal information filed on Sept. 22 in the District of Massachusetts, the United States charged that, from December 2012 to December 2015, Aegerion introduced into interstate commerce Juxtapid, a drug that was misbranded under the FDCA.  During this time period, Juxtapid was approved by the U.S. Food and Drug Administration (FDA) to treat patients with homozygous familial hypercholesterolemia (HoFH), a rare disorder, inherited from both parents, that prevents the removal of LDL-C, often called the “bad” cholesterol, from the blood, causing abnormally high levels of circulating LDL-C.  The Juxtapid label carried a black box warning that Juxtapid may cause liver toxicity, a serious side effect of using the drug, and the label also warned that Juxtapid may cause gastrointestinal adverse reactions.  FDA required a REMS, which is a  risk management plan deemed necessary to ensure that a drug’s benefits outweigh its risks, as part of Juxtapid’s approval.  The specific purpose of the Juxtapid REMS was to educate prescribers about the risks of liver toxicity and to restrict access to Juxtapid only to those patients with a clinical or laboratory diagnosis consistent with HoFH.

The information alleges that during the relevant time period, Aegerion failed to give health care providers complete and accurate information about HoFH and how to properly diagnose it, and that Aegerion also filed a misleading REMS assessment report.  According to the information, Aegerion therefore failed to comply with the required elements under the REMS to assure safe use of Juxtapid, in violation of the FDCA.  The information further alleges that Aegerion management and sales personnel distributed Juxtapid not only for the treatment of HoFH, but also as a treatment for high cholesterol generally, without adequate directions for such use.  Under the terms of a plea agreement, Aegerion has agreed to plead guilty to these charges and pay a criminal fine and forfeiture of $7.2 million.

In a deferred prosecution agreement to resolve a felony charge that Aegerion conspired to violate HIPAA, 42 U.S.C. §§ 1320d-6(a) and 1320-6(b)(3), Aegerion admitted that it conspired to obtain patients’ personally identifiable health information, without patient authorization, for commercial gain.  Under the terms of the deferred prosecution agreement, Aegerion will implement enhanced compliance provisions, including periodic certifications to the government concerning its implementation of those provisions.

Under the civil false claims settlement, Aegerion will pay $28.8 million over three years to resolve federal and state civil liability for causing false claims for Juxtapid to be submitted to government health care programs (Medicare, Medicaid, and TRICARE) arising from its promotion of Juxtapid for patients without a diagnosis of, or consistent with, HoFH; false and misleading statements to doctors that the use of Juxtapid was appropriate in patients with symptoms including high cholesterol, irrespective of whether such patients had a diagnosis of HoFH and despite counter-indications to a diagnosis of HoFH; and alteration or falsification of statements of medical necessity and prior authorizations that were submitted to federal health care programs.  The government further alleged that Aegerion defrayed patients’ copayment obligations for Juxtapid, in violation of the Anti-Kickback Statute (AKS), by funneling funds through Patient Services Inc. (PSI), an entity that claimed to be a non-profit patient assistance organization.  The federal share of the $28.8 million civil false claims settlement is $26.1 million and the state portion is $2.7 million.

“Aegerion put profits over patient safety and enriched itself at taxpayer expense,” said Acting U.S. Attorney William D. Weinreb for the District of Massachusetts.  “Our Office is committed to protecting patient safety and the integrity of federal health care programs, and we will continue to use our criminal and civil authority to ensure that drug companies play by the rules that protect the public, ensure quality of care, and preserve patient privacy.”

As part of the resolution, Aegerion has agreed to enter into a separate civil consent decree to resolve civil liability under the FDCA in connection with its failure to comply with the requirements of the Juxtapid REMS program and its distribution of Juxtapid with labeling that lacked adequate directions for all of Juxtapid’s intended uses.  Aegerion also entered into a Corporate Integrity Agreement (CIA) with the HHS-OIG.  The five-year CIA requires, among other things, that Aegerion implement measures designed to ensure that its promotional activities and any arrangements and interactions with third-party patient assistance programs comply with the law.  In addition, the CIA requires reviews by an independent review organization and compliance-related certifications from company executives and Board members.

“We sometimes require companies to put in place certain measures to more closely manage a drug’s risks when we don’t believe a medicine’s benefits would outweigh its side effects without these risk mitigation strategies,” said FDA Commissioner Scott Gottlieb, M.D. “This might include requiring prescribers to undergo certain training on a drug’s risks, or having providers take steps to more closely monitor patients.  By failing to follow the safety requirements that Aegerion had agreed to, the company put patients’ lives at risk and didn’t honor the safety commitments they made as a condition of gaining approval for their drug. This is unacceptable. We will continue to pursue those who skirt the law, and flout patient safety and other post-market commitments, using all of the enforcement tools available to us. Post-market safety requirements are a key element of FDA’s public health protections and we will ensure that they are fulfilled.”

“Today’s plea and settlement with Aegerion shows how the government will hold the pharmaceutical industry accountable for violating important FDA and privacy rules that are intended to keep patients safe and ensure the confidentiality of their information,” said Special Agent in Charge Harold H. Shaw of the FBI, Boston Field Division. “The FBI will continue to investigate companies like Aegerion that profit from exploiting patients who are searching for treatments for serious medical conditions.”

“Our corporate integrity agreement increases individual accountability for board members and company executives and it requires Aegerion to strengthen controls around promotional activities and other interactions with health care providers,” said Chief Counsel to the U.S. Department of Health and Human Services (HHS) Inspector General Gregory E. Demske.  “Importantly, the CIA also requires that Aegerion implement controls and monitoring designed to ensure true independence from any charity patient assistance programs to which it donates in the future.”

“Today’s agreement demonstrates that we will not allow pharmaceutical manufacturers to provide the medical community with false and incomplete information about their products, thereby jeopardizing the health and safety of our citizens,” said Special Agent in Charge Phillip Coyne for the HHS Office of Inspector General (OIG). “Nor will we allow corporations to profit at the expense of patient care and their personal information.”

The civil false claims settlement resolves a lawsuit filed by Michele Clarke, Tricia Mullins, and Kristi Winger Szudlo, former employees of Aegerion, under the qui tam or whistleblower, provisions of the False Claims Act, which permit private individuals, known as relators, to sue on behalf of the government for false claims and to share in any recovery.  The qui tam suit was filed in the District of Massachusetts and is captioned United States ex rel. Clarke, et al. v. Aegerion Pharmaceuticals, Inc., et al., No. 13-CV-11785 (D. Mass.).  Relators will receive $4.7 million from the federal proceeds of the civil false claims settlement. 

The government’s resolution of this matter illustrates the government’s emphasis on combating health care fraud.  One of the most powerful tools in this effort is the False Claims Act.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services at 900-HHS-TIPS (800-447-8477).

This resolution was the result of a coordinated effort by the U.S. Attorney’s Office for the District of Massachusetts, the Civil Division’s Consumer Protection Branch and Commercial Litigation Branch, the FDA’s Office of Chief Counsel and Office of Criminal Investigations, the FBI, HHS-OIG, and the Department of Labor’s Employee Benefits Security Administration.

Except as to conduct admitted as part of the guilty plea and deferred prosecution agreement, the claims resolved by the civil settlement are allegations only and there has been no determination of liability.

Telia Company AB and Its Uzbek Subsidiary Enter Into a Global Foreign Bribery Resolution of More Than $965 Million for Corrupt Payments in Uzbekistan

Stockholm-based Telia Company AB, an international telecommunications company that was formerly an issuer of publicly traded securities in the U.S., and its Uzbek subsidiary, Coscom LLC, entered into a global foreign bribery resolution and agreed to pay a combined total penalty of more than $965 million to resolve charges arising out of a scheme to pay bribes in Uzbekistan.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Joon H. Kim of the Southern District of New York, Chief Don Fort of Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Patrick J. Lechleitner of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) Washington, D.C., Field Office made the announcement.

“This resolution underscores the Department’s continued and unwavering commitment to robust FCPA and white-collar criminal enforcement. It also demonstrates the Department’s cooperative posture with its foreign counterparts to stamp out international corruption and to reach fair, appropriate and coordinated resolutions,” said Acting Assistant Attorney General Blanco. “Foreign and domestic companies that pay bribes put honest companies at a disadvantage and distort the free and fair market and the rule of law. Today’s resolution reflects the significant efforts of law enforcement, the Criminal Division and the U.S. Attorney’s Office for the Southern District of New York to bring such companies to justice, and to maintain a competitive and level playing field for companies to do business, create jobs and thrive.”

“Today, we announce one of the largest criminal corporate bribery and corruption resolutions ever, with penalties totaling just under a billion dollars,” said Acting U.S. Attorney Kim. “Swedish telecom company Telia and its Uzbek subsidiary Coscom have admitted to paying, over many years, more than $331 million in bribes to an Uzbek government official. Telia, whose securities traded publicly in New York, corruptly built a lucrative telecommunications business in Uzbekistan, using bribe payments wired around the world through accounts here in New York City. If your securities trade on our exchanges and you use our banks to move ill-gotten money, then you have to abide by our country’s laws. Telia and Coscom refused to do so, and they have been held accountable in Manhattan federal court today.”

“Today marks the second resolution of proceedings against corporate entities who have engaged in a global bribery scheme of government officials,” said Chief Fort. “It also further demonstrates the dedication we have to identifying illegal financial transactions being used for bribery in the international community. It is important that the global economy remain on a fair playing field and IRS-CI will remain committed in our efforts to dismantle these kinds of corrupt financial schemes.”

“Today’s resolution marks a win against a foreign corruption scheme where millions of dollars in bribery funds were paid to Uzbekistan officials and laundered through the U.S. financial system.” said Special Agent in Charge Lechleitner. “HSI, working hand in hand with our partners at IRS Criminal Investigation, leveled the playing field for publicly traded companies by exposing these corrupt practices and helped the U.S. government collect nearly $275 million in criminal penalties”

Telia entered into a deferred prosecution agreement in connection with a criminal information filed today in the Southern District of New York charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). The case is assigned to U.S. District Judge George B. Daniels. In addition, Coscom pleaded guilty and was sentenced by Judge Daniels on a one-count criminal information charging the company with conspiracy to violate the anti-bribery provisions of the FCPA. Pursuant to its agreement with the Department, Telia agreed to pay a total criminal penalty of $274,603,972 to the U.S., including a $500,000 criminal fine and $40 million in criminal forfeiture that Telia agreed to pay on behalf of Coscom. Telia also agreed to implement rigorous internal controls and cooperate fully with the Department’s ongoing investigation, including its investigation of individuals.

The U.S. Securities and Exchange Commission (SEC) and the Public Prosecution Service of the Netherlands (Openbaar Ministrie, or OM) announced separate settlements with Telia in connection with related proceedings. Under the terms of its resolution with the SEC, Telia agreed to a total of $457,169,977 in disgorgement of profits and prejudgment interest, and the SEC agreed to credit any disgorged profits that Telia pays to the Swedish Prosecution Authority (SPA) or OM, up to half of the total. Telia agreed to pay the OM a criminal penalty of $274,000,000 for a total criminal penalty of $548,603,972, and a total resolution amount of more than $1 billion. The Department of Justice agreed to credit the criminal penalty paid to the OM as part of its agreement with the company. The SEC agreed to credit the $40 million in forfeiture paid to the Department as part of its agreement with the company. Thus, the combined total amount of criminal and regulatory penalties paid by Telia and Coscom to the U.S., Dutch, and Swedish authorities will be $965,773,949.

According to the companies’ admissions, Telia and Coscom, through various managers and employees within Telia, Coscom and affiliated entities, paid approximately $331 million in bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry. The companies structured and concealed the bribes through various payments including to a shell company that certain Telia and Coscom management knew was beneficially owned by the foreign official. The bribes were paid on multiple occasions between approximately 2007 and 2010, so that Telia could enter the Uzbek market and Coscom could gain valuable telecom assets and continue operating in Uzbekistan. Certain Telia and Coscom management also contemplated structuring an additional bribe payment in late 2012, after Swedish media began reporting about Telia’s corrupt payments in Uzbekistan, Swedish authorities began a criminal investigation and Telia opened an internal investigation.

A number of significant factors contributed to the Department’s criminal resolution with the companies. Among these, the companies received significant credit for their extensive remedial measures and cooperation with the Department’s investigation. Specifically, the criminal penalty reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range. However, the companies did not receive more significant mitigation credit, either in the penalty or the form of resolution, because the companies did not voluntarily self-disclose their misconduct to the Department.

The resolution, reached in coordination with the SEC and authorities in the Netherlands, marks the second such resolution by a major international telecommunciations provider for bribery in Uzbekistan. On Feb. 18, 2016, Amsterdam-based VimpelCom Limited and its Uzbek subsidiary, Unitel LLC, also entered into resolutions with the Department of Justice and admitted to a conspiracy to make more than $114 million in bribery payments to the same Uzbek government official between 2006 and 2012. The investigation has thus far yielded a combined total of over $1.76 billion in global fines and disgorgement, including over $500 million in criminal penalties to the Department of Justice. In related actions, the Department has also filed civil complaints seeking the forfeiture of more than $850 million held in bank accounts in Switzerland, Belgium, Luxembourg and Ireland, which constitute bribe payments made by VimpelCom, Telia and a third telecommunications company, or funds involved in the laundering of those corrupt payments, to the Uzbek official.

Law enforcement colleagues within the OM and the SPA provided significant cooperation and assistance in this matter. Law enforcement colleagues in Austria, Belgium, Cyprus, France, Ireland, Latvia, Luxembourg, Norway, Switzerland, the Isle of Man and the United Kingdom have also provided valuable assistance. The Criminal Division’s Office of International Affairs provided significant assistance, as well. The SEC referred the matter to the Department and also provided extensive cooperation and assistance.

The IRS-CI and ICE-HSI are investigating the cases as part of the IRS Global Illicit Financial Team in Washington, D.C. Senior Litigation Counsel Nicola J. Mrazek and Trial Attorney Ephraim Wernick of the Criminal Division’s Fraud Section, and Assistant U.S. Attorney Edward Imperatore of the Southern District of New York are prosecuting the criminal case, with substantial assistance from the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS). MLARS Trial Attorney Michael Khoo is prosecuting the forfeiture case with substantial assistance from the Fraud Section and former MLARS Trial Attorney Marie M. Dalton, now an Assistant U.S. Attorney in the Western District of Washington.

If you are aware of foreign corruption, contact us now.

Pacific Architects and Engineers, LLC to Pay $5 Million In False Claims Act Settlement

Pacific Architects and Engineers, LLC (“PAE”) has agreed to pay the United States $5 million to resolve allegations that it knowingly failed to follow vetting requirements for personnel working in Afghanistan under a State Department contract for labor services. PAE is a Virginia-based contractor that provides personnel and other support to various federal government agencies.

The settlement was announced recently by U.S. Attorney Channing D. Phillips and Steve A. Linick, Inspector General for the U.S. Department of State.

The agreement resolves claims relating to PAE’s Civilian Police “CIVPOL” contract in support of State Department missions in Afghanistan, Haiti, Lebanon, Liberia, South Sudan, and elsewhere. In 2007, the State Department awarded PAE a task order under the CIVPOL contract to provide training and mentoring personnel to counter-narcotics and drug interdiction police and investigators in Afghanistan. The task order required PAE to conduct extensive background checks on U.S. personnel that were in high risk or armed positions, including independently developed reference checks. For local, national, and third party national employees working on the task order, PAE was obligated to submit their names to the State Department’s Regional Security Office in Afghanistan for additional security clearance. According to the government’s evidence, PAE was aware of these contractual requirements but did not comply with them for extended periods. The United States asserts that invoices PAE submitted to the State Department for the labor services of improperly vetted personnel were false.

“This settlement affirms our commitment to hold government contractors accountable for properly screening employees, particularly those who work alongside our government’s personnel in fragile areas of the world,” said U.S. Attorney Phillips. “In this particular matter, it is alleged that PAE failed to conduct the appropriate vetting for personnel working in Afghanistan under a State Department contract for labor services for which invoices were later submitted. Our Office will continue to investigate and seek appropriate recoveries from contractors who do not meet their obligations.”

“The OIG special agents and staff assigned to this case should be commended for their excellent investigative work,” said Inspector General Linick. “Rooting out waste, fraud, and abuse is at the heart of any OIG mission, as is ensuring that contractors are accountable for every taxpayer dollar they receive.”

The settlement also resolves a lawsuit filed in the U.S. District Court for the District of Columbia by former PAE manager Robert J. Palombo under the qui tam, or whistleblower provisions, of the False Claims Act. Under the False Claims Act, private citizens may bring suit on behalf of the United States and share in any recovery obtained by the government. Mr. Palombo will receive $875,000 as his share of the government’s recovery. The case is captioned United States ex rel. Robert J. Palombo v. PAE, Inc., et al.

The claims settled by this agreement are allegations only, and there has been no determination of liability.

This settlement was the result of an investigation into Mr. Palombo’s allegations by the United States Attorney’s Office for the District of Columbia and the Department of State, Office of Inspector General.

If you know of or suspect governmental or defense contractor fraud, contact us now.

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