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Cardiovascular Consultants Heart Center (CVC Heart Center), a cardiology clinic with offices in Fresno and Clovis, and its shareholder physicians — Dr. Kevin Boran, Dr. Michael Gen, Dr. Rohit Sundrani, Dr. Donald Gregory, and Dr. William Hanks — will pay $1.2 million to resolve federal and state False Claims Act allegations that they improperly performed and billed federal and state health care programs for medically unnecessary cardiovascular diagnostic procedures, U.S. Attorney Phillip A. Talbert announced.

The settlement resolves allegations that between January 1, 2010, and December 31, 2015, CVC Heart Center submitted claims for cardiovascular nuclear imaging (nuclear stress tests) that were not medically necessary or reasonable. It is alleged that the CVC physicians automatically scheduled patients for nuclear stress tests on an annual basis without seeing the patients beforehand to confirm that the procedure was necessary. A nuclear stress test is an expensive procedure that exposes patients to a significant amount of radiation through the injection of radioactive dyes, as well as to the risk of invasive procedures based on false positive results. This risk is only justified if the nuclear stress test is medically necessary. A Centers for Medicare & Medicaid Services (CMS) Local Coverage Determination prohibited the use of nuclear stress tests as a screening procedure.

This case was pursued by Assistant U.S. Attorney Edward Baker through a coordinated effort with the Department of Health and Human Services Office of Inspector General and Office of General Counsel, the Federal Bureau of Investigation, and the California Department of Justice, Bureau of Medi-Cal Fraud and Elder Abuse.

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

The Department of Justice announced last week that Hyperion Foundation, a Georgia not-for-profit entity (Hyperion), Julie Mittleider, a resident of Georgia and Hyperion’s former President, AltaCare Corporation, a Georgia corporation engaged in nursing home management (AltaCare), Douglas Mittleider, AltaCare’s Chief Executive Officer, and related companies, Long Term Care Services Inc. and Sentry Healthcare Acquirors Inc., have agreed to pay the United States a total of $1.25 million to resolve allegations of false claims to Medicare and the Mississippi Medicaid program for providing grossly substandard care to residents at the Oxford Health and Rehabilitation nursing home in Lumberton, Mississippi, from late 2005 through mid-2012, when it was operated by AltaCare, under a contract with Hyperion.

“Residents of nursing homes are some of our most vulnerable citizens,” said Acting Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division.  “Nursing home operators who bill Medicare and Medicaid for providing their residents with grossly deficient services will be held accountable.”

The government alleged that from October 2005 to May 2012, Hyperion made claims to Medicare and Medicaid for providing effectively worthless services to residents at the Lumberton, Mississippi facility, while the facility was managed by AltaCare.  For example, the United States alleged that Hyperion failed to meet the nutritional needs of residents, failed to administer medications to residents as prescribed by their physicians, overmedicated residents, hired insufficient staff to care for them, and diverted Medicare and Medicaid funds to other entities affiliated with Douglas or Julie Mittleider, leaving the facility unable to pay for its basic operations, including food, heat, air conditioning, pest control, and cleaning.  These failures, the United States alleged, caused the facility’s residents to suffer pressure ulcers, falls, dehydration, and malnutrition, among other physical, mental and emotional harms.  As a result, Hyperion allegedly submitted false claims for grossly substandard care, and Douglas Mittleider, AltaCare and certain related companies allegedly caused such false claims.

“When operators of nursing homes harm our most vulnerable citizens and break the law by defrauding our government for grossly substandard or worthless services, we will bring to bear all the resources of the Federal Government in order to rectify these terrible actions,” said D. Michael Hurst, Jr., U.S. Attorney for the Southern District of Mississippi.  “I commend our attorneys and investigators for resolving this travesty with one of the largest healthcare fraud settlements involving a single nursing home.  We will continue the Department of Justice’s long-standing commitment to protecting the elderly.”

“It’s troubling when a nursing home company and its executives accept Medicare and Medicaid money to care for vulnerable nursing home residents and provide grossly deficient care, as alleged in this case,” said Special Agent in Charge Derrick Jackson of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “We will continue to hold nursing homes accountable to ensure residents receive quality healthcare and are provided safe living conditions.”

The settlement resolves allegations filed in a lawsuit by Academy Health Center Inc., the owner and landlord of the Lumberton, Mississippi skilled nursing facility.  The lawsuit was filed under the qui tam provisions of the False Claims Act, which permit private parties to sue on behalf of the government for the submission of false claims and share in any recovery.  The False Claims Act authorizes the United States to intervene and take over primary responsibility for the action, as it did in this case.  The amount to be recovered by the private whistleblower has not been determined.

The case is captioned United States ex rel. Academy Health Center, Inc. v. Hyperion Foundation, Inc., et al., 3:10-cv-552-CWR-LRA (S.D. Miss.).  It was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Southern District of Mississippi, and HHS-OIG.  The claims settled by this agreement are allegations only, and there has been no determination of liability.

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

G. F. “Pete” Peterman, III, United States Attorney for the Middle District of Georgia, announced yesterday a civil settlement with trucking company Mercer Transportation Company, Inc. (Mercer). Mercer has agreed to pay $4.4 million to resolve allegations that it violated the False Claims Act by submitting claims for payment related to shipments originating at the Marine Corps Logistics Base (MCLB) in Albany, Georgia, that were obtained by bribery of Government officials from 2006 through 2012.

This settlement resolves a lawsuit under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to bring civil actions on behalf of the Government 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. The relator who filed this case under the whistleblower provisions of the False Claims Act will receive $814,000 as his share of the recovery.

In its civil complaint, the United States alleged that Mercer, through its agents, employees, and representatives, bribed two Government employees who worked at MCLB in Albany and who were responsible for awarding contracts for the shipment of Government freight out of MCLB. The United States’ complaint alleged that the bribery of these Government employees resulted in Mercer’s being awarded contracts for shipments out of MCLB that it would not have otherwise received during the period from October 2006 through May 2012.

“In simple terms, fraud committed by defense contractors is theft directly from the American people,” Peterman said. “When dealing with the U.S. Government – especially when dealing with the armed forces whose lives may depend on the work of these contractors – contractors are expected to act in good faith and to comply with their obligations. This U.S. Attorney’s Office will hold accountable contractors that seek to profit unfairly at the expense of American troops and taxpayers.”

“This settlement demonstrates the commitment of the Defense Criminal Investigative Service and its law enforcement partners to protect the integrity of all Department of Defense programs,” said Special Agent in Charge John F. Khin, Southeast Field Office. “DCIS’ efforts in this investigation mitigated further significant loss and waste of taxpayer dollars from this fraudulent scheme.”

According to Special Agent in Charge Mike Wiest, NCIS Southeast Field Office, “the preservation of the integrity of Department of Navy procurement activities is a top priority of the Naval Criminal Investigative Service. Through a joint investigation, NCIS and its partner agencies steadfastly pursued numerous allegations of corruption that caused significant harm to the U.S. Marine Corps and other Department of Defense equities resulting in this settlement.”

“This settlement is a result of the steadfast efforts of our investigators and our law enforcement partners,” said Frank Robey, Director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit. “Uncovering these types of schemes is a cooperative effort, and we look forward to continuing our work together to eradicate corruption.”

The United States’ civil settlement was the result of a coordinated effort among the Naval Criminal Investigative Service, the Defense Criminal Investigative Service, the U.S. Army Criminal Investigative Command’s Major Procurement Fraud Unit, the United States Attorney’s Office for the Middle District of Georgia, and the U. S. Department of Justice’s Civil Division’s Commercial Litigation Branch. The case was investigated by NCIS Special Agent Riley Proctor, DCIS Special Agent Lam Hoang, and Special Agent Jennifer Coleman of the U.S. Army Criminal Investigative Command.

The United States was represented by Assistant United States Attorney Todd P. Swanson and Assistant United States Attorney W. Taylor McNeill, both of the U.S. Attorney’s Office for the Middle District of Georgia, and Andrew Steinberg, of the Civil Division’s Commercial Litigation Branch.

Mercer fully cooperated in the United States’ pre-intervention investigation. The claims resolved by the settlement are allegations only; there has been no determination of liability. The case is captioned United States ex rel. James E. Reeves v. Mercer Transportation Co., Inc., (Case No. 1:13-CV-108-LJA (M.D. Ga.).

Chemed Corporation and various wholly-owned subsidiaries, including Vitas Hospice Services LLC and Vitas Healthcare Corporation, have agreed to pay $75 million to resolve a government lawsuit alleging that defendants violated the False Claims Act (FCA) by submitting false claims for hospice services to Medicare.  Chemed, which is based in Cincinnati, Ohio, acquired Vitas in 2004. Vitas is the largest for-profit hospice chain in the United States.

“Today’s resolution represents the largest amount ever recovered under the False Claims Act from a provider of hospice services,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division.  “Medicare’s hospice benefit provides critical services to some of the most vulnerable Medicare patients, and the Department will continue to ensure that this valuable benefit is used to assist those who need it, and not as an opportunity to line the pockets of those who seek to abuse it.”

The settlement resolves allegations that between 2002 and 2013 Vitas knowingly submitted or caused to be submitted false claims to Medicare for services to hospice patients who were not terminally ill.  Medicare’s hospice benefit is available for patients who elect palliative treatment (medical care focused on the patient’s relief from pain and stress) for a terminal illness and have a life expectancy of six months or less if their disease runs its normal course.  Patients who elect the hospice benefit forgo the right to curative care (medical care focused on treating the patient’s illness).  The government’s complaint alleged that Vitas billed for patients who were not terminally ill and thus did not qualify for the hospice benefit.  The government alleged that the defendants rewarded employees with bonuses for the number of patients receiving hospice services, without regard to whether they were actually terminally ill and whether they would have benefited from continuing curative care.

The settlement also resolves allegations that between 2002 and 2013, Vitas knowingly submitted or caused to be submitted false claims to Medicare for continuous home care services that were not necessary, not actually provided, or not performed in accordance with Medicare requirements.  Under the Medicare hospice benefit, providers may be reimbursed for four different levels of care, including continuous home care services.  Continuous home care services are only for patients who are experiencing acute medical symptoms causing a brief period of crisis.  The reimbursement rate for continuous home care services is the highest daily rate that Medicare pays, and hospices are paid hundreds of dollars more on a daily basis for each patient they certify as having received continuous home care services rather than routine hospice services.  According to the complaint, the defendants set goals for the number of continuous home care days billed to Medicare and used aggressive marketing tactics and pressured staff to increase the volume of continuous home care claims, without regard to whether the patients actually required this level of crisis care.

“This litigation and settlement demonstrate the commitment of the U.S. Attorney’s Office to investigate and pursue hospice providers engaging in practices that abuse the Medicare hospice benefit,” said Acting U.S. Attorney Thomas M. Larson of the Western District of Missouri.  “The integrity of the Medicare program must not be compromised by a hospice provider’s financial self-interest.”

Vitas also entered into a five-year Corporate Integrity Agreement (CIA) with the HHS Office of Inspector General (HHS-OIG) to settle the agency’s administrative claims.

Steve Hanson, Special Agent in Charge, for the U.S. Department of Health and Human Services, Office of Inspector General, Kansas City Region, stated, “Healthcare providers who knowingly overbill our programs simply to increase their profits need to be put on notice that such conduct will not be tolerated, and we will pursue any and all remedies at our disposal to protect the tax payer and the Medicare and Medicaid programs.”

In addition to resolving the lawsuit filed by the United States, the settlement resolves three lawsuits filed under the whistleblower provision of the FCA, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery.  The Act permits the United States to intervene in such a lawsuit, as it did in the three whistleblower cases filed against the defendants.  These cases were subsequently transferred to the Western District of Missouri and consolidated with the government’s pending action.  The amount to be recovered by the private whistleblowers has not yet been determined.

The settlement was the result of a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division and the U.S. Attorney’s Office for the Western District of Missouri, with assistance from the U.S. Attorneys’ Offices for the Central District of California and the Northern District of Texas and the Department of Health and Human Services Office of Inspector General.

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

The civil lawsuits are:  United States v. Vitas Hospice Services, LLC, et al., Civil Action No. 13-00449 (W.D. Mo.); United States ex rel. Laura Spottiswood v. Chemed Corporation, et al., Civil Action No. 13-505 (W.D. Mo.), transferred from the United States District Court for the Northern District of Illinois; United States ex rel. Barbara Urick v. VITAS HME Solutions, Inc., et al., Civil Action No. 13-536 (W.D. Mo.), transferred from the United States District Court for the Western District of Texas; and United States ex rel. Charles Gonzales v. VITAS Healthcare Corporation, et al., Civil Action No. 13-00344 (W.D. Mo.), transferred from the United States District Court for the Central District of California.

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

Health Services Management Inc. (HSM) has paid the United States $5 million to resolve claims that the company billed the Medicare and Medicaid programs for worthless services and for services that were never provided, announced Acting U.S. Attorney Abe Martinez. HSM is based in Murfreesboro, Tennessee, and owns and operates nursing homes throughout Texas and the United States. The claims resolved by the settlement are allegations only with no determination of liability.

The United States and Texas began the investigation following the filing of a qui tam, or whistleblower, lawsuit on Oct. 17, 2014. The whistleblower worked at Huntsville Health Care Center, a 92-bed nursing home and rehabilitation facility that HSM owned and operated. She claimed that during her employment, she witnessed patient abuse and neglect, inadequate care, physical and verbal abuse and denial of basic services, such as providing patients with food and water.

The investigation concluded that from Jan. 1, 2013, through Dec. 31, 2015, Huntsville Health Care Center billed for services that were not provided or which were so substandard and deficient that they were considered worthless and potentially harmful to specific Huntsville patients. The claims for payment to Medicare and Medicaid for those services were deemed to be fraudulent and submitted in violation of federal and state law.

“We take seriously the care of our most vulnerable citizens, the elderly and infirm,” said Martinez. “When providers accept federal funds for reimbursement, they have a duty and responsibility to provide the best care possible to the patient, especially when those patients are elderly and at times incapacitated. The United States Attorney’s Office (USAO) for the Southern District of Texas will aggressively hold those accountable who fail to provide the care that is expected when the failure to do so results in harm to the patients and the treasury.”

“It’s disturbing when a nursing home company accepts Medicare and Medicaid money to care for vulnerable nursing home residents and in return provides substandard care, as alleged in this case,” said Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services – Office of Inspector General (DHHS-OIG). “We will continue to hold nursing homes accountable to give residents the quality health services, and living conditions, taxpayers pay them to provide.”

As part of the settlement, HSM also agreed to enter into a Corporate Integrity Agreement with DHHS-OIG.

Under the False Claims Act and the Texas Medicaid Fraud Prevention Act, a private party – known as a relator – can file an action on behalf of the United States and Texas and receive a portion of the recovery. In this case, the relator received $1 million.

The USAO, DHHS-OIG and the Texas Attorney General’s Office – Civil Medicaid Fraud Division conducted the investigation. Assistant U.S. Attorney Jill Venezia handled the matter.

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

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.

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 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.

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.

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.

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