Toyobo Co. Ltd. of Japan and its American subsidiary, Toyobo U.S.A. Inc., f/k/a Toyobo America Inc. (collectively, Toyobo), have agreed to pay $66 million to resolve claims under the False Claims Act that they sold defective Zylon fiber used in bullet proof vests that the United States purchased for federal, state, local, and tribal law enforcement agencies, the Justice Department announced last week.

The settlement resolves allegations that between at least 2001 and 2005, Toyobo, the sole manufacturer of Zylon fiber, knew that Zylon degraded quickly in normal heat and humidity, and that this degradation rendered bullet proof vests containing Zylon unfit for use.  The United States further alleged that Toyobo nonetheless actively marketed Zylon fiber for bullet proof vests, published misleading degradation data that understated the degradation problem, and when Second Chance Body Armor recalled some of its Zylon-containing vests in late 2003, started a public relations campaign designed to influence other body armor manufacturers to keep selling Zylon-containing vests.  According to the United States, Toyobo’s actions delayed by several years the government’s efforts to determine the true extent of Zylon degradation.  Finally, in August 2005, the National Institute of Justice (NIJ) completed a study of Zylon-containing vests and found that more than 50 percent of used vests could not stop bullets that they had been certified to stop.  Thereafter, the NIJ decertified all Zylon-containing vests.

“Bulletproof vests are sometimes what stands between a police officer and death,” said Attorney General Jeff Sessions.  “Selling material for these vests that one knows to be defective is dishonest, and risks the lives of the men and women who serve to protect us. The Department of Justice is committed to the protection of our law enforcement officers, and today’s resolution sends another clear message that we will not tolerate those who put our first responders in harm’s way.”

“This settlement sends a strong message to suppliers of products to the federal government that they must be truthful in their claims, particularly with regard to health and safety,” said Carol Fortine Ochoa, Inspector General of the General Services Administration.

This settlement is part of a larger investigation undertaken by the Civil Division of the body armor industry’s use of Zylon in body armor.  The Civil Division previously recovered more than $66 million from 16 entities involved in the manufacture, distribution or sale of Zylon vests, including body armor manufacturers, weavers, international trading companies, and five individuals.  The settlement announced today brings the Division’s overall recoveries to over $132 million.  The United States still has lawsuits pending against Richard Davis, the former chief executive of Second Chance, and Honeywell International Inc.

The settlement announced today resolves allegations filed in two lawsuits, one brought by the United States and the other filed by Aaron Westrick, Ph.D., a law enforcement officer formerly employed by Second Chance who is now a Criminal Justice professor at Lake Superior University.  Dr. Westrick’s 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 2005 in Dr. Westrick’s case.  Dr. Westrick will receive $5,775,000.

This case was handled by the Justice Department’s Civil Division, along with the General Services Administration, Office of the Inspector General; the Department of Commerce, Office of Inspector General; the Defense Criminal Investigative Service; the U.S. Army Criminal Investigative Command; the Department of the Treasury, Office of Inspector General for Tax Administration; the Air Force Office of Special Investigations; the Department of Energy, Office of the Inspector General; and the Defense Contracting Audit Agency.

The claims settled by this agreement are allegations only; there has been no determination of liability.  The lawsuits resolved by the settlement are captioned United States ex rel. Westrick v. Second Chance Body Armor, et al., No. 04-0280 (PLF) (D.D.C.) and United States v. Toyobo Co. Ltd., et al., No. 07-1144 (PLF) (D.D.C.).

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UPMC Hamot (Hamot), a hospital based in Erie, Pennsylvania – and now affiliated with the University of Pittsburgh Medical Center (UPMC) – and Medicor Associates Inc. (Medicor), a regional physician cardiology practice, have agreed to pay the government $20,750,000 to settle a False Claims Act lawsuit alleging that they knowingly submitted claims to the Medicare and Medicaid programs that violated the Anti‑Kickback Statute and the Physician Self‑Referral Law, the Justice Department announced yesterday. Hamot became affiliated with UPMC after the conduct resolved by the settlement occurred.

The Anti-Kickback Statute prohibits offering, paying, soliciting, or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid, and other federally funded programs. The Physician Self-Referral Law, commonly known as the Stark Law, prohibits a hospital from billing Medicare for certain services referred by physicians with whom the hospital has an improper compensation arrangement. Both the Anti-Kickback Statute and the Stark Law are intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

The settlement resolves allegations brought in a whistleblower action filed under the False Claims Act alleging that, from 1999 to 2010, Hamot paid Medicor up to $2 million per year under twelve physician and administrative services arrangements which were created to secure Medicor patient referrals. Hamot allegedly had no legitimate need for the services contracted for, and in some instances the services either were duplicative or were not performed.

“Financial arrangements that improperly compensate physicians for referrals encourage physicians to make decisions based on financial gain rather than patient needs,” said Acting Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division. “The Department of Justice is committed to preventing illegal financial relationships that undermine the integrity of our public health programs.”

The lawsuit was filed by Dr. Tullio Emanuele, who worked for Medicor from 2001 to 2005, under the qui tam, or whistleblower, provisions of the False Claims Act. The Act permits private parties to sue on behalf of the government when they believe that defendants submitted false claims for government funds and to share in any recovery. The Act also allows the government to take over the case or, as in this case, the whistleblower to pursue it. In a March 15, 2017 ruling, the U.S. District Court for the Western District of Pennsylvania held that two of Hamot’s arrangements with Medicor violated the Stark Law. The case was set for trial when the United States helped to facilitate the settlement. Dr. Emanuele will receive $6,017,500.

“Federal law prohibits physicians from entering into financial relationships that may affect their medical judgment and drive up health care costs,” said U.S. Attorney Scott W. Brady. “Today’s settlement demonstrates our commitment to ensuring that health care decisions are made based exclusively on the needs of the patient, rather than the financial interests of health care providers.”

This matter was handled on behalf of the government by the U.S. Attorney’s Office for the Western District of Pennsylvania, the Justice Department’s Civil Division, and the Department of Health and Human Services Office of the Inspector General.

The case is captioned United States ex rel. Emanuele v. Medicor Associates, Inc. et al., Civil Action No. 10-cv-00245-JFC (W.D. Pa.). The False Claims Act claims resolved by this settlement are allegations only and there has been no determination of liability.

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

Tim Ioannides, M.D., a dermatologist and owner of Treasure Coast Dermatology in Vero Beach and Port St. Lucie, Florida has agreed to pay $2.5 million to resolve allegations that he violated the False Claims Act by billing Medicare and TRICARE for procedures he did not perform, the United States Attorney’s Office announced yesterday.  Dr. Ioannides also agreed to operate under an integrity agreement with the Department of Health & Humans Services, Office of Inspector General for 3 years.

“Physicians who bill for procedures they do not perform put personal monetary gain over their duty to their patients, and they raise the cost of health care for all of us as patients and taxpayers,” said Benjamin G. Greenberg, United States Attorney for the Southern District of Florida. “We will relentlessly pursue this type of fraud and abuse that plagues federal health care programs and threatens their financial stability.”

As set forth in the settlement agreement between the parties, the United States alleged that from 2010 to 2016, Dr. Ioannides billed for muscle flaps, complex surgeries involving the dissection and transposition of muscle to reconstruct extensive defects, even though he had not, in fact, performed them. This practice made Dr. Ioannides the highest paid physician in the nation for the muscle flap procedure in 2011, 2012, and 2013.  In addition, the United States alleged that during this time period, Dr. Ioannides would upcode claims for cryotherapy, which involves removing skin growths through the use of liquid nitrogen, by claiming to treat more areas than had actually been treated.

“Physicians who prioritize their personal greed over patient care violate their Hippocratic oath in a particularly deplorable manner,” said Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services, Office of Inspector General. “The OIG and our partners will not rest in our fight to ensure accountability in every corner of the health care industry as we work to protect the American public.”

“This settlement highlights the commitment of the Defense Criminal Investigative Service (DCIS) and its law enforcement partners to protect the integrity of TRICARE, the Department of Defense health care program that serves our war fighters, their family members, and military retirees,” said Special Agent in Charge John F. Khin, Southeast Field Office.  “With DoD’s limited resources and budgets, DCIS must continue to aggressively investigate fraud, waste, and abuse to preserve and recover precious taxpayer dollars for our most vulnerable programs.”

The lawsuit was filed by Patricia Cleary, a former patient of Dr. Ioannides. She filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government and receive a share of any recovery. The act also authorizes the government to intervene in and assume primary responsibility for litigating the lawsuit, as the government has done in this case.  Cleary will receive $475,000.

The investigation of this case was the result of a coordinated effort by the United States Attorney’s Office for the Southern District of Florida, HHS-OIG, and the DCIS. The case was investigated and the settlement negotiated by Assistant U.S. Attorney Susan Torres. The integrity agreement was negotiated by OIG Senior Counsel Kenneth D. Kraft.

The case is captioned Patricia Cleary v. Tim Ioannides, MD & Tim Ioannides, MD, LLC d/b/a Treasure Coast Dermatology, No. 15-14306-Civ-Rosenberg (S.D. Fla.).  The claims asserted against Dr. Ioannides and Treasure Coast Dermatology are allegations only, and there has been no determination of liability.

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

The Justice Department announced yesterday that Deloitte & Touche LLP has agreed to pay the United States $149.5 million to resolve potential False Claims Act liability arising from Deloitte’s role as the independent outside auditor of Taylor, Bean & Whitaker Mortgage Corp. (TBW), a failed originator of mortgage loans insured by the Federal Housing Administration (FHA) in the Department of Housing and Urban Development (HUD).

“With taxpayer dollars at stake, auditors must take their obligations seriously when auditing companies that participate in government programs,” said Acting Assistant Attorney General Chad A. Readler for the Justice Department’s Civil Division.  “When auditors fail to exercise their professional judgment, and make false statements that allow bad actors to remain in government programs and submit false claims to the government, there will be consequences.”

Under HUD’s Direct Endorsement Lender program, TBW was authorized to originate and underwrite mortgage loans insured by the FHA.  When a borrower defaults on an FHA-insured loan underwritten and endorsed by a Direct Endorsement Lender such as TBW, the holder of the loan can submit a claim to the United States to recoup losses resulting from the default.  To maintain its status as a Direct Endorsement Lender, a lender is required to submit to HUD annual audit reports on its financial statements and related reports on its internal controls and its compliance with certain HUD requirements.

Deloitte served as TBW’s independent outside auditor, and issued audit reports for TBW’s fiscal years 2002 through 2008.  The United States alleged that during that time period TBW had been engaged in a long-running fraudulent scheme involving, among other things, the purported sale of fictitious or double-pledged mortgage loans, and as a result, TBW’s financial statements failed to reflect its severe financial distress.  The United States alleged that Deloitte’s audits knowingly deviated from applicable auditing standards and therefore failed to detect TBW’s fraudulent conduct and materially false and misleading financial statements.  The United States alleged that Deloitte’s audit failures extended to the specific financial arrangements through which TBW carried out its fraudulent conduct.  By failing to detect TBW’s misconduct, Deloitte’s audit reports allegedly enabled TBW to continue originating FHA-insured mortgage loans until TBW collapsed and declared bankruptcy in 2009.

A number of TBW officials were criminally convicted in connection with the conduct at issue.

“HUD relies on auditors to ensure the soundness of participants in HUD programs. When CPA firms and auditors fail to detect fraud, waste or abuse the consequences are significant to federal programs, and, ultimately, to the American taxpayer and must be addressed,” said Helen M. Albert, Acting HUD Inspector General.

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

The settlement was the result of a coordinated effort between the Civil Division’s Commercial Litigation Branch, HUD and HUD’s Office of Inspector General.

United States Attorney Maria Chapa Lopez announced yesterday that AmeriCare Ambulance Service, Inc. and its sister company, AmeriCare ALS, Inc. (collectively, AmeriCare), have agreed to pay approximately $5.5 million to resolve allegations that they defrauded Medicare by billing for medically unnecessary ambulance transportation services.

“Fraudulently billing the government for medically unnecessary ambulance transports poses a heavy drain on the Treasury, deprives federal health care programs of valuable resources, and will not be tolerated,” said U.S. Attorney Chapa Lopez. “This lawsuit and today’s settlement evidence our office’s ongoing efforts to safeguard federal health care program beneficiaries from the effects of this type of unlawful conduct.”

According to a complaint filed by the government last year, from January 2008 through December 2016, AmeriCare submitted fraudulent claims to Medicare and TRICARE for Basic Life Support (BLS), non-emergency ambulance transports that were not medically justified. In support of these allegations, the government cited information regarding unwarranted ambulance transports it had received from numerous AmeriCare employees, as well as audits conducted by the agencies that administer Medicare and TRICARE. The government also cited damaging testimony it had elicited under oath from members of AmeriCare’s management team during the course of the investigation. This testimony, along with the other evidence obtained by the government, revealed that AmeriCare had engaged in a systemic practice – over many years – of submitting fraudulent claims to the government falsely attesting to the medical necessity of its non-emergent, BLS ambulance transports. That proof also revealed that AmeriCare had created thousands of false reports and other documentation during this time period, in a failed effort to support this illicit practice.

In addition to paying approximately $5.5 million, AmeriCare has also agreed to enter into an integrity agreement with the Inspector General of the U.S. Department of Health and Human Services.

“Medical service providers who engage in systemic fraud at the core of their business levy an assault on federal health care programs and the American taxpayer,” said Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services, Office of Inspector General. “In spite of often false medical documents, the OIG and our partners will not be deterred in our efforts to root out this type of fraud and protect the American public.”

“This settlement demonstrates the effectiveness of investigations by the Defense Criminal Investigative Service and our law enforcement partners to ensure that medical service providers do not bill for unnecessary services that divert and waste precious taxpayer dollars,” said Special Agent in Charge John F. Khin, Southeast Field Office. “DCIS protects the integrity of DoD programs by rooting out fraud, waste, and abuse that negatively impacts critical programs such as TRICARE.”

This settlement concludes a lawsuit originally filed by a former AmeriCare employee, Ernest Sharp. The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act that 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 here. Mr. Sharp will receive roughly $1.15 million of the proceeds of the settlement with AmeriCare.

The case is captioned United States, et al. ex rel. Sharp v. AmeriCare Ambulance, Case No. 8:13-cv-1171-T-33AEP. 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 Medicare fraud, contact us now.

Defense contractor Lockheed Martin Corporation has agreed to a settlement valued at $4.4 million to resolve allegations that it violated the civil False Claims Act by providing defective communications systems for the United States Coast Guard’s National Security Cutters, announced Acting United States Attorney Alex G. Tse and Department of Homeland Security Office of the Inspector General Special Agent in Charge of the San Diego Field Office Amanda Thandi.

Lockheed, headquartered in Maryland, provided communications systems for the Coast Guard’s National Security Cutters.  The United States alleges that the Radio Frequency Distribution System (RFDS) Lockheed provided fails to meet the requirement of transmitting and receiving several different radio signals at the same time without undue interference (known as simultaneous operations).  The Coast Guard has taken delivery of the first six Cutters and three additional Cutters are under construction.  All nine Cutters have versions of the same RFDS.  To settle the allegations, Lockheed has agreed to pay $2.2 million, and to provide the Coast Guard with repairs to the RFDS on the nine Cutters at no charge.  The repairs are valued at $2.2 million.

“This office remains committed to fighting fraud and false claims against the federal government,” said Acting U.S. Attorney Tse.  “It is essential that the communications systems on the Coast Guard’s National Security Cutters work properly.  I am pleased that Lockheed has agreed to repair the systems so that they fully function to support the Coast Guard’s important mission.”

The settlement, unsealed today, resolves a whistleblower lawsuit filed in the United States District Court for the Northern District of California.  An engineer who formerly worked for Lockheed filed the case pursuant to the qui tam provisions of the False Claims Act.  Under those provisions, private citizens, known as “relators,” may file lawsuits on behalf of the United States and receive a portion of the proceeds of a settlement or judgment.  In this case, the relator will receive $990,000 as his share of the government’s recovery from Lockheed.

Assistant U.S. Attorney Sara Winslow is handling the case with the assistance of Kathy Terry.  The settlement is the result of an investigation by the Department of Homeland Security Office of Inspector General and the U.S. Coast Guard Investigative Service.  Technical aspects of the settlement were made possible by the verification and coordination of United States Navy engineers, led by the Principal Engineer from the Coast Guard.

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

Keppel Offshore & Marine Ltd. (KOM), a Singapore-based company that operates shipyards and repairs and upgrades shipping vessels, and its wholly owned U.S. subsidiary, Keppel Offshore & Marine USA Inc. (KOM USA), have agreed to pay a combined total penalty of more than $422 million to resolve charges with authorities in the United States, Brazil and Singapore arising out of a decade-long scheme to pay millions of dollars in bribes to officials in Brazil.  KOM USA pleaded guilty today in connection with the resolution.  In addition, a guilty plea by a former senior member of KOM’s legal department was unsealed.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, Acting U.S. Attorney Bridget M. Rohde of the Eastern District of New York, and Assistant Director Stephen E. Richardson of the FBI’s Criminal Investigative Division made the announcement.

“Today’s resolution once again underscores the importance of the Department of Justice’s collaboration with foreign authorities to hold corrupt companies and individuals accountable for their crimes, while ensuring the fair and appropriate allocation of fines and penalties,” said Acting Assistant Attorney General Cronan.  “This case also represents the first coordinated FCPA resolution with Singapore and the most recent of several coordinated resolutions with Brazil.  The Criminal Division is committed to working with our international partners to ensure that honest, law abiding companies are able to compete on a level playing field across the globe.”

“The resolutions with KOM and its U.S. subsidiary are the result of a multinational effort to investigate and prosecute a corruption scheme that resulted in the payment by the defendant companies of over $50 million in bribes to Brazilian officials and in profits for the defendant companies of over $350 million from business corruptly obtained in Brazil,” said Acting U.S. Attorney Rohde.  “In an attempt to conceal their crimes, the defendants used the global financial system – including the United States banking system – to disguise the source and disbursement of the bribe payments by passing funds through a series of shell companies.  The United States, working with its law enforcement partners abroad, will continue to hold responsible those corporations and individuals who seek to enrich themselves through the corruption of government officials and legitimate governmental functions.”

“The resolution to this investigation shows to those around the world that the FBI and our law enforcement partners are dedicated to work together to bring justice to companies who play outside the rule of law,” said FBI Assistant Director Richardson.  “The FBI won’t stand by while individuals operate their business illegally using bribes.”

KOM entered into a deferred prosecution agreement with the Department in connection with a criminal information filed today in the Eastern District of New York charging the company with conspiracy to violate the anti-bribery provisions of the FCPA.  The case is assigned to U.S. District Judge Kiyo A. Matsumoto.  In addition, KOM USA pleaded guilty and was sentenced by Judge Matsumoto 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, KOM will pay a total criminal fine of $422,216,980, with a criminal penalty due to the United States of $105,554,245, including a $4,725,000 criminal fine paid by KOM USA.  As part of the deferred prosecution agreement, KOM also committed to implement rigorous internal controls and to cooperate fully with the Department’s ongoing investigation.

In related proceedings, the company settled with the Ministério Público Federal (MPF) in Brazil and the Attorney General’s Chambers (AGC) in Singapore.  The United States will credit the amount the company pays to Brazil and Singapore under their respective agreements, with Brazil receiving $211,108,490, equal to 50 percent of the total criminal penalty, and Singapore receiving up to $105,554,245, equal to 25 percent of the total criminal penalty.

The Departmant also unsealed charges today against a former senior member of KOM’s legal department, who pleaded guilty to one count of conspiracy to violate the FCPA on Aug. 29, 2017 in the Eastern District of New York.  He is awaiting sentencing.

According to admissions and court documents, beginning by at least 2001 and continuing until at least 2014, KOM conspired to violate the FCPA by paying approximately $55 million in bribes to officials at the Brazilian state-owned oil company Petrobras and to the then-governing political party in Brazil, in order to win 13 contracts with Petrobras and another Brazilian entity.  KOM effectuated and concealed the bribe payments by paying outsized commissions to an intermediary, under the guise of legitimate consulting agreements, who then made payments for the benefit of the Brazilian officials and the Brazilian political party.

In reaching the resolutions with the Department, KOM and KOM USA received credit for their substantial cooperation with the Department’s investigation and for taking extensive remedial measures.  For example, KOM has terminated and otherwise disciplined employees involved in the criminal conduct, and it has implemented an enhanced system of compliance and internal controls to address and mitigate corruption risks.  Accordingly, the criminal penalty reflects a 25 percent reduction off the bottom of the applicable U.S. Sentencing Guidelines fine range.

The case is being investigated by the FBI’s International Corruption Squad in Houston.  Trial Attorneys Derek J. Ettinger and David M. Fuhr and Assistant Chief Christopher J. Cestaro of the Criminal Division’s Fraud Section, as well as Assistant U.S. Attorneys Alixandra Smith  and Patrick Hein of the Eastern District of New York, are prosecuting the case.

If you know of or suspect FCPA violations, contact us now.

DaVita Rx LLC, a nationwide pharmacy that specializes in serving patients with severe kidney disease, agreed to pay a total of $63.7 million to resolve False Claims Act allegations relating to improper billing practices and unlawful financial inducements to federal healthcare program beneficiaries, the Justice Department announced yesterday.  DaVita Rx is based in Coppell, Texas.

The settlement resolves allegations that DaVita Rx billed federal healthcare programs for prescription medications that were never shipped, that were shipped but subsequently returned, and that did not comply with requirements for documentation of proof of delivery, refill requests, or patient consent.  In addition, the settlement also resolves allegations that DaVita paid financial inducements to Federal healthcare program beneficiaries in violation of the Anti-Kickback Statute.  Specifically, DaVita Rx allegedly accepted manufacturer copayment discount cards in lieu of collecting copayments from Medicare beneficiaries, routinely wrote off unpaid beneficiary debt, and extended discounts to beneficiaries who paid for their medications by credit card.  These allegations relating to improper billing and unlawful financial inducements were the subject of self-disclosures by DaVita Rx and a subsequently filed whistleblower lawsuit.

“Improper billing practices and unlawful financial inducements to health program beneficiaries can drive up our nation’s health care costs,” said Civil Division Acting Assistant Attorney General Chad Readler.  “The settlement announced today reflects not only our commitment to protect the integrity of the healthcare system, but also our willingness to work with providers who review their own practices and make appropriate self-disclosures.”

DaVita Rx has agreed to pay a total of $63.7 million to resolve the allegations in its self-disclosures and the whistleblower lawsuit.  DaVita Rx repaid approximately $22.2 million to federal healthcare programs following its self-disclosure and will pay an additional $38.3 million to the United States as part of the settlement agreement.  In addition, $3.2 million has been allocated to cover Medicaid program claims by states that elect to participate in the settlement.  The Medicaid program is jointly funded by the federal and state governments.

“Providers should not make patient care decisions based upon improper financial incentives or encourage their patients to do the same,” said U.S. Attorney Erin Nealy Cox for the Northern District of Texas.  “The U.S. Attorney’s Office has and will continue to work cooperatively with providers that bring such issues to light to redress the losses the federal healthcare system has incurred.”

“The conduct being resolved in this matter presents serious program integrity concerns” said CJ Porter, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services, “DaVita Rx’s cooperation in the investigation of this matter was necessary and appropriate to reach this resolution.”

The lawsuit resolved by the settlement was filed by two former DaVita Rx employees, Patsy Gallian and Monique Jones, under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government when they discover evidence that defendants have submitted false claims for government funds and to receive a share of any recovery.  The case is captioned United States ex rel. Gallian v. DaVita Rx, LLC, No. 3:16-cv-0943-B (N.D. Tex.).  The relators will receive roughly $2.1 million from the federal recovery.

The settlement 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 800-HHS-TIPS (800-447-8477).  HHS also offers several programs for health care providers to self-report potential fraud.  More information on self-disclosure processes can be found on the HHS-OIG website.

The investigation was conducted by HHS-OIG, the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of Texas.  The claims asserted by the government are allegations only and there has been no determination of liability.

Pine Creek Medical Center LLC (“Pine Creek”), a physician-owned hospital serving the Dallas/Fort Worth area, has agreed to pay $7.5 million to resolve claims that it violated the False Claims Act by paying physicians kickbacks in the form of marketing services in exchange for surgical referrals, the Department of Justice announced last week.

“Health care providers that attempt to profit from illegal kickbacks will be held accountable,” said Principal Deputy Assistant Attorney General Chad A. Readler, head of the Justice Department’s Civil Division.  “Improper financial incentives can distort medical decision making and drive up healthcare costs for federal health care programs and their beneficiaries.”

The government alleged that, between 2009 and 2014, Pine Creek engaged in an illegal kickback scheme whereby the hospital would pay for marketing and/or advertising services on physicians’ behalf and, in return, the physicians would refer their patients, including Medicare and TRICARE beneficiaries, to Pine Creek.  Among other things, Pine Creek allegedly paid for advertisements on behalf of the physicians in a number of local and regional publications.  Pine Creek also allegedly paid for radio and television advertising, pay-per-click advertising campaigns, billboards, website upgrades, brochures, and business cards, as well as other forms of marketing to induce physicians to refer patients to Pine Creek for medical services.

“The United States Attorney’s Office, in coordination with our partners at Main Justice and HHS-OIG, have and will continue to aggressively pursue those that violate the Anti-Kickback Statute, regardless of the nature or form that the kickback takes,” said Erin Nealy Cox, the U.S. Attorney for the Northern District of Texas.  “We must hold individuals and entities responsible for improperly furthering their financial interests at the expense of the federal health care programs.”

As part of the settlement, Pine Creek has agreed to enter into a corporate integrity agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates the defendants to undertake substantial internal compliance reforms for the next five years.

“Hospitals that try to boost their profits by paying kickbacks to physicians will instead pay for their improper conduct,” said Special Agent in Charge C.J. Porter, Department of Health and Human Services, Office of Inspector General’s Dallas Region.  “We will continue to investigate such illegal business arrangements that undermine impartial medical judgment.”

The settlement resolves allegations originally brought in a lawsuit filed by whistleblowers under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The whistleblowers, Suzanne Scott and Savannah Sogar, former employees of Pine Creek’s marketing department, will receive $1,125,000.

The government’s intervention in this matter illustrates its 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 800-HHS-TIPS (800-447-8477).

The case was handled by the U.S. Attorney’s Office for the Northern District of Texas and the Justice Department’s Civil Division, with assistance from the Federal Bureau of Investigation, and in coordination with the U.S. Department of Health and Human Services Office of Inspector General.

The lawsuit is captioned U.S. ex rel. Suzanne Scott, et al. v. Pine Creek Medical Center, LLC, Case No. 3:14-cv-3065 (N.D. Tex.). The claims settled by this agreement are allegations only; there has been no determination of liability.

Acting United States Attorney W. Stephen Muldrow announced on Friday that Dr. Arthur S. Portnow, the owner and operator of Arthur S. Portnow, P.A., d/b/a Apple Medical and Cardiovascular Group, d/b/a Apple Medical Group (collectively, Dr. Portnow) has agreed to pay $1.95 million to resolve allegations that he and his practice violated the False Claims Act by knowingly seeking reimbursement for medically unnecessary ultrasound tests that were performed on Medicare beneficiaries.

The government alleges that from August 2009 through August 2017, Dr. Portnow submitted fraudulent claims to Medicare for the evaluation and performance of medically unnecessary carotid ultrasounds, lower extremity arterial ultrasounds, abdominal aortic ultrasounds, renal and renal artery ultrasounds, and echocardiograms. The government also alleges that Dr. Portnow falsified patient records in an effort to justify those unnecessary ultrasounds. Dr. Portnow and his practice received hundreds of thousands of dollars as a result of this illicit testing.

“Fraudulently billing the government for medically unnecessary tests deprives federal health care programs, like Medicare, of valuable resources,” said Acting U.S. Attorney Muldrow. “This settlement is evidence that our office will continue to pursue those who seek to unlawfully exploit our nation’s federal health care programs at the expense of patients and the Federal Treasury.”

“Physicians who seek to boost their profits by charging taxpayers and patients for medically unnecessary tests will be thoroughly investigated,” said Special Agent in Charge Shimon R. Richmond of the U.S. Health and Human Services, Office of the Inspector General.  “Working in coordination with our law enforcement partners, we will continue to pursue health care professionals who threaten the integrity of Federal health care programs.”

In addition to paying the $1.95 million, as part of the settlement, Dr. Portnow has also agreed to enter into an integrity agreement with the Inspector General of the U.S. Department of Health and Human Services.

The settlement concludes a lawsuit originally filed in the United States District Court for the Middle District of Florida by a former employee (Kathleen Siwicki) of Dr. Portnow’s practice. The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act that permits 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. Ms. Siwicki will receive roughly $350,000 of the proceeds of the settlement with Dr. Portnow.

The government’s action in this matter illustrates the emphasis on combating health care fraud, and one of the most powerful tools in this effort is the False Claims Act. Tips from all sources about potential fraud, waste, abuse, and mismanagement can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477). The case is captioned United States, et al. ex rel. Siwicki v. Arthur S. Portnow, M.D., et al., Case No. 8:15-cv-987-T-27MAP. 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.

This settlement was the result of a coordinated effort by the U.S. Attorney’s Office for the Middle District of Florida and the HHS-OIG. It was handled by Assistant United States Attorney Christopher Tuite.