Defense Contractor Agrees to $4.535 Million Settlement for Alleged False Claim Act Violations

Advanced C4 Solutions, Inc. agreed today to pay $4.535 million to the United States to settle allegations that it submitted inflated invoices to the government for work performed at Joint Base Andrews.

The settlement was announced by United States Attorney for the District of Maryland Rod J. Rosenstein; Brigadier General Keith M. Givens, Commander Air Force Office of Special Investigations (OSI); Special Agent in Charge Robert Craig of the Defense Criminal Investigative Service – Mid-Atlantic Field Office (DCIS); and U.S. Small Business Administration Inspector General Peggy E. Gustafson.

“Federal authorities will vigorously investigate and prosecute defense contractors that cheat the government,” said U.S. Attorney Rod J. Rosenstein. “The Justice Department works closely with defense agencies to safeguard taxpayer dollars.”

Advanced C4 Solutions, Inc. (the “Company”) is a Florida-based company that was operating as a certified “small business” under Section 8(a) of the Small Business Act.  On June 10, 2010, the Company was awarded a contract, DO27, to supply project management and labor services for an Air Force technology project.  The contract was awarded by the U.S. Navy’s Space and Warfare Systems Command (“SPAWAR”), which was administering the contract in support of the United States Air Force.  Among other things, DO 27 required the Company to design, construct, and implement certain local area network and wide area network systems that would be utilized by Air Force personnel and other components of the U.S. Armed Forces on Joint Base Andrews in Maryland.  The DO 27 contract required the Company to accurately provide invoices to the United States for work performed under the DO 27 contract, including work by subcontractors.  Labor costs were required to be billed according to the job classifications set forth in the contract and the number of labor hours worked by personnel at each job classification.  The DO 27 contract also provided that the Company could only utilize pre-approved subcontractors.  Pursuant to this provision, the Company entered into subcontractor agreements with several entities, one of which was Superior Communication Solutions, Inc. (“SCSI”).

Advanced C4 Solutions and its subcontractors began work under the DO 27 Contract in June 2010.  Andrew Bennett was the Company’s project manager who was tasked with overseeing the work performed by the Company and its subcontractors under the DO 27 contract.  In this capacity, he was responsible for verifying the accuracy of all invoices submitted by subcontractors to the Company and, in turn, all the invoices submitted by the Company to SPAWAR.

The settlement resolves allegations that Bennett, while an employee of the Company, knew that SCSI created false invoices that charged for labor hours that were not actually worked, and charged the United States at job classification rates for personnel that did not have the requisite credentials to be billed at those rates, and yet submitted those SCSI invoices to the government for payment anyway.  SPAWAR subsequently paid these invoices not knowing they were false.

In related cases, Andrew Bennett, age 52, of Tampa Florida, James T. Shank, age 68, of Perry, Georgia, and a third individual were indicted on federal criminal charges related to their actions in this matter. Bennett and Shank pled guilty to conspiracy to commit wire fraud for their conduct related to the DO 27 contract.  The third defendant is scheduled for trial beginning on January 30, 2017.

United States Attorney Rod J. Rosenstein commended Air Force OSI, DCIS, and SBA for their work in the investigation. Mr. Rosenstein thanked Assistant U.S. Attorney Jason D. Medinger who handled this case.

Forest Laboratories and Forest Pharmaceuticals to Pay $38 million to Resolve Kickback Allegations Under the False Claims Act

Forest Laboratories LLC, located in New York, New York, and its subsidiary, Forest Pharmaceuticals Inc., have agreed to pay $38 million to resolve allegations that they violated the False Claims Act by paying kickbacks to induce physicians to prescribe the drugs Bystolic®, Savella®, and Namenda®, the Department of Justice announced yesterday.

“Kickback schemes undermine the integrity of medical decisions and increase the costs of health care for everyone,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Such schemes are particularly of concern when they are designed to influence drug prescriptions, and the Department of Justice will vigorously pursue companies that subvert the law at the public’s expense.”

The settlement resolves allegations that Forest violated the Anti-Kickback Statute, which prohibits the payment of remuneration to induce referrals of items or services covered by federal health care programs, by providing payments and meals to certain physicians in connection with speaker programs about Bystolic®, Savella®, or Namenda® between Jan. 1, 2008 and Dec. 31, 2011.  The United States contends that the payments and meals were intended as improper inducements because Forest provided these benefits even when the programs were cancelled (and Forest provided no evidence of a bona fide reason for the cancellation), when no licensed health care professionals attended the programs, when the same attendees had attended multiple programs over a short period of time, or when the meals associated with the programs exceeded Forest’s internal cost limitations.

As a result of today’s $38 million settlement, the federal government will receive $35.5 million and state Medicaid programs will receive $2.5 million.  The Medicaid program is funded jointly by the state and federal governments.

“We are committed to protecting federally funded healthcare programs from fraud, and this settlement reflects that commitment,” said U.S. Attorney Gregory J. Haanstad for the Eastern District of Wisconsin. “We are particularly concerned with ensuring that drugs are prescribed based on patients’ needs and not on the personal financial interests of drug manufacturers or prescribing physicians.”

“Quality and patient safety must be the driving factors in the medical decision making process,” said Special Agent in Charge Lamont Pugh III of U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG) – Chicago Regional Office. “Attempting to sway physicians to deviate from those core values with illegal inducements, as alleged in this lawsuit, debilitates their unbiased medical judgment at the expense of patients and taxpayers.”

The settlement resolves allegations filed in a lawsuit by former Forest employee Kurt Kroening, in federal court in Milwaukee, Wisconsin.  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.  Mr. Kroening will receive approximately $7.8 million.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $31.1 billion through False Claims Act cases, with more than $19.4 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement is the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Eastern District of Wisconsin, with assistance from the HHS Office of the Inspector General, the HHS Office of Counsel to the Inspector General, the Office of the General Counsel for the Defense Health Agency, the National Association of Medicaid Fraud Control Units, and the FBI.

The case is captioned United States ex rel. Kroening v. Forest Pharmaceuticals, Inc., et al., Case No. 12-CV-366.  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Justice Department Recovers Over $4.7 Billion From False Claims Act Cases in Fiscal Year 2016

The Department of Justice obtained more than $4.7 billion in settlements and judgments from civil cases involving fraud and false claims against the government in fiscal year 2016 ending Sept. 30, Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, announced today.  This is the third highest annual recovery in False Claims Act history, bringing the fiscal year average to nearly $4 billion since fiscal year 2009, and the total recovery during that period to $31.3 billion.

“Congress amended the False Claims Act 30 years ago to give the government a more effective tool against false and fraudulent claims against federal programs,” said Mizer.  “An astonishing 60 percent of those recoveries were obtained in the last eight years.  The beneficiaries of these efforts include veterans, the elderly, and low-income families who are insured by federal health care programs; families and students who are able to afford homes and go to college thanks to federally insured loans; and all of us who are protected by the government’s investment in national security and defense.  In short, Americans across the country are healthier, enjoy a better quality of life, and are safer because of our continuing success in protecting taxpayer funds from misuse.”

Of the $4.7 billion recovered, $2.5 billion came from the health care industry, including drug companies, medical device companies, hospitals, nursing homes, laboratories, and physicians.  The $2.5 billion recovered in fiscal year 2016 reflects only federal losses.  In many of these cases, the Department was instrumental in recovering additional millions of dollars for state Medicaid programs.  This is the seventh consecutive year the Department’s civil health care fraud recoveries have exceeded $2 billion.

The next largest recoveries came from the financial industry in the wake of the housing and mortgage fraud crisis.  Settlements and judgments in cases alleging false claims in connection with federally insured residential mortgages totaled nearly $1.7 billion in fiscal year 2016 – the second highest annual recovery in this area.

The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government programs and contracts relating to such varied areas as health care, defense and national security, food safety and inspection, federally insured loans and mortgages, highway funds, small business contracts, agricultural subsidies, disaster assistance, and import tariffs.  In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits alleging false claims on behalf of the government.

Most false claims actions are filed under those whistleblower, or qui tam, provisions.  If the government prevails in the action, the whistleblower, also known as the relator, receives up to 30 percent of the recovery.  Whistleblowers filed 702 qui tam suits in fiscal year 2016, and the Department recovered $2.9 billion in these and earlier filed suits this past year.  The government awarded the whistleblowers $519 million during the same period.

Health Care Fraud

The Department recovered $19.3 billion in health care fraud claims from January 2009 to the end of fiscal year 2016 – 57 percent of the health care fraud dollars recovered in the 30 years since the 1986 amendments to the False Claims Act.  These recoveries restore valuable assets to federally funded programs such as Medicare, Medicaid, and TRICARE, the health care program for service members and their families.  But just as important, the Department’s vigorous pursuit of health care fraud prevents billions more in losses by deterring others who might otherwise try to cheat the system for their own gain.  The Department’s success is a direct result of the high priority the Obama Administration has placed on fighting health care fraud.  In 2009, the Attorney General and the Secretary of the Department of Health and Human Services, the Department that administers Medicare and Medicaid, announced the creation of an interagency task force called the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement.  Additional information on the government’s efforts in this area is available at StopMedicareFraud.gov, a webpage jointly established by the Departments of Justice and Health and Human Services.

The largest recoveries this past year – $1.2 billion – came from the drug and medical device industry.  Drug manufacturers Wyeth and Pfizer Inc. paid $784.6 million to resolve federal and state claims that Wyeth knowingly reported false and fraudulent prices on two drugs used to treat acid reflux, Protonix Oral and Protonix IV.  The government alleged that Wyeth (before it was acquired by Pfizer) failed to report deep discounts available to hospitals, as required by the government to ensure that the Medicaid program enjoyed the same pricing benefits available to the company’s commercial customers.  Wyeth paid $413.2 million to the federal government and $371.4 million to state Medicaid programs.

In another settlement against a drug company, Novartis Pharmaceuticals Corp. paid $390 million based on claims that the company gave kickbacks to specialty pharmacies in return for recommending Exjade, an iron chelation drug, and Myfortic, an anti-rejection drug for kidney transplant recipients.  The settlement includes $306.9 million for the federal government and $83.1 million for state Medicaid programs.

Hospitals and outpatient clinics accounted for $360 million in recoveries.  Tenet Healthcare Corp., a major hospital chain in the United States, paid $244.2 million to resolve civil allegations that four of its hospitals engaged in a scheme to defraud the United States by paying kickbacks in return for patient referrals.  Tenet paid an additional $123.7 million to state Medicaid programs, and two of its subsidiaries pleaded guilty to related charges and forfeited $145 million, bringing the total resolution to $513 million.

In the medical lab arena, Millennium Health (formerly Millennium Laboratories) paid $260 million to settle allegations that it billed Medicare, Medicaid, and other federal health care programs for excessive and unnecessary urine drug and genetic testing and also that it gave free items to induce physicians to refer expensive and profitable lab tests to Millennium, in violation of the Anti-Kickback Statute and Stark Law.  The settlement included $214.8 million in alleged false claims against federal programs, $26 million in alleged false claims against state Medicaid programs, and $19.2 million in related administrative claims.

The nation’s largest contract therapy provider paid $125 million to resolve claims that it had induced skilled nursing homes to submit false claims to Medicare for rehabilitation services that were not reasonable, necessary, and skilled, or that weren’t provided at all.  The settlement was with RehabCare Group Inc., RehabCare Group East Inc., and their parent, Kindred Healthcare Inc.  Cases involving nursing homes and skilled nursing facilities accounted for more than $160 million in settlements and judgments this past fiscal year.

“These health care recoveries benefit vulnerable citizens in Medicare and Medicaid and the taxpayers who pay for those programs,” said Inspector General Daniel R. Levinson of the U.S. Department of Health and Human Services.  “Beyond those significant settlements, though, my agency works to improve voluntary observance of federal laws through corporate integrity agreements addressing compliance weaknesses, and self-disclosures that encourage health care providers and other entities to voluntarily report suspected violations.”

Housing and Mortgage Fraud

The Department recovered more than $7 billion in housing and mortgage claims from January 2009 to the end of fiscal year 2016, including settlements and judgments totaling $1.6 billion this past fiscal year – the second highest annual recovery in the history of the federally insured mortgage program.  Notable this year were settlements with Wells Fargo for $1.2 billion and Freedom Mortgage Corp. for $113 million.

Wells Fargo and Freedom Mortgage both admitted that they had originated and endorsed residential mortgages as eligible for federal insurance by the Federal Housing Administration (FHA) that did not meet requirements intended to reduce the risk of default.  This put consumers at risk of losing their homes in foreclosure and increased the number of claims against the FHA when their loans went into default.  The banks also admitted failing to report such deficiencies to the authorities as required under the program, despite internal reports exposing high rates of underwriting deficiencies that would have put the agency on notice so it could prevent continued program violations and mounting losses.  By originating and endorsing ineligible loans for FHA insurance, the banks increased their mortgage profits at taxpayer expense while incurring little or no risk of their own.

As part of the Wells Fargo settlement, the bank’s vice president of Credit Risk – Quality Assurance, Kurt Lofrano, admitted that he annually certified Wells Fargo’s compliance with FHA’s Direct Endorsement Lender program and the bank’s continued qualification to remain in the program.

These recoveries are part of the broader enforcement efforts by President Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency task force in 2009, to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.  For more information about the task force, visit www.stopfraud.gov.

Other Fraud Recoveries

Although health care and mortgage fraud dominated fiscal year 2016 recoveries, the Department has aggressively pursued fraud wherever it is found in federal programs and contracts.  For example, the Department recovered $82.6 million in false claims from BP Exploration and Production Inc. (BP) arising from the April 2010 Deepwater Horizon/Macondo Well explosion and oil spill in the Gulf of Mexico.  The government, through the Department of the Interior, leases portions of the Outer Continental Shelf to companies like BP that operate exploratory oil wells.  In exchange for the lease, the operators pay royalties based on the volume of oil extracted from the wells.  Program regulations applicable to exploration of the Outer Continental Shelf require well operators to maintain a “safe drilling margin” and to report plans to drill further into an open hole if the margin falls below legal limits.  The government alleged that BP provided false reports about its “safe drilling margin” that concealed its improper drilling, which left the well in a fragile state and ultimately resulted in the blowout.  The government’s civil fraud claims were part of a $20 billion consent decree reached with the United States and five Gulf states that also included damages and penalties under state and federal environmental laws, mandatory restoration of the area, and other relief.

The government also continued to pursue a variety of procurement fraud matters.  For example, L-3 Communications EOTech Inc. and its parent company, L-3 Communications Corp., paid the United States $25.6 million for defective holographic weapon sites EOTech sold to the Department of Defense, Department of Homeland Security, and FBI.  The defendants, including EOTech’s president, admitted knowing the sights failed to perform as represented in cold temperatures and humid environments, but delayed disclosing the defects to federal authorities for years.  Besides compensating the government for critical funds lost through fraud, such settlements ensure that the vital terms of contracts supporting the nation’s defense and security agencies are enforced, and deter other contractors from acting fraudulently or recklessly to increase their profits in the future.

The Department had several settlements with for-profit schools that allegedly participated in illegal schemes to secure federal education funds.  For example, the second largest for-profit education company in the country, Education Management Corp., paid the United States $52.6 million to resolve allegations that it unlawfully recruited students, engaged in deceptive and misleading recruiting practices, and falsely certified compliance with Title IV of the Higher Education Act and parallel state laws that prohibited such conduct, as part of a $95.5 million global federal-state settlement.

The Department also recovered $50 million in customs fraud.  U.S. Customs and Border Protection collects duties on imports of foreign goods to protect U.S. manufacturers from unfair competition abroad by leveling the playing field for domestic products.  Importers who seek an unfair advantage by knowingly evading or reducing their obligation to pay these duties are subject to damages and penalties under the False Claims Act.  These recoveries both address lost duties and safeguard U.S. markets.

These suits and settlements illustrate the diversity of cases pursued by the Department and the Department’s quest to root out fraud and false claims against the government wherever it may be found.

Holding Individuals Accountable    

On Sept. 9, 2015, the Department issued a memorandum on individual accountability for corporate wrongdoing.  This memorandum reinforced the Department’s commitment to use the False Claims Act and other civil remedies to deter and redress fraud by individuals as well as corporations.

Cardiologist Dr. Asad Qamar and his practice, the Institute of Cardiovascular Excellence (ICE), paid $2 million this past fiscal year, and released claims to an additional $5.3 million in suspended Medicare funds, to settle allegations that he and his practice billed Medicare, Medicaid, and TRICARE for medically unnecessary procedures and paid kickbacks to patients by waiving Medicare copayments irrespective of financial hardship.  Medicare copayments provide beneficiaries with an incentive to be smart health care consumers and avoid unnecessary procedures.  The government alleged that by waiving the required copayments indiscriminately, Dr. Qamar and ICE induced patients to undergo unnecessary and invasive procedures.  This conduct made Dr. Qamar the highest paid Medicare cardiologist in the United States in 2012 and 2013.  Dr. Qamar also agreed to a three-year exclusion from participating in any federal health care program followed by a three-year integrity agreement with the Department of Health and Human Services Office of the Inspector General.

Additional examples of individuals held personally liable for alleged false claims include George Hepburn ($10.3 million), founder and president of Dynasplint Systems Inc.; Dr. Jonathan Oppenheimer ($9.35 million), former owner and chief executive officer of a Nashville drug testing laboratory; Gottfried and Mieke Kellermann ($8.5 million), founders of Pharmasan Labs Inc. and NeuroScience Inc.; Jacob (Jake) J. Kilgore ($4 million), former co-owner, vice president, and later president of Orbit Medical Inc.; Dr. David G. Bostwick ($3.75 million), founder and former owner and chief executive officer of Bostwick Laboratories Inc.; Mark T. Conklin ($1.75 million), former owner, operator, and sole shareholder of Recovery Home Care Inc. and Recovery Home Care Services Inc.; Dr. David Spellberg ($1.05 million) and Robert A. Scappa, D.O. ($250,000), urologists with 21st Century Oncology LLC; and Ralph J. Cox III ($1 million), former chief executive officer of Tuomey Healthcare System.

Recoveries in Whistleblower Suits

Of the $4.7 billion the government recovered in fiscal year 2016, $2.9 billion related to lawsuits filed under the qui tam provisions of the False Claims Act.  During the same period, the government paid out $519 million to the individuals who exposed fraud and false claims by filing a qui tam complaint.

The number of lawsuits filed under the qui tam provisions of the Act has grown significantly since 1986, with 702 qui tam suits filed this past year – an average of 13.5 new cases every week.  The growing number of qui tam lawsuits, particularly since 2009, has led to increased recoveries.  From January 2009 to the end of fiscal year 2016, the government recovered nearly $24 billion in settlements and judgments related to qui tam suits and paid more than $4 billion in whistleblower awards during the same period.

“The qui tam provisions provide a valuable incentive to industry insiders who are uniquely positioned to expose fraud and false claims to come forward despite the risk to their careers,” said Principal Deputy Assistant Attorney General Mizer.  “This takes courage, for which they are justly rewarded under the Act.”

In 1986, Senator Charles Grassley and Representative Howard Berman led the successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud.  In 2009, Senator Patrick J. Leahy, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and its whistleblower provisions.  And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers.

Mizer also expressed his deep appreciation for the many dedicated public servants who investigated and pursued these cases – the attorneys, investigators, auditors, and other agency personnel throughout the Department’s Civil Division and the U.S. Attorneys’ Offices, as well as the agency Offices of Inspector General, and the many federal and state agencies that contributed to the Department’s recoveries this past fiscal year.

“The Department’s lawyers and staff, together with our law enforcement partners in federal and state governments, work tirelessly and often overcome daunting challenges,” said Mizer. “Their efforts continue to pay for themselves many times over, providing substantial benefits to the taxpayers.”

The government’s claims in the matters described above are allegations only; except where indicated, there has been no determination of liability.

Attorney General Kamala D. Harris, 42 Other Attorneys General, Announce $19.5 Million Settlement with Pharmaceutical Company Bristol-Myers Squibb Over Unlawful Promotion of Abilify Drug

California Attorney General Kamala D. Harris recently announced that California, along with 42 other states and the District of Columbia, has reached a $19.5 million agreement with biopharmaceutical company Bristol-Myers Squibb over allegations that the company illegally marketed the popular atypical antipsychotic drug Abilify. Attorney General Harris secured $1.3 million of the overall settlement for California.

In 2009, California and other states launched a multistate consumer protection investigation of Otsuka America Pharmaceutical, Inc., which manufactures Abilify, and Bristol-Myers Squibb, which is largely responsible for promoting Abilify. The states’ investigation found that Bristol-Myers Squibb engaged in off-label marketing by illegally promoting Abilify for therapeutic uses for which it was not approved, such as certain pediatric uses and to treat dementia. In addition to incentivizing sales representatives to engage in off-label marketing, the investigation found that the company misled doctors and patients about the drug’s risks and side effects and misrepresented the findings of scientific studies concerning the drug in marketing messages.

“These companies endangered and compromised the health and well-being of millions of Americans in order to turn a profit,” said Attorney General Harris. “This settlement makes clear that pharmaceutical companies using deceptive and unlawful tactics to promote drugs will not be tolerated in the United States.”

Abilify is approved by the Food and Drug Administration to treat schizophrenia, bipolar disorder, major depressive disorder, and Tourette’s disorder. Abilify, known as a blockbuster drug because of its popularity, generated $5.5 billion in sales in 2014, with Bristol-Myers Squibb receiving approximately $2.02 billion of that amount.

The settlement places strict rules on how Bristol-Myers Squibb can promote and market Abilify going forward, including prohibiting the company from promoting the drug for off-label uses, compensating health care providers for promotional activities without disclosing their connection to the company, using medical grants to promote the drug, and making unsubstantiated safety or efficacy comparisons between Abilify and other products.

In addition, under the terms of the agreement, Bristol-Myers Squibb must provide only accurate and scientifically balanced information about Abilify, conspicuously disclose risks, and take clear steps to ensure it is not creating financial incentives for promotion, sales, and marketing that would violate the law.

Attorney General Kamala D. Harris has a longstanding record of prosecuting illegal and deceptive marketing and sales of prescription drugs.

In September 2016, Attorney General Kamala Harris and 35 other Attorneys General filed a lawsuit against Indivior, a British pharmaceutical company, and MonoSolRX, an Indiana pharmaceutical film technology company, for engaging in a “product-hopping” scheme to block competition to Suboxone, an opioid addiction treatment, ultimately generating almost one billion dollars in undeserved profits.

In May 2016, Attorney General Harris filed a lawsuit against Johnson & Johnson for false advertising and deceptive marketing of its surgical mesh products for women, alleging that the company neglected to inform both patients and doctors of possible severe complications and misrepresented the frequency and severity of risks.

Last year, Attorney General Harris along 48 other states and the District of Columbia reached a $71 million settlement with the pharmaceutical company Amgen Inc. to resolve allegations that Amgen unlawfully promoted biologic medications Aranesp and Enbrel. California received $4.6 million from the settlement. The consent judgment required Amgen to reform its marketing and promotional practices and refrain from making deceptive or misleading claims in promoting Enbrel or any drug in the same class as Aranesp.

South Miami Hospital Agrees to Pay the United States $12 Million to Settle False Claims Act Allegations

South Miami Hospital, a not-for-profit regional hospital located in South Miami, Florida has agreed to pay the United States approximately $12 million to settle allegations that it violated the False Claims Act by submitting false claims to federal healthcare programs for medically unnecessary electrophysiology studies and other procedures allegedly performed by John R. Dylewski, M.D., at South Miami Hospital.

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Shimon R. Richmond, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG), Miami Region, John F. Khin, Special Agent in Charge, Defense Criminal Investigative Service (DCIS), Southeast Field Office, and Scott Rezendes, Special Agent in Charge, Office of Personnel Management, Office of Inspector General (OPM-OIG), made the announcement.

“This settlement shows our continued resolve to pursue institutional providers who turn a blind eye to the systematic overutilization of medical procedures and inflated billing practices resulting in significantly increased costs to the federal government,” said Wifredo A. Ferrer, United States Attorney for the Southern District of Florida.

“This settlement highlights the commitment of the Defense Criminal Investigative Service (DCIS) and its law enforcement partners to protect the integrity of the Department of Defense (DoD) health care program known as TRICARE,” said DCIS Special Agent in Charge John F. Khin.  “DCIS aggressively investigates health care providers that defraud the DoD, to preserve American taxpayer dollars intended to care for our warfighters, their family members, and military retirees.”

“Performing medically unnecessary heart procedures is shocking to the conscience,” said Shimon R. Richmond, HHS-OIG Miami Special Agent in Charge. “Conducting cardiac catheterizations purely for profit, not patient care, seriously breaches the “do no harm” commitment physicians pledge. Together with our law enforcement partners, we will seek out, stop these practices and protect the Medicare patients who are victimized by physicians participating in these schemes.”

“It is absolutely unconscionable that anyone in the medical profession would place profit above a patient’s health and well-being,” said OPM-OIG Special Agent in Charge Rezendes.  “We remain firmly committed to ensuring that Federal employees, annuitants, and their families are protected and that such unscrupulous behavior is identified and stopped.”

The allegations arose from a lawsuit filed by two whistleblowers, James A. Burks, M.D., and James D. Davenport, M.D., under the qui tam provisions of the False Claims Act.  Relator Burks is a board-certified vascular surgeon and medical doctor who began his practice as a vascular surgeon at South Miami Hospital in 2003.  Relator Davenport is a board-certified cardiologist and medical doctor, who was an active member of various peer review committees at South Miami Hospital between 2010 and 2014.  Under the False Claims Act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.  Drs. Burks and Davenport will receive approximately $ 2,748,500 from the recovery announced today.

According to court documents, plaintiffs claimed to have personal knowledge of Dr. Dylewski and South Miami Hospital engaging in a number of unnecessary cardiac procedures, including echocardiograms, electrophysiology studies, head upright tilt tests, and other treatments of arrhythmia by ablation, cryoablation, or implantation of an electronic device, for the sole purpose of increasing the amount of physician and hospital reimbursements paid by Medicare and other federally-funded programs.

The settlement was the result of a coordinated effort by the United States Attorney’s Office for the Southern District of Florida, HHS-OIG, DCIS, and OPM-OIG.  The case was investigated and the settlement negotiated by Assistant U.S. Attorney John C. Spaccarotella.

The case is captioned United States of America ex. rel. James A. Burks, M.D. and James D. Davenport, M.D. v. John R. Dylewski, M.D., et al., Case No. 14-CV-22079 (S.D. Fla.).  The claims settled by the lawsuit are allegations only, and there has been no determination of liability.

United States Settles False Claims Act Allegations Against Orthopedic Surgery Practice For $4,488,000

On Wednesday, United States Attorney A. Lee Bentley, III announced that Southeast Orthopedic Specialists (SOS), a Jacksonville, Florida-based orthopedic medical group, has agreed to pay the government $4.488 million to resolve allegations that it violated the False Claims Act.

The United States contends that it has certain civil claims against SOS arising from SOS billing federal healthcare programs for services that were not medically necessary and reasonable. Specifically, the United States contends that SOS sought reimbursement for millions of dollars of healthcare claims that were questionable. The United States alleges that these questionable bills include:

1.  SOS certified that it met certain standards related to the “meaningful use” of electronic health records when the practice had, in fact, not met those standards;

2. SOS knowingly billed for certain claims as “incident to” physician supervision when no physician was present or there was no verification of any physician being present;

3.  SOS knowingly billed for certain claims using Modifier 25 signifying that a separate evaluation and management service was performed even when there was no such separate service;

4.  SOS knowingly billed for certain claims using Modifier 59 signifying that two procedures, rather than one, were billable even when these procedures should have more appropriately been billed as one such procedure;

5.  SOS knowingly scheduled patients’ follow-up operative visits from 12 weeks following surgery to 14 weeks in an effort to bill for a separate visit outside the normal Medicare 90 days Diagnosis-Related Group charge;

6.  SOS knowingly used and billed for ultrasound-guided injections routinely even in the absence of medical necessity; and

7.  SOS knowingly billed for certain physical therapy claims using Modifier KX so as to exceed the Medicare cap on physical therapy, despite the absence of medical necessity.

“The United States Attorney’s Office is committed to taking the steps necessary to protect Medicare and other federal health care programs from fraud,” said U.S. Attorney Bentley. “When health care practitioners submit fraudulent claims for reimbursement, we will hold them accountable.”

“The Department of Health and Human Services, Office of Inspector General will relentlessly seek out those who defraud the Medicare program,” said Special Agent in Charge Shimon Richmond.  “Obtaining tax dollars which Medicare providers are not entitled to impacts our entire healthcare system and the OIG will hold health care providers accountable who misrepresent services to boost profits.”

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $31.6 billion through False Claims Act cases, with more than $19.2 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was investigated by the U.S. Department of Health and Human Services. It was prosecuted by Assistant United States Attorney Jason Mehta.

The 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.

SEC Issues $20 Million Whistleblower Award

Yesterday, the Securities and Exchange Commission announced an award of more than $20 million to a whistleblower who promptly came forward with valuable information that enabled the SEC to move quickly and initiate an enforcement action against wrongdoers before they could squander the money.

The $20 million award is the third-highest since the SEC’s whistleblower program issued its first award in 2012.  The program has now awarded more than $130 million to whistleblowers who voluntarily provided the SEC with unique and useful information that led to a successful enforcement action.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

“This whistleblower alerted us with a valuable tip that led to a near total recovery of investor funds.  Sizeable awards like this one should encourage whistleblowers everywhere that there are real financial incentives to promptly reporting potential securities law violations to the SEC,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.

Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.  All payments are made out of an investor protection fund established by Congress that is financed through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.

Aerospace Parts Manufacturer Pays $2.7 Million to Settle Lawsuit Alleging it Failed to Perform Required Inspections on Parts

Air Industries Corporation (AIC), a Garden Grove-based aerospace parts company, has paid the United States $2.7 million to resolve allegations that it falsely certified it had performed required inspections on aerospace parts used in military aircraft, spacecraft and missiles used by the Department of Defense.

AIC, which manufactures and distributes bolts, screws and aerospace fasteners, paid the money on September 7, and United States District Judge James V. Selna dismissed the case on September 22. The matter was announced after Judge Selna this week unsealed the lawsuit that led to the settlement.

The government alleged that, between June 2010 and September 2013, AIC falsely certified it had performed certain non-destructive testing on aerospace parts, including magnetic particle inspections and liquid penetrant inspections. The parts manufactured by AIC were sold to major aerospace contractors, who used the parts in the manufacture of aircraft and other equipment sold to the United States.

“Every company that does business with the United States has a duty and responsibility to honor it contracts, especially in ensuring equipment produced is safe and suitable for use,” said United States Attorney Eileen M. Decker. “The Department of Justice is committed to protecting investments made by taxpayers in contracts with private entities, especially when it comes to the purchase of equipment used in our national defense.”

Chris Hendrickson Special Agent in Charge of the Defense Criminal Investigative Service (DCIS), Western Field Office, said, “This settlement is representative of quality, uncompromising work by DCIS and the U.S. Attorney’s Office to ensure the integrity of the Department of Defense procurement process by penalizing government vendors who choose profit over quality and, in some circumstances, safety. DCIS and our partners will steadfastly pursue anyone who attempts to perpetuate schemes to defraud the Department of Defense and comprise our nation’s security.”

The settlement resolves allegations initially made in a “whistleblower” lawsuit filed in late 2012 by an employee of AIC. The lawsuit was filed under the qui tam 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. The employee who filed the qui tam action will receive $621,000 of the recovered funds.

The claims resolved by the settlement are allegations and AIC did not admit liability. The whistleblower is still pursuing several employment-based claims against AIC.

The government’s investigation was conducted by the U.S. Department of Defense, Office of the Inspector General and the U.S. Attorney’s Office.

Reno Geothermal Power Plant Operator Enters Into $5.5 Million Settlement With DOJ Over Grant Fraud Allegations

Several Reno companies that operate geothermal power plants in Nevada, California, Hawaii and elsewhere, have agreed to pay the United States $5.5 million to resolve civil fraud allegations that they unlawfully applied for and received millions in federal clean energy grants, announced U.S. Attorney Daniel G. Bogden for the District of Nevada.

Ormat Technologies, Inc., Ormat Nevada, Inc., Puna Geothermal Venture II, L.P., ORNI 18, LLC, and Puna Geothermal Venture, G.P. (hereinafter referred to as Ormat), and the United States entered into the agreement to avoid the delay and uncertainty and expense of protracted litigation.  The agreement states that it is neither an admission of liability by the defendants nor a concession by the United States that its claims are not well founded.

“The False Claims Act is an effective civil tool to ferret out fraud in federal taxpayer-funded programs,” said U.S. Attorney Bogden.  “The settlement monies announced today will be deposited into a federal fund used to help crime victims and for a variety of other law enforcement purposes.”

The settlement agreement, effective this week, arises out of a civil lawsuit filed on Feb. 4, 2013 by Tina Calilung and Jamie Kell against Ormat alleging that they violated the civil False Claims Act by submitting false applications for federal clean energy grants to which they were not entitled. The defendant companies are based in Reno, Nev. Calilung and Kell are former employees of Ormat Technologies.

The lawsuit alleged that the federal government had claims against the defendant arising from the submission of applications for and receipt of grants under the American Recovery and Reinvestment Tax Act of 2009, related to the 8MW Puna Geothermal Power Plant and Puna KS-14 Well, both on the island of Hawaii, and the North Brawley Geothermal Power Plant in Imperial County, Calif.

Since January 2009 and through the end of federal fiscal year 2015, the Justice Department has recovered a total of more than $26.4 billion from cases involving fraud and false claims against the government. The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans’ benefits, federally insured loans and mortgages, highway funds, research grants, agricultural supports, school lunches, and disaster assistance.  In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government.

Most false claims actions are filed under the Act’s whistleblower, or qui tam, provisions that allow individuals to file lawsuits alleging false claims on behalf of the government.  If the government prevails in the action, the whistleblower, also known as the relator, receives up to 30 percent of the recovery.  Whistleblowers filed 638 qui tam suits in fiscal year 2015 and the department recovered $2.8 billion in these and earlier filed suits this past year.  Whistleblower awards during the same period totaled $597 million.  https://www.justice.gov/opa/pr/justice-department-recovers-over-35-billion-false-claims-act-cases-fiscal-year-2015.

Assistant United States Attorney Roger Wenthe handled the case on behalf of the U.S. Attorney’s Office for the District of Nevada.

Omnicare to Pay Over $28 Million to Settle Kickback Allegations

The nation’s largest nursing home pharmacy, Omnicare Inc., has agreed to pay $28.125 million to resolve allegations that it solicited and received kickbacks from pharmaceutical manufacturer Abbott Laboratories in exchange for promoting the prescription drug, Depakote, for nursing home patients.  CVS Health Corporation, which is headquartered in Rhode Island, acquired Ohio-based Omnicare in 2015, approximately six years after Omnicare ended the conduct that gave rise to the settlement.

“Every day, elderly nursing home residents suffering from dementia rely on the independent judgment of our nation’s healthcare professionals for their personal care and their medical treatment,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Department of Justice’s Civil Division.  “Kickbacks to entities making drug recommendations compromise their independence and undermine their role in protecting nursing home residents from the use of unnecessary drugs.”

Nursing homes rely on consultant pharmacists, such as those employed by Omnicare, to review their residents’ medical charts at least monthly and make recommendations to their physicians about what drugs should be prescribed for those residents.  The settlement announced today resolves allegations that Omnicare solicited and received kickbacks from Abbott in exchange for recommending that physicians prescribe Depakote, an anti-epileptic drug manufactured by Abbott, to elderly nursing home residents.

According to the government’s complaint, Omnicare disguised the kickbacks it received from Abbott in a variety of ways.  Abbott allegedly made payments to Omnicare described as “grants” and “educational funding,” even though their true purpose was to induce Omnicare to recommend Depakote.  For example, Omnicare allegedly solicited substantial contributions from Abbott and other pharmaceutical manufacturers to its “Re*View” program.  Although Omnicare claimed that Re*View was a “health management” and “educational” program, the complaint alleges that it was simply a means by which Omnicare solicited kickbacks from pharmaceutical manufacturers in exchange for increasing the utilization of their drugs on elderly nursing home residents.  In internal documents, Omnicare allegedly referred to Re*View as its “one extra script per patient” program.  The complaint also alleges that Omnicare entered into agreements with Abbott by which Omnicare was entitled to increasing levels of rebates from Abbott based on the number of nursing home residents serviced and the amount of Depakote prescribed per resident.  Finally, the complaint alleges that Abbott funded Omnicare management meetings on Amelia Island, Florida, offered tickets to sporting events to Omnicare management and made other payments to local Omnicare pharmacies.

In May 2012, the United States, numerous states and Abbott entered into a $1.5 billion global civil and criminal resolution that, among other things, resolved Abbott’s liability under the False Claims Act for alleged kickbacks to nursing home pharmacies, including Omnicare and PharMerica Corp.  In October 2015, PharMerica agreed to pay $9.25 million to the United States and numerous states to resolve civil liability under the False Claims Act for the alleged kickbacks from Abbott.  The settlement announced today resolves Omnicare’s role in that alleged kickback scheme.

“This settlement ensures that some of the most vulnerable amongst us, those suffering from dementia, are provided with the level of care they deserve,” said U.S. Attorney John P. Fishwick Jr. for the Western District of Virginia.  “Families and loved ones who make the difficult decision to place those they care about into a nursing home must do so with the confidence that medical decisions are being made with the interests of the patient in mind, not big drug companies.”

Approximately $20.3 million of the settlement will go to the United States, while $7.8 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.

“It is disturbing that any health care corporation would pay kickbacks that corrupt the professional medical decision making process in order to pad their profits,” said Special Agent in Charge Nicholas DiGiulio of the Department of Health and Human Services Office of Inspector General (HHS OIG).  “These practices are unacceptable and will not be tolerated.”

The settlement with Omnicare announced today, together with the prior settlements with Abbott and PharMerica, resolves allegations in two lawsuits filed in federal court in the Western District of Virginia by Richard Spetter and Meredith McCoyd, former Abbott employees.  The lawsuits were 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 part in this case in May 2014.  The United States filed a complaint-in-intervention against Omnicare in December 2014.  As part of today’s resolution, McCoyd will receive $3 million from the federal share of the settlement amount.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $31.6 billion through False Claims Act cases, with more than $19.2 billion of that amount recovered in cases involving fraud against federal health care programs.”

This matter was jointly handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Virginia, HHS-OIG, the Office of the Attorney General for the Commonwealth of Virginia and the National Association of Medicaid Fraud Control Units.

The cases are captioned United States ex rel. Spetter v. Abbott Labs., et al., Case No. 10-cv-00006 (W.D. Va.) and United States ex rel. McCoyd v. Abbott Labs., et al., Case No. 07-cv-00081 (W.D. Va.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

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