The $1+ Billion Settlements For Corporate Misconduct Possible in 2015


Last post, we took a look at more than $40 billion in settlements between the government and corporations in 2014. After a year of record settlements including the largest civil settlement reached between the U.S. Government and a single entity, a decrease in the overall amount of fines should be expected. Nevertheless, it looks like there will still be multiple settlements over the next year reaching more than $1 billion.  Banks dominate the list once again as additional players will be resolving investigations into mortgage fraud and market manipulation that have been common in the financial industry over the past few years.

Here are the settlements we are currently watching for in 2015:

1. Royal Bank of Scotland – FHFA Mortgage Securities
RBS has yet to resolve the private label securities lawsuit filed by the Federal Housing Finance Agency in 2011 related to mortgage securities it sold to Fannie Mae and Freddie Mac. It is one of only two unresolved FHFA lawsuits and The Times reported that RBS may have to pay at least $7.7 billion to resolve the matter. The bank has already set aside $2.9 billion towards a settlement.

2. Standard & Poor’s – Mortgage Ratings
The subsidiary of McGraw Hill Financial faces a $5 billion lawsuit from the Department of Justice and a California lawsuit seeking $4 billion for its inflation of mortgage bond ratings. In July, the Wall Street Journal reported that S&P was open to paying more than $1 billion to resolve the charges brought by the Federal Government.  S&P may also make the news for a smaller settlement of more than $60 million to resolve an investigation into its practices governing grading of commercial real estate bonds in 2011 by the Securities & Exchange Commission, New York and Massachusetts.

3. Morgan Stanley – Mortgage Securities
Bloomberg has reported that Morgan Stanley could resolve a DOJ investigation into its mortgage-backed bond practices in the first few months of 2015.  Documents suggest that Morgan Stanley encouraged subprime lender New Century Financial to make risky loans from 2004 until 2007.  The potential settlement amount for the investigation into its due diligence practices and disclosures to purchasers has not been disclosed, but the number could be significant since New Century made more than $50 billion in mortgage loans in 2006 and was the second largest subprime mortgage lender behind Countrywide.

4. Commerzbank – Anti-Money Laundering and Sanctions
The Financial Times reported that Germany’s second largest bank could pay more than $1 billion to resolve an investigation of the Department of Justice, the New York State Department of Financial Services (NY DFS) and the Manhattan District Attorney’s office into anti-money laundering and sanctions violations. A settlement of $650 million was expected last year but delayed as authorities began investigating the bank’s role in the Olympus accounting scandal.

5. Deutsche Bank – Interest Rate Benchmark Manipulation
Deutsche Bank is under investigation by the U.S. and U.K.  for Libor manipulation between 2005 and 2011.  Settlement talks between the authorities and the European bank are still at an early stage but both UBS and Rabobank paid more than $1 billion to authorities globally to resolve similar allegations.

6. Barclays – FOREX
Barclays could be headed for a fine around $1 billion for FOREX manipulation because of its role in the same misconduct causing six banks to pay $4.4 billion to three regulators in November. Barclays reportedly pulled out of the global settlement with the Commodity Futures Trading Commission and the UK Financial Conduct Authority at the last minute because the NY DFS, where it is also under investigation, would not agree to a resolution. Citigroup and JPMorgan both paid more than $1 billion to resolve regulators’ investigations while receiving a 30% discount with the FCA for the early settlement.

7. General Motors – Ignition Switch Recall
GM discovered ignition switch problems with its vehicles more than ten years prior to its recall announcement in 2014.  It is expected to face a fine from the U.S. Government similar to the one paid by Toyota Motors.  Toyota paid $1.2 billion in March 2014 to resolve the investigation into its misleading disclosures over vehicle problems with unintended acceleration.  Arizona has already sued GM for $3 billion related to its delayed automotive recall of ignition switches. GM also faces a lawsuit from car owners seeking $10 billion for the lost value of their vehicles.

8. Wal-Mart – FCPA
Wal-Mart’s multi-year investigation into bribery allegations in Mexico and elsewhere will be moving from the investigation phase into settlement negotiations at some point over the next few years. 2015 is probably too early to expect a settlement but with spending on the internal investigation starting to slow it could be a hot topic at the end of 2015 and throughout 2016. Some have speculated that the potential resolution will require more than $1 billion, making it the largest FCPA fine ever.  Wal-Mart has already spent approximately $500 million to investigate the bribery charges.

Electronic Health Records: A Prognosis for Missteps and Potential Fraud

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The Wall Street Journal recently reported that the Department of Veterans Affairs is in discussions with Apple to provide portable electronic health records (“EHRs”) to military veterans. The plan reportedly calls for Apple to develop specialized software tools that would allow veterans and their families to access their EHRs through Apple’s Health Records EHR data viewer. The proposed plan is intended to simplify and streamline health data access for patients visiting VA healthcare sites.

It’s Time for HHS to Set an Example


“Setting an example is not the main means of influencing another, it is the only means.”

Albert Einstein

Holding individuals criminally responsible for their actions or the actions of their corporations in defrauding our government health plans has been more difficult than one would imagine. There was once a time where he who stole from the King could suffer consequences as grave as death. However, it seems as though these days the majority of corporations simply account for civil penalties as a cost of doing business.One man would like that to change.

As written by Julian Pecquet, “The top Republican on the Senate Finance Committee wants the federal government to explain why the conviction rate for Medicare fraud is largely flat despite the millions recently spent to beef it up.” The Democratic Congress appropriated $198 million in discretionary funds for Medicare fraud prevention last year on top of an $11 million increase in mandatory spending. However, the number of criminal convictions fell slightly that year (from 588 to 583), prompting Sen. Charles Grassley (R-Iowa) to demand some answers in a letter he sent to the heads of the Health and Human Services and Justice departments.In his letter, Sen. Grassley states, “The decline in criminal cases filed, the stagnant number of criminal defendants, and the low level of actual convictions raise serious questions about how Department of Justice and Health and Human Services are allocating resources to combat criminal health care fraud.”

I await the response of government officials.Unless a firm example is established, corporations will continue to defraud the healthcare system as a cost of doing business.

Record Stark Law Settlement Under False Claims Act

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Two hospital systems have recently settled allegations by whistleblowers under the False Claims Act that they improperly rewarded physician referrals under the Stark Law, with one believed to be the largest settlement of its kind. Broward Health will pay $69.5 million in a settlement announced last week and Adventist Health will pay $118.7 million in an unrelated case with multiple whistleblowers.

The Stark Law prevents hospitals from paying doctors for referrals of Medicare patients. By restricting the financial incentives for treatment of patients insured by government health care programs, the law helps fight unnecessary overbilling.

There have been a number of large settlements in the past year of similar cases involving its corollary, the Anti-Kickback Statute (“AKS”). The AKS applies more broadly, as it covers the payment of referrals to individuals other than doctors. A few of these cases have contained allegations of both kickbacks to physicians and others, implicating both laws.

There is also an ongoing case against Tuomey Healthcare System involving the Stark Law which received a verdict against the hospital of $237 million. Over the summer, Tuomey lost their appeal to the Fourth Circuit. A news article at the time indicated that the hospital was considering its legal options and involved in settlement discussions with the U.S. Government.

Broward Health was accused of paying cardiologists more than $1 million using medical director jobs which were largely a sham designed to boost their compensation

The allegations against Adventist weren’t immediately clear from the press release. Lat year, Adventist indicated it self-reported violations of the Stark Law to the Department of Justice.

Both the Stark Law and the AKS place certain permitted conduct within a safe harbor or exclusion to only target the types of conduct that Congress and regulators have found objectionable. If the conduct violates one or both laws, they also implicate the False Claims Act, which will reward whistleblowers with 15 to 30 percent of the recovery for reporting information to the U.S. Government.

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A New Flavor: Ambulance Fraud


There is fraud at all stages of the health care delivery process, and as a settlement in a district court case in the Eastern District of New York emphasizes, even ambulance companies are trying to get a bigger piece of that Federal pie, courtesy of you the taxpayer.

The case is:

United States ex rel. Kaplan v. Metropolitan Ambulance & First-Aid Corp. et al., Civil Action No. 00-3010 (E.D.N.Y.).

According to allegations in a qui tam suit by the former CFO of one of the companies, Metropolitan Ambulance & First Aid Corp. (now known as SEZ Metro Corp.), Metro North Ambulance Corp. (now known as SEZ North Corp.) and Big Apple Ambulance Service Inc. (formerly known as United Ambulance), and the president of the companies, Steve Zakheim, used falsified records to appeal a Medicare refund demand. The situation is a bit convoluted, but what the companies were doing essentially consisted of the old health-care fraud standby: taking patients on unnecessary and expensive ambulance trips, and billing Medicare for the services. The government determined that these trips were in fact unnecessary and demanded a refund of the tens of millions of (tax payer) dollars that had been paid out. As is customary, an extensive appeals process was available.

However, Zakheim and his ambulance armada apparently didn’t have the required proof to back-up their case on appeal, so they allegedly doubled their fun/fraud by submitting hundreds of forged letters verifying that the ambulance trips were medically necessary! The ROI was not so good here: Zakheim and the companies must pay $2.5 million in settlement money, not to mention the millions of dollars to be refunded. Vigilant whistleblower Larry Kaplan will pocket $618,450.

One has to ask: was it really worth it to engage in the fraud in the first place? This is yet another case in which the business logic behind some of the decisions seems to have been seriously lacking. The next time you see an ambulance speeding along (possibly with a bunch of cash flying out the windows) keep in mind that it might be following the  road to fraud!

This article is brought to you by the QTT, the epicenter for whistleblowers and people interested in the False Claims Act, Qui Tam Provisions, and Medicare and Medicaid fraud. To discuss a potential case, please call Eric Young at 1 (800) 590-4116.

How Common is Accounting Fraud?

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Accounting irregularities have come up a fair amount recently, from the increase in SEC investigations in this area announced at the beginning of the year to the SEC fine against CSC for $190 million in June. With a wave of new stories hitting the media, it doesn’t seem like this area of securities law is going to slow down anytime soon. Here are the latest areas related to accounting fraud to be getting coverage:


At the end of June, Harry Markopolos, the whistleblower that famously attempted to notify the U.S. Government of the Bernie Madoff ponzi scheme, warned the SEC about accounting and investment reporting issues with the MBTA pension fund. After a six month investigation, Markopolos told the SEC and other agencies that the pension fund may be overstating its books by as much as $470 million out of the $1.6 billion pension.

Among the issues noted in their study of publicly released information by the pension fund:

  • They discovered statistically improbably events, such as a return on investment two years in a row of 17.7 percent.
  • They used a different accounting approach three years in a row to calculate asset valuation.

The Massachusetts Bay Transportation Authority operates the leading share of the bus, subway, commuter rail and ferry system in greater Boston. The pension plan is funded partly by taxpayers and covers the workers and retired employees of the transit system.

Interestingly, Markopolos did not submit the tip to the SEC whistleblower program for a reward.


A former SEC attorney is attempting to crowdsource an investigation into CalPERS. The California Public Employees’ Retirement System is America’s largest public pension plan with over $300 billion in assets.

Earlier this year, CalPERS told its Investment Committee that it couldn’t track how much money it was spending on private equity firms. Given that the SEC has been investigating advisers and the private equity industry for problems with their fee disclosures and hidden fees, we wouldn’t be surprised if a whistleblower emerges with information about how investment banks or private equity firms were fleecing public pension funds and is able to capture a reward in the future.


This Japanese corporation known in America for its personal computers is expected to have to restate profits lower by more than $1 billion due to accounting irregularities. The amount is nearly double the earlier estimates as it has discovered overstated profits in its computer and semiconductor business in addition to the earlier reported problems related to its contract with Tokyo Electric Power for smart grid technology. The company has yet to file its latest annual report due to the need for the accounting restatement.

Will accounting fraud be the next big area for the government to pursue once it wraps up the smaller mortgage fraud cases?  We’ll just have to wait to find out.

If you have evidence of accounting fraud at a publicly traded company, contact one of our SEC whistleblower attorneys to discuss reporting it to the U.S. Government. An attorney can be reached by our contact form or calling 1-800-590-4116.

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Health Care Whistleblowers Account for 65% of False Claims Act Lawsuits

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Whistleblowers provide most of the leads to the Justice Department concerning health care fraud every year. In FY 2014, 93 percent of the cases opened by the Civil Division were started by a qui tam complaint, according to the prepared remarks of Principal Deputy Assistant Attorney General Benjamin C. Mizer at the Pharmaceutical Compliance Congress and Best Practices Forum on October 22, 2015.

Sobering News of Fraud in the Addiction Treatment Industry

Sobering News of Fraud in the Addiction Treatment Industry

The opioid epidemic has exacted an immeasurable cost on our country in both human and financial costs. It has also given rise to a new type of health care scam in America – addiction treatment fraud. Unscrupulous operators of drug treatment centers and sober homes are preying on people in desperate need of drug treatment services while also defrauding American taxpayers out of tens of millions of dollars annually.

Crankin’up the HEAT


HEAT is the rather odd acronym for the Health Care Fraud Prevention and Enforcement Action Team. It is the brainchild of Attorney General Holder and Health and Human Services Secretary Sebelius, and despite the great stretches of the imagination it takes to make it work as an acronym (HCFPEAT doesn’t exactly roll off the tongue), it seems to be taking a bite out of health care fraud.

HEAT is a coordinated effort between DOJ and HHS, and it has a Medicare Fraud Strike Force that has been going around various cities busting health care fraud perps. It’s operating in various locations, including South Florida, but no, you are not likely to see Attorney General Holder wearing a Miami Vice suit and driving a go-fast boat into a medical center.

In recent testimony given before the House Ways and Means Subcommittee on Health and Oversight, Edward Siskel, the Associate Deputy Attorney General, stated that since May 2009, the Strike Force has been putting fear in the hearts of health care fraudsters. Strike Force prosecutors have filed over 120 cases charging more than 290 defendants and have obtained 16 convictions. The Strike Force also appears to have had a deterrent effect. In the twelve months since the Strike Force was announced, the Miami area has seen an almost $2 billion reduction in durable medical equipment submissions compared to the preceding 12 month period.

Deputy AG Siskel also notes in his testimony statistics all too familiar to qui tamers: the bulk of the DOJ’s civil case load comprises suits against drug and medical device makers. Qui tam suits have proved to be an important weapon in the DOJ’s fraud-fighting arsenal, and have helped the government to recover $24 billion since 1986. This goes to show that the civil justice system is just as important as the swaggering Task Force in the fight against health care fraud.

This article is brought to you by the QTT, the epicenter for whistleblowers and people interested in the False Claims Act, Qui Tam Provisions, and Medicare and Medicaid fraud. To discuss a potential case, please call Eric Young at 1 (800) 590-4116.

VMware settles Best Price Whistleblower Suit for $75.5 Million

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The Department of Justice has settled a False Claims Act case against VMware for $75.5 million. The lawsuit, initiated by a whistleblower, contained allegations that the company concealed its commercial pricing practices and overcharged the U.S. Government on products and services sold pursuant to the GSA Multiple Award Schedule contract entered into by VMWare and Carahsoft Technology Corporation.

The U.S. Government requires contractors to disclose the prices and discounts offered to commercial customers in order to ensure that government agencies are getting the supplier’s best price. The GSA regulations specify that prospective vendors applying for a MAS contract make After negotiation of the price(s) and establishment of the government contract, contractors must subsequently inform the government of changes to their pricing practices or discounts for commercial customers.

If they do not make accurate disclosures, the submission of claims for payment under the contracts can overcharge the federal government and violate the False Claims Act. In this case, the settlement resolved the allegations without a determination of liability.

The U.S. Government spends more than $80 billion a year on information technology currently. It is divided between civilian and defense spending, with civilian agency spending accounting for approximately $48 billion a year. With growing spending in this area, it seems like there is more False Claims Act litigation as well. Last summer, the Government intervened in another best price case brought by a whistleblower against CA Technologies.

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