DOJ Aggressively Pursues Health Care Fraud in 2019

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In the first half of 2019, the United States Department of Justice (“DOJ”) has shown that it intends to aggressively pursue health care providers who engage in fraudulent schemes to enrich themselves at the expense of their patients and American taxpayers. The DOJ has been especially diligent in its investigation and prosecution of health care providers who receive kickbacks and other improper incentives, as well as those on the other side of the transaction who make the illegal payments.

Recent DOJ Settlements Involving Health Care Providers

A review of the 2019 DOJ press release headlines offers insight into the scope and pervasiveness of illegal practices that some health care providers allegedly engage in:

  • Avanti Hospitals LLC, and Its Owners Agree to Pay $8.1 Million to Settle Allegations of Making Illegal Payments in Exchange for Referrals – January 28, 2019
  • Pathology Laboratory Agrees to Pay $63.5 Million for Providing Illegal Inducements to Referring Physicians – January 30, 2019
  • Covidien to Pay Over $17 Million to The United States for Allegedly Providing Illegal Remuneration in the Form of Practice and Market Development Support to Physicians – March 11, 2019
  • MedStar Health to Pay U.S. $35 Million to Resolve Allegations that it Paid Kickbacks to a Cardiology Group in Exchange for Referrals – March 21, 2019
  • United States Files Lawsuit Against West Virginia Hospital, Its Management Company, and Its CEO Based on Kickbacks and Other Improper Payments to Physicians – March 25, 2019
  • Former CEO of Hospital Chain to Pay $3.46 Million to Resolve False Billing and Kickback Allegations – April 30, 2019
  • Pharmaceutical Company Agrees to Pay $17.5 Million to Resolve Allegations of Kickbacks to Medicare Patients and Physicians – April 30, 2019
  • Rialto Capital Management and Current Owner of Indiana Hospital to Pay $3.6 Million to Resolve False Claims Act Allegations Arising from Kickbacks to Referring Physicians – June 3, 2019

The DOJ’s Arsenal in the Fight Against Health Care Fraud

Three statutes are most often implicated in fraud and abuses cases involving health care providers are the False Claims Act, 31 U.S.C. §§ 3729-3733 (“FCA”); the Anti-Kickback Statute 42 U.S.C. § 1320a-7b(b) (“AKS”); and the Physician Self-Referral Law, 42 U.S.C. § 1395nn (commonly known as the “Stark Law”).

The False Claims Act

The federal False Claims Act, 31 U.S.C. §§ 3729-3733, authorizes a private individual, known as a “relator,” to bring a cause of action on behalf of the federal government to recover funds lost because of fraud or other misconduct. A lawsuit filed under the False Claims Act is known as a qui tam action, and it allows a relator to sue on behalf of the government and, if successful, receive a percentage of the recovery.

The FCA was signed into law by President Lincoln during the Civil War. It was originally intended as means to legally pursue unscrupulous contractors who defrauded the Union Army by selling inferior goods, such as sawdust mixed with gunpowder, crippled horses, and boots made of cardboard. Even today, the FCA remains one of the most effective and important tools to prevent the government from purchasing overpriced, inferior, or nonexistent goods or services.

Most FCA violations in the health care industry arise from the submission of false or fraudulent claims for payment to government-funded health care programs, such as Medicare, Medicaid, CHAMPVA, and TRICARE. The civil penalties for violations of the FCA can be substantial. The filing of false claims can result in fines of up to three times the amount of the government’s losses, plus a penalty ranging from $11,463 to $22,927 for each false claim submitted. If a health care provider submits a claim to the government that resulted from a kickback or Stark law violation, it can also render the claim false or fraudulent.  This, in turn, creates liability under the FCA, in addition to liability under the AKS or Stark law. Some examples of FCA violations involving health care providers can be found here.

The FCA’s whistleblower provision allows a relator to file a lawsuit on behalf of the United States. If the government makes a successful recovery based on original information provided by a whistleblower, the whistleblower may be entitled to a reward of 15 to 30% of the government’s recovery.

The Anti-Kickback Statute

The Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b), prohibits offering, paying, soliciting, or receiving “remuneration” to induce referrals of items or services covered by Medicare, Medicaid, and other federally-funded health care programs. The AKS is a criminal law that involves any item or service payable by a federal health care program (e.g., drugs, supplies, or health care services for Medicare or Medicaid patients). “Remuneration” includes anything of value and can include items other than cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consulting services.

In certain sectors of the economy, a reward given to someone for a business referral is a commonly accepted and legal practice. However, compensation paid to someone for a referral involving a federal health care program is a crime. The AKS applies to both those who offer or pay remuneration as well as those who solicit or receive remuneration. Since an AKS violation can result in criminal liability, the intent of each party to the transaction is a critical element to determining culpability.

United States v. Greber, 760 F.2d 68 (3rd Cir. 1985) is a landmark case which held that paying a referring physician to use a laboratory’s services, even if the remuneration was compensation for professional services, was a violation of the AKS. Greber was a physician who was board certified in cardiology. Greber’s company, Cardio-Med, Inc., provided diagnostic services, some of which were billed to Medicare. The government eventually charged Greber with, inter alia, Medicare fraud in violation of 42 U.S.C. § 1395nn(b)(2)(B). The charges were based on Cardio-Med’s practice of paying kickbacks from Medicare funds to referring physicians in order to obtain future referrals. Greber claimed that the payments were for work performed by physicians, and future referrals were only one purpose of the payments. Greber was convicted, and he appealed. The Third Circuit affirmed the conviction, holding that a payment to a referring physician is illegal if it is done to encourage future referrals, even if the payment is compensatory. 760 F.2d at 72.

The policy reasons underlying the AKS are based on the premise that kickbacks exploit the health care system, drive up costs for medical services, and impede fair competition in the industry. Kickbacks can also result in patient steering, which can compromise the decision-making process of health care providers and institutions. Hospitals that participate in the Medicare program, or other federally-sponsored health care programs, are required to enter into contracts in which they agree to comply with federal laws and regulations, including the AKS.

Although the AKS is a criminal statute, it provides both criminal and civil penalties for violations. The criminal penalties can include fines of up to $25,000 and five years’ imprisonment for each violation. The Office of the Inspector General for the Department of Health and Human Services can pursue civil penalties of up to $50,000 per violation plus three times the amount of sustained by the government.

The Physician Self-Referral Law

The Physician Self-Referral Law or Stark Law, 42 U.S.C. § 1395nn, prohibits a physician from referring patients for certain “designated health services” payable by Medicare to an entity with which the physician, or his or her immediate family member, has a financial relationship, unless one of a number of specific exceptions applies. A financial relationship can include ownership or investment interests, or compensation arrangements between a physician, or immediate family, and an entity that furnishes designated health services.

Designated health services include:

  • Clinical laboratory services;
  • Physical therapy, occupational therapy, and outpatient speech-language pathology services;
  • Radiology and certain other imaging services;
  • Radiation therapy services and supplies;
  • DME and supplies;
  • Parenteral and enteral nutrients, equipment, and supplies;
  • Prosthetics, orthotics, and prosthetic devices and supplies;
  • Home health services;
  • Outpatient prescription drugs; and
  • Inpatient and outpatient hospital services.

The Stark law is a strict liability statute, which means that a physician does not have to possess the specific intent to violate the law. Much like the AKS, the Stark Law is intended to ensure that a physician’s medical judgment is based only on the best interests of the patient and is not swayed by improper financial incentives.

Penalties for Stark law violations can include:

  • Denial of payment – Medicare will not pay for designated health services that were provided pursuant to a prohibited referral.
  • Refund of payment – Any entity that collects payment for designated health services that were provided pursuant to a prohibited referral must refund all such payments.
  • Imposition of civil monetary penalties – a civil monetary penalty of up to $15,000 can be imposed for each prohibited service, as well as additional civil assessments and potential liability under the False Claims Act.
  • Exclusion from federal health care programs — Physicians and entities can be excluded from participation in government-sponsored health care programs.

The Necessity of Whistleblowers

The government lacks the resources to identify and prosecute every instance of fraud carried out by unscrupulous physicians, medical equipment providers or hospitals. Many settlements and successful verdicts reported by the DOJ are often based on information provided by a whistleblower willing to come forward after hearing or witnessing some type of improper conduct. In the health care sector, a whistleblower is often a current or ex-business partner, a hospital or office staff member, a patient, or a business competitor.

Anyone who is an “original source” of information involving fraud against the government can be a whistleblower. As defined in the False Claims Act, original source means “an individual who either (i) prior to a public disclosure . . . has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based, or (2) who has knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions, and who has voluntarily provided the information to the Government before filing an action under this section.” 31 U.S.C. § 3730(e)(4)(B).

There are many pitfalls to filing a whistleblower claim with a government department or agency. Without proper legal representation, a whistleblower might not receive a reward even though he or she provided information and assisted the government in the investigation that resulted in a successful recovery. The attorneys at McEldrew Young have a proven track record of success in all types of whistleblower cases. If you have evidence of a fraudulent scheme involving a health care provider or facility, or any other type of fraud against the government, the attorneys at McEldrew Young will provide a free confidential review of your evidence and recommend the best course of action. For a no obligation consultation, call Eric L. Young or Paul Shehadi at (215) 367-5151 or you can submit your information through the contact form found on most pages of this site.

McEldrew Young Whistleblower Lawsuit Against INSYS Results in $225 Million Settlement of Allegations Involving Opioid Sales and Marketing Abuses

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INSYS Agrees to Global Resolution of Claims Arising from Separate DOJ Criminal and Civil Investigations

The Department of Justice announced that INSYS Therapeutics, Inc. (“INSYS”) has agreed to pay $225 million to resolve allegations that it paid kickbacks and engaged in other illegal marketing tactics to promote sales of its fentanyl spray, Subsys. According to the terms of the settlement, INSYS will pay a criminal fine of $2 million and forfeit $28 million. The pharmaceutical manufacturer will also pay $195 million to settle civil claims based on allegations in five different qui tam lawsuits filed by separate relators.

McEldrew Young represents one of the five relators, a former INSYS sales representative who became concerned as the drug manufacturer continually pushed the boundaries of its marketing tactics to boost sales of its powerful opioid painkiller. In 2016, McEldrew Young filed a complaint under seal on behalf the relator in the United States District Court for the Central District of California. The complaint included allegations that INSYS promoted Subsys for various off-label, or unapproved, uses including musculoskeletal pain, fibromyalgia, neck pain, and back pain, despite the fact that the FDA only approved the drug for the management of breakthrough cancer pain.

Allegations of Improper Dosing Instructions and Meddling with Insurance Authorizations

INSYS management allegedly directed its sales representatives to encourage physicians to prescribe Subsys for continuous use, rather than only as needed, and to start new patients at twice the starting dose permitted by the FDA-approved label. Sales representatives were also allegedly instructed to complete prior authorization forms on behalf of the patient or physician. They also provided physicians with an appeal letter template that would be filled out if patients could not obtain prior authorization from their insurer.

The TIRF REMS Access Program

INSYS allegedly employed other less subtle tactics to remove certain “obstacles” purposely set in place to control distribution of the dangerous class of fentanyl-based painkillers, such as Subsys. For example, the FDA requires that physicians and pharmacists enroll in a program known as the TIRF REMS (Transmucosal Immediate Release Fentanyl – Risk Evaluation and Mitigation Strategy) Access Program. The program was designed to reduce the risks of misuse, abuse, addiction, overdose and serious complications due to medication errors with the use of TIRF medicines. Prescribers and pharmacists must study educational materials and pass an online knowledge assessment exam is order to obtain certification.

In an effort to increase the number of prescribers in the TIRF REMS Access Program, INSYS sales representatives allegedly provided physicians with cheat sheets that contained all the correct answers to the knowledge assessment exam. The practice of distributing the test answers was allegedly considered commonplace among sales representatives. Physicians who allegedly received the cheat sheets could easily circumvent the educational requirement of the program which was intended to ensure that they had sufficient information to make informed risk-benefit decisions prior to starting a patient on a TIRF drug.

Allegations of Sham Speaker Programs and Other Physician Incentives

Much like a number of other pharmaceutical manufacturers, INSYS utilized “speaker programs,” which were purportedly intended to be educational programs through which physicians were paid to present medical information to their colleagues at lunch and dinner events. It was alleged that these events were, in reality, sham programs whose only purpose was to pay doctors and pharmacists to convince their peers to prescribe Subsys for various off-label uses.

According to allegations in the case, many of the speaking events were held at inappropriate locations, such as noisy restaurants and strip clubs, and were nothing more than a pretense to provide attendees with free food, alcohol, and monetary compensation. The alleged payment of bribes and kickbacks to attending prescribers was designed as a way to increase the number of Subsys prescriptions written, as well as the dosage of those prescriptions. Many physician-speakers allegedly received compensation without ever having provided any educational content whatsoever at these events.

Another form of illegal kickbacks allegedly involved the use of gift cards. INSYS management allegedly encouraged sales representatives to provide gift cards to physicians as an incentive to continue prescribing Subsys. Sales representatives allegedly employed covert techniques to conceal the details of the transactions involving the purchase of the gift cards. Under one such scheme, an INSYS sales representative would allegedly purchase gift cards at a local food establishment and persuade the store owner to create fraudulent receipts for the value of the purchase price of the gift cards. The doctored receipts would falsely reflect the purchase of coffee and other small food items which could permissibly be given to a physician’s office. The sales representative would allegedly submit the fraudulent receipts for reimbursement by INSYS and then directly give the gift cards as a form of illegal and untraceable kickbacks to the physicians who prescribed Subsys.

The Rochester Connection

As the manufacturer of Subsys, INSYS was only the first link in the chain of bad actors who allegedly put profit ahead of preventable harm to thousands of vulnerable patients. Rochester Drug Cooperative (“RDC”), the sixth largest distributor of pharmaceutical products in the country, was charged as a corporate entity with conspiring to distribute drugs, conspiracy to defraud the United States, and failing to file suspicious order reports.

Last month, the CEO of RDC signed a Deferred Prosecution Agreement (“DPA”) in connection with the pending charges against the company. Under the DPA and a related consent decree, RDC agreed to: 1) accept responsibility for its conduct by making admissions and stipulating to the accuracy of an extensive statement of facts; 2) pay a $20 million penalty; 3) reform and enhance its Controlled Substances Act compliance program; and 4) submit to supervision by an independent monitor. If RDC remains compliant with the DPA, the government will defer prosecution and seek to dismiss the charges after five years.

The recent charges against RDC stem from a two-year investigation by the Drug Enforcement Administration (“DEA”) after RDC violated the terms of a prior civil settlement. The disclosure of the prior investigation and resulting civil settlement came to light after RDC’s former CEO, Laurence Doud III, filed a lawsuit against the company last year. In the suit against RDC, Doud claims he was fired so that RDC could shift responsibility to him for the recent DEA criminal investigation.

Mr. Doud and RDC’s former chief compliance officer were both recently charged with conspiring to distribute drugs and defrauding the government. The indictments mark the first time that federal criminal charges have been brought against company executives for conspiring to illegally distribute opioids

Linden Care Specialty Pharmacy

In his lawsuit against RDC, Mr. Doud also alleged that two members of RDC’s executive team defamed him by asserting that he and BelHealth Investment Partners had an improper financial relationship. BelHealth Investment Partners is a private equity firm that acquired Linden Care LLC (“Linden Care”), a company that ran a now-defunct specialty pharmacy based in Woodbury, New York.

The recent investigation by the DEA was based, in part, on the inaccurate reporting, or lack of reporting, of pharmaceutical sales between RDC and Linden Care. Prior to going out of business, it is believed that Linden Care was one of the largest, if not the largest, distributors of Subsys in the nation.

McEldrew Young’s initial investigation of the allegations against INSYS identified the critical role that Linden Care played as the leading dispenser of Subsys throughout the country. The complaint filed by McEldrew Young on behalf of its client was the only one to name Linden Care as a defendant in the INSYS qui tam lawsuit. Although the case against INSYS has settled, McEldrew Young’s suit against Linden Care and Belhealth Partners is currently pending before the United States District Court for the Central District of California.

The False Claims Act

The INSYS case demonstrates the importance of whistleblowers in identifying and reporting fraud. Fraud against the government takes many forms, and employees and contractors are often in the best position to detect and report such conduct. The government simply doesn’t have the resources to identify and prosecute every instance of fraud. Consequently, many unscrupulous actors continue to defraud the government, and American taxpayers, for years without detection or prosecution.

The False Claims Act provides a monetary incentive to whistleblowers who provide original information. If the government makes a monetary recovery based on the information provided, a whistleblower can receive between 15 and 30 percent of the recovery. The False Claims Act also contains provisions that protect a whistleblower from retaliation by an employer.

If you have information about fraud against the government, the experienced attorneys at McEldrew Young can assist with all aspects of the process, from investigating your claim, filing a complaint, and successful recovery of a reward.

The DNA of Medicare Fraud & the False Claims Act

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False Claims Act

Genetic Testing Laboratory Pays $2 Million to Settle Allegations of Medicare Fraud

The Justice Department announced a settlement last month with GenomeDx Biosciences Corp. (“GenomeDx”), a genetic testing laboratory based in Vancouver, British Columbia with offices in San Diego. GenomeDx agreed to pay nearly $2 million to resolve alleged violations of the False Claims Act. According to the complaint, GenomeDx committed Medicare fraud by submitting false claims for its “Decipher” post-operative genetic test. The Decipher test measures the activity of genes in prostate tumors to evaluate the risk of cancer recurrence.

Southern District of New York Federal Court Greenlights McEldrew Young’s False Claim Act Case Against Teva Pharmaceuticals for Trial Involving Allegations of Nationwide Kickback Scheme

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Chief U.S. District Judge Colleen McMahon ruled on February 27th that a False Claims Act suit brought by two former employees of Teva Pharmaceuticals USA, Inc. will proceed to a trial on the merits.  In a detailed seventy-page opinion, the Court rejected numerous arguments asserted by Teva Pharmaceuticals USA, Inc. and two of its subsidiaries (“Teva”) in its motion for summary judgment.  The ruling preserves all of the relators’ claims asserted against Teva under the federal False Claims Act.

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.

Sobering News of Fraud in the Addiction Treatment Industry

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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.

Health Care Whistleblower Lawsuits Bring in Another $375 Million for Government

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This has been quite a week for settlement announcements in the world of the False Claims Act. In the past two days, the Department of Justice has announced an additional $375 million in settlements initiated by whistleblower lawsuits. This follows the earlier Novartis announcement that it would pay $390 million to resolve.

Review Concludes Washington Should Renew Medicaid Fraud False Claims Act

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The False Claims Act passed by Washington State in 2012 to fight Medicaid Fraud must be reauthorized by the state legislature by June 30, 2016 or it will expire. As part of that process, the law was reviewed by the Washington State Legislature Joint Legislative Audit & Review Committee. The result of that review was a determination that Medicaid fraud recoveries have increased since the Act was passed and that there is no evidence private individuals rewarded by the law have brought frivolous cases.

Annual recoveries in the state increased by 28% after the law was enacted. The law provided the Attorney General the authority to investigate 29 civil cases of Medicaid fraud as well as receive a higher share of federal recoveries in qui tam cases. For every dollar the state has expended on the program, it has recovered $2.96.

The review also looked into the question of whether the Washington False Claims Act has spurred the filing of frivolous cases. This has been a concern in some states considering legislation authorizing rewards for qui tam whistleblowers, such as West Virginia. It is one of the primary points of opposition by businesses. There review of cases in Washington did not find evidence to support such a theory. The review also solicited feedback from other entitites seeking potential examples of frivolous lawsuits and none were provided by them.

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Record Breaking Settlement of Declined False Claims Act Lawsuit

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DaVita Healthcare Partners agreed to pay up to $495 million to settle a False Claims Act lawsuit brought by two whistleblowers, a doctor and a nurse, that worked at DaVita. It is the largest settlement ever in a case where the Department of Justice chose to decline intervention. The company has now agreed to pay nearly $1 billion to settle allegations of Medicare and Medicaid fraud since 2012.

DaVita provides dialysis services to patients with chronic kidney failure and end stage renal disease.  The lawsuit concerned allegations that DaVita wasted medicine in vials and billed Medicare for it. The CDC since 2002 has allowed the reuse of single-use vials in the drugs at issue if proper procedures are followed. The company billed Medicare for the unused portions of the drugs which it discarded.

What is a declined case? The government, after conducting an investigation on the merits of the litigation, generally intervenes and takes over prosecution of the civil claims in around 20 percent of cases brought under the False Claims Act. The rest of the whistleblowers receive a declination letter from the Department of Justice which informs the relator (as a whistleblower under the FCA is known) that they may continue the lawsuit on the government’s behalf (this is what is meant by qui tam, which you may often see in this context).

There have only been five years in the history of the False Claims Act where non-intervened cases reached settlements or judgments exceeding $100 million. Looking at the statistics since 1987, none of the annual totals of these cases exceeded $200 million.

In the past, relatively few non-intervened cases reached a successful settlement or judgment. Some whistleblowers evaluate the situation and decide that they are not interested in prosecuting it themselves if the government isn’t interested in vindicating the fraud against them. However, the success ratio may be improving as more law firms have decided to take these cases and run with them against the large corporations that they challenge.

When False Claims Act cases like these settle, the whistleblowers who file them typically get between 15 and 30 percent of the settlement. The law mandates these percentages, but there are few situations where the amount paid could be less than the minimum award. However, the Department of Justice, on behalf of the U.S. Government, investigated the relator’s claims and declined to intervene in it. In a declined case, the mandated percentage by the law is between 25 and 30 percent.

If you have additional questions about how these lawsuits worker, or have evidence of misconduct by a company which you wish to report, contact one of our Philadelphia FCA attorneys.

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DOJ Reaches False Claims Act Resolution With Defense Contractor

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The U.S. Department of Justice recently partially unsealed a whistleblower’s false claims act case against Federal Cartridge Co., a subsidiary of Alliant Techsystems, Inc., alleging that approximately 30 to 40 percent of the lots of ammo provided by the company failed to pass government specifications but were still distributed to Immigration and Customs Enforcement field offices around the country.

According to the lawsuit, the defects included rounds with “light loads”, causing bullets to stick in gun barrels. It is further alleged that the company also provided defective “heavy loads” that caused bullets to damage guns. The complaint also indicates that the shells had no gunpowder and in at least one case, the projectile part of the bullet was inserted backward into the cartridge.

According to the courageous whistleblower in this case, Jeffrey Campbell, and as reported here, “the defects were so prevalent that he and other employees worried about the rounds continuing to ship to field offices because they were dangerous.”

The company recalled some of the ammo due to the report of defects but replaced it with rounds from other lots that had failed quality tests. Pursuant o the False Claims Act, Campbell sued on behalf of the United States and as a result will share in a portion of the government’s recovery.  The contract for the ammunition was worth up to $90 million, the lawsuit says. As often is the case with government fraud, the acts of the whistleblower in this case will not only save taxpayer funds but it will also increase the safety of those will serve and protect our country.

The motion to unseal revealed that the government and company have reached a settlement on everything except attorneys’ fees.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented numerous clients in some of the nation’s largest qui tam cases for over a decade.  For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete the online form here.

 

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