GIANT HEDGE FUND PLEADS GUILTY TO INSIDER TRADING

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Facing charges from the U.S. Securities and Exchange Commission (“SEC”), Major hedge fund, SAC Capital Advisors, announced its intent, this week, to plead guilty to allegations that the company profited handsomely from illegal insider trading.  As part of the guilty plea SAC has agreed to pay $1.8 billion, the largest financial penalty ever to result from insider trading claims.  Additionally, the company will no longer operate as an investment adviser or invest third-party funds.  Government officials described the penalties as “steep but fair” and “commensurate with the breadth and duration of the charged criminal conduct.”

The federal government alleges that SAC managers and analysts illegally executed trades, based on inside information, between 1999 and 2010 to the tune of hundreds of millions of dollars.  According to the lead prosecutor, U.S. Attorney for the Southern District of New York, Preet Bharara, the company “trafficked in inside information on a scale without any known precedent in the history of hedge funds.”  The funds managed by SAC were a roughly equal mix of client and employee money.

SAC’s plea will not resolve a pending case, brought by the SEC, against the company’s founder Steven A. Cohen.  According the SEC’s civil suit, Cohen, a billionaire and financial rock star, failed to prevent the insider trading that was so rampant throughout his company.  For his part, Cohen flatly denies the SEC’s allegations.

It is unknown at this time whether a whistleblower’s tip played a role in the SEC’s investigation.  However, if that was indeed the case, that individual or group of individuals may receive up to ten to thirty percent of the government’s total recovery, pursuant to the SEC’s Whistleblower program under Dodd-Frank.

McEldrew Young Purtell Merritt is a law firm representing SEC whistleblowers reporting securities fraud such as insider trading to the U.S. Government.  For a free confidential consultation, please call Eric L. Young, Esquire at (800) 590-4116 or complete ou online form to contact us.

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.

Do You Have a Qui Tam Whistleblower Case?

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How Do I Know If I Have A Qui Tam Whistleblower Case?

The term “whistleblower” is very broad and can have multiple meanings. Any time someone reports a wrong, arguably they could be considered a whistleblower.

Only if the wrongdoing involves fraud against the government does a whistleblower have the right under federal and state false claims acts to file a qui tam case  on behalf of the government and collect a reward in the event of a recovery.

The following questions can help you determine if you have a qui tam whistleblower claim.  If you answer “Yes” to any of these questions, you may have a case.

Did this unjust conduct cause a governmental entity to lose money?

To bring a claim under federal or state False Claims Acts you have to have government money involved. In other words, there needs to be fraud on the taxpayers. For example, if you discover that your employer is defrauding its customers, you can certainly become a whistleblower and report that misconduct, but you cannot file a qui tam whistleblower case because there is no fraud on the government. The exception is, of course, when the government happens to be one of the customers.

Sometimes the fraud against the government can be very subtle. For example, maybe the company took a grant as part of a government program and it might be in violation of a contract it signed as a condition for getting the government grant.

Is your information based on something you saw or heard firsthand?

Generally speaking, you cannot base your qui tam case on something you learned from publicly available information. You must be an original source for the information – you must have first-hand and exclusive knowledge of the misconduct.

For example, there may be extensive discussion on web sites on how a pharmaceutical company is marketing one of its drugs off-label, which is arguing against the law. You cannot file a qui tam suit based on the information that is freely available on those web sites. If, however, you have specific first-hand knowledge of this off-label marketing, you might have a case.

Do you have any documents to back up your report?

The government is limited in terms of the time and resources they have to devote to qui tam false claims act cases, so they work on what they believe to be the best cases, with the most potential upside. Part of that consideration is the evidence a whistleblower has to support the case.

The reality is that if you don’t have any documentary evidence, this puts you at a severe disadvantage in getting the government’s attention. You want to be in a position where you’re giving the government a really good head start on the case.

Evidence could be, for example, emails or memos where people are talking about the fraud, or sometimes people record conversations when it’s legal to do so.

Does the government not yet know of this unjust conduct?

Generally speaking, you can’t make a case based on information that is already known. This can be a tricky question. Because qui tam cases are filed under seal, sometimes it is hard to tell whether there are other cases already on file. The simple truth is that in many cases there is more than one whistleblower, and the first whistleblower to file is the one that is entitled to any reward that might be paid.

An experienced whistleblower lawyer can help you work through these challenges.

Has anyone done anything to try to cover up this fraud?

Here, we get back to the question of whether you have evidence to support your claims. An experienced whistleblower attorney will counsel a client about how to maintain evidence that the client already has, or to gather additional evidence without being in violation of any laws that protect a defendant’s confidentiality or trade secrets.

If you answered “Yes” to any of these questions, you might have a qui tam whistleblower case. Please call us for a no-commitment, no-cost discussion. Qui tam whistleblower lawsuits can be complex, and you need an experienced qui tam attorney to help you get started on the right foot.

Young Law Group, P.C., Attorneys-at-Law, represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at 1-800-590-4116 or email to eyoung@young-lawgroup.com.

U.S. Recovered Over $2 Billion from Health Care Fraud in 2012 Alone

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The premier whistleblower advocacy group, Taxpayers Against Fraud (“TAF”), recently released a report detailing that Whistleblower lawsuits brought under the qui tam provisions of the False Claims Act have generated over $3 billion in settlements and judgments in civil cases in 2012 alone. Cases involving pharmaceutical and medical device sales and marketing fraud comprised the largest portion of these recoveries or approximately $2 billion. The TAF report concluded that every dollar invested by the U.S. government to investigate and prosecute health care fraud generates about $16.4 dollars. The report further details that between 2008 and 2012, the U.S. government expended approximately $575 million in cases that recovered approximately $10 Billion.

As noted in the TAF report, the U.S. Department of Justice has embraced cases being brought under the qui tam provisions of the False Claims Act and, in fact, in 2009 created the Health Care Fraud Prevention and Enforcement Action Team (HEAT) which is aimed at enabling closer collaboration between the Department of Justice and the U.S. Department of Health and Human Services. The TAF report emphasized some recent significant recoveries in the pharmaceutical industry under the False Claims Act including cases involving GlaxoSmithKline, Merck, and other Pharma heavyweights.

GSK paid approximately $1.5 Billion to resolve False Claims Act cases involving a number of drugs marketed and sold for uses not approved by the FDA, payment of kick-backs to prescribers, and other false and misleading statements about drug safety and efficacy. Likewise, Merck paid over $300 million for false and misleading claims about some of its drugs.

As noted in the TAF report, the positive impact that False Claims Act qui tam cases have for U.S. taxpayers cannot be fully accounted for. The reported settlement amounts do not include the amount of money saved by government health care programs due to the deterrent effect of False Claims Act cases. These major settlements undoubtedly cause some pharmaceutical companies and others in the healthcare arena to think twice before engaging in widespread sales and marketing fraud at the expense of federal and state health care programs. At the end of the day, whistleblower programs such as those provided for under the qui tam provisions of the False Claims Act are a critical component to our healthcare system self-correcting such  that wide spread fraud and other misconduct can be ferreted out.

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.

U.S. Department of Justice Scores Major Win Against Mortgage Fraud

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This week the U.S. Department of Justice (“DOJ”) announced a significant victory in the fight against mortgage fraud.  A federal jury in the Southern District of New York found Bank of America Corp. (“BofA”) and former Countrywide executive, Rebecca Mairone, liable for civil fraud after a lengthy trial focusing on the companies’ actions leading up to the financial crisis of 2008.  BofA acquired Countrywide and assumed its liabilities just months before the financial collapse, from which the nation is still reeling.  While U.S. District Court Judge Jed Rakoff will determine the ultimate penalty, the DOJ is seeking $848.2 million from the financial giant.

The suit, U.S. ex rel. O’Donnell v. Bank of America Corp, originated with a whistleblower, former Countrywide executive Edward O’Donnell, who provided inside information into the firm’s fraudulent home loan practices and surely proved invaluable to the case.  The case surrounds a Countrywide program, known as the “High Speed Swim Lane,” or tellingly “Hustle” for short.  Under “Hustle” Countrywide originated millions of dollars in shoddy home mortgages, which were subsequently sold to government operated Fannie Mae and Freddie Mac.  At the time, Countrywide eliminated the substantive vetting of loan recipients, while simultaneously paying lucrative bonuses to employees to incentivize volume, a proverbial recipe for disaster.  Not surprisingly, about forty-three percent of the loans issued under “Hustle” had material defects.  After the economy collapsed, precipitating the federal government takeover of Fannie and Freddie, American taxpayers were left holding the bag.

To prosecute the case, DOJ utilized the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), an often overlooked weapon in its arsenal.  Among other provisions, FIRREA outlaws fraud against a federally insured financial institution.  Similar to other federal laws that fight fraud, FIRREA has a whistleblower provision through which knowledgably insiders are entitled to a percentage of the government’s recovery.

In a rare move for a bank facing legitimate fraud allegations, BofA opted not to settle out of court, but defend the case at trial with a highly paid team of corporate defense lawyers.  One must wonder whether it now regrets that decision, given an increasing climate of public hostility towards risky lending and investing practices.  Seemingly indicating the DOJ’s unwillingness to balk at the prospect of facing off against financial giants in court, U.S. Attorney Preet Bharara in the Southern District of New York recently stated, “[t]his office will never hesitate to go to trial to expose fraudulent corporate conduct and to hold companies accountable, particularly when it has caused such harm to the public.”

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.

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.

NEW YORK FALSE CLAIMS ACT TAKES THE LEAD IN THE FIGHT AGAINST FRAUD

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New York is once again pushing the envelope with proposed amendments to the New York False Claims Act, N.Y. Fin. Law §§ 187 – 194 (“NYFCA”).  Twenty-nine states, the District of Columbia, and a number of large U.S. cities have enacted their own False Claims Acts that substantially mirror the federal False Claims Act, 31 U.S.C. § 3729, et seq. (“FCA”).  However, no state or local law, nor the FCA, is as comprehensive as the NYFCA.

In 2010, New York amended the NYFCA, bringing claims of tax fraud within the purview of the law.  Upon doing so, New York became the first, and to date the only, jurisdiction to include such a provision within its False Claims Act.  By contrast, the FCA specifically discounts tax fraud, leaving such claims to the, arguably less effective, IRS Whistleblower program.  New York Attorney General Eric Schneiderman, championed the amendment during his time as a New York State Senator.

Likely due in large part to its success prosecuting cases under the expanded NYFCA, a number of New York State Senators are looking to again widen the scope of the law to further hone its efficacy as a fraud fighting tool.  Senate Bill S4362, the proposed expansion to the NYFCA, would cover whistleblowers who provide information about violations of New York’s banking, insurance, and financial services laws to the New York State Department of Financial Services (“DFS”).  In the event of a successful DFS action, the whistleblower will be entitled to receive up to thirty-percent of the total recovery as a reward for their assistance.  Additionally, the proposed amendments offer the same protections from retaliatory employment actions, currently enjoyed by NYFCA whistleblowers.  Looking to again champion the strengthening of the NYFCA, on October 23, 2013, Mr. Schneiderman’s office submitted proposed regulations related to the expansion.

Young Law Group, P.C.

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.

BANK OF AMERICA ACCUSED OF MORTGAGE FRAUD IN QUI TAM SUIT

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Just weeks after being found liable for violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”), Bank of America, Corp. (“BofA”) is again facing allegations of mortgage related fraud.  This time the lawsuit asserts that BofA defrauded the federal government and multitudes of borrowers by gaming the Home Affordable Refinance Program (“HARP”).  The Federal Housing Finance Agency (“FHFA”) established HARP in March of 2009 to help alleviate the troubles created by plummeting property values after the burst of the U.S. housing bubble in 2006.

Specifically, HARP facilitates refinancing for underwater homeowners, who are otherwise current on their payments, by offering favorable interest rates and refinancing without mortgage insurance.  In order to participate in HARP, an underwater homeowner’s mortgage must be owned or guaranteed by federally-backed Fannie Mae or Freddie Mac.  To further encourage refinancing, the FHFA substantially reduced loan level price adjustments (“LLPAs”), common risk-based fees, for HARP loans purchased by Fannie and Freddie.  The removal of LLPAs was designed as a cost reduction for lenders, who would in turn pass the savings on to borrowers.

However, one such homeowner, John J. Platz, alleges in his qui tam complaint filed under the False Claims Act that BofA profited illegally by first, pushing the FHFA to drop LLPAs, but then failing to pass along savings to consumers.  Platz contends that this violated the terms and conditions of payment for lenders under HARP and resulted in the submission of thousands of false claims to the federal government.

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.

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

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TEva

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.

New York State Amends False Claims Act

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New York is leading the way at preventing tax fraud at the state level becoming the first state to creates a reward for whistleblowers. The amendment to New York’s False Claims Act will provide for an award to the whistleblower so long as the defrauding taxpayer earns more than $1 million in annual net income and defrauds the state of more than $350,000.

The whistleblower may earn up to 30 percent if he brings the case alone and up to 25 percent if the government decides to intervene. These percentages are based upon a number of factors including the amount of the whistleblower’s assistance.

As reported on The Post Standard, “The tax department guesses that billions of tax dollars go unpaid every year. In recent years, starting with Gov. Eliot Spitzer, the state has poured money into the department’s enforcement unit for staff, sting operations and sophisticated data collection systems to bust tax cheats. Spitzer appointed Comiskey to lead the effort and he set a record in his first year, bringing in $3 billion — $1 billion more than the year before. The effort continued under Gov. David Paterson. This year’s state budget relied on $221 million in extra tax fraud collections to help close the budget gap.

“New York state’s been exceptionally aggressive in the last few years during the budget crisis at collecting any source of tax revenue they can find, fairly or unfairly,” said Tim Lynn, a lawyer at Green & Seifter, an expert in business tax credits. “This is another weapon in their arsenal to cure their budget problems.”

Lynn said he suspects cases could come in the area of sales taxes or fuel and highway use taxes — the kinds of taxes where employees are aware of the amount of money that should have been paid. It is less likely there will be cases involving income taxes, which are confidential and handled by bookkeepers, he said.

The state first passed a whistle-blower law, called the False Claims Act, in 2007. It is modeled after the federal law. Until now, the law has mostly been used in Medicaid fraud cases. The old state law, like the federal law, specifically exempted tax fraud.

In three years, Medicaid fraud cases brought under the False Claims Act have recovered about $200 million for the state.

By 2014, the state estimates it will recover about $20 million a year from tax fraud.

Schneiderman likes to call it “the false claims act on steroids.”

McEldrew Young Purtell Merritt represents whistleblowers nationwide. For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 to speak to one of our whistleblower attorneys.

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