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.

 

JUDGE SAYS $1 MILLION FINE TOO LOW FOR COUNTRYWIDE MORTGAGE FRAUD

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A federal judge has signaled that $1 million is too low of a penalty for those responsible for the Countrywide mortgage fraud debacle.  At a hearing last week in a Manhattan federal court, Judge Jed S. Rakoff, declared that such a penalty would be a “windfall” for Bank of America, Corp., (“BofA”) the entity legally responsible for its now defunct subsidiary, Countrywide Financial Corp. (“Countrywide”).  While he has not yet determined the penalty, Judge Rakoff stated, “[i]t would be a windfall to a perpetrator who made, hypothetically, $100 million, to just penalize them $1 million…[t]hat would have no deterrent effect at all.”

As reported earlier by Young Law Group, in October a jury unanimously found BofA and former Countrywide executive, Rebecca Mairone, liable for civil fraud after a lengthy trial focusing on the companies’ sale of junk mortgages leading up to the mortgage crisis of 2007 and 2008.  Former Countrywide executive turned whistleblower, Edward O’Donnell, initially filed the case in federal court.  The details of the case involve a program, internally deemed “Hustle,” wherein Countrywide eliminated substantive vetting of home loan recipients, but also pushed employees for higher loan volume by paying lucrative bonuses.  Shortly before the economy collapsed, Countrywide sold over 30,000 risky mortgages, worth hundreds of millions of dollars, to Fannie Mae and Freddie Mac.

U.S. Attorney Preet Bharara of the Southern District of New York prosecuted the case using an under-utilized weapon in the fight against fraud, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (“FIRREA”).  Like the False Claims Act, FIRREA has a whistleblower provision, which will likely ensure O’Donnell receives a percentage of the government’s total recovery.  FIRREA makes it a crime to perpetrate fraud against a federally insured financial institution.

FIRREA generally sets the maximum penalty of $1.1 million, but gives the sentencing judge discretion if the defendant has caused losses or made gains in excess of this amount.  The Department of Justice is seeking $848.2 million in fines and penalties, a figure it roughly equates with the financial damages sustained by the Fannie Mae and Freddie Mac.  BofA argues that the losses suffered by Fannie and Freddie were a result of overall economic downturn and not any fraud on Countrywide’s part.  Thus, the financial giant’s lawyers maintain that it should pay no penalty, or at maximum the general statutory cap of $1.1 million.  Judge Rakoff’s statements in last week’s hearing, however, clearly indicate that he does not think the statutory cap binds his judgment and he believes BofA is liable for either gains it made as a result of its fraud, losses maintained by the government, or both.  However, the total amount that Judge Rakoff will ultimately order BofA to pay is unclear at this time.

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.

CAREMARK LLC SETTLES FALSE CLAIMS ACT CASE FOR $4.25 MILLION

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Yesterday the U.S. Department of Justice (“DOJ”) announced an agreement with Caremark, LLC to settle allegations filed that it defrauded the federal government and five states.  Caremark, LLC is a pharmacy benefit management company (“PBM”), operated by CVS Caremark, Corp. a company which is no stranger to the False Claims Act.  PBMs are third-party administrators, whose primary role is the payment and process of prescription drug claims on behalf of healthcare plans.

The allegations surfaced in a lawsuit filed by former Caremark employee, Janaki Ramadoss, pursuant to the qui tam provisions of the False Claims Act.  The details of the case allege that Caremark knowingly disregarded its obligations to reimburse Medicaid for the costs of prescription drugs received by Medicaid beneficiaries, which should have been covered under the beneficiaries’ private healthcare plans administered by Caremark.  Medicaid, commonly referred to as the payer of last resort, is not responsible for health care and prescription costs which are simultaneously covered by a private health care plan.  Individuals with overlapping coverage from Medicaid and a private plan are classified as “dual eligible.”  In addition to paying for the care and prescriptions of a “dual eligible” beneficiary, private insurers are required to reimburse claims erroneously paid by Medicare.  Assistant Attorney General for the Justice Department’s Civil Division, Stuart F. Delery, noted that, “it is vitally important that cash-strapped Medicaid programs receive reimbursement for costs they incur that should have been paid for by other insurers.”  By failing to do so, Caremark caused false claims for payment to be submitted to Medicaid.

In addition to the federal government, Arkansas, California, Delaware, Louisiana, and Massachusetts joined the case and will receive proceeds from the settlement.  The federal government will receive approximately $2.3 million, while the five states share $1.94 million.

The case is captioned United States ex rel. Ramadoss v. CVS Caremark Inc., SA-12-CA-929WRF (W.D. Texas).

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.

CONTRACTOR DEFRAUDS DOD FOR FRESH PRODUCE

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On November 19, 2013, the Department of Justice (“DOJ”) announced that FreshPoint, Inc., the nation’s largest distributor of fresh produce, agreed to settle claims that it defrauded the Department of Defense (“DOD”).  FreshPoint, Inc., based in Houston, Texas, is a wholly-owned subsidiary of SYSCO, Corp. who was also listed as a defendant in the qui tam case.  The allegations stem from fraud committed by FreshPoint in connection with fifteen contracts to provide fresh fruits and vegetables to DOD schools and military institutions.

Former FreshPoint employee Charles Hall filed the lawsuit in a Georgia federal court, pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3729.  According to Mr. Hall, FreshPoint was contractually required to charge the DOD for produce at its actual cost, plus a pre-set price mark-up.  Under this agreement, FreshPoint was expressly prohibited from making its own price adjustments.  Mr. Hall alleges that from Dec. 17, 2007 to Sept. 11, 2009 FreshPoint routinely violated its DOD contracts by improperly inflating its prices to reflect its own market perceptions.  This in turn resulted in hundreds of pricing violations.

Under the settlement, FreshPoint will pay the federal government $4.2 million.  As the whistleblower, Mr. Hall will receive an award of approximately $798,000.  In a DOJ statement Assistant Attorney General Stuart F. Delery stated, “[t]he Department of Justice is committed to ensuring the integrity of federal contracts and will pursue contractors that knowingly overcharge the government for goods or services … contractors that do business with the government must do so honestly and fairly or suffer the consequences of their misconduct.”  For its part FreshPoint denies the allegations and claim the settlement is not tantamount to an admission of guilt.

This case is representative of many fraud schemes perpetrated by government contractors.  The onus is generally on companies contracting with the U.S. government to provide the best price possible for goods and services.  Often this comes in the form of pre-set mark-ups, such as those at issue in this case.  This theoretically ensures that the government, and by extension the U.S. taxpayers, are getting the best deal.

The DOD is a sought-after customer for providers of fresh produce.  Due to the enormity of its mandate and the sheer volume of its personnel, the DOD is the nation’s largest food service provider.

The case caption is U.S. ex rel. Hall v. SYSCO Corp., No:  4:11-CV-57 (S.D. Ga.).

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.

LOUISIANA SETTLES FALSE CLAIMS ACT CLAIM WITH OPTOMETRIST’S OFFICE

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On November 18, 2013, the Department of Justice announced a settlement with Sabine Optical, an optometry office located in Baton Rouge, Louisiana, based on allegations of Medicaid fraud.  According to the details of the case, Sabine Optical (“Sabine”) which does business as The Vision Center, engaged in a pattern of billing behavior designed to garner illegal U.S. and Louisiana Medicaid payments.

The qui tam lawsuit, filed under the False Claims Act, was brought by whistleblower and former Sabine employee William Y. Guess.  Mr. Guess claims that Sabine employed a number of traditional fraud schemes, commonly seen in False Claims Act cases.  Mr. Guess alleges that the tactics ran the gamut, from billing Medicaid for procedures that were never performed to falsification of Medicaid patients’ prior authorization forms.  Mr. Guess also contends that Sabine routinely billed Medicaid using another provider’s Medicaid number.

The case was filed under both the Federal False Claims Act and its Louisiana counterpart, demonstrating once again the value of individual states’ false claims laws.  Pursuant to the settlement, Sabine will pay $1.2 million in damages, $819,960.00 to the U.S. and $380,040.00 to Louisiana.  For his efforts, Mr. Guess will receive twenty percent of the total recovery.

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.

JURY FINDS GOVERNMENT CONTRACTOR JM EAGLE LIABLE FOR FRAUD

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Today a federal jury in the Central District of California unanimously found JM Eagle liable for defrauding the United States and several individual states.  The trial was the first step in the culmination of seven years of contentious litigation.  In order to facilitate a smoother proceeding, U.S. District Judge George H. Wu separated the trial into liability and damages phases.  The second half of the bifurcated trial will soon commence to determine damages, and ultimately the amount owed by JM Eagle.

JM Eagle, the world’s largest manufacturer of PE and PVC piping, is headquartered in Los Angeles, CA.  Given its preeminence in its field, JM Eagle has supplied considerable amounts of PE and PVC piping to the federal government, as well as, state and local governments throughout the nation.

The qui tam suit, filed under the False Claims Act, was brought by former JE Eagle employee John Hendrix.  Mr. Hendrix formerly worked as an engineer in the company’s product assurance division, located in New Jersey.  Mr. Hendrix claimed that JE Eagle deliberately manufactured and sold substandard piping, which was utilized throughout the country in water and sewer lines to disastrous effect.  The jury agreed with Mr. Hendrix and found JE Eagle knowingly manufactured and sold an inferior, albeit cheaper to produce, product to increase its profit margins.

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.

WHISTLEBLOWER SUES FOR ALLEGED FRAUD AGAINST POSTAL SERVICE

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Recently revealed court documents allege that Virginia-based Northrop Grumman (“Northrop”) defrauded the United States Postal Service (“USPS”) out of millions of dollars.  The allegations could spell trouble for Northrop, a defense and aerospace powerhouse, which regularly contracts with the United States government.

The Complaint, filed under the False Claims Act, alleges that Northrop and sub-contractor Motor Drives & Controls, Inc. profited illegally pursuant to a 2007 contract with the USPS to deliver one-hundred Flats Sequencing System machines (“FSS”).  The FSS machines were designed to sort mail to reflect delivery sequences, a process that is currently performed by manual labor.  The USPS hoped to save approximately $600 million a year, by using the machines.

The whistleblower behind the claim is Maryland resident and former Northrop employee Beau Michaud.  Mr. Michaud worked on the FSS project from January 2007 to February 2011 and claims his internal complaints were met with resistance.  According to Mr. Michaud the contract mandated that Northrop issue efficiency reports certifying compliance with performance standards as a prerequisite to installment payments from the USPS.  Mr. Michaud alleges that Northrop made material misrepresentations to USPS regarding the FSS machine’s efficiency, reliability and speed.  Moreover, the Complaint contends that the company deliberately concealed documents to hide the fact that the FSS machines were not meeting the standards of the contract.  Of course if these allegations are true, these actions constituted false claims for payment against the government.

The lawsuit is seeking over $179 Million in damages.  For its part, Northrop vigorously denies all liability.

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.

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