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.

LAYOFFS FROM BIG-PHARMA – DO YOUR PART TO HELP FIGHT PHARMACEUTICAL FRAUD

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Pharmaceutical Layoffs

Unfortunately, many pharmaceutical companies place the pursuit of profits above compliance with the law and the well-being of innocent patients, who place their trust in their products.  In order to bolster their bottom line, some Pharma companies engage in fraudulent sales and marketing schemes at the expense of taxpayers through artificially inflated payments made by government healthcare programs.  Fortunately, you can help to fight back.

Have you witnessed or heard of questionable behavior on the job?  Have you been instructed to engage in conduct you know to be improper, or to ignore the improper conduct of others?  Big Pharma has paid out over $30 Billion in recent years in qui tam/False Claims Act settlements resulting from illegal sales and marketing practices.  These include, marketing drugs for off-label uses, paying kick-backs and bribes to health-care providers, manipulating and misrepresenting data related to the efficacy of products and potential adverse effects, and a host of similar improper activity.

For instance, in 2012, facing allegations of off-label marketing and kick-backs for the sale of  Paxil, Wellbutrin, Advair, Lamictal, Zofran, Imitrex, Lotronex, Flovent, Valtrex, and Avandia, Pharma giant GlaxoSmithKline agreed to a massive $3 Billion settlement with the U.S. government, as well as, several states and cities.  The multi-billion dollar settlement was the largest in U.S. history for Pharma fraud.  Similarly, in September 2009, Pfizer agreed to pay over $2 Billion to settle multiple whistleblower lawsuits claiming the company illegally marketed four of its drugs. Federal and State governments are serious about combating healthcare fraud.  The False Claims Act is a valuable tool, which allows whistleblowers to assist in holding fraudsters accountable, by filing qui tam lawsuits on behalf of the government.  Recognizing the immeasurable benefit of whistleblowers in the fight against fraud, the False Claims Act incentivizes knowledgeable individuals to come forward.

Nonetheless, deciding to become a whistleblower is not easy.  In our experience, many times it takes an adverse employment situation such as a layoff to prompt a whistleblower to take action.  If you find yourself in that situation and believe that you have information that the government may be interested in, you should contact an experienced whistleblower attorney immediately to protect your legal rights.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented individuals in countless qui tam cases for over a decade.  Young Law Group attorneys represented whistleblowers in two of the largest False Claims Act settlements in history.  Our firm takes every inquiry seriously and considers confidentiality a top priority.    For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 or email to eyoung@young-lawgroup.com.

 

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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Fortune 500 Software Company to Pay $11 Million to Settle False Claims Act Case

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Today, CA Technologies, a Fortune 500 company, has agreed to resolve a False Claims Act Complaint for $11 million.   The crux of the Complaint, alleges that CA Technologies  knowingly double billed its government clients for software renewals on contracts from 2001 through 2009.

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The case was filed in 2006, by a courageous whistleblower, Ann Marie Shaw, a former employee at CA Technologies.  According to the unsealed lawsuit, CA Technologies utilized two methods to defraud its government clients. In an effort to double bill, the company targeted its clients with expiring maintenance plans on its software products.  The company would then solicit maintenance renewals from such clients.  However, as alleged by Ms. Shaw, unbeknownst to the clients, when they did renew, in lieu of starting the renewal date at the expiration of the clients’ existing plans, CA Technologies set the renewal period to commence on the day it received the order.  As a direct result of this pervasive scheme, the government was double billed for two maintenance plans until the expiration of the original plan.

In addition to double billing, the Complaint further alleges that the company breached a contract with the Department of Defense that provided for prepaid software.  Unbeknownst to the government, the company diverted any requests for the prepaid software to third-party vendors, thus again causing the government to incur additional and unnecessary expenses.

Contrary to the beliefs of many, blowing the whistle on your employer is never an easy decision to make. It often involves risking one’s livelihood to stand up for what is right.  Understanding the same, I applaud Ms. Shaw for her efforts leading to the settlement of this matter.  As a U.S. citizen, she deserves my gratitude.

Young Law Group is a nationwide leader in whistleblower representation and has successfully represented individuals in countless qui tam cases for over a decade.  Young Law Group attorneys represented whistleblowers in two of the largest False Claims Act settlements in history.  Our firm takes every inquiry seriously and considers confidentiality a top priority.    For a free confidential consultation, please call Eric L. Young, Esquire at 1-800-590-4116 or email to eyoung@young-lawgroup.com.

 

UK Contemplates Qui Tam Provision

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It has recently been reported that the British government is contemplating the creation of a reward system, with qui tam provisions similar to the False Claims Act, to encourage whistleblowers to come forward with necessary information to root out government fraud and other white-collar crime.

The U.K. Home Office, acting in concert with other British agencies, are examining the qui tam provisions contained in the False Claims Act, as well as the IRS and SEC Whistleblower programs. As of now, the British government does not financially reward individuals for revealing original information used by the government to thwart fraud. Due to the recognized potential and actual hardships associated with the courageous act of blowing the whistle, as a seasoned False Claims Act attorney, I feel the addition of a qui tam provision will greatly assist our allies across the pond in its fight against government fraud.

As reported in the New York Times here, Britain’s government will “consider the case for incentivizing whistleblowing, including the provision of financial incentives, to support whistleblowing in cases of fraud, bribery and corruption,” the Home Office said as part of a document announcing the new National Crime Agency (“NCA”) in Britain. The NCA is Britain’s closest equivalent to the FBI. Although discussions concerning a qui tam provision have commenced, there is no deadline regarding a decision on the same.

Since 1986, the Department of Justice’s civil fraud section has recovered more than $20 billion in settlements and judgments, including whistleblower actions.  It is well-recognized that the qui tam provisions of the FCA provide strong incentive for citizens to assist the government in preventing and deterring fraud.

In 2011, the SEC established its own whistleblower program pursuant to the Dodd-Frank Act, the financial industry reform bill passed in response to the financial crisis. Under the SEC’s program, whistleblowers who supply original information that results in sanctions exceeding $1 million can receive rewards representing up to 30 percent of those sanctions. The SEC on numerous occasions has praised the legislatures’ inclusive of a qui tam provision which, according to Mary Jo White, SEC Chairwoman, “has had a big impact on our investigations by providing us with high quality, meaningful tips.”

I am hopeful that the British government will recognize and appreciate the importance of our qui tam provisions and establish its own incentives to reward courageous whistleblowers for their vital information.

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.

 

 

 

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 Purtell Merritt 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 Purtell Merritt 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.

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.

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.

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.

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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