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.

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.

 

CA Health System to Pay $46 Million to Resolve Whistleblower Suit

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Sutter Health, a Sacramento, CA-based health system, announced the resolution of a whistleblower lawsuit regarding unbundling and over-billing schemes for anesthesia services provided.  The 2009 lawsuit was brought against Sutter by billing auditor, Rockville Recovery Associates. The commissioner joined suit in 2011. A trial in Sacramento Superior Court was scheduled to commence later this month.

According to California Insurance Commissioner, Dave Jones, “Sutter patients or their insurers received three separate charges relating to anesthesia including a charge by an outside anesthesiologist, a charge for the operating room and a charge under an obscure code…” “Unbundling” is the practice of submitting bills piecemeal or in a fragmented fashion to maximize the reimbursement for various tests or procedures that are required, pursuant to Medicare and Medicaid guidelines, to be billed together and therefore at a reduced cost.  According to the suit, the services billed were allegedly already captured in an operating room charge.

In touting the settlement, Commissioner Jones stated, “this settlement represents a groundbreaking step in opening up hospital billing to public scrutiny.” “The settlement requires Sutter to disclose on its Website every component of its anesthesia billing and what those services cost Sutter. Patients, insurers and the public will now be able to compare Sutter’s costs to what it charges for anesthesia. They will see any mark-ups. I commend Sutter for agreeing to these reforms and this settlement. This new transparency should lead to lower prices and point the way to similar billing reforms for all types of hospital services.”  California’s complete press release may be viewed in its entirety here.

“Unbundling” is a frequently utilized tactic by government health care fraud offenders.  An unbundling scheme simply allows a health care provider, or in this case, a health care system, to fraudulently maximize its reimbursement amount by billing the tests and/or procedures separately rather than properly accounting for the test and/or procedures under the single group billing code.

If you are aware of an unbundling scheme, or believe you are a victim of unbundling, contact Young Law Group for a free confidential consultation.

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.

SEC Loses Case Against Celebrity Mark Cuban

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The U.S. Securities and Exchange Commission has lost a high-profile but low-stakes case against billionaire celebrity investor Mark Cuban in a Federal Court in Dallas.  The SEC alleged that Cuban engaged in insider trading when he sold his 6.3% stake in Canadian internet company Mamma.com to avoid a $750,000 loss after Mamma.com executives came to him looking for financing.  The jury deliberated for less than five hours before reaching a verdict in Cuban’s favor.

Cuban sold his multimedia Web service to Yahoo Inc. for $4.7 billion in 1999.  He now owns the NBA’s Dallas Mavericks, the high definition television network HDNet and the Landmark Theater chain.

It would seem reasonable to wonder why the SEC would use its already strained resources to pursue a case that could most accurately be described as immaterial under almost any measure.  The $750,000 loss that was allegedly avoided by Cuban was clearly immaterial to his financial statements.  The fact that Mamma.com was seeking Cuban’s assistance because he was already the Company’s largest shareholder probably means this was a situation that was unlikely to ever be repeated.  The most obvious answer is that Cuban’s celebrity status guaranteed a large volume of media coverage related to the case.  Other than the anticipated media coverage, it is hard to see a reason why the SEC would pursue a weak case involving immaterial amounts in a situation where there was no allegation of ongoing harm.

Is anticipated media coverage an appropriate reason for the SEC to pursue a case? Perhaps it is an appropriate reason in a situation where a highly publicized SEC Enforcement action might deter others from engaging in similar misconduct.  However, the Cuban case is clearly a unique factual situation where any deterrent effect is hard to envision.  Young Law Group believes that the SEC would be better off using its resources to pursue important cases that would serve the purpose of increasing transparency in financial markets and deterring misconduct.  One reliable way to achieve this objective would be for the SEC to pursue strong cases based upon inside information it receives from whistleblowers with first-hand knowledge of wrongdoing in financial markets.

Young Law Group, P.C., represents whistleblowers in the United States and abroad, in a variety of cases, including IRS Whistleblowers, False Claims Act (Qui Tam), and SEC related fraud.  For a free confidential consultation with one of our SEC whistleblower lawyers, please call Eric L. Young, Esquire at (215) 367-5151 or email to eyoung@young-lawgroup.com.

JP Morgan Reported To Be Close To Finalizing A $13 Billion Settlement With Department Of Justice

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October 21, 2013 – It is being widely reported that the Department of Justice and JP Morgan are finalizing the details of a $13 billion settlement relating to the 2008 financial meltdown.  JP Morgan has already paid close to $6 billion dating back to 2010 in other fines and penalties arising out of the 2008 financial crisis.  Reports are that this settlement will encompass numerous open investigations into the bank’s fraudulent sale of toxic mortgage back securities.  If consummated, this settlement will be one of the largest settlements ever involving one of the nation’s largest financial institutions.  Reports are that the deal will include $9 billion in fines and provide relief to consumers totaling approximately $4 billion.  It is also being reported that this deal will not insulate JP Morgan from criminal charges.  While this amount seems to be substantial in the eyes of the average American, then certainly the largest penalty ever imposed on a U.S. corporation, however, it is less than half of the $21 billion profit JP Morgan recorded in 2012.

In addition, the bank previously set aside $28 billion to cover the legal costs in connection with the government investigations that have apparently led to the reported settlement.  The reality is that while these settlement amounts appear to be very large, they pale in comparison to the amount of money spent by the federal government to prop up these firms, including JP Morgan, in the aftermath of the 2008 mortgage meltdown.  For example, $4 billion will reportedly go to settle a suit by the Federal Housing Finance Agency against JP Morgan for knowingly making false statements and omitting material information with regard to the sale of $33 billion in worthless mortgage bonds to government-sponsored mortgage finance companies.  However, that is only about two percent (2%) of the almost $2 billion in taxpayer money the government spent so far to prop up JP Morgan and others for this misconduct.  The New York Times reported, “the government also prefers to settle with big companies rather than indict them, fearing that criminal charges can unnerve the broader economy.”

Attorney General Holder has been quoted as saying, “If we do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”  As such, the government appears to be concerned that if it levies harsh criminal sanctions against banks, including JP Morgan, that it will rattle the financial markets, and therefore, the government apparently shies away from taking such direct action to eradicate the type of misconduct that led to the 2008 collapse.  Does such an approach make sense?  Considering that these penalties appear to be nothing more than a slap on the wrist, when considering the damage that was caused and the profits that JP Morgan and others have made since 2008, isn’t it time that our government takes a tougher stance?  Unfortunately, it appears that the financial privileged in our country are above the law.  Until our government prosecutes corporations and executive who devise and carry out the fraudulent schemes, this type of misconduct will continue because it is profitable to do so.  In other words, it is the cost of doing business.

So long as these companies and their executives know that they will not be held to account for fraudulent misconduct, so long as that conduct is profitable, they will continue to engage in it.

Reports are that the Justice Department’s case against JP Morgan is being bolstered in part by the involvement of a whistleblower from inside the bank who is aiding the government.  The Wall Street Journal has reported that, “the cooperating person has provided information – including emails – suggesting the bank vastly overstated the quality of mortgages that were being bundled into securities and sold to investors before the financial crisis, the people said.”  The Wall Street Journal also reported, “Justice Department lawyers are embolded by documents, uncovered in the course of their investigation, that point to JP Morgan knowingly peddling mortgage back securities whose underlying loans were of lesser quality than pitched to investors, according to people familiar with the investigation.”  Reports of insider assistance to the government in pursuing a case against JP Morgan further highlights the critical nature that whistleblowers play in allowing our system to self-correct.  The simple matter is, without the assistance of an insider such as the person being reported to be assisting the Justice Department in the JP Morgan case, the government would be at a severe disadvantage at the pre-litigation stage in leveraging any meaningful resolution.

Whistleblowers provide detailed uncontroverted evidence that otherwise would be unavailable to the government.  It is believed that this insider may have filed a claim under the Federal False Claims Act, which includes a qui tam provision that enables individual citizens to bring claims on behalf of the taxpayers against companies such as JP Morgan, who are alleged to have defrauded our government.  To encourage such whistleblowers to come forward, the False Claims Act includes bounty provisions that compensate whistleblowers for the courageous efforts that are necessary for someone to step forward and report powerful corporate interest, such as those in the JP Morgan case.  These bounties can range anywhere between 15 and 30 percent of civil penalties and fines collected by the federal government as a result of the underlying qui tam action.

Young Law Group, P.C., represents whistleblowers in the United States and abroad, in a variety of cases, including IRS Whistleblowers, False Claims Act (Qui Tam), and SEC related fraud.  For a free confidential consultation, please call Eric L. Young, Esquire at (215) 367-5151 or email to eyoung@young-lawgroup.com.

 

Bank of America Settles Billion Dollar Mortgage Fraud Case

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On February 9, 2012, the Justice Department announced the settlement of one of the largest False Claims Act cases relating to mortgage fraud in history. Bank of America (BOA) and its Countrywide Financial Subsidiaries will have to pay upwards of $1 billion for reckless behavior in underwriting loans to unqualified borrowers. These loans were insured by the Federal Housing Administration (FHA). When the borrowers could not pay back the loans, the FHA suffered hundreds of millions of dollars in damages. Originally, the FHA agreed to insure the loans without the knowledge that Countrywide was originating the mortgage loans based on inflated appraisals. Since BOA acquired Countrywide in 2008, they are responsible for the subsidiary’s actions. The $1 billion will be split between recovery for the FHA and a program to fund loan modification for anyone who is a Countrywide borrower.

This case is extremely important in holding the banks accountable for the resulting chaos of the recent mortgage crisis. What is interesting in this particular case is that the government has decided not to retrieve all of the money directly; instead it is building a program with part of the recovery to help the borrowers. While it is important for the government to restock the treasury and address the debt problem, the ultimate goal is to help the taxpayers who were hurt the most when the bubble burst. The way Countrywide conducted itself with regard to the FHA and to the borrowers, shows that it is more interested in producing solvent investments for the company, rather than adhering to the law regarding determining qualified borrowers. Not only is the settlement a victory for proponents of the False Claims Act as a necessary tool, but also for the American public.

Countrywide Financial Subsidiaries is not the only company being held responsible for its actions. Bank of America was also being investigated for its role in defrauding the government over the eligibility of homeowners involved with the Home Affordable Modification Program. It seems that even after BOA acquired Countrywide, the fraudulent practices did not end. The country is still reeling from the effects of the subprime mortgage crisis of 2008. Slowly the economy seems to be improving, but that is not the case for millions of Americans that became victims of practices like those utilized by Bank of America and Countrywide Financial. Were it not for the False Claims Act, the settlement may not have been this substantial and would not be on its way towards helping those borrowers in need. With the implementation of the Dodd-Frank Wall Street Reform bill and the strengthening of the False Claims Act, the tools are now available to expose and bring to justice these fraudulent acts.

See Also:
http://www.justice.gov/usao/nye/pr/2012/2012feb09.html

Recent Qui Tam Cases Part 1: Medicare and Medicaid

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A good way to understand what may qualify as a qui tam case is to consider some recent examples. Qui tam encompasses many, many areas (think about how many things the government pays individuals and companies to “git ‘r done”). We’ll try to focus on the hot areas that are seeing the most action right now.

First in this series is the white-hot area of Medicare and Medicaid fraud. There is big money at stake in this area, and it seems that some companies just can’t stop themselves from illicitly taking a huge helping of taxpayer dollars. Here are some recent cases.

McAllen Hospitals L.P., d/b/a/ South Texas Health System, a subsidiary of Universal Health Services Inc., announced in October 2009 that it would pay $27.5 million to settle a qui tam case. The qui tam whistleblower alleged that the hospital group illegally paid kickbacks to doctors in McAllen, Texas, to get the docs to refer patients to the group’s hospitals. These payments were disguised through a variety of sham contracts. Under the federal Stark Law, physicians are prohibited from referring Medicare/Medicaid patients to an entity with which the physician has a financial relationship (subject to a few exceptions).

Also in October 2009, four pharmaceutical companies agreed to pay $124 million to settle a qui tam suit alleging Medicare fraud. The companies, including Mylan Pharmaceuticals, UDL Laboratories, AstraZeneca Pharmaceuticals, and Ortho McNeil Pharmaceutical, were accused by a whistleblower of failing to pay rebates to state Medicaid programs. According to the Medicaid Drug Rebate Program, drugmakers must enter into a national rebate agreement with the Department of Health and Human Services in order for states to get federal funding for drugs (obviously drugmakers are eager to have their products dispensed in every state, so they agree to pay these rebates). The four drugmakin’ defendants failed to honor the rebates they were required to pay to the states, and this constituted fraud.

In November 2009, the DOJ intervened in a qui tam case against Virginia Medicaid providers. The suit alleged that the providers, Universal Health Services Inc., Keystone Marion LLC, and Keystone Education and Youth Services LLC committed Medicaid fraud while they were running a mental health treatment facility for young boys. Specifically, the providers were alleged to have provided substandard care in violation of state and federal Medicaid requirements, falsified records, and filed bogus Medicaid claims.

Also in November, the largest nursing home pharmacy in the country, Omnicare Inc., of Covington, Kentucky, and a drug company, IVAX Pharmaceuticals, agreed to pay a collective $112 million to settle claims that they were involved in kickback schemes to bilk Medicare in violation of the Anti-Kickback Statute. This qui tam suit alleged that the pharmacy solicited and received kickbacks from Johnson & Johnson in return for recommending to physicians that they prescribe J & J’s now-notorious anti-psychotic drug Risperdal to nursing home patients. The suit also alleged that the pharmacy got millions in kickbacks in exchange for agreeing to buy $50 million worth of drugs from IVAX.

Unfortunately for Johnson & Johnson, its kickback scheme with Omnicare has also led to a qui tam suit being filed against J & J itself. In January 2010, the government announced that it was joining the qui tam suit against J & J for paying kickbacks to Omnicare to push Risperdal and other drugs. That case is raising some other qui tam issues, mostly about which whistleblower was the first to file (each of the two whistleblowers who filed separate claims are maintaining that they filed first).

Finally, a dental management company that runs “Small Smiles Centers” across the country is probably not smiling after it agreed to pay $24 million to settle claims that it defrauded Medicaid by performing unnecessary services on children. FORBA Holdings LLC allegedly performed many dental procedures (e.g., root canals) on low-income kids that were either not medically necessary or were performed in a sub-standard manner. FORBA then submitted claims to Medicaid for reimbursement, hence the False Claims Act violation.

For additional information about about whistleblower law or a free case evaluation, please contact one of our False Claims Act lawyers.

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