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The Medical Center of Southeastern Oklahoma (“MCSO”) and its parent company, Health Management Associates, Inc. (“HMA”) have agreed to settle claims by a whistleblower in a qui tam lawsuit that they billed Medicaid for procedures that were either not medically necessary or were not performed in violation of the False Claims Act.  MCSO is an acute care hospital located in Durant, Oklahoma.   An acute care hospital provides short-term treatment for a severe injury or episode of illness, an urgent medical condition, or during recovery from surgery.

Medicaid is a health care program for people with low income in the United States.  It is jointly funded by the federal government and the states, and managed by the individual states.  The State of Oklahoma’s Medicaid program is known as SoonerCare.

In 2012, a whistleblower filed a qui tam lawsuit alleging that MCSO and HMA billed SoonerCare for unnecessary surgical procedures performed by Daniel Castro, M.D., an otolaryngologist (also known as an ear, nose and throat physician), and hospital services related to the unnecessary surgeries.  Specifically, the whistleblower, Sandra Simmons, alleged that Dr. Castro performed functional endoscopic sinus surgeries (“FESS”) that were not medically necessary on children who were Medicaid beneficiaries.  The whistleblower alleged that MCSO, HMA and Dr. Castro submitted claims to the SoonerCare Medicaid program for the unnecessary surgical procedures and related hospital services, and for services that were not actually performed.   According to the whistleblower, the false claims were submitted between 2005 and 2010. Dr. Castro has not had medical privileges at MCSO since 2010.

MCSO and HMA will pay $1,065,000 to the federal government and $435,000 to the State of Oklahoma to settle the allegations.  The whistleblower will receive approximately $160,000 of the settlement proceeds as her reward under the qui tam provisions of the False Claims Act.

The False Claims Act permits whistleblowers, known as relators, to file suit on behalf of the government against individuals or entities who commit fraud against a government agency.  Typically, whistleblowers are entitled to a percentage of any recovery as a reward.

If you know of fraud on the government, click here to see if you may have a False Claims Act case.

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Clothing importers Dana Kay, Inc. (“Dana Kay”) and Siouni & Zar d/b/a Danny & Nicole (“Danny & Nicole”) (collectively “Companies”) have agreed to settle claims by a whistleblower in a qui tam complaint that they violated the False Claims Act by knowingly underreporting the value of the clothing they imported to avoid paying customs duties to the United States. 

Dana Kay and Danny & Nicole both headquartered in New York, are importers of women’s clothing under the labels Dana Kay, Danny & Nicole, Le Bos, Gabby Skye, Zarr Collection, Just Taylor, DN Design, Julian Taylor, and Taylor Dresses.  The clothing is sold at U.S. retailers including J.C. Penney, Chico’s, Ann Taylor, Dress Barn, and Cache.  According to the Justice Department, the Companies imported approximately 5 million garments in each of the previous 8 years.

Clothing importers like Dana Kay and Danny & Nicole are required to pay customs duties of 21.985%-28.285% for each garment they import into the U.S. for commercial purposes according to the Harmonized Tariff Schedule of the United States.  The government requires that all import companies submit declarations under oath that the prices reflected in their invoices are accurate.

In 2011, a former employee of Dana Kay, Michael Krigstein, filed a whistleblower complaint under the qui tam provisions of the False Claims Act.  The Department of Justice filed its Complaint in Intervention in January 2014.  The government and the whistleblower, a garment cutter with the Dana Kay since 2006, alleged that the Companies knowingly schemed to evade the payment of customs duties to the United States during the period 2003 to 2012.

Specifically, the complaints alleged that the Companies knowingly understated the value of each garment imported into the United States by approximately $2.50. The underreporting of the value resulted in an alleged underpayment of customs fees to the government of about $3 million per year.  The government contended that each submission of an invoice containing inaccurate prices to the government was a violation of the False Claims Act.

The settlement agreement entered into by the parties reflects that the companies have agreed to pay the government $10 million to settle the allegations.  As his reward under the qui tam provisions of the False Claims Act, the whistleblower will receive approximately 23% of the amount recovered by the government.

To read about other types of government fraud, click here.

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California-based CRC Health Corp. (“CRC”) has agreed to settle allegations by a whistleblower in a qui tam lawsuit that it submitted false claims to Medicaid in violation of the False Claims Act. Specifically, the whistleblower claimed that CRC knowingly billed Medicaid for substance abuse treatment that was either not provided or for treatment that was not provided by properly qualified and licensed personnel.

CRC is the owner and operator of a residential substance abuse treatment facility in Burns, Tennessee called New Life Lodge (“New Life”). In 2011, Angie Cederoth, a former New Life employee, filed a whistleblower complaint under the qui tam provisions of the False Claims Act.

The False Claims Act permits private individuals to file qui tam lawsuits on behalf of the government against individuals or entities that may be committing fraud against the government. The individual who pursues the action, called a relator, is typically entitled to a percentage of any monies recovered by the government as a reward.

In the whistleblower’s complaint, she alleged that, from 2006 to 2012, New Life submitted claims to Medicaid for substance abuse treatment services that were either not provided or were provided by individuals who were not properly licensed therapists in the State of Tennessee.

In addition, the government alleged that New Life violated Tennessee state regulations by not having a licensed psychiatrist available to patients, by exceeding the Tennessee Department of Mental Health patient-staff ratios, by billing for Tennessee Medicaid patients in excess of New Life’s state-licensed bed capacity, and for allegedly double-billing Medicaid for prescription medications given to patients at the facility.

Medicaid is a health care program for individuals and families who meet specific low income criteria. It is jointly funded by federal and state governments, and managed by the states. CRC has agreed to pay $9.25 million to the federal government and the State of Tennessee Medicaid program to settle the whistleblower’s allegations.
The whistleblower will receive approximately $1.5 million as her reward under the qui tam provisions of the False Claims Act.

To read more about the types of government fraud that may violate the False Claims Act, click here.

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Hope Cancer Institute (“Hope”) and its owner Dr. Raj Sadasivan have agreed to settle allegations by three whistleblowers in a qui tam lawsuit that they violated the False Claims Act and committed fraud against the government when they submitted falsified claims to Medicare and Medicaid.  Hope, located in Kansas City, Kansas, and Sadasivan have agreed to pay $2.9 million to settle the government’s and whistleblowers’ allegations that they billed the government for larger doses of cancer drugs than were actually given to patients, and falsified the amount of time spent treating patients.

According to The Kansas City Star, three employees working in Hope’s office first uncovered the alleged fraud when they discovered medical records for a patient none of the employees recognized. In 2012, the employees, Krisha Turner, Crystal Dercher, and Amanda Reynolds, filed a qui tam lawsuit under the provisions of the False Claims Act against Hope and Sadasivan.

According to the whistleblowers’ lawsuit, they saw Sadasivan physically alter medical records with scissors and tape before he photocopied and submitted the altered records to Medicare and other government health care programs. Specifically, the whistleblowers alleged that they discovered 13 patients whose medical records had been altered to reflect that the patients received 1,000 milligrams of the intravenous chemotherapy drug Rituxan, when the patients had only received doses of 500 milligrams.  The government contends Sadasivan overbilled the government by $145,000 for each patient.

In addition, according to the Justice Department, Hope and Sadasivan also submitted claims to Medicare and Medicaid for the chemotherapy drugs Avastin and Taxotere that were not given to patients.  The government alleged that employees of Hope were instructed to bill for a predetermined amount of each drug at a specific dosage level, even if a lower dosage was given to the patient.

According to The Kansas City Star, Sadasivan also billed Medicare at a higher rate for more involved 25-minute patient visits when in reality, he typically spent about 10 minutes with each patient.  10-minute patient visits are billed at a lower rate.

The three whistleblowers will share in a percentage of the $2.9 million settlement proceeds as their reward under the qui tam provisions of the False Claims Act.

If you know of government fraud, click here to see if you may have a valid qui tam claim.

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The Justice Department announced that the United States has intervened in two whistleblowers’ qui tam lawsuit alleging that a durable medical equipment supplier, Orbit Medical Enterprises, Inc. (“Orbit Medical”) and its former vice president and sales manager, Jake Kilgore, violated the False Claims Act.

According to its website, Orbit Medical based in Salt Lake City, Utah, specializes in the distribution of durable medical equipment such as power wheelchairs, mobility aids like canes and walkers, in-home oxygen tanks, and other home medical equipment. In 2010, two former employees of Orbit Medical filed a qui tam lawsuit in the United States District Court for the District of Utah alleging that Orbit Medical and Kilgore increased the company’s power wheelchair sales by falsifying physician prescriptions and supporting documentation.

Medicare Part B covers durable medical equipment such as power-operated wheelchairs.  In order to be eligible for Medicare coverage, a physician must perform a face-to-face examination of the Medicare beneficiary and provide a written prescription for the power wheelchair.

According to the whistleblowers’ qui tam suit, Kilgore directed Orbit Medical’s sales representatives to knowingly alter physician prescriptions and supporting paperwork so that its power wheelchair claims would be covered and paid for by federal health care programs such as Medicare, the Federal Employees Health Benefits Plan, and the Defense Health Agency. The government contends that Orbit’s submissions to federal government programs were false claims in violation of the False Claims Act.  Specifically, the whistleblowers allege that Orbit staff created documents purporting to falsely certify that physicians examined patients in person, altered prescriptions to falsely show medical necessity for power wheelchairs, and forged physicians’ signatures on prescriptions.

In October 2013, a federal grand jury in Utah indicted Kilgore for health care and wire fraud related to his time at Orbit Medical.  According the Federal Bureau of Investigation, the scheme allegedly resulted in the payment of more than $15 million by Medicare to Orbit.

If the government is ultimately successful in its claims against Orbit Medical, or if the case is settled, the whistleblowers, Dustin Clyde and Tyler Kackson,  may be entitled to receive a percentage of any recovery under the qui tam provisions of the False Claims Act.

To read more about healthcare fraud, click here.

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A New York federal judge has ruled that the bankruptcy court erred when it allowed Hawker Beechcraft Corp. (“Hawker”) to discharge damages and penalties that could stem from a whistleblowers’ qui tam lawsuit alleging it violated the False Claims Act. 

In 2007, Donald Minge and David Kiehl, former employees of TECT Aerospace and TECT Wellington (collectively “TECT”), filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act against TECT and Hawker. TECT is a government subcontractor that manufacturers airplane parts for airplane manufacturers such as Hawker.  According to the qui tam complaint, in January 1996, Hawker was awarded a contract to provide T-6A and King Air aircraft to the U.S. Air Force and the U.S. Navy’s Joint Primary Aircraft Training System program.

According to the complaint, Hawker and it subcontractors, such as TECT, were to perform the contact pursuant to certain drawings and specifications.  The whistleblowers’ complaint alleged that TECT and Hawker knowingly misrepresented to the federal government that the airplanes they provided to the government complied with contract specifications, when, in fact, they did not.

Specifically, the whistleblowers alleged that wing spars for the aircraft, the part that gives the wing of the aircraft its strength, were “hot formed,” a process that can cause wrinkles in the metal, and workers used hammers and crowbars to pound the wrinkles out, so the parts would pass inspection. According to the complaint, this process did not comply with manufacturing specifications.  The whistleblowers alleged that TECT and Hawker submitted false claims to the government when it certified that the planes complied with contract specifications when they did not.

In 2012, Hawker filed for Chapter 11 bankruptcy protection.  The bankruptcy court found that debt potentially due to the federal government as a result of the False Claims Act case was dischargeable.  Hawker emerged from bankruptcy protection in February 2013 and was sold to Textron, the parent company of Cessna.

The whistleblowers subsequently appealed.  U.S. District Judge P. Kevin Castel determined that the qui tam claims should not be discharged in bankruptcy because the whistleblowers plainly alleged fraud by the debtor in a contract with a government agency.  The proceeding was remanded back to the bankruptcy court for further proceedings.

If the whistleblowers are ultimately successful, they will receive a portion of any monies recovered by the government as their reward under the qui tam provisions of the False Claims Act.

If you know of government fraud, click here to see if you may have a whistleblower claim.

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Okland Construction headquartered in Utah has agreed to settle allegations made by a whistleblower in a qui tam lawsuit that it violated the False Claims Act in connection with the Small Business Administration’s (“SBA”) Section 8(a) Program for Small and Disadvantaged Businesses.

The SBA’s Section 8(a) Program is a business development program designed to assist companies that are majority owned and controlled by individuals that are socially and economically disadvantaged, as defined by the SBA. Section 8(a) approved companies are eligible to receive sole-source contracts (no-bid contracts) up to a maximum of $4 million for goods and services contracts and $6.5 million for manufacturing contracts.

Smaller 8(a) approved firms are permitted to form joint ventures with large business “mentors” to bid on and perform contracts. The Mentor-Protégé Program enhances the ability of disadvantaged firms to perform larger prime contracts and benefits new companies by demonstrating how experienced businesses operate.

According to Fox Business, Okland entered into a mentor-protégé arrangement with Saiz Construction in 2002, but did not form an SBA-approved joint venture.  Without an approved joint-venture arrangement, mentor and protégé entities cannot jointly bid and perform 8(a) contracts that are set aside solely for 8(a) approved businesses.

In 2011, Saiz Construction and its owner Abel Saiz filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act alleging that Okland did not form a qualifying joint venture with Saiz Construction and was not eligible to jointly bid or perform the primary functions on multiple set aside contracts with Saiz Construction.  The government alleged that Okland prepared the bids for the contracts, provided the project managers, submitted invoices and preformed accounting functions on the contracts.  According to the whistleblower, Okland concealed its extensive involvement in performing the 8(a) contracts by misrepresenting that its employees were actually employees of Saiz Construction.  The government contended these misrepresentations were false claims submitted in violation of the federal False Claims Act.

Okland has agreed to pay $928,000 to resolve the allegations.  As their reward under the qui tam provisions of the False Claims Act, Saiz Construction and Abel Saiz will share in $148,480 of the settlement proceeds.

To read more about set aside contract fraud, click here.

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Tenet Healthcare Corporation and several of its affiliates have agreed to settle allegations by a whistleblower in a qui tam lawsuit that the entities violated the Stark Law, the Anti-kickback Statute, and the False Claims Act by engaging in improper financial relationships with certain physicians. According to the Settlement Agreement, the Defendants Tenet Healthcare Corporation, Tenet Healthsystem GB, Inc. Tenet South Fulton, Inc., Tenet Hialeah Healthsystem, Inc., Lifemark Hospitals of Florida, Inc., Tenet HealthSystem North Shore, Inc., Tenet Good Samaritan, Inc., Tenet St. Mary’s Inc., Brookwood Center Development Corporation, Eastern Professional Properties, Inc., AMISUB (SFH), Inc., Tenet Hospitals Limited, San Ramon Regional Medical Center, Inc. and Los Alamitos Medical Center (collectively “Tenet”) have agreed to pay $4,000,000 to settle the whistleblower’s allegations.  

The Settlement Agreement reflects that the whistleblower, Marc Osheroff, filed a lawsuit under the qui tam provisions of the federal False Claims Act, as well as the state False Claims Acts of Florida, California, Texas, and Tennessee in July 2009.  The United States, Florida, California, Texas, and Tennessee declined to intervene in the qui tam action.  The whistleblower chose to proceed with the case on his own.

The whistleblower alleged that Tenet engaged in improper financial relationships with numerous physicians in violation of the Stark Law and the Anti-kickback Statute.  Specifically, the whistleblower alleged that, between 2005 and 2013, Tenet entered into medical office building leases with the physicians at rates that were below fair market value.  Tenet then allegedly submitted false claims to Medicare for inpatient and outpatient services referred by those same physicians, in violation of the False Claims Act.

The Tenet hospitals identified in the Settlement Agreement include Atlanta Medical Center, South Fulton Medical Center, Hialeah Hospital, Palmetto General Hospital, North Shore Medical Center, Good Samaritan Medical Center, St. Mary’s Medical Center, Saint Francis Hospital, Doctors Hospital at White Rock Lake and San Ramon Regional Medical Center.

As his reward under the qui tam provisions of the False Claims Act the whistleblower will receive $1,000,000 of the settlement proceeds.  In addition, Tenet will pay an additional $1,000,000 for the whistleblower’s attorneys’ fees and costs.

To read more about healthcare fraud, click here.