Whistleblower Qui Tam Lawyer Blog
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U.S. District Judge Amy Totenberg recently fined two whistleblowers $1.6 million for sending e-mails to two reporters in Atlanta about their pending False Claims Act case while it was under seal.  The case at issue was filed under the qui tam provisions of the False Claims Act in 2006 by Victor Bibby and Brian Donnelly against numerous lending institutions including JPMorgan Chase & Co., Bank of America, Wells Fargo Bank, Wells Fargo Home Mortgage and Mortgage Investors Corporation.

The whistleblowers, employees of Georgia mortgage broker U.S. Financial Services, Inc., filed the complaint alleging that multiple mortgage lenders defrauded military veterans and the federal government in connection with a Veterans Affairs loan refinancing program.  As with all cases filed under the False Claims Act, the case was initially sealed for a period of 60 days while the government investigated and decided whether or not to intervene.  As is the norm in qui tam cases, the government obtained several extensions of the statutory seal period.

According to the Daily Report newspaper, almost four years after the case was initially filed, but while it was still under seal, the whistleblowers engaged in confidential correspondence with an investigative reporter and producer at a Fox affiliate television station in Atlanta.  Nothing was published by the press, however, until after the case became unsealed approximately one year later.

After five years of investigation, the government ultimately declined to intervene in the False Claims Act case, the case became unsealed, and the whistleblowers proceeded on their own.  Subsequently, the whistleblowers settled with all of the defendants except Wells Fargo and Mortgage Investors Corporation.  The government recovered approximately $161 million in the settlement.  The two whistleblowers shared in around $43 million as their reward under the qui tam provisions of the False Claims Act.  Sometime after the settlement, Wells Fargo learned of the whistleblowers’ communications with the news media while the case was under seal.  Wells Fargo then moved to dismiss the False Claims Act case citing the whistleblowers’ violation of the seal, despite the fact that news of the lawsuit was not disclosed until after the seal was lifted.

In her January 5, 2015 order, Judge Totenberg denied the dismissal, instead imposing a sanction of $1.6 million against the whistleblowers to be paid to the government within 75 days.  The judge stated that, by contacting the media while the case was sealed by law, the whistleblowers “tarnished and jeopardized their ‘whistleblower’ representative role on behalf of the government.”  Wells Fargo has since appealed the denial of its dismissal motion.

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According to the South Florida Business Journal, a California judge has approved the $68.5 million settlement of a whistleblower’s case against Office Depot alleging violations of the California False Claims Act.

Office supply giant Office Depot, headquartered in Boca Raton, Florida, was named in a whistleblower’s lawsuit filed under the qui tam provision of the California False Claims Act.  The whistleblower, David Sherwin, initially filed the qui tam complaint against Office Depot in March 2009, prior to its 2013 merger with Office Max.  The City of Los Angeles intervened in the lawsuit in 2012.

Pursuant to the First Amended Complaint-in-Intervention of the City of Los Angeles (“Complaint”), relator David Sherwin was a Florida resident and a former account manager for Office Depot.   The South Florida Business Journal reported that the whistleblower passed away in March 2014, but his estate continued to pursue this matter after his death.

According to the Complaint, the allegations against Office Depot stem from its participation in a contract with various California agencies through the U.S. Communities Government Purchasing Alliance (U.S. Communities).  According to its website, U.S. Communities is a purchasing cooperative that combines the buying power of more than 90,000 public agencies nationwide by offering the participating public agencies the ability to make purchases through existing, competitively solicited contracts between a supplier and a lead public agency.

According to the whistleblower’s complaint, between 1996 and 2010, Los Angeles County was the lead public agency for U.S. Communities’ largest contract – a contract to supply office and stationery products.  The County of Los Angeles awarded the contract to Office Depot after a competitive solicitation process designed to ensure that all public entities participating in the contract received the highest quality products and services at the lowest possible prices (the “Contract”).

The Complaint alleged that, after being awarded the Contract, Office Depot negotiated separate contracts with public entities outside U.S. Communities at lower prices than those contained in the Contract.  According to the government, Office Depot was required to revise the prices in the Contract to match those favorable prices; however, it did not do so.  In addition, the government claimed that Office Depot overstated its costs for certain items in violation of the Contract.  The government contended these were violations of the California False Claims Act.

Office Depot has agreed to pay $68.5 million to approximately 1,000 California public agencies to settle the allegations.  The whistleblower’s estate will receive approximately $23 million of the proceeds pursuant to the qui tam provisions of the California False Claims Act.

To read about state government fraud and whistleblower claims, click here.

 

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Three whistleblowers allege that Med-Care Diabetic & Medical Supplies, Inc. (“Med-Care”) committed Medicare fraud in violation of the False Claims Act.  Med-Care is a durable medical equipment supply company based in Boca Raton, Florida.  According to its website, Med-Care offers a ship-to-home service for various medical supplies including: diabetic testing products such as glucose meters, test strips, lancets and lancing devices; respiratory devices like nebulizers; and catheter and ostomy supplies.

The qui tam complaint filed in the U.S. District Court for the Southern District of Florida alleges that Med-Care violated Medicare’s conditions of payment by pressuring Medicare beneficiaries to accept medical supplies they did not want or need or without first obtaining a doctor’s prescription.

The False Claims Act complaint was initiated by three whistleblowers: Tiffany Bumbury, a former telemarketer in the New York call center of a Med-Care affiliate – East End Associates; Stanley Bernstein, a telemarketer at Med-Care from May 2010 to April 2014; and Jamie Camuccio, a former employee of Med-Care from January 2012 to February 2014. The whistleblowers allege that Med-Care and its principles defrauded the federal government by: engaging in unsolicited telemarketing of Medicare beneficiaries; providing illegal kickbacks to Medicare beneficiaries in violation of the Anti-Kickback Statute; paying illegal kickbacks in exchange for the referral of Medicare patients; and billing for unnecessary medical equipment.

Medicare rules prohibit medical equipment providers from cold-calling Medicare patients.  In fact, companies are only allowed to initiate calls to Medicare patients if very specific conditions are met, such as to resupply a product that the patient has previously requested.  According to the complaint, the telemarketers were guided by Danny Porush.  According the Palm Beach Post, Porush was the inspiration for the character portrayed by Jonah Hill in the movie “Wolf of Wall Street.”  Porush was the president and a director of now defunct Stratton Oakmont, Inc.

The federal government declined to intervene in the whistleblowers’ lawsuit.  If the whistleblowers are successful in their claims against the company, they may be entitled to share in any recovery as their reward under the qui tam provisions of the False Claims Act.

In addition to the pending civil claim, Med-Care was recently served with multiple search warrants by federal agents.  According to the Palm Beach Post, federal officials refused to disclose why Med-Care is being investigated.

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Iron Mountain Incorporated and Iron Mountain Information Management LLC (collectively “Iron Mountain”) has agreed to settle allegations by two whistleblowers in a qui tam lawsuit that it overcharged the government in violation of the False Claims Act.  According to the Justice Department, the allegations concern General Services Administration contracts under which Iron Mountain provided record management services to various government entities between 2001 and 2014.  The Justice Department alleged that Iron Mountain breached the contracts by providing inaccurate information about its sales practices during contract negotiations and overcharged the government for services provided.

Iron Mountain is a publicly-traded company headquartered in Boston, Massachusetts. Whistleblower Brent Stanley is a Massachusetts resident.  He was employed by Iron Mountain as an account executive from May 2001 to March 2009.  The second whistleblower, Patrick McKillop, is an Arizona resident who has been employed in the document storage industry for over 30 years.

According to the whistleblowers’ complaint filed in the United States District Court for the Eastern District of California, in its application for the initial contract in 2001 and the extension of the contract in 2006, Iron Mountain gave false, incomplete, and inaccurate information about its commercial pricing practices to the government.  As a result, the government claims it agreed to prices that were higher than it would have agreed to if Iron Mountain had provided truthful and accurate information.   In addition, the whistleblowers alleged that Iron Moutain failed to inform the government of lower prices it was offering to non-government, commercial customers and failed to provide these discounts to government purchasers, as required by the contract.

The government also alleged that Iron Mountain charged the government for storage that Iron Mountain claimed met the National Archives and Records Administration requirements when, in fact, it did not meet the requirements.

According to the Justice Department, Iron Mountain will pay $44.5 million to settle the allegations that it violated the False Claims Act.  As their reward under the qui tam provisions of the False Claims Act, the two whistleblowers will share in $8,010,000 of the settlement proceeds.

To learn more about whistleblower and False Claims Act cases, click here to watch our video What is Procurement Fraud?

 

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The State University of New York’s Research Foundation (“Research Foundation”) has agreed to settle claims brought by five whistleblowers in a qui tam lawsuit filed in 2010 under the False Claims Act that it knowingly submitted false statements to the federal government.  According to the Justice Department, the allegations relate to audits done by the Research Foundation on federally funded health care programs in New York State, such as Medicaid, and the Children’s Health Insurance Program.

According to the government, the Research Foundation is a not-for-profit company that supports research for the State University of New York.  The allegations relate to a contract between a Research Foundation program, the Center for Development of Human Services (“CDHS”), and the New York State Department of Health to provide reports to the federal government about eligibility for the state’s Medicaid and Children’s Health Insurance Programs.  Specifically, it was alleged by the whistleblowers that CDHS  manipulated audits it performed by pre-screening the cases and determining which cases to include in the audit, rather than using a random sampling as was intended.

According to the government, CDHS acknowledged in the settlement agreement that it submitted false statements about New York State’s eligibility error rates to the Centers for Medicare and Medicaid Services.  According to the complaint, CDHS falsely reported that there was an error rate in the Medicaid program of less than the maximum allowed rate of three percent, when in reality, the error rate exceeded twenty percent.

The whistleblowers, five former employees of the Research Foundation, filed a complaint under the qui tam provisions of the False Claims Act in 2010.  In the complaint, three of the former employees alleged they were retaliated against after challenging directives from their managers to alter data.

The Research Foundation has agreed to pay $3.75 million to settle the whistleblowers’ and government’s claims.

The whistleblowers, Ava Dock, Patricia Monks, Patrick Campion, Carol Mousseau, and James Ryan will share in $825,000 as their reward under the qui tam provisions of the False Claims Act.

To learn more about the False Claims Act, click here to watch our video What is the False Claims Act?

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The Justice Department announced that defense contractors Supreme Foodservice GmbH, Supreme Foodservice FZE, and their subsidiaries (collectively “Supreme”) have agreed to settle criminal and civil allegations by a whistleblower in a qui tam lawsuit that the Supreme entities violated the False Claims Act.  According to the Department of Justice, the allegations involved contracts to provide food and water to U.S. military member serving in Afghanistan and to provide fuel and transport other cargo to troops in Afghanistan.

According to the Justice Department, the criminal claims involved a contract between Supreme and the Defense Logistics Agency – Troop Support to provide food and water for U.S. troops serving in Afghanistan.  The government alleged that Supreme implemented a scheme to knowingly overcharge the U.S. for fresh fruits and vegetables and bottled water.  The government alleges that Supreme used a United Arab Emirates company, Jamal Ahli Foods Co., LLC, as an intermediary to obscure the inflated prices being charged to the government.  The government claims the U.S. was overcharged by approximately $48 million between July 2005 and April 2009.   In settlement of the criminal allegations, Supreme pleaded guilty to fraud against the U.S., conspiracy to commit fraud, and wire fraud.  Supreme agreed to pay $48 million in restitution, $10 million in criminal forfeiture, $96 million in criminal fines, and refund $38.3 million of overpayments on bottled water directly to the Defense Logistics Agency.

In addition to the criminal claims, a whistleblower, Michael Epp, filed a complaint under the qui tam provisions of the False Claims Act alleging that Supreme violated the False Claims Act.  The whistleblower is Supreme CmbH’s former Director, Commercial Divisions and Supply Chain. The whistleblower alleged that Supreme knowingly inflated the charges for supplying food and water to troops in Afghanistan.  In addition, the qui tam complaint alleged that Supreme failed to pass along rebates and discounts to the government as it was required to do during the period between June 2005 and December 2010.

Other Supreme subsidiaries also agreed to pay $20 million to settle allegations that they overbilled the government for fuel purchased by the Defense Logistics Agency and pay $25 million for allegedly submitting falsified billings for transporting food between the U.S. and Afghanistan.

The whistleblower will receive approximately $16.16 million of the settlement proceeds as his reward under the qui tam provisions of the False Claims Act.

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OtisMed Corporation (“OtisMed”) has agreed to pay over $80 million to resolve criminal and civil allegations by a whistleblower in a qui tam suit that it and one of its former executives violated the False Claims Act and Food, Drug and Cosmetic Act (“FDCA”).

According to the Stryker Corporation’s website, OtisMed is a biotechnology firm based in Alameda, California that focuses on customized products to assist orthopedic surgeons. OtisMed was founded in 2005.  Stryker acquired OtisMed in November 2009.

According to the Justice Department, the allegations relate to OtisMed’s distribution, with the intention to defraud and mislead, of adulterated medical devices in violation of the FDCA.  Specifically, OtisMed and one of its founders and former chief executive officer, Charlie Chi, were criminally charged with marketing and selling the OtisKnee Orthopedic Cutting Guide (“OtisKnee”) to surgeons throughout the U.S. after the product had been rejected by the Food and Drug Administration (“FDA”).  The OtisKnee was intended to be used in total knee replacement surgeries as a cutting guide for surgeons to assist them in making accurate bone cuts relative to the patient’s specific anatomy.

In October 2009, just before OtisMed’s acquisition by Stryker, whistleblower Richard Adrian filed a qui tam action under the False Claims Act alleging that between January 2006 and September 2009, OtisMed and Chi sold over 18,000 of the OtisKnee cutting guides without approval by the FDA for the product and falsely represented to purchasers that the product was exempt from FDA pre-market approval.

The Justice Department announced that OtisMed and Chi pleaded guilty in Newark, New Jersey federal court to violating the FDCA.  OtisMed was fined $34.4 million and ordered to $5.16 million in criminal forfeiture. Chi is scheduled to be sentenced in March 2015.

OtisMed agreed to pay $41.2 million, plus interest, to Medicare, TRICARE (the military’s insurance program), Federal Employee Health Benefits, and Medicaid, to settle the civil allegations raised in the whistleblower’s qui tam lawsuit.  Because the Medicaid program is jointly funded by the states and the federal government, the participating Medicaid states will share in $376,700 of the settlement amount. The whistleblower will receive approximately $7 million of the settlement as his reward under the qui tam provisions of the False Claims Act.

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The Justice Department announced that it has intervened in a qui tam lawsuit filed under the False Claims Act by a whistleblower against Air Ideal, Inc.  According to its website, Air Ideal, Inc. is a multi-regional construction company based in Winter Park, Florida that provides general construction services and has current annual revenue of over $10 million.

According to the complaint filed by the government, Air Ideal allegedly received government contracts set aside for companies located in a Historically Underutilized Business Zone (“HUBZone”) by falsely certifying that it was located in a HUBZone when it was not.

The HUBZone program helps small businesses in urban and rural communities gain preferential access to federal contracts.  It was enacted as part of the Small Business Reauthorization Act of 1997 and is overseen by the Small Business Administration (“SBA”).  Specifically, the SBA decides which small businesses qualify to receive HUBZone contracts and maintains a listing of all approved HUBZone businesses so that federal agencies can locate vendors.

In order to qualify as a HUBZone business, the following criteria must be met:

  • It must meet the SBA’s “small business” standards;
  • It must be owned and controlled at least 51% by U.S. citizens, a Community Development Corporation, an agricultural cooperative, or an Indian tribe;
  • Its principal office must be located within a HUBZone; and
  • At least 35% of its employees must reside in a HUBZone.

In May 2013, Patricia Hopson, an employee of Pavkov Contracting Co., an Air Ideal competitor, filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act against Air Ideal and its co-owner, Kim Amkraut.  In her complaint, the whistleblower claimed that in performing her duties as a project coordinator at Pavkov, she allegedly learned that Air Ideal listed an address in its HUBZone application that was nothing but a “virtual office” that provided mail forwarding services, but at which, no Air Ideal employees actually worked.  The whistleblower also alleged that the actual location of Air Ideal was not in a designated HUBZone.

The federal government filed its own complaint in the whistleblower’s case alleging that Air Ideal obtained millions of dollars’ worth of contracts from the U.S. Coast Guard, U.S. Army, U.S. Department of the Interior, and U.S. Army Corps of Engineers using its allegedly fraudulently procured HUBZone certification.

If the government is successful in its case against Air Ideal, the whistleblower may be entitled to a reward under the qui tam provisions of the False Claims Act.

 

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The Justice Department announced that the Maricopa County Community College District (“MCCCD”) in Arizona has agreed to settle a qui tam case alleging it had knowingly submitted false claims to the government in order to receive federal funds.  MCCCD, based in Phoenix, operates the community college system in Maricopa County, Arizona.  According to its website, MCCCD is one of the largest providers of higher education in the United States, with 10 colleges and 2 skill-training centers.  According to the Department of Justice, MCCCD submitted false claims to the Americorps program run by the Corporation for National and Community Service (“CNCS”) in order to receive service-learning grants and awards.

CNCS is a federal agency established in 1993 that administers several service-oriented programs including Senior Corps, Americorps, and the Social Innovation Fund.   In 2011, Christine Hunt, an employee of Paradise Valley Community College, part of the MCCCD system, filed a complaint under the qui tam provisions of the False Claims Act alleging that MCCCD knowingly submitted falsified documents to the Americorp’s Project Ayuda program, a student community-service work program involving nearly 1,000 MCCCD students.    Specifically, the whistleblower alleged that she witnessed another MCCCD employee forging signatures and overstating the number of community-service work hours performed by students.

Students participating in the Project Ayuda program could receive awards of up to $5,350 in return for performing community service. It was alleged, however, that students received credit for work they did not actually perform, were credited for community-service work when they were doing schoolwork, or received credit for community service they performed prior to their involvement with the program.

The whistleblower filed her complaint under the qui tam provisions of the False Claims Act which permit individuals to bring lawsuits on behalf of the government and share in any recovery.  MCCCD has agreed to pay $4.08 million to settle the allegations.  In this case, the whistleblower will receive approximately $775,000 as her reward under the qui tam provisions of the False Claims Act.

To read more about education fraud or other types of false claims submitted to the government, click here to view our frequently asked questions or view our You Tube page .

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A home health agency, CareAll Management LLC, has agreed to settle a whistleblower’s qui tam lawsuit alleging it upcoded patient billings submitted to Medicare and Medicaid in violation of the False Claims Act.   According to its website, CareAll is one of the largest providers of home health services in Tennessee with 25 locations throughout the state.

In 2012, the former director of services for CareAll’s Knoxville office and a registered nurse, Toney Gonzales, filed a whistleblower action under the qui tam provisions of the False Claims Act.  In his lawsuit, Mr. Gonzales alleged that CareAll and its affiliates, overstated the severity of home healthcare patients’ conditions and knowingly submitted upcoded billings to government healthcare programs such as Medicare and Medicaid.  Upcoding is defined as the practice of assigning an inaccurate billing code to a medical procedure to increase reimbursement to the medical provider.

In addition, the whistleblower’s complaint also alleged that CareAll provided home health services that were not medically necessary.  Medicare and Medicaid will only pay for home healthcare services that are medically necessary.

According to the complaint, the wrongdoing occurred from 2006 to 2013.  The government contended that the upcoded billings and invoices for services that were not medically necessary were false submissions made in violation of the federal and Tennessee False Claims Act.   CareAll, agreed to pay $25 million to the federal government and the state of Tennessee to settle the whistleblower’s claims.

In 2012, CareAll settled another False Claims Act lawsuit alleging that CareAll and its affiliates knowingly submitted falsified cost reports for fiscal years 1999, 2000 and 2001 to support their Medicare billings. The United States alleged that the cost reports were false because they knowingly hid the relationship between the management company and the home health agencies.   CareAll previously paid $9.38 million to settle those allegations.

In addition to the monetary payment, CareAll agreed to be bound by a corporate integrity agreement with the Department of Health and Human Services-Office of Inspector General.

Of the $25 million settlement amount, the whistleblower Tony Gonzales will receive approximately $3.9 million as his reward under the qui tam provisions of the False Claims Act.

To read more about healthcare fraud, click here to view our Frequently Asked Questions page.