Whistleblower Qui Tam Lawyer Blog
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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.

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Dignity Health (“Dignity”), formerly known as Catholic Healthcare West, has agreed to settle allegations by a whistleblower in a qui tam lawsuit that 13 of its hospitals submitted false claims to Medicare and TRICARE in violation of the False Claims Act.

According to its website, Dignity, headquartered in San Francisco, California, is the largest hospital provider in California and the fifth largest health system in the nation.  The whistleblower’s allegations involved 13 of Dignity’s 39 hospitals in California, Arizona, and Nevada.

In 2009, Kathleen Hawkins, a former employee of Dignity, filed a whistleblower lawsuit under the qui tam provisions of the False Claims Act in the Northern District of California. According to the whistleblower, 13 of Dignity’s hospitals knowingly overcharged government healthcare programs, such as Medicare and TRICARE (the military healthcare program), for inpatient admissions when care should have been given on an outpatient basis.

The government claims that from 2006 to 2010, the hospitals submitted claims for inpatient services provided to patients who underwent elective cardiovascular procedures when the procedures should have been submitted as outpatient procedures.  In addition, the complaint alleged that four of the hospitals also knowingly overcharged the government for minimally-invasive kyphoplasty procedures used to treat compression fractures by billing them as inpatient, rather than outpatient, procedures.

Dignity will pay $37 million to settle the False Claims Act violation allegations.  In addition, Dignity has entered into a five-year corporate integrity agreement with the U.S. Department of Health and Human Services-Office of Inspector General.

The whistleblower will receive approximately $6.25 million of the settlement proceeds as her reward under the qui tam provisions of the False Claims Act.

Click here to read our Frequently Asked Questions about False Claims Act and Whistleblower cases.

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The Department of Justice announced that DaVita Healthcare Partners, Inc. (“DaVita”) has agreed to settle allegations that it violated the False Claims Act and the Anti-Kickback Statute for $350 million, plus the civil forfeiture of $39 million. The allegations were first made in a lawsuit filed under the qui tam provisions of the False Claims Act by whistleblower, David Barbetta, a former Senior Financial Analyst in DaVita’s mergers and acquisitions department.

According to DaVita’s website, it is one of the leading providers of dialysis services to patients with chronic kidney disease and end stage renal failure. It has 2,119 outpatient dialysis centers in 46 states and the District of Columbia.  DaVita is headquartered in Denver, Colorado and acquired Healthcare Partners, an operator of medical groups in several states, in 2012.

In his qui tam complaint, the whistleblower alleged that DaVita violated the False Claims Act by submitting claims for payment involving the referral of patients from physicians with whom DaVita had illegal kickback arrangements.  According to the government, DaVita engaged in multiple complicated schemes to provide improper compensation to physicians to induce them to refer patients to DaVita’s dialysis centers.  For example, the government alleged that DaVita identified medical practices with a significant number of patients in a specific geographical area suffering from renal disease and offered to engage in joint venture dialysis clinics to which the physicians groups would then refer their dialysis patients.  The government claimed the joint ventures consisted of DaVita either acquiring an interest in an existing dialysis clinic owned by the physician or the sale of an interest in a DaVita clinic to the physician. The complaint stated that the physicians were often paid to serve as medical directors of the joint venture clinics.  The government also alleged that DaVita entered into non-compete and non-disparagement agreements with the physicians in which the physicians agreed that they would not refer their patients to any non-DaVita dialysis provider.

The Anti-Kickback Statute prohibits offering or providing anything of value to physicians in order to induce patient referrals. DaVita has agreed to pay $350 million to settle the civil allegations of violation of the False Claims Act and the Anti-Kickback Statute.  In addition, DaVita has agreed to a civil forfeiture of $39 million in settlement of the Justice Department’s criminal investigation.

The whistleblower will receive a percentage of the settlement proceeds as his reward under the qui tam provisions of the False Claims Act.

Check out our video for more information on the False Claims Act.

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The Justice Department announced that the Boeing Company has agreed to settle four whistleblowers’ qui tam claims alleging violations of the False Claims Act.  Boeing has agreed to pay the federal government $23 million to resolve the allegations that it submitted false claims to the United States for work on government contracts.

Boeing is a leading manufacturer of commercial jetliners and defense systems and the largest global aerospace company.  According to its website, Boeing, headquartered in Chicago, Illinois, employs approximately 169,000 people in 65 countries. According to the whistleblowers, in 2005, over 50% of Boeing’s revenues were generated from contracts with the United States government.

In 2007, present and former Boeing employees residing in Texas, filed a qui tam complaint under the provisions of the False Claims Act against Boeing.  The whistleblowers alleged that Boeing improperly charged the federal government for labor costs associated with contracts with the United States Air Force performed at Boeing’s Aerospace Support Center in San Antonio, Texas.  The contracts related to maintenance and repair of the C-17 Globemaster aircraft, used by the military to carry large equipment, supplies and troops worldwide.

Specifically, the complaint alleged that Boeing knowingly misrepresented that work was performed on one task when, in reality, the work was performed on a different task payable under a different contact type. The whistleblowers claimed that Boeing shifted costs and tasks in this manner to increase its profits, to the detriment of the federal government.  According to the government, the knowing submission of invoices containing improperly coded charges violated the False Claims Act.

The four whistleblowers, Clinton Craddock, Fred Van Shoubrouek, Anthony Rico, and Fernando de la Garza, will share in $3,910,000 of the settlement proceeds as their reward under the qui tam provisions of the False Claims Act.  Craddock and Van Shoubrouek are current Boeing employees.  De La Garza is a former Boeing employee.  Rico was employed by a Boeing subcontractor, Aerotek.

What is Procurement Fraud?

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Extendicare Health Services, Inc. (“Extendicare”) and its subsidiary Progressive Step Corporation (“ProStep”) have agreed to settle two whistleblowers’ qui tam claims that they violated the False Claims Act by billing government health care programs for substandard nursing services and billing for rehabilitation therapy services that were not medically necessary or reasonable.

According to the Extendicare website, its United States operations are headquartered in Milwaukee, Wisconsin.  Through its subsidiaries, it is made up of 156 skilled nursing, assisted living, and rehabilitation facilities in eleven states.   ProStep provides inpatient rehabilitation services, such as physical and occupational therapy and speech-language pathology services, through Extendicare’s skilled nursing facilities.

Skilled nursing facilities, most often called “nursing homes,” are licensed healthcare facilities that offer short-term care for individuals who need rehabilitation services and long-term care for patients with serious or persistent health conditions, such as Alzheimer’s Disease, who cannot be cared for at home or in an assisted living facility.

According to the Justice Department, two whistleblowers brought separate cases under the qui tam provisions of the False Claims Act alleging that Extendicare had violated the False Claims Act. Tracy Lovvron and Donald Gallick, both former employees of Extendicare, filed the qui tam complaints in Pennsylvania and Ohio, respectively.

According to the government, between 2007 and 2013, Extendicare billed Medicare and Medicaid for materially substandard skilled nursing services (e.g., it failed to have an adequate number of skilled nurses for the number of skilled nursing residents, and it failed to follow the appropriate protocols to prevent falls and pressure sores) and submitted claims for rehabilitation services that were not medically necessary.

The government claims that the violations occurred in 33 nursing homes in eight states:  Indiana, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania, Washington, and Wisconsin. The Justice Department announced that Extendicare and ProStep have agreed to pay $32.3 million to the federal government to settle the allegations.  The Medicaid programs of the eight states will share in a $5.7 million settlement.  In addition, Extendicare and ProStep will enter into a facility-wide five-year corporate integrity agreement.

As their reward under the qui tam provision of the False Claims Act, the whistleblowers will share in approximately $2 million.

To find out how to blow the whistle on healthcare fraud, click here.