WHISTLEBLOWER QUOTE OF THE DAY:

“Whistleblowers can receive an award not only when their tip initiates an investigation, but also when they provide new information or documentation that advances an existing inquiry.”

Andrew Ceresney, Director of the SEC’s Division of Enforcement
 

DAILY WHISTLEBLOWER HEADLINES:

Whistleblower Earns $3.5 Million Award for Bolstering Ongoing Investigation

The Securities and Exchange Commission today announced a whistleblower award of more than $3.5 million to a company employee whose tip bolstered an ongoing investigation with additional evidence of wrongdoing that strengthened the SEC’s case.

The SEC noted that whistleblowers should be encouraged to come forward and report allegations of potential securities laws violations even if they think the SEC may already be looking into it.

“Whistleblowers can receive an award not only when their tip initiates an investigation, but also when they provide new information or documentation that advances an existing inquiry,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “This particular whistleblower’s tip substantially strengthened our ongoing case and increased our leverage during settlement negotiations with the company.” read more »

Road building giant to pay $2.2M settlement

One of the state's largest road building companies agreed to pay a $2.25 million fine to settle fraud claims related to minority contracting work.

Mountain State Contractors, which is a subsidiary of Mt. Juliet-based Jones Brothers, reached the settlement after two years of talks with the U.S. Attorney's Office.

The investigation stemmed from a federal whistleblower suit in which a Jones Brothers executive claimed he was told to falsify documents to make it seem as if a minority contractor was doing work that was actually performed by Jones Brothers. Federal contracting laws require that a percentage of federally funded road projects go to small, minority or women-owned firms.

The Tennessean uncovered the federal investigation last year after a search warrant was unsealed. The search warrant was for agents to seize computers and records from the College Grove offices of G&M Associates.

According to the search warrant, G&M and Jones Brothers conspired to make it appear that G&M's workers were doing work on projects for the Tennessee Department of Transportation and the Metro Nashville Airport Authority. The companies went so far as to have Jones Brothers' workers put G&M magnets on their trucks, according to the search warrant. read more »

Whistle-blower accuses health-care systems of knowingly submitting false claims

A Clemmons whistle-blower defended the viability of a complaint in federal court by saying two health-care systems “knowingly” participated in submitting fictitious cost-report claims to Medicare and Medicaid.
Joseph Vincoli’s first lawsuit was filed in June 2009 in the Middle District of N.C. against North Carolina Baptist Hospital and Carolinas Healthcare Systems of Charlotte.
 
The systems submitted their dismissal requests April 8, citing “fundamental deficiencies” in Vincoli’s second amended complaint filed Feb. 4.

Vincoli provided additional details in his response, filed Thursday, about how he figured out the alleged fictitious claims were occurring.
 
A cost report is submitted by the hospital to Medicare. If a plan is self-administered, the payments for domestic care are to be reported as unrecovered cost. Payments to itself are considered a related party transaction.
Among his projections is that Baptist had $179.2 million in cost overstatements over a 13-year period.
 
Vincoli repeated allegations that current and former Baptist officials are attempting to “belittle” him as a major part of Baptist’s defense strategy. He said that includes efforts to “blacklist” him in job opportunities, such as a job with the N.C. Department of Public Safety in which he was fired without notice in December 2013.
 
More information about those allegations, can be found at www.journalnow.com.
Vincoli worked at Baptist as its managed-care director from July 2006 until his job was terminated in October 2007. read more »

As Feds Crack Down On For-Profit College, A Founder Heads To Prison For Fraud

A federal judge's ruling in Florida has brought a new development in the various government investigations of the for-profit college industry: prison time for the school's founder.

Alejandro Amor, the founder of a college called FastTrain in South Florida, was sentenced last week to eight years in federal prison for fraud.

Court papers say FastTrain, which closed down in 2012, engaged in deceptive advertising and pressure tactics, such as hiring former strippers to recruit for the school. Investigators found that the company forged signatures, enrolling people who were not qualified for college and more than 1,000 students who hadn't even finished high school. The school had collected some $35 million in student loans and federal financial aid. The judge's ruling concluded that millions of dollars of that money had effectively been stolen.

Amor's lawyer had argued that rogue employees were responsible for the fraud. Three former employees had earlier been convicted. The FastTrain case is extreme, and the tactic of criminal charges is so far unusual. (There is a second case, also in Miami, where the founder of now-shuttered Dade Medical College was sentenced to house arrest for illegal bundling of campaign contributions.)

But allegations of misleading claims and deceptive advertising are not unusual at all.

They are part of a multiagency assault mounted by the Obama administration's Department of Education, the Federal Trade Commission, many states and the federal Consumer Financial Protection Bureau, which was formed after the financial crisis in 2008. An interagency task force was announced in 2014, and the Education Department announced a new "enforcement unit" in February of this year, with a director from the FTC.
 
As of last June, 28 for-profit colleges were under investigation, according to a report from the Brookings Institition.

This list includes some of the very biggest names in the business: Apollo Group (operators of the University of Phoenix), DeVry and ITT. All three companies have denied the allegations and say they are cooperating fully with investigators. read more »

News Analysis: Be Nice to Whistleblowers

"If you saw a woman over the age of 40 with a box of papers in the waiting room, that was a good case," mused a former IRS agent on the utility of vengeful ex-wives as whistleblowers. Readers will recall that the protagonist in the movie The First Wives' Club nailed her ex-husband by ratting him out to the IRS.
Now the IRS wants to welcome all kinds of whistleblowers, according to the discussion at the May 1 OffshoreAlert conference in Miami Beach. The IRS whistleblower program is celebrating its 10th anniversary. Nonetheless, practitioners still complain about an unwillingness to take hard cases, lack of communication, and slowness in the payment of awards.

"They did not put me here to fail," said Lee D. Martin, national director of the IRS whistleblower program. "We're working cases," said Martin, who has been in the post since August 2015.

Martin's office, which has a staff of 61, including 19 senior analysts, rejected 10,615 claims in 2015, nearly 75 percent of them for lack of actionable claim, according to its 2015 report 2016 TNT 28-18: Other IRS Documents. Martin explained that of this number, 53 percent were rejected for lack of specificity, 11 percent because the information was already known, and 10 percent for falling below the $2 million deficiency threshold. A further 7 percent were rejected because the statute of limitations had expired.

Dean Zerbe of Zerbe, Fingeret, Frank & Jadav PC and Bryan C. Skarlatos of Kostelanetz & Fink LLP complained about the lack of communication during the time it takes to complete a case. The governing statute requires the IRS to pay awards out of collected funds (section 7623). Funds are not considered collected until the statute of limitations runs and the taxpayer has exhausted all appeals. So it takes a minimum of five to eight years to get the claim paid. read more »