WHISTLEBLOWER NEWS QUOTE OF THE DAY:

"Allowing companies to escape or face reduced liability from FCA actions because they have 'checked the boxes' on how to establish a compliance program will merely encourage companies to game this requirement the same way they game contract and regulatory requirements. Such gaming does not reduce fraud; it enables fraud."

Neil Getnick, managing partner of the law firm of Getnick & Getnick, LLP and Chairman of the Taxpayers Against Fraud Education Fund

 

DAILY WHISTLEBLOWER HEADLINES:

Byram Healthcare and Hollister, Inc. to Pay $20.9 Million to Resolve Kickback Allegations

The Department of Justice announced today that Hollister Inc. (Hollister), a manufacturer of disposable health care products, and Byram Healthcare Centers Inc. (Byram), a supplier of medical products, have agreed to pay $11.44 million and $9,372,882.50, respectively, to resolve allegations that Hollister paid unlawful kickbacks to Byram and that Byram received unlawful kickbacks from Hollister and several other manufacturers, with the intent to induce Byram to conduct promotional campaigns designed to refer patients to the manufacturers’ products.  The settlement with Byram also calls for the company to pay $127,117.50 to the state of California to resolve allegations that Byram submitted falsely inflated claims to that state’s Medicaid program, Medi-Cal, in violation of California regulations.

“This settlement demonstrates the Justice Department’s continuing determination to prevent manufacturers and suppliers of medical devices covered by federal health care programs from paying or receiving kickbacks,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “We will not permit such illegal payments to taint the decision-making of those who serve the beneficiaries of these important programs.”

“We are committed to rooting out commercial bribery, especially in the healthcare industry where the payment of kickbacks erodes patients’ trust in the quality of their medical care,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.  “These unlawful cash incentives also threaten the integrity of the health care system and siphon taxpayer dollars from our nation’s health care programs.” 

“The FBI will aggressively investigate companies that engage in kickback schemes at the expense of both patients and taxpayers,” said Special Agent in Charge Harold H. Shaw of the FBI’s Boston Field Division.  “Those who seek to exploit the nation’s health care system through bribes or other fraudulent conduct will be held accountable for their actions.” read more »

Pennsylvania Man Charged In Alleged $35 Million Fraud Against Veterans’ Education GI Bill

A Harrisburg, Pennsylvania, man will appear in federal court today to face charges that he conspired to defraud millions from the Post 9/11 GI Bill, a federal education benefits program designed to help veterans who served in the armed forces following the terrorist attacks on Sept. 11, 2001, U.S. Attorney Paul J. Fishman announced.

David Alvey, 49, is charged by complaint with one count of conspiracy to commit wire fraud. Special agents with the U.S. Department of Veterans Affairs, Office of Inspector General, the FBI, and the U.S. Department of Education, Office of Inspector General, arrested Alvey this morning in Maryland. He will appear this afternoon before U.S. Magistrate Judge Stephanie A. Gallagher in Maryland federal court.

 “The Post 9/11 GI Bill was designed to provide educational opportunities to a generation of men and women who served in the U.S. Armed Forces following the attacks on 9/11,” U.S. Attorney Fishman said. “Alvey and others allegedly sought to pillage those well-earned benefits as part of a complex $35 million scam that targeted veterans and enrolled them in unapproved online courses without their knowledge. Rooting out fraud against the government is always a priority of this office, especially when the conduct exploits those who serve our country with such courage.”

“The allegations of fraud committed by David Alvey are extremely serious because not only did his scheme potentially harm the Department of Veterans Affairs, it also victimized our nations deserving veterans and their families,” Jeffrey G. Hughes, Special Agent in Charge of the U.S. Department of Veterans Affairs, Office of Inspector General’s Northeast Field Office, said. “The VA’s education benefit program is meant to help our veterans who have selflessly made great sacrifices for our country and now are in need of VA assistance. Any fraud against this program directly impacts our nation’s heroes.” read more »

Should False Claims Act go easier on providers?

By Lisa Schencker

A hospital CEO and attorneys were divided during testimony before a congressional committee Thursday on whether healthcare providers should be given greater protections against frivolous fraud lawsuits.

Dennis Burke, CEO of Good Shepherd Health Care System in Hermiston, Oregon, said whistle-blowers should have to bring their allegations directly to providers before filing False Claims Act lawsuits. The chairman of the subcommittee that held the hearing, Rep. Trent Franks, (R-Ariz.), also said companies should be incentivized to self-report false claims.

Others, however, including another committee member and an attorney who supports whistleblowers said such proposals would only serve to weaken an already successful law.

The hearing Thursday, held by a House judiciary subcommittee focused on oversight of the False Claims Act. Under that law, whistle-blowers may bring suits against providers and others on behalf of the government alleging fraudulent billing to government programs. Providers found liable for such fraud face penalties of up to $11,000 per false claim submitted plus triple damages, leading most cases to settle.

In 2015, two-thirds of federal whistle-blower lawsuits targeted healthcare entities. Whistleblowers in successful False Claims Act lawsuits are entitled to a portion of whatever money the government recovers.

Last year, the government recovered more than $3.5 million from False Claims Act cases, including $1.9 million from healthcare fraud cases. Such cases often involve allegations of paying kickbacks to providers, providing unnecessary care or overcharging for goods or services. read more »

Feds seek judgment in Lance Armstrong case

By  Brent Schrotenboer, USA TODAY Sports

The federal government has put a price on its fight against Lance Armstrong -- exactly $32,267,279.85.

That’s how much it says his cycling team was paid by the U.S. Postal Service based on 41 claims for payment between June 10, 2000 and October 2004, according to court documents filed Wednesday. And now it wants a federal judge to rule on that issue as part of its effort to get it back in triple – nearly $100 million.

“Because the factual record is undisputed, the United States respectfully requests that this Court enter an order granting partial summary judgment in its favor,” the government stated in its filing Wednesday.

It’s the latest and most critical stage yet in the government’s 3-year-old civil fraud lawsuit against Armstrong and two other co-defendants -- Johan Bruyneel, Armstrong’s former cycling team director, Tailwind Sports, the cycling team’s owner.

The government filed for partial summary judgment on that amount Wednesday, hoping it will bolster its effort to recover damages on behalf of the USPS, which paid that amount to sponsor Armstrong’s cycling team.

Armstrong also on Wednesday requested summary judgment against the government, a motion that asks the judge to rule on key parts of the case without taking them to a jury trial.

One of those issues is the amount at stake. In its suit, the government says that Armstrong’s cycling team violated its sponsorship contract by doping and that it submitted false claims for payment to the USPS while in violation of that contract. read more »

Beware – corporate defendants can succeed in using the False Claims Act’s ‘government action’ bar to stop whistleblowers

On April 20, 2016, the US District Court for the Eastern District of California dismissed a False Claims Act (FCA) case based on 31 U.S.C. § 3730(e)(3), otherwise known as the FCA’s “government action” bar, in US ex rel. Bennett v. Biotronik, Inc. This bar provides: “In no event may a person bring an action under [the FCA] which is based upon allegations or transactions which are the subject of a civil suit or an administrative civil monetary penalty proceeding in which the Government is already a party.” Compared with the FCA’s public disclosure bar (§ 3730(e)(4)(a)), which serves a similar goal of preventing claims by parasitic relators where the government is already on notice of alleged fraud, the government action bar is invoked relatively infrequently. However, Bennett is reminder that qui tam defendants who face or have faced multiple suits predicated on the same or similar allegations should always consider the availability of a defense based on the government action bar, in addition to other available defenses.
 
The relator in Bennett alleged that the defendant, Biotronik, paid doctors to enroll patients in studies that lacked scientific and medical value, as a result of which doctors prescribed Biotronik’s cardiac devices.  A prior FCA case against Biotronik (the Sant case) contained similar allegations about studies, along with other kickback allegations. The government had intervened and immediately settled the Sant case, but the “covered conduct” in that settlement did not include the allegations relating to studies; instead, it focused on other types of purported payments to physicians. read more »

Can a $24 Billion Hedge Fund Blow the Whistle? Citadel Thinks So

A whistleblower typically brings to mind the image of a back-office worker or disgruntled former employee, not a titan of finance.

But Ken Griffin’s Citadel, the operator of a $24 billion hedge fund and a global trading arm, is shattering that mental picture. The Chicago-based firm has filed a request with the U.S. Commodity Futures Trading Commission for whistleblower status, saying it uncovered unscrupulous trading on futures exchanges beginning in 2013, according to two people familiar with the matter who asked not to be named discussing private matters.

Under the Dodd-Frank Act, whistleblowers who give the government tips that lead to prosecutions can get a substantial bounty: between 10 percent and 30 percent of the recovered amount. Earlier this month, the CFTC awarded a whistleblower, whom it didn’t name, more than $10 million for providing “key original information” that led to a successful enforcement action, the largest in the commission’s history.

In this case, Citadel could not only make some money but also look like a hero helping stamp out manipulation in some of the world’s most important markets. That the firm took matters into its own hands shows how deeply spoofing, the form of cheating at issue here, has penetrated the global marketplace -- and how slow regulators and exchanges have been to root it out. read more »

In-House Lawyers Warned Of High-Stakes State Tax Litigation

By Kristen Rasmussen, Daily Report

False claims acts with whistleblower provisions to challenge corporate tax returns are plaguing Fortune 1000 companies, an in-house lawyer and a corporate law firm partner said at a panel discussion Tuesday.

Because of the uncertainty surrounding most tax laws and the recent implementation of several state statutes, this "disturbing" trend has become a "cottage industry," said Eric Tresh with Sutherland Asbill & Brennan. Tresh was speaking to more than 100 lawyers gathered at his firm Tuesday for the 6th annual Value Challenge conference held by the Georgia chapter of the Association of Corporate Counsel.

"It is a high-stakes, high-dollar litigation that is only going to get worse as states face budget crises," added Camilla Heard, director of income tax controversy at Home Depot. Although the federal False Claims Act—perhaps best known in the context of Medicaid fraud—contains a so-called “tax bar” provision prohibiting qui tam actions alleging false tax claims, several of the state and local versions of the law do not. That means corporate defendants have to “keep up with the grey tax laws” of the thousands of jurisdictions in which they pay taxes, Tresh and Heard said.

Split 9th Circ. OKs Steeper Sentences For Medical Suppliers

Law360, Washington (April 28, 2016, 9:25 PM ET) -- Medical equipment suppliers who fraudulently overbill Medicare can be given longer sentences based on their positions of trust, a split Ninth Circuit ruled Thursday, saying a California couple convicted of $1.6 million worth of False Claims Act violations took advantage of a government honor system.

In a 2-1 decision, a Ninth Circuit panel ruled a California federal judge rightly applied an “abuse of trust” sentencing enhancement to Patrick Sogbein and Adebola Adebimpe based on the husband and wife’s personal certification that the motorized wheelchairs for which they fraudulently billed Medicare were valid requests, U.S. Circuit Judge Mary Murguia wrote for the majority.

Medicare bills submitted by durable medical equipment suppliers are not scrutinized on an individual basis, but instead are occasionally audited, allowing speedy reimbursements, the panel majority said, quoting a witness who described the process as an “honor system.” The suppliers must then be responsible for personally determining that the equipment they billed for was needed, Judge Murguia wrote. read more »

Proskauer, Ex-Atty Hit With $5B Suit Over Stanford Scheme

By Y. Peter Kang, Law360

Investors victimized by Robert Allen Stanford's $7 billion Ponzi scheme filed a $5 billion putative class action accusing a Proskauer Rose LLP partner and the firm of aiding the fraud, less than two months after a similar suit was dismissed by the Fifth Circuit.

Two investors in Stanford International Bank Ltd. allege that Proskauer and Thomas Sjoblom, a former attorney for both Proskauer and nonparty Chadbourne & Parke LLP, aided the Ponzi scheme by warding off probes conducted by the U.S. Securities and Exchange Commission and other financial regulators. The scheme, in which Stanford's foreign bank sold investors sham securities called certificates of deposit, resulted in a 110-year prison sentence for Stanford.

Attorneys for the investors said in a 96-page complaint that the previous suit, filed on behalf of named plaintiff Samuel Troice and tossed by the Fifth Circuit in March on the ground of attorney immunity under Texas state law, never reached the class certification stage, and thus the investors are not barred from filing a new suit. read more »
 

SEC Bars Ponzi Schemer For $11M Apple Day-Trading Fraud

By Jody Godoy, Law360

A Utah man imprisoned for lying during a U.S. Securities and Exchange Commission probe into his nearly $11 million Ponzi scheme promising returns of more than 100 percent through day-trading Apple stock was barred Wednesday from handling securities.

Roger Bliss, 57, agreed to the SEC administrative order a week after consenting to a judgment in Utah federal court requiring him to pay back the $10,985,704 the agency claimed he made off of investors. The SEC went after Bliss in a civil suit last year for luring investors with made-up annual returns of 100 to 300 percent day-trading Apple Inc., and the Utah Attorney General pressed parallel criminal charges in state court.

Bliss pled guilty to four counts of securities fraud and one count of unlawful activity in Salt Lake County court in December and is currently serving a four year sentence handed down in February.

That sentence runs concurrently with the 12 months a federal judge slapped on Bliss for obstruction of justice and lying to the SEC in an attempt to evade an asset freeze by transferring a sailboat to his brother-in-law, Kevin Fortney. read more »

Twenty-Five Miami-Area Defendants Charged with Submitting $26 Million in False Claims to the Medicare Part D Program

Charges were filed today against 25 Miami-area defendants in three separate cases for their alleged participation in various schemes to defraud Medicare of approximately $26 million in false claims through the Medicare Part D program.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Assistant Special Agent in Charge William J. Maddalena of the FBI’s Miami Division and Special Agent in Charge Shimon R. Richmond of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG) Miami Regional Office made the announcement.

“These cases build on our recent efforts to focus on Medicare prescription drug benefit fraud, targeting those who take advantage of the fastest-growing component of the Medicare program,” said Assistant Attorney General Caldwell.  “Working with our partners in the Medicare Fraud Strike Force, the Criminal Division uses cutting-edge data analysis techniques to identify emerging fraud schemes and to stay ahead of the criminal curve.”

“Those who commit Medicare fraud through the filing of false claims, payment or receipt of kickbacks, or fraudulent medical practices jeopardize the integrity of the government benefit programs that countless citizens rely on for their well-being,” said U.S. Attorney Ferrer.  “The U.S. Attorney’s Office and our law enforcement allies will continue to pro-actively identify for prosecution the individuals who pay kick-backs for the unauthorized use of Medicare benefits for their own illicit financial gain.”

“The actions of the FBI and our partners in the Medicare Fraud Strike Force have disrupted several health care fraud operations today,” said Assistant Special Agent in Charge Maddalena.  “Unfortunately, South Florida remains ground zero for these types of scams.  As such, we will continue to pursue those individuals who pay kickbacks and fraudulently bill for medical services that are not necessary or ever provided.” read more »

Taxpayers Against Fraud Touts 30-Year Success Of Whistleblower Law In The Fight Against Corrupt Government Contractors In Congressional Testimony

On Thursday, the Subcommittee on the Constitution and Civil Justice of the House Judiciary Committee will be holding an oversight hearing on the False Claims Act. Among those testifying will be Neil Getnick, managing partner of the law firm of Getnick & Getnick, LLP, based in Manhattan, who will be testifying in his capacity as Chairman of the Taxpayers Against Fraud Education Fund.[1]

Mr. Getnick will tout the 30-year anniversary of the bipartisan 1986 amendments to the civil war-era 'False Claims Act.' Those amendments strengthened federal protections for whistleblowers and removed certain hurdles on whistleblowers filing so-called "qui tam" suits. Qui tam suits are filed by whistleblowers on behalf of the federal government against fraudulent government contractors. The Department of Justice examines the law suits, investigates the allegations, and can take over the litigation or allow the whistleblower to continue it on his or her own. The whistleblower is protected from employer retaliation and may receive up to 30 percent of the reward.

Mr. Getnick said: "By any measure, the 1986 amendments have been and are a fantastic success. Prior to 1986, the Department of Justice recovered less than $50 million a year under the False Claims Act.  In the ten years following 1986, the DOJ recovered$1 billion. Last year alone, DOJ recovered more than $3.5 billion, $2.8 of which came from qui tam suits. The total recoveries in the last six years was $26.4 billion." read more »

IRS Estimates $458 Billion Gap Between Taxes Paid and Owed

By Richard Rubin

Americans pay about 81.7% of the federal taxes they owe on time, down slightly from previous estimates, the Internal Revenue Service said Thursday.

That noncompliance leaves a so-called tax gap—the difference between taxes owed and tax collected—of $458 billion a year, and $406 billion after IRS enforcement. The missing money would have been enough to pay for more than 10% of federal spending in the years covered by the study, but tax experts and IRS Commissioner John Koskinen say it is unrealistic to assume the government could collect all that is owed.
 
“The burden on taxpayers and the strain on our resources would be too great,” Mr. Koskinen said Thursday.

The report is the IRS’s first update to its estimate of the tax gap since 2012, when the agency analyzed tax year 2006 and reported a voluntary compliance rate of 83.1%, which was itself down from the 83.7% compliance rate for tax year 2001. The data released Thursday cover 2008 through 2010, a period when taxpayers were under greater financial stress because of the financial crisis and recession.

Because of methodology changes, the apparent decline in compliance doesn’t necessarily reflect a real change in taxpayers’ behavior, the IRS said. read more »

WHISTLEBLOWER AWARDS & SETTLEMENTS:

CFTC Whistleblower Receives $10M Confidential Settlement

A whistleblower has been awarded $10 million by the US Commodity Futures Trading Commission (CFTC) Whistleblower Office for providing information leading to a successful enforcement action by the agency.

The award is the second largest ever issued by the agency, and steps have been taken by the CFTC to ensure the recipient's confidentiality, as they have also done with the company being penalized.

The CFTC Whistleblower Program was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Under the CFTC Whistleblower Program, an individual who provides the CFTC with original information leading to an enforcement action that results in over $1 million in monetary sanctions is eligible to receive an award of 10 to 30 percent of the amount collected. The statute also provides whistleblowers with protections to help ensure that insiders can approach the CFTC with information without fear of reprisal. read more »