DAILY WHISTLEBLOWER HEADLINES:

GAO Audit: Feds Failed To Rein In Medicare Advantage Overbilling

Private Medicare Advantage plans treating the elderly have overbilled the government by billions of dollars, but rarely been forced to repay the money or face other consequences for their actions, according to a congressional audit released Monday.

In a sharply critical report, the Government Accountability Office called for "fundamental improvements" to curb overbilling by the health plans, which are paid more than $160 billion annually. The privately run health plans, an alternative to traditional fee-for-service Medicare, have proven popular with seniors and have enrolled more than 17 million people. The plans, which were the subject of a Center for Public Integrity investigation, also enjoy strong support in Congress.

GAO took aim at Medicare's primary tactic for recouping overcharges, a secretive, and lengthy, audit process called Risk Adjustment Data Validation, or RADV. Unlike many other anti-fraud programs, RADV has cost the government way more than it has returned to the treasury.

The GAO said that the Centers for Medicare and Medicare Services, an arm of the Department of Health and Human Services, has spent about $117 million on these audits, but so far has recouped just $14 million. CMS officials counter that the mere threat of RADV these audits has caused health plans to voluntarily return approximately $650 million in overpayments – and that upcoming audits will recover tens of millions more.

"As the MA (Medicare Advantage) program continues to grow, safeguarding the program from loss is critical," the GAO report said. The report did not name any of the health plans studied. read more »

Exclusive: U.S. investigates market-making operations of Citadel, KCG

Federal authorities are investigating the market-making arms of Citadel LLC and KCG Holdings Inc, looking into the possibility that the two giants of electronic trading are giving small investors a poor deal when executing stock transactions on their behalf.

The Justice Department has subpoenaed information from Citadel and KCG (KCG.N) related to the firms' execution of stock trades on behalf of clients, according to people familiar with the investigation.

Authorities are examining internal data concerning the firms’ routing of customer stock orders through exchanges and other trading systems, to see whether they are giving customers unfavorable prices on trades in order to capture more profit on the transactions, according to the people familiar with the inquiry. Under Securities and Exchange Commission rules, U.S. brokers are legally required to seek the “best execution reasonably available” on orders, a standard meant to ensure that all customers get a favorable price and a swift trade.

The Justice Department has looked at a number of high-speed trading firms that pay retail brokerages to sell them their flow of customer orders for stock trades. This segment of the industry is known as wholesale market making.

The documents subpoenaed from KCG related to the firm’s market making activities from 2009 to 2011, according to a person familiar with the KCG probe. In 2012, the head of KCG’s electronic trading group, which included its wholesale market making arm, Jamil Nazarali, left the firm to join Citadel. Since then, Citadel’s own wholesale market maker has grown substantially under Nazarali. read more »

BNA Insights: The Sound of Uncertainty — Whistle-Blowers and the SEC

If you blow a whistle and the Securities and Exchange Commission isn’t around to hear it, does it still make a sound? For almost six years, courts, including two federal appeals courts, have been divided on this question.

In particular, they disagree over who qualifies as a “whistle-blower” for purposes of Dodd-Frank Wall Street Reform and Consumer Protection Act anti-retaliation protections. Some courts focus on the act while others focus on the recipient of the report—i.e., is reporting suspected misconduct to corporate managers sufficient, or must the would-be whistleblower take his or her concerns to the SEC?

The Dodd-Frank whistle-blower provisions were enacted in response to the SEC’s failure to investigate Bernard Madoff, despite complaints by tipster Harry Markopolos that the convicted fraudster's investment advisory business was a Ponzi. In overhauling the whistle-blower program, Congress mandated new incentives and protections for those who report suspected securities law violations. These mandates have confused American courts ever since.

In its definitions section, Dodd-Frank states that a whistle-blower is “[a]ny individual who provides . . . information [concerning a securities violation] to the Commission.” 15 U.S.C.A. § 78u-6 (2010) (emphasis added). The source of the confusion lies further in the text–a cross-reference in Dodd-Frank to the Sarbanes-Oxley Act.

Specifically, Dodd Frank provides that “[n]o employer may . . . directly or indirectly . . . discriminate against, a whistleblower. . . in making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002.” 15 U.S.C.A. § 78u-6 (2010). (emphasis added).