StethoscopeThe Lexington County Health Services District (“Lexington Medical Center” or “LMC”) located in West Columbia, South Carolina, has agreed to pay $17 million dollars to resolve allegations that it violated the Physician Self-Referral Law (the “Stark Law”) and the False Claims Act (“FCA”) by maintaining improper financial arrangements with 28 physicians.

The FCA is a federal statute that allows whistleblowers, or “relators,” to bring qui tam lawsuits on behalf of the United States government and against their employers who commit fraud against the government.

The action was initiated by Dr. David Hammett, a former physician at Lexington Medical Center. He filed his FCA lawsuit in 2013. FCA suits are filed “under seal,” and the government has 60 days to elect to intervene. If the lawsuit is successful, no matter if the government chose to intervene, and the government recovers money from a fraudulent contractor, the whistleblower who is the source of the information stands to take-home a considerable portion of the government’s recovery.

A long awaited Supreme Court decision that held major implications for False Claims Act litigants was handed

New-York-City2down this week. On Tuesday, the United States Supreme Court upheld a jury verdict that found State Farm Insurance Company (“State Farm”) defrauded a federal flood insurance program to avoid paying a homeowner’s insurance claim in the wake of Hurricane Katrina.

The False Claims Act (“FCA”) is a law Congress adopted to expose rampant fraud among contractors supplying the Union Army during the American Civil War. Frauds included businesses that sold guns that did not shoot and boots that fell apart after a day’s use. The statute encourages private parties, (“whistleblowers”) or (“relators”), with knowledge of fraud to file suit and collect a share of the government’s recovery.

Supreme-Court-PillarsGreene LLP secured another win for its clients in the U.S. Court of Appeals for the First Circuit in the firm’s seminal False Claims Act case, U.S. ex rel. Escobar v. Universal Health Services. The First Circuit’s decision will allow Greene LLP’s clients to continue pursuing fraud claims against the healthcare company, Universal Health Services Inc., the largest provider of mental health services to Medicaid programs across the country. Courts and lawyers across the country were tracking the First Circuit’s most recent Escobar ruling, as the decision could have made bringing False Claims Act cases considerably more onerous for whistleblowers from the outset.

In June, Greene LLP secured a favorable and unanimous decision for its clients in the U.S. Supreme Court. The Escobar decision represents the Supreme Court’s willingness to bolster the variety of viable theories of recovery under the statute. The June decision promises to have lasting consequences for a wide variety of whistleblower suits filed under the False Claims Act.

Greene LLP’s clients were prompted to file an FCA suit under Massachusetts’ qui tam provision by the death of their daughter, Yarushka Rivera, a Massachusetts teenager who died from an epileptic seizure after being treated at a mental health facility run by Universal Health Services (“UHS”). Under Massachusetts Medicaid (“MassHealth”) regulations, health care professionals must meet licensing and minimum qualification requirements to provide services reimbursed by the government.

Shipping-ContainersTwo whistleblowers brought fraud allegations against shippers of military freight and helped the U.S. Government recover $13 million in a False Claims Act settlement announced this month. The case involved a nationwide contract described by Transport Topics Newspaper as “the largest logistics outsourcing in history.”

Richard Ricks, 58, and Marcelo Cuellar, 30, filed a complaint under the federal False Claims Act, alleging that contractors under the Defense Transportation Coordination Initiative (“DTCI”) knowingly inflated charges to the Government for shipping military freight throughout the United States.

The Defense Transportation Coordination Initiative was a massive initiative by the U.S. Department of Defense (“DoD”) to manage distribution of military freight in the continental United States. The purpose of the DTCI was to “increase the operational effectiveness of the U.S. Military and at the same time, obtain efficiencies. The premise is that DoD will increase operational effectiveness… [and] also obtain efficiencies through best business practices such as increased consolidations and mode conversions.” In effect, the DTCI was an attempt to outsource and reduce transportation costs—a fact lost on the fraudulent contractors. In 2015, the program was abandoned because of rampant fraud.

Hedge-Fund-Office-Building-150x150The Second Circuit Court of Appeals recently limited the enforceability of employment separation agreements that seek to ban would-be whistleblowers from filing claims against their former employers. In U.S. ex rel. Ladas v. Exelis, Inc, et al., the Court held that broad lawsuit release provisions in employment separation agreements, which are increasingly common in the corporate sphere, cut against public policy by discouraging the filing of qui tam suits to uncover fraud against the government.

False Claims Act (“FCA”) Whistleblower Michael Ladas was the Director of Quality at Power Solutions. In 2005, Power Solutions entered into a contract with the U.S. Government to provide power supply devices. During this time, as Director of Quality, Ladas was responsible for ensuring production compliance with government contracts, product testing, and documenting and reporting manufacturing defects in Power Solutions’ products.

During Ladas’ employment as Director of Quality, Power Solutions entered into a subcontract with Innovative Mold Solutions (“IMS”), where IMS manufactured casing components for Power Solutions’ products. In November 2007, without alerting Power Solutions or the government, IMS made substantial changes in the manufacturing of its power supply case components, using a significantly less expensive adhesive material and considerably changing the process it used to apply that material. An engineering professor employed by Power Solutions alerted Ladas that a change in application method would require significant additional testing to ensure the casing’s reliability and durability; but neither IMS nor Power Solutions put the casing through additional testing, and the changes were not submitted to the government for approval.

Yellow-and-Red-Pills-150x150A federal judge will decide the fate of a “whistleblower’s” and the United States Postal Service’s (“USPS”) lawsuit against cyclist Lance Armstrong and his now defunct racing company, Tailwind Sports. The False Claims Act (“FCA”) lawsuit, originally filed by Armstrong’s former teammate, Floyd Landis, alleges that Tailwind Sports and Armstrong unlawfully submitted bills to the federal government for sponsorship. Landis alleges that Tailwind athletes and Armstrong, who were sponsored by the USPS from 2001-2004, were involved in an illegal “doping” scheme, which allegedly violated material elements of their contract with the federal government.

The FCA allows the government to recover actual damages and penalties of three times those damages. The fraudulent government contractor is also hit with an $11,000 penalty per false claim. In November, those penalties per claim will raise to nearly $22,000 per claim.

At its core, the statute allows individuals (“whistleblowers”) to file lawsuits with allegations that fraud has been committed against the federal government. Whistleblowers are entitled to share in any recovery received by the government.

Loan-Application 2B&H Education, the operator of a chain of beauty and massage schools known as the “Marinello School of Beauty,” which are located in the state of California, paid over $8 million dollars to settle a False Claims Act (“FCA”) lawsuit brought by employees-turned-whistleblowers.

The False Claims Act, originally enacted in 1863 during height of the civil war to combat rampant fraud in government contracting, was amended by Congress in 1986 to enhance the federal government’s ability to recover losses from fraud against the United States.

Violations of the FCA are subject to civil penalties (approximately $20,000) for each false claim plus three times the amount of the loss that the government incurred as a result of the defendant’s actions.

Talking-to-Patient-300x186 2
Paradigm Spine, a medical device manufacturer, has agreed to pay the United States $585,000 to resolve allegations under the False Claims Act. A former employee of the company turned whistleblower to alert the government of the fraud.

Under the settlement agreement announced last week, the company stipulates that it caused health care providers to submit false claims to Medicare for spine surgeries by marketing the company’s “coflex-F” device for surgical uses that were not approved by the U.S. Food and Drug Administration (FDA).

The United States government and whistleblower Chris Coyle, a former Paradigm Spine sales representative, claimed that the company caused physicians and hospitals to submit false claims to federal health care programs for certain spine surgeries that were not eligible for reimbursement.  In receiving reimbursements from Medicare, a medical device manufacturer must scrupulously follow CMS, FDA, and other federal and state government regulations.

Whistle-300x225The U.S. Department of Justice announced a False Claims Act (“FCA”) settlement this week with Alpharetta, Georgia-based anesthesiology provider “Sweet Dreams Nurse Anesthesiology” for $1.1 million dollars.

The company has agreed to pay the government to resolve allegations that it submitted false claims to Medicare and Georgia’s state-run healthcare program.

Medicare and like state programs pay only for services that are “reasonable and necessary for the diagnosis or treatment of illness or injury.” In submitting claims to Medicare for reimbursement, healthcare providers “certify” that they have complied with relevant and “material” regulations governing the services they provide.

The-Pentagon-150x150 2The United States Department of Justice filed a False Claims Act (“FCA”) complaint against DynCorp, International alleging that the company overcharged the federal government to train Iraqi police forces.  DynCorp, which is headquartered in McLean, Virginia, is a large logistics, transportation, and military-services subcontractor and is used extensively by the U.S. government and foreign governments to transport and provide goods and services to combat zones.

In an FCA suit, individuals (“whistleblowers”), file lawsuits on behalf of the government with allegations that fraud has been committed against a federal government program.  Whistleblowers, if successful, are entitled to share in any recovery received by the government.  Here, the government filed a suit on its own behalf.

In April 2004, the State Department’s Bureau for International Narcotics and Law Enforcement Affairs awarded a contract to DynCorp to provide training for local police in Iraq.  The contract included appropriations for other services needed to support the recruitment of officers—trainers, guards, translators, vehicles, and living quarters for contractor personnel.

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