Govt-Health-Insurance-PolicyOnce a start-up, now a Johnson & Johnson subsidiary, Acclarent Medical will pay $18 million to settle a False Claims Act (“FCA”) suit that alleged its medical sales division promoted its devices to physicians for “off-label” uses and provided those physicians “kick-backs” in exchange for their business. Acclarent Medical describes itself as a medical device company “dedicated to the development of innovative devices providing new technologies to meet the needs of ENT patients.” The company is based in Menlo Park, California and markets products throughout the United States.

The False Claims Act is a federal statute that allows “whistleblowers” to bring lawsuits against government contractors who fraudulently overbill the government for goods or services.

False Claims Act lawsuits are brought under seal, and the Department of Justice has the opportunity to intervene and prosecute the action on behalf of the whistleblower if it so chooses. If the suit is successful, and funds are recovered for the government, regardless of the if the government decides to intervene, the whistleblower receives a substantial portion of the government’s recovery.

New-York-City2-300x200Columbia University will pay $9.5 million dollars to settle a False Claims Act suit that alleged the university routinely overcharged federal agencies for medical research.

The False Claims Act (“FCA”) allows whistleblowers to bring allegations under seal against companies and institutions that fraudulently bill the federal government. After filing, the government has the option to “intervene” and control the suit itself. If the whistleblower’s suit is successful, as it was here, the whistleblower is entitled to a portion of the government’s recovery. Whistleblowers typically receive 15-30% of the government’s take.

The government’s complaint alleges that Columbia impermissibly applied its “on-campus” research cost rate instead of the substantially lower “off-campus” rate when seeking federal reimbursement for 423 National Institutes of Health (“NIH”) grants where the research was primarily performed at  facilities owned by the state of New York or other academic institutions.

Supreme-Court-Pillars-Exterior-150x150The government has elected to intervene in a False Claims Act (“FCA”) suit filed by West Virginia internet provider, Citynet, against competitor Frontier Communications.  The suit alleges that Frontier misused $40.5 million dollars in federal stimulus funds to build a high-speed internet network designed solely to rig the West Virginia market in its favor.

In an unusual twist, the suit names West Virginia state officials – Homeland Security Chief Jimmy Gianato, Chief Technology Officer Gale Given, and former Commerce Secretary Kelly Goes – as defendants, alleging they were complicit with Frontier’s scheme to defraud the federal government and suppress competition within the state.

The False Claims Act allows individuals (“whistleblowers”) to file lawsuits with allegations that fraud has been committed against the federal government.  Whistleblowers can be people, or businesses, like Citynet, and are entitled to share in any recovery received by the government.

dollar-billThe U.S. Attorney for the Central District of California recently settled a False Claims Act (“FCA”) lawsuit with the information technology company En Pointe Gov. for $5.8 million dollars.

The lawsuit alleged that En Pointe Gov. fraudulently represented itself as a small business in order to bid on government contracts that were specifically set-aside for small businesses.  En Pointe Gov. did not meet small business qualifications.

The case was filed in 2014 in the Central District of California by Minburn Technology Group, LLC and whistleblower Anthony Colangelo, who is the managing member of Minburn. Minburn subcontracted with EnPointe to provide database IT-services.

Bank-ManagerA West Palm Beach, Florida-based mortgage company has agreed to a $30 million settlement to rid itself of False Claims Act violation allegations. Ocwen Financial Corp will pay $15 million to the federal government and $15 million to cover the attorneys’ fees and costs incurred by whistleblowers who brought the False Claims Act case.

Ocwen Financial, formed in 1988, has been servicing residential mortgage loans since that year, and has serviced “subprime” mortgages since 1994. The company holds 671,623 residential loans worth more than $102.2 billion. The company also owns commercial assets totaling $290.9 million.

The False Claims Act (“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 are committing frauds against the government.

Supreme-Court-PillarsFalse Claims Act (“FCA”) penalties will double. Last week, the Department of Justice announced that an obscure agency dubbed the Railroad Retirement Board updated FCA penalties as prescribed by Congress. Under the rule, minimum per-claim penalties will jump to $10,781 from $5,500, and maximum per-claim penalties will rise to $21,563 from $11,000. The development has been expected since May.

The DOJ may choose to pursue a smaller penalty if the full amount due under the FCA will produce “a negative economic impact.” In an unusually terse statement, the DOJ said, without explanation, that it “is not invoking that authority in this rule.” The increase takes effect Aug. 1 and applies to violations after Nov. 2, 2015.

Last week’s regulation also updated penalties in more than 50 other categories affecting a wide range of enterprises. Fines under the Financial Institutions Reform, Recovery and Enforcement Act will soar to $9.5 million from $5.5 million, and penalties related to improper disclosure of bids on government contracts would boost to $1 million from $500,000.

Stethoscope1-150x150Travis Thams, the whistleblower who filed a False Claims Act (“FCA”) lawsuit on behalf of the United States and 28 states, stands to receive a substantial portion of the $8 million settlement reached with his employer, Cardiovascular Systems, Inc. (“CSI”).

Thams was recruited to CSI to act as a District Sales Manager. He was responsible for selling the entire portfolio of CSI products.

CSI manufactures devices to treat peripheral artery disease (“PAD”). The devices in question are electrically driven and use a diamond-coated “crown” to sand away hard plaque within the arteries. As the crown “spins” at between 60,000 to 120,000 revolutions per minute within the artery, the plaque is effectively “sanded” away, and it restores blood flow.

Ricky Howard, a former employee of a California construction company that did work on domestic military bases, will receive $1.48 million dollars for his information regarding fraudulent billing practices. Howard has worked in the masonry trade his entire career, and was employed by Harper Construction Company (“Harper”) when he discovered the company’s frauds on the government.

Earlier this month, the U.S. Attorney for the District of Southern California announced that Harper has paid $5.4 million dollars to resolve allegations that it “up-charged” the U.S. government for its work on Camp Pendleton and Camp Lejeune and fraudulently created “sham” companies to fulfill government contracting requirements.

Harper Construction is ranked among the Top 400 construction companies, the Top 100 Design Build Firms, and the Top 100 Green contractors in the United States. It is the second largest privately-held company in San Diego, California. It reported revenues in 2010 of approximately $360 million.

Supreme Court ColumnsThe U.S. Supreme Court ruled today that Greene LLP’s theory of liability in a False Claims Act suit against a Massachusetts health care provider was, and will remain a viable theory for recovery under the statute. The case, argued before the Supreme Court in Washington, DC on April 19, 2016, centered on the so-called “implied certification” theory of False Claims Act liability. As a result of the decision, claims for payment to the United States may be considered “false” for failure to comply with applicable regulations, even if the claim itself does not expressly certify compliance with those regulations.

Greene LLP’s clients were spurred to file the False Claims Act suit under that statute’s qui tam provision by the death of their daughter, Yarushka Rivera, a Massachusetts teenager who died from complications with a medication originally prescribed by a nurse at a satellite mental health facility run by Universal Health Services. Under Massachusetts Medicaid (“MassHealth”) regulations, certain unlicensed health care professionals may provide services reimbursed by the government – but only with specified restrictions, such as a requirement that such unlicensed providers be supervised by licensed providers.

Rivera was treated by mental health care providers at a Universal facility in Lawrence, Massachusetts facility, first by two unlicensed counselors who were not supervised as required by MassHealth regulations. When her condition worsened, her care was transferred by the facility’s Clinical Director to a person held out to Greene LLP’s clients as a very experienced therapist, a licensed psychologist with a Ph.D. When Rivera’s condition continued to deteriorate, Greene LLP’s clients asked that their daughter’s care be transferred to a psychiatrist. Her care was transferred to a fifth Universal provider, who prescribed Trileptal for Rivera.

Model-House-on-Money-200x300Last week, M&T Bank (“M&T”), headquartered in Buffalo, New York, agreed to pay $64 million dollars to settle allegations that the company violated the False Claims Act. Whistleblower Keisha Kelschenbach initiated the suit by alleging M&T knowingly originated and underwrote mortgage loans insured by the U.S. Department of Housing and Urban Development (HUD) that did not meet applicable requirements.

During the time period covered by the settlement, M&T Bank participated as a “direct endorsement lender” in the HUD insurance program. Under the program, M&T had the authority to originate, underwrite, and endorse mortgages for insurance.  If M&T approved a mortgage loan for insurance and the loan later defaulted, the holder of the loan could submit an insurance claim to HUD for the losses resulting from the defaulted loan.

Under the program, HUD did not review M&T’s loans for compliance before it is endorsed them for insurance. M&T, as a government fiduciary, was therefore required to (1) follow program regulations intended to ensure the company is properly underwriting and certifying mortgages for insurance; (2) maintaining a quality control program that can prevent and correct deficiencies in underwriting practices, and (3) self-report any deficient loans identified by the bank’s quality control compliance program.

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