False Claims Act Resource Center

Whistleblower Protection Caucus Created by Bipartisan Group of Senators

March 2nd, 2015 by Qui Tam

The official founding of a Senate Whistleblower Protection Caucus was announced on February 25, 2015 by Senator Charles Grassley (R-IA). This is a cross-party group of senators created by Senators Chuck Grassley (chairman), Ron Wyden (D-OR) (vice-chairman), Ron Johnson (R-WI), Mark Kirk (R-IL), Deb Fischer (R-NE), Thom Tillis (R-NC), Barbara Boxer (D-CA), Claire McCaskill (D-MO), Tammy Baldwin (D-WI), and Ed Markey (D-MA).

The National Whistleblower Center released a report on just how whistleblowers are essential to protecting the United States from fraud. The report is titled, “Utilizing Whistleblowers in the Fight Against Waste, Fraud and Abuse.” The Executive Director of the National Whistleblower Center, Stephen M. Kohn, stated, “This is an example of bipartisanship which makes our system work.” Furthermore, Kohn said, “The National Whistleblower Center looks forward to working with the Senate Whistleblower Protection Caucus to ensure all whistleblowers obtain meaningful protection.”

Medicare, Part D, Full of Fraud Due to Lack of Oversight

February 25th, 2015 by Qui Tam

Medicare, Part D began in 2006 as a program to get much needed medication to more than 36 million senior citizens and people with disabilities.  Billions of needless expense has been added to the program due to lack of oversight and doctors prescribing name brand medications instead of generics.  Moreover, ProPublica has reviewed Medicare’s data and found that many doctor’s patterns of prescribing were fraudulent.  Some doctors blame this on identity theft claiming their identities were stolen.  One doctor, Ernest Bagner, III, made this claim.  Nevertheless, law enforcement, fraud units of at least two insurers and Medicare’s fraud contractor never blocked his national provider ID, which is needed to fill prescriptions.  Bagner had the highest total of money paid by Medicare for prescriptions by 2010.  Bagner claimed that the prescriptions were not his.  He stated, “These people make more money off of my name than I do.”  Some investigating his case do not believe he is being completely truthful.

There are many schemes that are constantly developing to loot the Medicare program.  Many foreign, aging, poor or disabled doctors are hired at small pharmacies and their ID’s are used to write thousands of fraudulent prescriptions for patients whose identities make also have been bought or stolen.  After dispensing, the drugs can be relabeled then sold to wholesalers or other pharmacies.  Other schemes include willing doctors who bill Medicare for the same prescriptions many times over that are never filled.  Not all prescriptions are for pain killers so law enforcement may overlook them.

In Los Angeles, Sheriff’s Sargent Steve Opferman heads LA County’s Health Authority Law Enforcement Task Force.  This is a hot spot of Medicare fraud and he spends much his time running down Part D scams.  Sgt. Opferman stated that most of the scams are related to Armenian organized crime rings. The scams depend upon a large group of doctors who are either unaware or dishonest.  Once the doctors are under law enforcement radar, the crime ring merely finds another doctor.  Opferman stated that Medicare is short of help and investigations can take “months or years” to get basic prescription or billing data.  He stated, “It’s like pulling teeth.”  Opferman said that if Medicare would ensure that doctors and pharmacies are legitimate and if they would shut down ID’s quickly when fraud is suspected, Medicare could stop much of the fraud.

Investigators from many agencies are involved in fraud cases and many times fall short of the goal line so justice is rarely swift.  Part D is run by private insurance companies unlike other parts of Medicare.  Insurers are supposed to look for fraud.  Typically the beginnings of cases investigated by insurers are once they notice a spike in a doctor’s prescribing or when tipped off by a patient.  Medicare does not require insurers to notify its Part D fraud contractor, only encourages reporting.  Insurers are not allowed to block a suspected doctor’s prescriptions.  Furthermore, insurers can only see a portion of the doctor’s prescribing record and they have no insight into the prescribing patterns   that are sent to other companies.  Contractors must get the patient’s chart from the insurers, who suspect fraud, to determine if the patient actually saw the doctor or was prescribed the correct medication.  This is usually where the investigation comes to a dead end.  Part D competes with other areas of Medicare fraud, such as kickbacks.  Only a small percentage is referred for prosecution.  Most are dropped due to “lack of resources or insufficient evidence,” states a 2012 report from the Government Accountability Office.

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US Settles False Claims Act Allegations Against ev3 for $1.25 Million

February 9th, 2015 by Qui Tam

The Justice Department announced that it has reached a $1.25 million settlement with ev3, a medical device manufacturer base in in Minnesota.   Ev3 formerly was known as Fox Hollow Technologies. A lawsuit filed under the whistleblower provision of the False Claims Act alleges that between 2006-2007, Fox Hollow induced 12 hospitals in 9 states to admit patients who were undergoing elective atherectomy procedures.   This minimally invasive procedure removes atherosclerosis and opens up coronary arteries, thereby increasing blood flow.   It is usually performed on an outpatient basis.  At that time, Fox Hollow sold the Silver Hawk Plaque Excision System, a device that was used in these procedures.  In order to increase hospital purchases of this device, Fox Hollow convinced the 12 hospitals to admit the atherectomy patients.  The hospitals subsequently submitted claims for unnecessary admissions and received higher reimbursements from Medicare for procedures that should have been performed in an outpatient facility. For more information, please click here.


$2.25 Million Settlement for Unnecessary Angioplasties

January 6th, 2015 by Qui Tam

United States ex rel. Carroll v. Adventist Health Systems, et al., Case No. CV-10-4925 DMR

A settlement in the amount of $2,250,000, payable by St. Helena Hospital, to the United States, stems from allegations that it submitted false claims to Medicare for certain cardiac procedures and related inpatient submissions.

Former employee of St. Helena Hospital, Kacie Carroll, filed the qui tam action in the U.S. District Court for the Northern District of California. Carroll will receive $450,000.

During the period from 1/1/2008 through 7/31/2011, it was alleged, that St. Helena Hospital knowingly charged Medicare for medically unnecessary percutaneous coronary interventions, more commonly known as angioplasty, the surgery performed to open narrowed or blocked blood vessels that supply blood to the heart. In addition, it was also alleged that the hospital unnecessarily admitted angioplasty patients who should have been treated on a less costly, outpatient basis.

Prescriptions for Controlled Substances to Medicare Patients is on the Rise

January 6th, 2015 by Qui Tam

Even as the abuse of prescription drugs has escalated and the national crackdown on it has occurred, new data suggests that doctors are prescribing even larger numbers of prescriptions for the most potent controlled substances to Medicare patients.

And, along with the increase in the number of prescriptions written, physicians are under increased scrutiny, as well as facing disciplinary action. Twelve of Medicare’s top 20 prescribers of Schedule 2 drugs (those that include powerful narcotic painkillers and stimulants with the highest potential for abuse and dependence) have faced disciplinary actions by their state medical boards or criminal charges related to their medical practices.

The most recent year for which data is available, 2012, Medicare covered nearly 27 million prescriptions for Schedule 2 controlled substances. Within the past year, Medicare has started to use prescribing data to identify potentially problematic doctors, as have some state medical boards as well. Beginning in mid-2015, Medicare will have the authority to kick doctors out of the program if they prescribe in abusive ways.


December 9th, 2014 by Qui Tam

North Atlantic Medical Services Inc. (NAMS), a medical device company that provides equipment and services for treatment of respiratory ailments, reached an agreement to pay $852,378 to resolve allegations that it violated the False Claims Act. The Department of Justice announced that NAMS agreed to pay this settlement due to submitting claims to Medicare and Medicaid for services provided by unlicensed personnel. NAMS was doing business as Regional Home Care Inc. and was based in Massachusetts.

Under Massachusetts law, Medicare and Medicaid require suppliers of respiratory therapy equipment and services to comply with state licensing standards. Respiratory therapists must apply for and obtain a license. It was alleged that between September 2010 and January 2013, NAMS utilized unlicensed employees to set up sleep apnea masks and oxygen therapy equipment for patients residing in Massachusetts. NAMS continued to bill Medicare and Medicaid for services provided by unlicensed employees after the Massachusetts Department of Public Health informed them that this practice was illegal. Former NAMS employees, Konstantinos Gakis and Demetri Papageorgiou, filed the lawsuit under the False Claims Act. Together the whistleblowers will share in the government’s recovery and will receive $153, 428.

The Commonwealth of Massachusetts, which paid in part for the Medicaid claims at issue, will recover $229, 210. Special Agent in Charge Phillip M. Coyne for the U.S. Department of Health and Human Services of Inspector General stated, “To safeguard patient health and ensure that taxpayer money is spent well, Medicare and Medicaid require providers of respiratory care services to follow state licensure rules. Companies seeking to boost profits by using unlicensed personnel will be held accountable for their actions.”

Government Settles False Claims Act Allegations Against Oxygen and Sleep Therapy Company


Supplier of Food to U.S. and Coalition Troops in Afghanistan Pays $389.300,000 in Civil Damages, Criminal Fines and Penalties; Pleads Guilty to Major Fraud, Conspiracy, Other Charges

December 8th, 2014 by Qui Tam

On behalf of their client Michael Epp, the law firms Morgan Verkamp LLC (Cincinnati) and Pietragallo Gordon Alfano Bosick & Raspanti, LLP (Philadelphia) note the settlement of claims initiated by Mr. Epp alleging fraud on the part of Supreme Foodservice, the “prime vendor” of food and related items to the Department of Defense and coalition troops in Afghanistan from 2005 until at least 2009.

Under agreements finalized today between Supreme Foodservice GmBH, Justice Department lawyers in Washington, D.C. and Philadelphia, and Mr. Epp, Supreme will pay the United States $101,000,000 in damages under the False Claims Act. Supreme Foodservice GmBH and related entities have entered guilty pleas to charges of major fraud, conspiracy to commit major fraud, and wire fraud. The criminal plea agreements require payment of $288,300,000 in fines and restitution, making the total recovery on the prime vendor contract $389,300.000. The allegations are detailed in a criminal Information filed this morning in U.S. District Court in Philadelphia.

“We believe this is the largest fraud recovery against any contractor relating to the Afghanistan and Iraq wars, the largest recovery in a military procurement case initiated by a qui tam whistleblower, and one of the largest fraud recoveries against any defense contractor,” said Frederick Morgan, one of Mr. Epp’s attorneys. “That the defendants pled guilty to major fraud is testament to the tenacity of the federal prosecutors and the strength of the evidence.”

Mr. Epp’s civil complaint, brought in March 2010 under the qui tam provisions of the United States Civil False Claims Act, alleges in part that Supreme Foodservice used a shell corporation to inflate the cost to the government of produce served to the troops; illegally increased the cost of bottled water by misrepresenting acquisition costs; and obtained kickbacks from vendors disguised as “prompt payment” discounts. Mr. Epp is a German citizen who worked for Supreme in Dubai, where its Prime Vendor operation was based. Such contracts are used by the military to allow it to purchase all needed food and beverage items from a single company, which procures from manufacturers and suppliers and delivers to the government. He managed Supreme’s supply chain under the Prime Vendor contract until early 2007.

In addition to the detailed knowledge of Supreme’s fraud set out in his complaint, Mr. Epp provided the government investigating teams with tens of thousands of e-mail messages and documents which were integral to the ability of the United States to bring these matters to a successful close. Morgan Verkamp personnel, led by Paralegal Specialist Mary Jones, spent thousands of hours analyzing the documents for the government teams, and Mr. Epp repeatedly traveled to Philadelphia from the Middle East to meet with the government’s attorneys and investigators. “This case demonstrates the power the False Claims Act brings to people who know about fraud against the United States taxpayers, even if they live abroad,” Morgan said. “By using the False Claims Act to bring Mr. Epp’s information to the Justice Department in a structured and cooperative manner, we were able to provide a level of assistance which would have been impossible without the qui tam law.”

The False Claims Act rewards whistleblowers for bringing information to the government, and Mr. Epp is to receive $16,160,000 pursuant to the False Claims Act’s “relator share” provision. Jennifer M. Verkamp of Morgan Verkamp said “The False Claims Act returns billions of dollars to American Taxpayers based on relatively small payments to whistleblowers. Here, for less than six percent of the total recovery, the Justice Department not only obtained a trove of information about these crimes and frauds, but also the detailed knowledge of a close observer to help connect the dots, and extensive support by private lawyers representing Mr. Epp. This is exactly what the Act was intended to achieve.”

“The False Claims Act is based on partnership between private whistleblowers and their lawyers, and the United States and its lawyers,” said Marc S. Raspanti of Pietragallo Gordon Alfano Bosick & Raspanti, “and this case exemplifies this partnership at its best.”

The Department of Justice’s civil investigation was run by Trial Attorney Art J. Coulter, Assistant Branch Director Michael Tingle, and Director Michael Granston of the Commercial Frauds Branch of the Civil Division, all of Washington, D.C.; and by Assistant United States Attorneys Colin Cherico, Joel Sweet, Mary Catherine Frye, and Margaret Hutchinson of the U.S. Attorney’s Office for the Eastern District of Pennsylvania.

The criminal investigation was run by Assistant United States Attorney Bea Witzleben, also of the Eastern District. Principal investigative support was provided by Defense Criminal Investigative Service Special Agent Kishara Gant of the DCIS Philadelphia Field Office, with support from DCIS Special Agent Andrew Dunphy.

The civil case, United States ex rel. Epp v. Supreme Foodservice A.G., No. 10-CV-1134, remains pending before Hon. Mary A. McLaughlin of the United States District Court for the Eastern District of Pennsylvania. The civil complaint, the settlement agreement, the criminal information, and other documents will be available at www.morganverkamp.com.

Senator Leahy Comments on Record-Breaking Fraud Enforcement Penalties in 2014

November 25th, 2014 by Qui Tam

Senator Patrick Leahy (D-VT), Judiciary Committee Chairman, reported that the Department of Justice recovered a record-breaking $24 billion under the False Claims Act in 2014 for civil and criminal penalties. The majority of the penalties were related to the financial crisis that started in 2014 and included financial institutions such as Citibank and JP Morgan. In 2009, Senator Leahy authored a law, Fraud Enforcement Recovery Act, which aids federal prosecutors in going after those who commit financial fraud by strengthening tools and increasing resources for prosecution. A bipartisan bill coauthored by Senator Leahy and Senator Chuck Grassley (R-Iowa), Fighting Fraud to Protect Taxpayers Act, was overwhelmingly supported by Congress. The bill would reinvest some of the money collected, at no expense to the taxpayers, from fraud cases back into the law enforcement of fraud.

Senator Leahy stated, “This is a win for taxpayers, for law enforcement, and for accountability. The Justice Department should be commended for its record-breaking recovery of nearly $24 billion in civil and criminal penalties for fraud against the government and the American people, and particularly those families who suffered financial hardship as a result of the 2008 economic crisis. Many of these cases were brought under the Whistleblower provisions of the False Claims Act – a critical tool I have long supported which fights waste, fraud and abuse.”

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Decision on the Use of Statistical Sampling in False Claims Cases

November 12th, 2014 by Qui Tam

A district court in the Eastern District of Tennessee recently upheld that utilization of statistical sampling to establish liability in false claims cases.  This ruling should expand the prosecutorial capabilities of the federal and state governments , by encouraging them to pursue ever larger companies and individuals who submit a significant number of false claims for payment to the government, without causing concern for the overextension of limited government resources.

The U.S. filed a consolidated complaint based on allegations raised in two separate and later consolidated qui tam actions filed by whistleblowers Glenda Martin and Tammie Taylor against Life Care Centers of America, Inc. (“Life Care”)(Case. Nos. 1:08-cv-251 and 1:12-cv-64), the owner of over 200 skilled nursing care facilities.  The U.S. consolidated complaint alleged that Life Care pressured its rehabilitation therapists to maximize the intensity, type, and length of care a patient received in order to exhaust Medicare’s skilled nursing facility benefit.  According to several allegations raised by the U.S., these rehabilitation determinations were made without regard to whether the therapy was medically reasonable or necessary and was, on occasion, even unskilled.  Life Care allegedly submitted 154,621 claims on behalf of 54,396 patient admissions to Medicare for reimbursement from January 1, 2006 through October 31, 2012. 

Due to the vast number of claims submitted by Life Care and the difficulty in reviewing each one individually, the U.S. sought to utilize statistical sampling on 400 patient admissions at 82 Life Care facilities where more than 65% of patient days were engaged in an intense level of therapy in order to extrapolate and demonstrate the invalidity of all of Life Care’s claims.  Life Care filed a Motion for Summary Judgment challenging the use of statistical sampling in order to establish liability. 

Specifically, Life Care argued that the government could only establish liability by reviewing each claim for payment individually because otherwise it could not establish the False Claims Act elements of presentment of a claim, falsity, scienter (or knowledge), and materiality.  However, the court noted the impracticability of such a requirement, considering the size of the universe of claims at issue.  It held that the purpose of statistical sampling is to locate similarities and probabilities even where the individual claims contain slight differences and that, with such sampling, the government could identify claims and demonstrate falsity.  The court also held that it was sufficient for the U.S. to demonstrate scienter on each of the claims in the statistical sample and then, again, extrapolate.  Moreover, the court held that Life Care’s concerns about materiality were premature considering that the U.S. argued that its model took into account various formulations for the overbilling and that the fact finder would have the ultimate responsibility of discerning whether such modeling was correct.

Finally, Life Care argued that statistical sampling would impact its right to due process, as it would not be allowed to develop a defense with regard to each individual false claim.  However, the court disagreed with this point, noting that other courts had permitted the use of statistical sampling and that Life Care would have the opportunity to cross-examine the U.S.’ witness to challenge the government’s statistical sampling methodology and counter such analysis with its own expert.

The court concluded that nothing in the False Claims Act prohibits the use of statistical sampling to establish liability, but the court reiterated that it is up to the fact finder to determine if the sampling is accurate and reliable.



Attorney General Holder Leaves Legacy on False Claims Act

November 10th, 2014 by Qui Tam

As Attorney General Eric Holder prepares to step down, his success with False Claims Act cases is being highlighted by the Department of Justice. Amongst his greatest legacy is the creating Heath Care Fraud Prevention and Enforcement Action Team (“HEAT”) in 2009. Since its inception in 2009, the HEAT team has conducted six nationwide enforcement actions resulting in charges against 600 individuals and a financial recovery nearing $2 billion. Additionally, the Department has recovered more than $20.2 billion as a result of False Claims Act actions since 2009.

Highlights of the enforcement efforts include a record breaking 2013 recovery of $3.8 billion. This is the second largest annual recovery in history, bested only by a $5 billion recovery in 2012. The largest recoveries in 2012 were attributed to off label marketing of pharmaceutical drugs, including record breaking recoveries from GlaxoSmithKline. Additionally, the Department received an all-time high of 752 relator actions under the False Claims Act in 2013, double the number since 2009. Attorney General Holder is credited with creating a relator friendly attitude at the Department of Justice.


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