False Claims Act Resource Center

Bank of America Agrees to Pay over $9.6 Billion to Settle Claims relating to the Housing Crisis

August 26th, 2014 by Qui Tam

Bank of America will be paying the federal government, California, Delaware, Illinois, Maryland, New York and Kentucky a total of $9,650,000,000.00 to resolve claims arising out of the packaging, origination, marketing, sale, structuring, arrangement and issuance of residential mortgage-backed securities and collateralized debt obligations by Bank of America, Countrywide, Merrill Lynch and Franklin Financial Corporation. Included within this settlement are three suits brought by individuals under the False Claims Act. These lawsuits were based upon the alleged sale of defective residential mortgage loans to Fannie Mae and/or Freddie Mac. $1 billion of the settlement will be used to resolve these suits. The individuals who made these allegations have not been identified but will receive a portion of the money which is being paid. Over $5 billion will go to the United States Treasury as a civil monetary penalty. The remaining amount will go to the federal and state governments. Bank of America will also be providing $7,000,000,000.00 of consumer relief intended to address the harm that its alleged conduct caused.

The settlement addresses conduct that took place prior to January 1, 2009. This agreement does not prevent criminal charges from being brought in the future or lawsuits from being filed against any individual who is alleged to have engaged in wrongful conduct.

Community Health Systems Inc. to Pay $98.15 Million to Resolve False Claims Act Allegations

August 6th, 2014 by Qui Tam

The Justice Department announced today that Community Health Systems Inc. (CHS), the nation’s largest operator of acute care hospitals, has agreed to pay $98.15 million to resolve multiple lawsuits alleging that the company knowingly billed government health care programs for inpatient services that should have been billed as outpatient or observation services.  The settlement also resolves allegations that one of the company’s affiliated hospitals, Laredo Medical Center (LMC), improperly billed the Medicare program for certain inpatient procedures and for services rendered to patients referred in violation of the Physician Self-Referral Law, commonly known as the Stark Law.  CHS is based in Franklin, Tennessee, and has 206 affiliated hospitals in 29 states.

“Charging the government for higher cost inpatient services that patients do not need wastes the country’s health care resources,” said Assistant Attorney General Stuart F. Delery for the Justice Department’s Civil Division.  “In addition, providing physicians with financial incentives to refer patients compromises medical judgment and risks depriving patients of the most appropriate health care available.  This department will continue its work to stop this type of abuse of the nation’s health care resources and to ensure patients receive the most appropriate care.”

The United States alleged that from 2005 through 2010, CHS engaged in a deliberate corporate-driven scheme to increase inpatient admissions of Medicare, Medicaid and the Department of Defense’s (DOD) TRICARE program beneficiaries over the age of 65 who originally presented to the emergency departments at 119 CHS hospitals.  The government further alleged that the inpatient admission of these beneficiaries was not medically necessary, and that the care needed by, and provided to, these beneficiaries should have been provided in a less costly outpatient or observation setting.  CHS agreed to pay $89.15 million to resolve these allegations.  The settlement does not include hospitals that CHS acquired from Health Management Associates (HMA) in January 2014.

In addition, the government alleged that from 2005 through 2010, one of CHS’s affiliated hospitals, LMC in Laredo, Texas, presented false claims to the Medicare program for certain cardiac and hemodialysis procedures performed on a higher cost inpatient basis that should have been performed on a lower cost outpatient basis.  The government also alleged that from 2007 through 2012, LMC improperly billed Medicare for services referred to LMC by a physician who was offered a medical directorship at LMC, in violation of the Stark Law.  The Stark Law prohibits a hospital from submitting claims for patient referrals made by a physician with whom the hospital has an improper financial relationship, and is intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives, and is instead based on the best interests of the patient.  CHS agreed to pay $9 million to resolve the allegations involving LMC.

“This is the largest False Claims Act settlement in this district and it reaffirms this office’s commitment to investigate and pursue health care fraud that compromises the integrity of our health care system,” said U.S. Attorney David Rivera for the Middle District of Tennessee.  “This office is committed to ensuring that all companies billing government healthcare programs are responsible corporate citizens and that hospital providers do not engage in schemes to increase medically unnecessary in-patient admissions of government healthcare program beneficiaries in order to increase profits.”

“This settlement demonstrates our commitment to working with our law enforcement partners and with the Department of Justice to protect the integrity of our nation’s health care system,” said U.S. Attorney Kenneth Magidson of the Southern District of Texas.  “Put simply, these types of fraudulent practices will not be tolerated and the investigation and resolution of such claims will continue to be a high priority of this office.”

“Health care providers should make treatment decisions based on patients’ medical needs, not profit margins,” said U.S. Attorney Anne M. Tompkins for the Western District of North Carolina.  “We will not allow this type of misconduct to compromise the integrity of our health care system.”

As part of today’s agreement, CHS entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services – Office of Inspector General (HHS-OIG), requiring the company to engage in significant compliance efforts over the next five years.  Under the agreement, CHS is required to retain independent review organizations to review the accuracy of the company’s claims for inpatient services furnished to federal health care program beneficiaries.

“In an effort to ensure the company’s fraudulent past is not its future, CHS agreed to a rigorous multi-year Corporate Integrity Agreement requiring that the company commit to compliance with the law,” said Inspector General Daniel R. Levinson, of the U.S. Department of Health and Human Services.  “The dedicated work of OIG’s investigators, auditors, and attorneys, in concert with our law enforcement partners, has again resulted in the recovery of taxpayer dollars and better protection against fraud in the future.”

The settlement resolves lawsuits filed by several whistleblowers under the qui tam provisions of the False Claims Act, which permit private parties to file suit on behalf of the government and obtain a portion of the government’s recovery.  Those relators are Kathleen Bryant, former Director of Health Information Management at CHS’s Heritage Medical Center in Shelbyville, Tennessee; Rachel Bryant, former nurse at CHS’s Dyersburg Hospital in Dyersburg, Tennessee; Bryan Carnithan, former Emergency Medical Services Coordinator at CHS’ Heartland Hospital in Marion, Illinois; Amy Cook-Reska, former coder for CHS’ LMC in Laredo; Sheree Cook, former nurse at CHS’s Heritage Medical Center in Shelbyville; James Doghramji, former internal medicine and emergency room physician at CHS’s Chestnut Hill Hospital in Philadelphia; Thomas Mason, former emergency room physician at Lake Norman Regional Medical Center in Mooresville, North Carolina; Scott Plantz, former emergency room physician at CHS’s Longview Regional Medical Center in Longview, Texas; and Nancy Reuille, former nurse and Supervisor of Case Management at CHS’s Lutheran Hospital in Fort Wayne, Indiana.  The relators’ share of the settlement has not yet been determined.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $20.2 billion through False Claims Act cases, with more than $14 billion of that amount recovered in cases involving fraud against federal health care programs.

This settlement was the result of a coordinated effort by the U.S. Attorney’s Offices for the Middle District of Tennessee, Southern District of Texas, Northern and Southern Districts of Illinois, Northern District of Indiana and Western District of North Carolina; the Civil Division’s Commercial Litigation Branch; HHS-OIG; DOD’s Defense Health Agency – Program Integrity Office and the FBI.

The lawsuits are captioned United States ex rel. Bryant v. Community Health Systems, Inc., et al., Case No. 10-2695 (S.D. Tex.);  United States ex rel. Carnithan v. Community Health Systems, Inc., et al., Case No. 11-cv-312 (S.D. Ill.);  United States ex rel. Cook-Reska v. Community Health Systems, Inc., et al., Case No. 4:09-cv01565 (S.D. Tex.);  United States ex rel. James Doghramji; Sheree Cook; and Rachel Bryant v. Community Health Systems Inc., et al., Case No. 3-11-cv-00442 (M.D. Tenn.);  United States ex rel. Mason v. Community Health Systems, Inc., et al., Case No. 3:12-cv-817 (W.D.N.C.);  United States ex rel. Plantz v. Community Health Systems, Inc., et al., Case No. 10C-0959 (N.D. Ill.);  United States ex rel. Reuille v. Community Health Systems Professional Services Corporation, et al., Case No. 1:09-cv-007RL (N.D. Ind.).  The claims resolved by this agreement are allegations only and there has been no determination of liability.

From the USDOJ: http://www.justice.gov/opa/pr/2014/August/14-civ-822.html


Agencies finalize Rule on Contractor Whistleblower Costs

July 30th, 2014 by Qui Tam

Effective July 25, 2014, The Department of Defense, General Services Administration, and NASA have implemented as a final with changes, an interim rule amending the Federal Acquisition Regulation (FAR) to adopt a section of the National Defense Authorization Act (NDAA) for the Fiscal Year (FY) 2013.  The rule addressed permissible legal costs incurred by a contractor or subcontractor related to a whistleblower proceeding brought by the submission of a complaint of reprisal by the contractor or subcontractor.

            The final rule will stop government contractors and subcontractors from charging the government legal fees related to whistleblower retaliation suits. These fees, incurred with any proceeding brought by a contractor or subcontractor employee submitting a whistleblower complaint of reprisal in accordance with 41 U.S.C.4712 or 10 U.S.C.2409, are treated the same as any pre-existing cost principle treats costs incurred with any proceeding brought by a Federal, State, local, or foreign government. This applies for violations of, or failure to comply with, any laws or regulations by the contractor, or costs incurred in connection with any proceeding brought by a third party in the name of the U.S. under the False Claims Act, 31 U.S.C.3730.  The final rule has been modified to include whistleblower complaints in the provisions at FAR 31.205-47(c).

Virginia Company will pay $343,000 to settle Medicare fraud claim

July 25th, 2014 by Qui Tam

On Tuesday, July 22, 2014, a federal judge in Pittsburgh approved a settlement in which a Virginia-based medical research firm will pay $343,000 to the U.S. to settle claims that it defrauded the government by improperly marketing genetic tests to patients at a Green County medical office.

The Justice Department asserts that American International Biotechnology (“AIB”) and a former contract sales agent, Jason Hoover, violated the federal False Claims Act by improperly obtaining referrals for genetic tests and billing to Medicare. Mr. Hoover was also accused of offering kickbacks of $50 per patient to a nurse at Lions Medical Center, a facility operated by Greentree Medical Center, located in Rices Landing, PA.

Greentree Medical Center initially raised the federal suit that was later joined by the Justice Department. In the complaint, filed in April 2013, Greentree and the U.S. asserted that Mr. Hoover devised the scheme starting in 2012. Mr. Hoover regularly visited Lions Medical to assess cardiac equipment, thereby obtaining patient insurance information. Mr. Hoover established exclusive contact with a registered nurse named Matt Burkett after meeting at a dinner to pitch AIB’s genetic tests. Under the guise that the genetic tests would be part of a free clinical trial, Mr. Hoover asked Mr. Burkett to simply swab each patient’s cheek and submit an order with the patient’s signature. According to the complaint, Mr. Hoover initially offered a $50 kickback for the nurse’s help. Mr. Burkett declined the bribe, but asked who specifically should be swabbed. Mr. Hoover instructed Mr. Burkett to swab “everyone who comes through the door.” Believing the testing was free and part of a research project, Mr. Burkett obtained patient consent and swabbed the patients’ cheeks. Mr. Hoover then completed the blank form and submitted the forms to the insurance companies, including Medicare. In some cases, Medicare paid as much as $4000 per patient for this unwanted testing. On numerous occasions Greentree asked AIB to stop billing, to no avail.

AIB asserts that they were unaware such activities occurred and put the blame solely on Mr. Hoover’s shoulders. “[AIB] had no knowledge of the alleged actions of the contract sales agent, and only learned of the action on receipt of the complaint; it did not approve or sanctions the actions of the sales agent.” AIB chose to settle the case rather that litigate to “avoid the delay; uncertainty, inconvenience and expense.”

Kickback Case Survives Motion to Dismiss

July 7th, 2014 by Qui Tam

A fraud suit alleging that five hospitals in the south bribed local clinics to refer undocumented immigrants to the hospitals to give birth has survived a motion to dismiss.


In the suit, captioned U.S. ex rel. Williams v. Health Management Associates (M.D. Ga.), a whistleblower alleges that the Georgia- and South Carolina-based hospitals paid local clinics fees, ostensibly for translation support, assistance in determining Medicaid eligibility and other services.  The clinics serve pregnant undocumented immigrants.  The women who use the clinics generally do not qualify for government healthcare programs.  However, Medicaid does reimburse hospitals for emergency services when undocumented immigrants give birth at their facilities.


The whistleblower in Williams alleged that the fees paid by the hospitals to the clinics were sham payments to induce the clinics to refer more patients to the hospitals. 


The defendants argued that the whistleblower’s complaint failed to state a claim for relief, but the court disagreed.  Among the reasons, the court noted that the whistleblower had alleged that the defendants executed certifications to the government falsely stating that the services for which they sought reimbursement were procured without payment of a kickback.  The certification further stated that the information provided to the government was “true, correct and complete.” 


Based on these alleged false certifications, the court concluded that the whistleblower had adequately alleged that the defendants had falsely billed the government for services provided to the undocumented pregnant women. 


The case now proceeds to discovery.




Nursing Home Operator Loses Challenge to ‘Worthless Services’ Conviction

July 7th, 2014 by Qui Tam

The Eleventh Circuit has turned back an appeal from a nursing-home operator convicted of healthcare fraud after he billed government programs while his residents went without food, diapers and medication.

The case, United States v. Houser, is notable for its treatment of the so-called “worthless services” theory, commonly used by whistleblowers alleging fraud against the government under the False Claims Act.

Houser, the nursing-home operator, ran three facilities in Rome, Georgia.  The facilities lacked working heating, air conditioning, diapers and food.  Staff had to borrow medications from some residents and give them to others because Houser failed to pay his pharmacy bill.

Houser was charged with and convicted of conspiracy to commit healthcare fraud based on his submission of claims for the virtually nonexistent services he provided to his residents.  On appeal, Houser argued that his conviction was impermissibly based on a “worthless services” theory, which, he contended, could be applied only in civil suits.  Under a worthless services theory, a contractor can be held liable for defrauding the government if, in performing a contract, it provides products or services that are so deficient as to be of no value to the government.

Houser contended that the worthless-services concept was too vague to be imported into criminal law.  The Eleventh Circuit rebuffed his argument, concluding that his conviction rested on his failure to provide certain services at all, not just the lack of value for services he did provide.

“We do not believe that Mr. Houser’s conviction requires us to draw the proverbial line in the sand for purposes of determining when clearly substandard services become ‘worthless,’” the court wrote.

Armstrong FCA Suit Cycles Onward

July 1st, 2014 by Qui Tam

Seven-time Tour de France winner Lance Armstrong has been no match so far for the False Claims Act.

A Washington, D.C., federal judge on Friday denied Armstrong’s request to dismiss the FCA suit brought against him by former teammate Floyd Landis and the federal government.  The suit alleges fraud against the U.S. Postal Service, which sponsored Armstrong during the years when, he now admits, he was doping.

Armstrong’s lawyers had argued that the government had brought the claims too late because it knew or should have known much earlier of Armstrong’s doping.  But Judge Robert L. Wilkins ruled that a prior investigation into doping by Armstrong did not put the government on notice of his cheating.  The earlier investigation actually vindicated Armstrong, who did not admit to doping until January 2013.

For more information, click here.

Order in the Clinic de la Mama Kickback Case

June 30th, 2014 by Qui Tam

US Dist. Court for the Middle District of Georgia, Athens Division

While this is a straightforward and simple kickback case (kickback for the referral of undocumented pregnant women eligible for Medicaid), The Order “knocks down multiple motions to dismiss and does it with a flourish and in detail.” Both DOJ and the State of Georgia intervened in this case.

Plaintiffs allege that five hospitals in Georgia and South Carolina paid clinics that provided prenatal care to undocumented Hispanic mothers to refer those mothers to their hospitals for the delivery of their babies in violation of the federal Anti-Kickback Statute, 42 U.S.C. § 1320a-7b. When the hospitals submitted Medicaid claims for these deliveries, Plaintiffs contend that they violated the federal False Claims Act 31 U.S.C. § 3729, and its Georgia counterpart, the Georgia Medicaid False Claims act, O.C.G.A. § 49-4-168.1 to 168.6.

The order begins, “It is estimated that more than 340,000 babies are born each year to undocumented alien mothers in United States hospitals. The American taxpayers, through the Medicaid program, pay these hospitals at least $1 billion per year for these deliveries. While the wisdom of the public policy related to these issues is for the Legislative and Executive Branches (and not for this Court) to consider, the financial opportunities presented by these numbers reveal why the healthcare industry may be motivated to pursue this slice of the Medicaid pie aggressively.” In this case, Plaintiffs maintain that Defendants’ aggressive pursuit violated the law.

The court found that “Plaintiffs have adequately alleged facts to support the conclusion that Defendant acted knowingly and willfully.” The order ends, “For the reasons described in this Order, the Motions to Dismiss are denied.”

To view the referenced Order in the case, click here.

Third Circuit Adopts a More Lenient Approach on How Whistleblowers Must Plead False Claim Suits

June 26th, 2014 by Qui Tam

This month, The Third Circuit, became the latest appeals court to reject a stricter pleading standard typically applied by four circuits when interpreting Federal Rule of Civil Procedure 9(b), which states that fraud suits must describe misconduct “with particularity,” demanding that complaints include samples of actual false claims.  In a unanimous decision, the Third Circuit found little statutory support for such a demand; rather, the court commented favorably on the “nuanced approach” of the First, Fifth and Ninth circuits which have been more willing to let FCS suits proceed when circumstantial evidence strongly suggests false claims were submitted.

In its ruling in Foglia v. Renal Ventures, the Third Circuit stated, “It is hard to reconcile the text of the FCS, which does not require that the exact content of the false claims in question be shown with the ‘representative samples’ standard favored by the Fourth, Sixth, Eighth and Eleventh circuits.” 

Now, there is an even stronger line drawn straight down the middle between the eight circuits, deepening the division. 

For more information, click here.

Where’s the Beef? High Court Approves Deceptive Advertising Claims Based upon Allegedly False Descriptions of Food and Drink

June 20th, 2014 by Qui Tam

Under the Lanham Act, one can bring a suit claiming that the defendant has engaged in unfair competition by using misleading advertising or labeling.  The Federal Food, Drug and Cosmetic Act (“FDCA”) prohibits, among other things, the misbranding of food and drink.  Under the FDCA, the United States is generally the only one who can initiate an action against someone who has used false or misleading labeling.  In Pom Wonderful, LLC v. Coca-Cola Company, No. 12-761 (June 12, 2014), the United States Supreme Court examined whether a private party may bring a Lanham Act claim challenging a food or drink label that is regulated by the FDCA.

Pom Wonderful distributes pomegranate juices.  Coca Cola, under its Minute Maid brand, created a juice blend made up largely of apple and grape juices as well as a small amount of pomegranate, blueberry and raspberry juices.  Although the drink only contained 0.3% pomegranate and 0.2% blueberry juices, the words “pomegranate” and “blueberry” appeared on the front label for the product in all capital letters.  The label also had pictures of blueberries, grapes and raspberries in front of a halved pomegranate and a halved apple.  Pom Wonderful sued Coca Cola under the Lanham Act claiming that its label deceived customers and misled them into believing that the drink was made up mostly of pomegranate and blueberry juices when it actually contained mostly apple and grape juices.  Coca Cola responded that it was permitted to use the label under the FDCA and that the FDCA prevented a private party, like Pom Wonderful, from proceeding with a suit under the Lanham Act.

The Supreme Court disagreed with Coca Cola.  Initially, the Court stated that there was no language in either the Lanham Act or FDCA which prevented someone from bringing suit under the Lanham Act challenging a label which also happened to be regulated by the FDCA.  Moreover, while both statutes dealt with food and beverage labeling, each provision had its own scope and purpose.  According to the Court, the statutes complement each other.  Specifically, the Lanham Act protects commercial interests against unfair competition while the FDCA protects the public health and safety.  Furthermore, the Food and Drug Administration, which is primarily responsible for enforcing the FDCA, does not have expertise in judging the effect that labels might have on competition.  Rather, this knowledge is in the hands of those who participate in the marketplace and the Lanham Act draws on this experience by empowering those participants to challenge food and beverage labels that they believe deceive and mislead consumers.  As a result, the Court held that the trial court should not have found in favor of Coca Cola and sent the case back to that court for further proceedings.

It is anticipated that the Pom Wonderful decision will encourage those in the food and beverage industry to place greater scrutiny on labels and other forms of advertising with an eye towards whether they can accuse a competitor of trying to sell consumers a pig in a poke.



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