False Claims Act Resource Center

Archive for March, 2011

Whistleblower Sparks Federal Suit Against NYC

Wednesday, March 23rd, 2011

In January 2011, the U.S. Attorney’s office in Manhattan filed a lawsuit against the City of New York, accusing the city’s Human Resources Administration of overbilling Medicaid millions of dollars by abusing the federally funded 24-hour home care program.  The suit followed a complaint filed by a whistleblower.  The suit alleges that, in response to a 2006 modification in Medicaid policy relieving the city of financial responsibility for the 24-hour home care program, the city began improperly and unnecessarily approving the use of the program for inappropriate patients.  Prior to 2006, the City of New York shared the cost of the 24-hour home care program (then called Personal Care Services) with the federal and state governments.  Beginning January 1, 2006, Medicaid removed NYC from the contributing equation, leaving the financial burden of the program to fall solely on federal and state funding. 

Though the complaint did not specify whether enrollment in the program spiked after 2006, it did allege that improper and/or fraudulent enrollment in the program had steadily occurred between the years of 2000 and 2010; the time period on which their investigation focused.  Improper enrollment, the government said, was demonstrated in the countless cases where patients either did not need the services of in-home 24-hour care, or needed more intensive services that could not be provided by in-home care.  The U.S. Attorney’s office said that the city had improperly authorized coverage for a “substantial percentage”, often disregarding various stipulations and qualifications mandated by the Medicaid program for approving patients for 24-hour home care.  The lawsuit failed to provide an amount that the City of New York had allegedly overbilled throughout the ten year span, however, the government asked the court to award treble damages.  

 For more information see:  http://www.nytimes.com/2011/01/12/nyregion/12medicaid.html?_r=2&partner=rss&emc=rss

Health Care Fraud Prevention Summit Takes On Detroit

Wednesday, March 23rd, 2011

On June 8, 2010, President Obama announced the onset of regional fraud prevention summits; a nationally comprehensive effort to fight health care fraud.  Since inception, five summits have been held across the nation in the cities of Miami, FL, Los Angeles, CA, Brooklyn, NY, Boston, MA, and most recently, Detroit, MI.  These summits are only part of the joint effort undertaken by the Departments of Justice and Health and Human Services (“HHS”) to attack health care fraud across the nation.  Together, the two departments have joined forces to form the Health Care Fraud Prevention and Enforcement Action team (“HEAT”), which is a partnership between various subdivisions of the departments, including the Criminal Division’s Fraud Section, the U.S. Attorneys’ Offices, the HHS Office of Inspector General, the FBI, and other federal, state and local law enforcement partners.

The recent Health Care Fraud Prevention Summit in Detroit consisted of statements from Attorney General Eric Holder and HHS Secretary Kathleen Sebelius, as well as three educational panels aimed at identifying best practices for providers, law enforcement, and beneficiaries in preventing health care fraud.  In Detroit alone, the efforts of the Medicare Fraud Strike Force has resulted in charges brought against 120 defendants since May of 2009.  The health care fraud schemes associated with these defendants cost taxpayers approximately $120 million.  63 of the 120 defendants have pleaded guilty thus far, and eight were convicted at trial.

 For more information see:  http://www.justice.gov/opa/pr/2011/March/11-ag-329.html

Enron Whistleblower Awarded $1.1 Million by IRS… 12 Years After Initial Warning

Wednesday, March 23rd, 2011

The whistleblower recently awarded $1.1 million by the Internal Revenue Service had initially exposed Enron’s fraudulent practice of generating fictitious income by using abusive tax shelters to the IRS back in 1999. Erika A. Kelton of the Washington law firm Phillips & Cohen, was quoted saying, “If the IRS had pursued this information in 1999 when my client first informed them of these abusive tax shelters, the government might have realized the depth of Enron’s problems and perhaps taken steps that might have helped avoid a total meltdown.” Though the firm refused to reveal the identity of their client, they did state that the informant had testified anonymously before the Senate Finance Committee in 2004. During his testimony, the informant stated that he worked for a Wall Street investment bank and was “intimately aware of competitors’ fraudulent tax shelters.” He further stated that over the course of several years of trying to persuade the IRS to take action, he spent thousands of hours educating them on countless fraudulent schemes, which he believes involved over $10 billion of taxable income. Needless to say, the informant described his experience with the IRS as “extremely frustrating and discouraging.”

Unfortunately, the Enron whistleblower was only entitled to receive a maximum of 15 percent of the total amount of unpaid taxes the IRS was able to recover as a result of the information he had provided. The Federal False Claims Act was later changed in 2006 to allow a whistleblower to receive a reward of 15 to 30 percent of the governments’ recovery. The $1.1 million awarded to the Enron informant was the maximum 15 percent allowed under the law at the time he had initially contacted the agency in 1999.

For more information see:

Medline Settles Kickback Case for $85M

Thursday, March 17th, 2011

Former Medline Industries, Inc. employee turned whistleblower, Sean Mason, will receive $23.4 million of the $85 million Medline will pay to settle Mason’s lawsuit alleging false claims act violations. Mason’s complaint accuses Medline, an Illinois medical products company, of inducing medical providers such as HCA, Inc. and HealthSouth Corp., with fraudulent kickbacks in the form of “rebates”, excessive gifts, and donations, to get there business in return.

The medical providers identified in the complaint use federal funds provided by Medicare and Medicaid to purchase supplies from the defendant, and therefore kickbacks to these companies is in violation of the federal False Claims Act.  Medline’s general counsel denies the allegations, claiming the settlement was made solely to avoid costly litigation. Ironically, the federal government also lacked faith in the whistleblower’s complaint, having determined not to intervene in the matter. Mason’s legal counsel, Milberg LLP, claim this settlement is one of the largest ever awarded a whistleblower alleging violations of the False Claims Act, for which the government did not intervene.

For more information see:  http://www.reuters.com/article/2011/03/12/medline-kickback-settlement-idUSN1120850920110312

Protecting the Evergreen State: Washington Senate Introduces Medicaid False Claims Act

Tuesday, March 8th, 2011

A Bill currently pending before the Washington State Senate would enact a Medicaid False Claims Act to protect against false claims made to the Washington State Medicaid Program.  Senate Bill Number 5458 would, like the federal False Claims Act, encourage private whistleblowers (known as qui tam “relators”) to step forward and file a lawsuit against those who submit false claims for payment to the Washington State Medicaid Program.  Senate Bill 5458 is patterned after the federal False Claims Act, which has been used by the federal government to recover more than $27 Billion in taxpayer funds since 1986.  If Senate Bill 5458 is signed into law, Washington would become the 29th State in the United States with its own State False Claims Act.

To read the text of Senate Bill 5458 see: http://apps.leg.wa.gov/documents/billdocs/2011-12/Pdf/Bills/Senate%20Bills/5458-S2.pdf

Collect Call: 2 Firms Pay $16.5 Mill. For Phone Maintenance Fraud

Thursday, March 3rd, 2011

A telecommunications company, and a New York financial firm have agreed to pay more than $16.5 million to settle a whistleblower lawsuit claiming they defrauded the government. Avaya, which provided desktop phone systems to hundreds of federal and state agencies, was alleged to have billed the government for equipment and maintenance even when the devices didn’t work or had been replaced with upgraded systems. CIT Group was accused of continuing the billing practices when it bought a portion of Avaya’s customer base.

For more information see:  http://online.wsj.com/article/AP815fb68aeffc422a9f23f8f3f080ba93.html

The IRS’s Proposed Amendments to Its Informant Reward Program

Thursday, March 3rd, 2011

The article, “The IRS’s Proposed Amendments to Its Informant Reward Program” authored by Marc S. Raspanti and Douglas K. Rosenblum was published in The Legal Intelligencer on March 2, 2011.  Mr. Raspanti is a partner in the firm’s Philadelphia office and Mr. Rosenblum is an  associate in the Philadelphia office.

To read the article:  http://www.falseclaimsact.com/library/files/irs_article_in_legal.pdf

SEC Appoints Corporate Insider to Head Newly Established Whistleblower Office

Wednesday, March 2nd, 2011

On February 11, the SEC appointed Sean McKessy, former corporate secretary for AOL and Altria group (Phillip Morris) to head its new whistleblower program.  McKessy was previously an attorney in the SEC’s enforcement division.  Because of his corporate background, many worry that he will be an impediment to creating an effective SEC whistleblower program.  Indicative of this trend, the U.S. Chamber of Commerce already placed its imprimatur on the appointment in a statement that it was “encouraged” that McKessy “has a solid understanding of corporate compliance programs.”  So far the SEC has declined to make McKessy available for an interview. 

For more information see:  http://www.washingtonpost.com/wp-dyn/content/article/2011/02/18/AR2011021807539.html?nav=emailpage

New York’s Largest Residential Services Provider Cooks the Books in Order Get Paid More

Wednesday, March 2nd, 2011

New York State recently settled claims against Young Adult Institute (YAI), a provider of residential services for developmentally disabled adults for $18 million. Under government sponsored programs, New York State reimbursed YAI for losses sustained in operating its state programs. The state charged YAI with inflating its losses by attributing additional expenses unrelated to the state programs to the losses in order to inflate the amount to be reimbursed, and by inflating the proper amount of those expenses. Specifically, YAI was alleged to have attributed work of certain employees to the program when, in fact, they never worked in the program. YAI also inflated funding expenses by categorizing certain employees as high level staff subject to higher reimbursement rates and salary. The government learned about the fraud after receiving a complaint from a whistleblower.

The article may be found here: http://www.ag.ny.gov/media_center/2011/jan/jan18a_11.html


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