False Claims Act Resource Center

Archive for June, 2011

DOJ Intervenes Against Tennessee Cardiologist

Thursday, June 30th, 2011

On June 13, 2011, it was announced that the U.S. Department of Justice would intervene in a False Claims Act suit against Eli Hage Korban, M.D., and two Tennessee hospitals, Jackson-Medicine Country General Hospital and Regional Hospital of Jackson.  The suit is before Judge Bernice Bouie Donald, U.S. District Court for the Western District of Tennessee, Jackson Division. 

The claims against the defendants allege fraudulent billing and overuse of medical services.  More specifically, the qui tam suit alleges that the CEO of both hospitals “chose to ignore blatant overutilization of cardiac medical services, including but not limited to cardiac sonography, scintigraphic stress imaging, angiography, angioplasty, and stenting by Korban, shielding same from any scrutiny by the hospitals’ clinical quality improvement mechanisms.”  Specific to Dr. Korban, the Complaint alleges that he ordered “numerous unnecessary diagnostic studies at the defendant hospitals” which included transthoracic echocardiography, scintigraphic stress imaging, and transesophageal echo.  It is also alleged that Dr. Korban ordered these tests on elderly nursing home patients and subsequently ordered their transport to the defendant hospitals via ambulance for allegedly unnecessary PCI procedures, diagnostic coronary angiography, and other coronary peripheral interventions. 

The suit was brought by Wood M. Deming, M.D., a cardiologist at Regional Cardiology Consultants in Jackson, Tennessee.  Under the False Claims Act, Dr. Deming will share in a portion of the proceeds recovered by the government.

For more information see: http://www.healthleadersmedia.com/content/TEC-267322/DOJ-Intervenes-in-TN-Stent-Fraud-Lawsuit

Johnson & Johnson Ordered to Pay $327 Million for Deceptive Marketing

Thursday, June 30th, 2011

 In early June 2011, a U.S. District Court Judge ordered Johnson & Johnson to pay $327 million due to its deceptive marketing of the antipsychotic medication, Risperdal.  The Office of the Inspector General of the U.S. Office of Personnel Management, the U.S. Department of Justice, the U.S. Attorney’s Office of the Eastern District of Pennsylvania, and various attorneys general of multiple states have been investigating the off-label marketing of Risperdal for many years.  Approximately two months earlier, Johnson & Johnson set aside an unspecified amount of money to be used to resolve the litigation and investigations related to Risperdal which the company is presently facing.

This case includes other state lawsuits involving the marketing of the antipsychotic drug.  While Johnson & Johnson emerged victorious in June 2010 in a lawsuit brought in Pennsylvania, that case contrasted the $3.95 million award in 2009 from a West Virginia judge in a suit alleging that Johnson & Johnson misled doctors about the risks and benefits of Risperdal.  Similarly, in October 2010, a jury in Louisiana ordered the company to pay $257.7 million for making misleading claims which did not include the $73 million in legal fees which were later added.

For more information see:  http://www.bloomberg.com/news/2011-06-03/j-j-ordered-to-pay-327-million-on-deceptive-marketing-claims.html

Nuclear Site Contract Results in $4 Million Settlement to Resolve FCA and Anti-Kickback Act Violations

Thursday, June 30th, 2011

On June 17, 2011, the U.S. Department of Justice announced the settlement of claims against Fluor Hanford, Inc. alleging that the company knowingly submitted false claims and paid and received kickbacks relating to a contract to operate and manage radioactive waste at the Department of Energy’s Hanford Nuclear Site in Hanford, Washington.      Fluor has agreed to pay the U.S. government $4 million to resolve both the false claims and kickback allegations. 

Internal audits by Fluor alerted the company to weaknesses in its purchase card controls, which was exploited by three individuals who coordinated the handling of the mixed radioactive waste.  It is alleged that these coordinators made hundreds of fraudulent purchases using government credit cards to funnel the Department of Energy funds to themselves.  In addition, at least fourteen material coordinators from Fluor solicited and accepted kickbacks from a Hanford-area vendor known as a Fast Pipe and Supply Company and its owner, Shane Fast.  The kickbacks were comprised of gift cards, cash, tickets to sporting events, and other items of value.  The government alleged that the material coordinators gave in excess of $3.5 million in business to Fast Pipe in exchange for these kickbacks.

 Five former Fluor employees were indicted for their participation in the schemes detailed above; four have pled guilty, while the fifth is presently awaiting trial.  The investigation of these was conducted by the Civil Division of the U.S. Department of Justice, the U.S. Attorney’s Office for the Eastern District of Washington and the Department of Energy Office of Inspector General.   

For more information see:  http://www.justice.gov/opa/pr/2011/June/11-civ-793.html

Corrupt Officials and Contractors are Charged with Taking “Time and a Half” in connection with New York’s Automated Payroll System

Wednesday, June 29th, 2011

The Wall Street Journal reports that the development of New York City’s automated payroll system – known as CityTime – was the subject of significant fraudulent kickbacks.  The US Attorney recently announced indictments of two New Jersey executives accused of paying off contractors involving over $600 million in city funds, and over $40 million in kickbacks.  In total, 11 individuals have been charged with the fraud.  The alleged corruption has proved to be an embarrassment to Mayor Michael Bloomberg, and the project itself has been subject to cost overruns, which has inflated the total cost from $68 million initially to over $700 million today. 

For more information see:  http://online.wsj.com/article/SB10001424052702303936704576398100826124240.html

Paralysis of the IRS Whistleblower Program

Wednesday, June 29th, 2011

The Tucson Sentinel reports that despite Congressional expansion of the IRS whistleblower program in 2006, the program does not live up to its expectations.  In the four years since Congress passed the new program, only one whistleblower has purportedly collected an award—an accountant who collected $4.5 million for reporting a $20 million tax underpayment.  In the meantime, the IRS continues its practice of refusing to communicate with whistleblowers concerning  the status of investigations, and the investigations themselves seem to be excessively long. 

The US Government Accountability Office and the IRS Inspector General are currently auditing the program to determine its efficacy.  Senator Charles Grassley, the champion of the whistleblower program remains concerned about paralysis in the program due to the IRS’s concerns about taxpayer privacy.  There also seems to be dissension in the ranks of the IRS concerning the desirability of the whistleblower program.  Attorneys for whistleblowers credit the IRS program; but place blame for the impediments with the IRS chief counsel, who has erected significant roadblocks.  Some of these attorneys believe that the secrecy and slowness of the claims process has deterred viable whistleblowers from coming forward with tips. 

For more information see: http://www.tucsonsentinel.com/nationworld/report/062211_irs_whistleblowers/red-tape-old-guard-slow-whistleblowing-corporate-tax-cheats/

Supreme Court Rules that Laws Limiting Marketing Efforts of Drug Manufacturers Are a Violation of Free Speech

Wednesday, June 29th, 2011

On Thursday, the United States Supreme Court struck down a Vermont law that blocked drug manufacturers’ use of prescription drug information in marketing campaigns designed to sell new drugs to physicians.  Although the law was designed to hold down health care costs and shield physicians from harassing marketing campaigns by preventing manufacturers from using prescription drug information to craft marketing campaigns, the Court found that the law hampered pharmaceutical companies from promoting opposing viewpoints concerning the drugs.  The Court struck down the law as restricting only pharmaceutical companies, while  no one else’s use of the information was similarly restricted. 

For more information see:  http://www.csmonitor.com/USA/Justice/2011/0623/Supreme-Court-strikes-down-law-restricting-sale-of-prescription-drug-info.

Grenade Makers Attempt to Defuse False Claims Act Charges Denied

Friday, June 3rd, 2011

Last week, United States District Judge Steve Merryday upheld Relator John King’s amended qui tam Complaint against grenade manufacturer DSE, Inc. and its subcontractors Kaman Precision Products, GTI Systems, and JKS Industries.  Mr. King, a former employee at DSE, alleges that the company terminated him from the position of quality-assurance manager when he refused to certify the quality of defective grenades that either exploded prematurely or failed to explode at all.

According to the Complaint, DSE and its subcontractors cut corners on quality control in order to meet production deadlines for the U.S. government.  Judge Merryday ruled that the allegations in the amended Complaint were sufficient “to allege that each defendant knowingly participated in a scheme to provide substandard grenades to the United States Armed Forces.”

Judge Merryday also rejected subcontractors’ argument that Mr. King could not have known about their quality control processes because he worked for DSE, and not the subcontractors.  While he did not observe the subcontractors’ work first-hand, the Court held it was sufficient that Mr. King inspected the final product and found it defective.

For more information see: http://www.courthousenews.com/2011/05/31/36960.htm

Father-Son Duo Indicted in Multimillion-Dollar Military Contract Bribery Scheme

Friday, June 3rd, 2011

Two American businessmen, George H. Lee and his son, Justin W. Lee, have been charged with giving U.S. Army officers airline tickets, vacations, and over $1 million in bribes to secure multimillion-dollar contracts to provide supplies to the U.S. military and to help rebuild Iraq.  Their indictment was unsealed on May 27, 2011.

The Lees join a group of almost 60 contractors and military officers to face criminal charges related to misconduct in obtaining a variety of government contracts in the early part of the Iraq war.  Their involvement in the Iraqi contracting scandal has been known for some time, as their company, Lee Dynamics International, has been barred from doing business with the federal government since July 2007.

Documents filed in the criminal proceeding against George and Justin Lee allege that the Lees provided $225,000 in bribes to one unnamed Army Major (identified as “Person One”) in exchange for the officer directing over $14 million in contracts to Lee Dynamics.  The description of “Person One” in the indictment closely matches that of Maj. Gloria D. Davis, who shot and killed herself in Baghdad in December 2006 after admitting to investigators that she had taken the $225,000 in bribes from the Lees’ company.

The indictment also ties the Lees to another corrupt Army officer, Maj. John Cockerham, who was recently sentenced to 17 years in prison for taking over $9.6 million in bribes while working at a contracting office in Kuwait.  The government has charged George and Justin Lee with providing at least $1 million to Major Cockerham in exchange for being funneled contracts to provide American troops with bottled water, bunk beds, and mattresses.

For more information see:  http://www.nytimes.com/2011/05/31/world/middleeast/31iraq.html?_r=1


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