False Claims Act Resource Center

Archive for August, 2011

Minnesota Transit Constructors to Pay $4.6 Million to Resolve False Claims Act Allegations

Friday, August 26th, 2011

Minnesota Transit Constructors Inc. (MnTC), a joint venture comprised of Granite Construction, C.S. McCrossan Inc. and Parsons Transportation Group, as well as a number of subcontractors, have agreed to pay the United States $4.6 million to resolve allegations that they knowingly submitted false claims related to a federally-funded transit construction project in Minneapolis.

MnTC was the prime contractor on the project to design and build the Hiawatha Light Rail Transit System, a light-rail line linking downtown Minneapolis-St. Paul International Airport and the Mall of America.  The United States alleged that the companies falsely claimed that they had used Disadvantaged Business Enterprises (DBEs) for part of the work on the project when they had not.   The U.S. Department of Transportation’s (DOT) DBE program provides assistance to businesses owned by minorities and women, as well as socially and economically disadvantaged individuals, to participate in federally-funded construction and design projects.

Read more at: http://www.justice.gov/opa/pr/2011/August/11-civ-1080.html

Indiana joins suit against Brown Mackie, Art Institute parent company

Friday, August 26th, 2011

The State of Indiana has joined in a whistleblower lawsuit against Education Management Corporation (EDMC), alleging the for-profit college company and two of its subsidiaries received more than $12 million in state financial aid after making false claims and misrepresentations to the state.  The United States of America, the States of California, Florida, Illinois, Massachusetts, Minnesota, Montana, New Jersey, New Mexico, New York, the District of Columbia, and two whistleblowers are also parties to the lawsuit, pending in the Western District of Pennsylvania. 

The states and federal government allege the EDMC defendants violated a federal law that bans incentive compensation for college admissions employees based on the numbers of students they enroll.  By using a system where college recruiters’ compensation was tied to enrollment numbers, EDMC and two of its subsidiaries operating in Indiana violated Title IV of the Higher Education Act of 1965, the lawsuit alleges.

This lawsuit is the first time the Indiana Attorney General’s office has used a whistleblower lawsuit to seek civil penalties due to false claims paid out of state financial aid, rather than out of Medicaid. 

Read more at http://www.in.gov/portal/news_events/72194.htm

New Hampshire-Based Red River Computer Co. Agrees to Pay $2.3 Million to Resolve False Claims Act Allegations

Friday, August 26th, 2011

John P. Kacavas, the U.S. Attorney for the District of New Hampshire, announced that Red River Computer Co., Inc. has agreed to pay $2.3 million to resolve allegations that it violated the False Claims Act.  The allegations relate to Red River Computer Co’s business with various federal agencies, including the U.S. Department of Defense, the U.S. Department of Commerce, the U.S. Department of Interior, the Environmental Protection Agency, the Library of Congress and the General Services Administration. 

An investigation by the United States identified concerns with respect to dozens of contracts that Red River had with the government, including instances where Red River contracted to provide a particular good or service, but failed to do so despite being paid.  Red River cooperated in the government’s investigation. 

Read more at http://www.fbi.gov/boston/press-releases/2011/new-hampshire-based-red-river-computer-co.-agrees-to-pay-2.3-million-to-resolve-false-claims-act-allegations

California-Based Taleo Corp. Agrees to Pay $6.49 Million to Resolve False Claims Act Allegations

Friday, August 26th, 2011

The Justice Department has announced that Taleo Corp. has agreed to pay $6.49 million to resolve allegations that it knowingly caused false claims to be submitted to the Transportation Security Administration (TSA). 

Taleo’s subcontract with an entity that provided human resource services to the TSA stated that Taleo would provide supporting software and would charge its commercial rates with certain discounts.  The United States alleged that Taleo charged TSA a higher rate than it should have under the contract. 

This settlement resolves allegations filed by a former Taleo employee under the whistleblower provisions of the False Claims Act, which authorizes private parties to sue on behalf of the United States for fraud and to share in any recovery. 

For more information see: http://www.justice.gov/opa/pr/2011/August/11-civ-1049.html

Male v. Female Billing Error Results in Settlement

Monday, August 15th, 2011

St. Francis Hospital and Medical Center has settled a False Claims Act complaint for $516,527 amidst claims that it overbilled Medicare for a prostate cancer treatment. The drug Lupron is an injectable that is used to treat prostate cancer in men, as well as endometriosis and fibroids in women. The treatment for males and females each have a separate billing code, with the treatment for women yielding a higher reimbursement rate.

The government alleges that from 2001-2009, the hospital billed for the female billing code in the treatment of males. The Department of Health and Human Services also alleges the hospital knew about the billing errors, but failed to report them or repay the excess reimbursements, which constitutes a violation of the False Claims Act. A hospital spokeswoman said that St. Francis settled to avoid litigation costs and said the error was a result of a “misinterpretation of billing requirements.”

For more information see:  http://www.courant.com/health/connecticut/hc-st-francis-medicare-0811-20110810,0,5649721.story

Hospital Settles False Claims Act Complaint after Criminal Conviction

Monday, August 15th, 2011

Following the conviction of cardiologist Dr. John R. McLean on six charges of health care fraud offenses, Peninsula Regional Medical Center in Salisbury, Maryland has agreed to pay $1.8 million to settle allegations that the hospital failed to prevent the doctor from inserting medically unnecessary cardiac stents. The $1.8 million settlement is being paid under the False Claims Act. The hospital has also agreed to pay back monies received from federal health benefit programs for the medically unnecessary stents.

For more information see:  http://www.therepublic.com/view/story/22e8b43c57b2406cbb34e934101da710/MD–Questionable-Stents/

SEC Issues Subpoenas to Natural Gas Shale Well Producers

Friday, August 12th, 2011

In response to a recent New York Times Article (Insiders Sound an Alarm Amid a Natural Gas Rush, June 25, 2011) concerning inflated projections for the production of natural gas from three shale gas formations, the SEC has issued subpoenas to at least two producers, Quicksilver Resources, Inc. and Exco Resources, Inc, for documents concerning projected decline curves and economics of shale gas wells.  The SEC regulates company reports of oil and gas reserves and inventories for investors. 

The New York Times reviewed hundreds of industry e-mails and other corporate documents indicating that extraction of natural gas from shale formations, and in particular certain wells in Texas and Arkansas, may be costly and may not produce the amount of natural gas estimated.  The article quoted an analyst from an independent energy research company as saying that “The word in the world of independents is that the shale plays are just giant Ponzi schemes and the economics just do not work.”  Individuals within the natural gas industry also questioned corporate projections In light of substantial declines in gas well production.  Some within the industry have even begun to compare the shale gas rage to the dot.com bubble of the late 90’s, and the Enron collapse early in the last decade. 

The Times reported that while natural gas within the shale formations may be plentiful, it may also be costly to extract because active wells are frequently surrounded by less-productive wells that cost more to drill and extract than the gas is worth.  Moreover, federal and state governments either provide subsidies to the natural gas business to support shale gas production, or are looking to do so.

New SEC Whistleblower Provisions Now in Effect

Friday, August 12th, 2011

The new SEC whistleblower provisions take effect today.  A new website is up and running regarding this program:


2010 IRS whistleblower report

Wednesday, August 10th, 2011

The IRS gave its 2010 report to Congress on the Use of Section 7623, more commonly known as the IRS Whistleblower Law. Some of its highlights include an increase in staffing in the department from 17 to 21 during fiscal year 2010. Additionally, the IRS has invested in a new software program. By July 2010, all 7623 claims had been loaded into the new system. The software captures the claim information from receipt, through the award determination process, should the claim reach that point. Nine of ninety-seven full paid claims in 2010 had collections greater than $2 million, but all were under the old Informant Award Program. Therefore, the IRS cannot yet predict what type of impact the 431 whistleblower submissions against 5,429 taxpayers they received in fiscal year 2010 will have. The report also made mention of the fact that Section 7623 does not provide for whistleblower protection. Retaliation is not prohibited under the Section and a potential whistleblower’s only recourse from retaliation would be under state laws.

For more information see:  http://www.irs.gov/pub/whistleblower/annual_report_to_congress_fy_2010.pdf

Mass Attorney General leads dissent against big bank settlement

Wednesday, August 10th, 2011

Massachusetts Attorney General Martha Coakley has announced that she will oppose the inclusion of MERS (Mortgage Electronic Registration System) issues in the $20 billion mortgage settlement deal proposed by the Department of Justice. The deal would release the banks from legal claims in state investigations and lawsuits. Despite pressure from the Department of Justice to sign on to the settlement, several states have launched investigations into the use of the MERS system, which homeowner advocates and activists have claimed transferred mortgages, but never recorded them with local registries of deed. Therefore, the transactions, and thereby the mortgages are invalid, leaving the titles to homes “clouded.” The homeowner could then find themselves unable to sell or refinance properties without going to court.

New York Attorney General Eric Schneiderman shares Coakley’s concerns, and launched his own investigation into MERS and the mortgage issues in April. Schneiderman said he was shocked to learn the government’s multi-state probe lacked documents and had no witness depositions. Elizabeth Warren, a senior adviser to President Obama agreed, stating that the government may not have fully investigated the allegations of illegal seizures of homes.

 For more information see:  http://www.huffingtonpost.com/richard-zombeck/post_2212_b_910015.html


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