Records Management Company to Pay $44.5 Million to Settle Whistleblower Claims

Iron Mountain, a Boston-based information storage company, has agreed to pay $44.5 million to settle whistleblower allegations. A former Iron Mountain employee and a longtime professional in the records management industry accused the company of overcharging the federal government for record storage services.

Iron_mountain_logoAccording to the Justice Department, Iron Mountain provided record storage services under General Services Administration contracts between 2001 and 2014. During that time, Iron Mountain allegedly breached the terms of their government contract by failing to provide accurate commercial sales figures when the contract was being negotiated, and failing to offer lower prices to the government. The whistleblowers also accused Iron Mountain of charging the government for storage that did not meet requirements set by the National Archives and Records Administration. Taken together, Iron Mountain’s alleged false claims resulted in government agencies overpaying for records storage and management.

Relators Brent Stanley and Patrick McKillop filed the qui tam lawsuit against Iron Mountain in the Eastern District of California. Stanley, a former employee with Iron Mountain, and McKillop, a records management industry veteran, will share over $8 million from the total recovered by the government in the settlement.

The Iron Mountain case highlights the need for whistleblowers in the many industries the government contracts with to provide goods and services. While the records management industry might not produce as many whistleblower cases as the health care industry, for example, this case shows just how much we need whistleblowers to expose fraud and save taxpayer dollars from being wasted.

If you have firsthand knowledge of wrongdoing in connection with a government contractor, get in touch with an experienced whistleblower lawyer who can evaluate your case and help you decide the most appropriate course for your claim.

The Case of the Spoiled Spuds

Last week, jurors in North Dakota found brothers, Aaron and Derek Johnson, guilty of defrauding the government of roughly $2 million. Their crime? Conspiring to receive illegal payments and making false claims in order to collect crop insurance money.

potato-texture-1399901-mProsecutors in the case say the Johnson brothers engaged in a scheme designed to compromise the government’s crop insurance program, which helps farmers financially recover from crop losses they incur due to issues like bad weather or the wet breakdown crops, much like potatoes go through after harvest. In this case, the Johnson brothers intentionally destroyed their potato crop in order to collect insurance money.

According to the Associated Press, the Johnsons allegedly threw frozen and spoiled potatoes in with their own crop and stored the potatoes in a warehouse they heated to 80 degrees in an attempt to deteriorate the crop. Prosecutors say they also used a chemical called Rid-X in order to speed up the deterioration process. Rid-X is used primarily for dissolving solid materials in septic systems.

This case was successful in large part due to the community of farmers who provided testimony on the condition of their potato crop at the time the Johnson brothers were receiving money from their fraudulent insurance claim. While this was a criminal matter, False Claims Act cases involving crop insurance fraud are more common than you might think.

With Rising Fraud in the Industry, Home Healthcare Sees Increased Scrutiny

For the last five years, the government has been working to stop fraud in the home healthcare industry. Crackdown efforts recently led to a Dallas doctor being charged for his role in running a $374 million fraud scheme in which his company certified over 11,000 patients for home healthcare services that they didn’t need. Dr. Jacques Roy has pleaded not guilty and is currently awaiting trial. Several of his co-conspirators have pled guilty charges.

iStock_000009293508SmallUnfortunately, this is only one example of an enormous problem with home health care fraud across the country. According to an Office of Inspector General study, one in every four home healthcare agencies had questionable billings in 2010, and roughly half of the Justice Department’s current healthcare fraud cases involve home healthcare agencies.

Experts can trace the growing fraud back to the state of Florida eliminating a requirement that forced home care agencies to get certified before opening for business. With limited barriers to entry, the state saw an explosion in the number of home care agencies, which led to a surge in companies billing Medicare at unusually high rates.

According to Modern Healthcare, the most common allegations of fraud in the industry stem from companies billing Medicare for services that are either never provided or are considered medically unnecessary. Paying kickbacks to patient recruiters is also very common in the industry.

The government created the Health Care Fraud Prevention and Enforcement Action Team (HEAT) in 2009 to combat growing health care. HEAT now operates in nine U.S. cities and has been responsible for several high-level fraud busts in Miami and Detroit that returned hundreds of millions to the government. It should also be said that the industry itself has also taken steps to prevent fraud. Industry trade associations have worked to curtail the number of agencies popping up across the country, and have asked the government to cap the percentage of revenue a company can receive in Medicare outlier payments.

 

Defense Contractor to Pay $389 Million in Fines, Damages and Penalties Over Major Fraud

Supreme Group B.V. and several subsidiaries pleaded guilty to major fraud charges on Monday in connection with a contract to provide food and water to U.S. military forces in Afghanistan. The defense contractor will pay $288.36 million in fines and penalties stemming from the criminal case, and will pay $101 million to resolve civil allegations made in a whistleblower lawsuit.

download (1)In 2005, Supreme Foodservice AG (now called Supreme Foodservice GmbH, a Supreme Group subsidiary) entered into a contract to provide troops in Afghanistan with food and water. According to the Justice Department, the company devised and executed a scheme that forced the U.S. to overcharge for the goods provided, specifically Local Market Ready goods (referred to as LMR). Supreme used a United Arab Emirates company called Jamal Ahli Foods Co. (“JAFCO”) that it controlled as a middleman to artificially mark up prices on locally-produced products sold to military forces.

Incriminating emails between Supreme executives show that the company was aware they were marking up prices on goods at margins of around 60 percent. One particular email from a Supreme executive says the company shouldn’t raise prices any more than they already have because they didn’t want to raise suspicions with their government customer.

In 2007, a Supreme entered into a “separation agreement” with a Supreme executive, who was paid 400,000 Euros to keep quiet on the fraud scheme. A former Supreme employee brought the scheme to a stop in 2009 by notifying the government about JAFCO and the inflated prices on goods in Afghanistan.

The civil case against Supreme was predicated on whistleblower claims made by a Supreme executive, who accused the company of violating the False Claims Act when it knowingly overcharged the government for goods. The whistleblower also claimed that Supreme received rebates from suppliers that it failed to pass on to the government.

Sanofi Named in Lawsuit Claiming Tens of Millions Spent on Kickbacks

A whistleblower lawsuit claims that the recently removed CEO of Sanofi and other high-level executives conspired in a scheme to funnel millions of dollars in company money to doctors, hospitals and pharmacy chains as kickbacks to get them to purchase and prescribe a Sanofi diabetes medication. The lawsuit was filed by Diane Ponte, a former Sanofi employee who was allegedly ousted from her job as retaliation for discovering the fraud scheme.

sanofi_niouAccording to Ponte, pharmaceutical giant Sanofi used contracts that appeared to be legitimate as the means to pay kickbacks to health care professionals and pharmacies. Her lawsuit further claims that around $1 billion of company money is still missing and unaccounted for.

Ponte discovered the alleged fraud when she was asked to approve nine Sanofi contracts – seven with consulting firm Accenture and two with Deloitte, a professional services firm – worth $34 million. These contracts had actually already been executed four months prior, leading Ponte to conclude that the money was for “illegal incentives” or kickbacks designed to get Accenture and Deloitte to influence prescribers and purchasers to switch to Sanofi drugs over those of competitors. She further claims that former Sanofi CEO Christopher Viehbacher and other executives “conspired to and/or caused” employees to approve these contracts without first receiving approval from the company’s accounting, purchasing or legal departments.

When Ponte reported the alleged fraud to her superiors, an internal investigation corroborated her findings. Two of the executives she claimed were covering up the kickbacks “retired” from the company in 2013, receiving millions in severance. One of the two actually became a high-paid employee at Accenture. After speaking with her superiors, she claims to have endured a hostile working environment before her superiors created a pretext for her termination from the company.

This lawsuit comes only two years removed from another lawsuit against Sanofi involving kickbacks, which settled for $109 million. The company was supposed to enter into a corporate integrity agreement with the Department of Health and Human Services (HHS) following the settlement, compelling them to report any illegalities on the part of the company and its employees. But according to CNBC, the agreement still has not been executed.

 

Is the Whistleblower Protection Act Strong Enough to Protect Federal Employees?

On November 4, the Supreme Court heard argument in Department of Homeland Security v. MacLean, a case that demonstrates the hurdles that federal employees must clear in order to receive whistleblower protection under the Whistleblower Protection Act. The WPA has often been criticized for not being able to do the one thing it’s supposed to – protect whistleblowers. Efforts have been made to bolster the WPA, but as we see in MacLean, the many requirements that whistleblowers must meet under the law make actually obtaining relief highly problematic.

downloadRobert MacLean was removed from his position as a federal air marshal in 2006 for giving a reporter “sensitive security information.” MacLean had contacted the reporter back in 2003, divulging plans the Transportation Security Administration (TSA) had to remove air marshals from long distance flights. He challenged his dismissal under the WPA. Now, the Supreme Court will decide whether MacLean’s divulging of “sensitive security information” was “specifically prohibited by law.”

Federal employees are not allowed to bring First Amendment claims, as they must go through the Civil Service Reform Act (CSRA) and the WPA for redress. So in Maclean’s case, the Supreme Court will determine whether his speech was “specifically prohibited by law” under the WPA rather than evaluating whether or not his speech was of public concern.

Justice Sonia Sotomayor has said the facts are in MacLean’s favor, but he has been embroiled in this case for eight years and counting, and if his case is sent back to the Federal Circuit, the painstaking wait could continue still longer. The bottom line is that MacLean and other federal employees may be denied relief when even when their First Amendment rights are arguably violated. The hoops they must jump through are many, the odds of actually achieving relief are daunting, and the time it takes to resolve these claims can exhaust both financial and emotional reserves. If we are really interested in having whistleblowers come forward and expose matters of public concern, why are we not doing more to protect them?

Maricopa County Community College District Settles Whistleblower Lawsuit for $4 Million

The Maricopa County Community College District (MCCCD) has agreed to pay $4.08 million to settle whistleblower allegations that it submitted false claims in connection with national and state AmeriCorps education grants. The settlement resolves claims initially filed by Christine Hunt, an MCCCD employee. Based in Phoenix, MCCCD operates community colleges in Maricopa County.

downloadAccording to the Justice Department, MCCCD allegedly bilked money from the Corporation for National and Community Service (CNCS), the agency that administers national service programs like AmeriCorps. MCCCD received AmeriCorps grant money to fund Project Ayuda, a program designed to get students interested in national service. In order to receive an education award from AmeriCorps, a student must complete designated hours of service requirements.

In her lawsuit, Hunt claims that MCCCD wrongly certified that students had completed this requirement so they could earn the award. As a result, AmeriCorps gave improper education awards to students that did not earn them. Additionally, MCCCD was able to secure CNCS grant money to fund Project Ayuda.

As a reward for taking action and exposing her employer’s alleged fraud, Hunt will receive a whistleblower reward of $775,827. Her case demonstrates that fraud against the government can happen in areas where you least expect. We can only hope that her actions will deter other grantees from exploiting the government and inspire others like herself to come forward if they’ve witnessed similar misconduct.

The Largest Health Care Fraud Settlements in 2014

usa-dollar-bills-1431130-mEarlier this week, we profiled some of the Justice Department’s largest mortgage fraud settlements from 2014, including the largest civil settlement from a single entity (Bank of America agreed to pay a record $16.65 billion under a global resolution). In addition to recoveries in the financial sector, DOJ was able to successfully recover roughly $2.3 billion in health care fraud cases, largely due to the help of health care whistleblowers.

The year saw two massive cases settle involving Johnson & Johnson and Omnicare. Both cases accounted for a substantial portion of the total recovered in 2014.

  • Johnson & Johnson – $1.1 Billion: J&J and a couple of subsidiaries agreed to pay $1.1 billion to resolve claims that they promoted several drugs for off label use. J&J allegedly promoted Risperdal, Natrecor and Invega for uses not deemed safe by the U.S. Food and Drug Administration by paying kickbacks to physicians in exchange for writing off-label prescriptions. This caused health care providers to submit hundreds of millions in alleged false claims for reimbursement through government health care agencies. In addition to the $1.1 billion to the federal government, J&J paid over $600 million to state Medicaid programs and $485 million in criminal fines and forfeitures. The settlement, one of the largest in the nation’s history, could not have been possible without the brave men and women who blew the whistle on the pharmaceutical giant. One particular whistleblower from Northern California received $28 million for filing suit against J&J.
  • Omnicare – $116 Million: Omnicare agreed to settlement terms with the DOJ after the nation’s largest provider of pharmaceuticals to nursing homes was accused of paying kickbacks to entice nursing homes into choosing Omnicare as their pharmacy provider. The allegations were in violation of the Anti-Kickback Statute, which prohibits companies from offering, soliciting, paying or receiving payment to induce referrals for goods or services covered by government health care agencies. Omnicare paid an additional $8.2 million to state Medicaid programs that were affected by the alleged fraud. Much like the J&J case, this case was assisted by multiple whistleblowers who came forward and helped the government build a case against Omnicare. One of the whistleblowers, a former Omnicare employee, walked away with $17.24 million for his role in exposing the alleged fraud.

 

Mortgage and Housing Fraud Recoveries Total Over $3 Billion for 2014

dept_justiceIn fiscal year 2014, the Justice Department obtained roughly $3.1 billion in recoveries stemming from the housing and mortgage fraud claims, the most ever recovered in a fiscal year for that sector. The government has now recovered $4.65 billion over the last five years from financial institutions whose misconduct contributed to housing and mortgage crisis.

Below are the top four housing and mortgage fraud claims settled in 2014:

  • Bank of America – $1.85 Billion: BofA acknowledged that it submitted false claims to Freddie Mac, Fannie Mae and the Federal Housing Administration (FHA) in connection with the underwriting, origination and quality control of residential mortgages. The $1.85 billion was just another part of the settlement that included a $5 billion fine under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) and $7 billion in relief for BofA consumers who lost their homes due to the alleged fraud. BofA’s global resolution was worth $16.65 billion total.
  • JPMorgan Chase – $614 Million: JPMC allegedly submitted false claims through the origination and underwriting of non-compliant mortgages that were submitted for insurance coverage through the Department of Housing and Urban Development (HUD), the FHA and the Department of Veterans Affairs (VA). These non-compliant mortgages led to substantial losses for the FHA and VA.
  • SunTrust – $418 Million: Between 2006 and 2012, SunTrust allegedly originated and underwrote non-compliant mortgages to be insured by the FHA. It also failed to use effective quality control measures to identify non-compliant mortgages, and failed to report the non-compliant loans the company did identify to FHA. SunTrust also paid out $500 million in relief to consumers, $40 million to state governments and $10 million to the federal government in addition to the $418 million to settle civil mortgage fraud charges, bringing the total paid under the settlement to $968 million.
  • U.S. Bank – $200 Million: Between 2006 and 2011, U.S. Bank effectively ignored lending requirements by originating and underwriting mortgages that didn’t meet FHA requirements. U.S. Bank acknowledged that its conduct caused the FHA to insure thousands of bad loans that later resulted in substantial losses.

The financial sector of the nation’s economy continues to be a hotbed for misconduct and fraud. Now more than ever the government is relying on whistleblowers to expose any wrongdoing by financial institutions. In a successful case, a whistleblower is eligible to receive a share of any recoveries as well as the gratitude of the nation for helping save taxpayer dollars.

Sevenson Settles Bid-Rigging and Kickback Charges

Sevenson Environmental Services Inc. has agreed to pay $2.72 million to settle a lawsuit claiming that it violated the False Claims Act and the Anti-Kickback Statute by rigging contract bids, accepting kickbacks and inflating charges to the U.S. Environmental Protection Agency (EPA).

SevensonLogo4The New York-based environmental remediation company was the primary contractor responsible for cleanup at the Federal Creosote Superfund Site in Manville, New Jersey. According to the Justice Department, Sevenson solicited and accepted kickbacks from various subcontractors in exchange for work at the Federal Creosote Site. The lawsuit further claims that Sevenson and the subcontractors conspired to pass the kickbacks on to the EPA and in one case inflated the charges for soil disposal to fund the kickbacks.

A whistleblower who reports a fraud scheme like this to the government may be entitled to a reward of up to 25 percent of any money recovered. If you are thinking about reporting fraud or wrongdoing to the government, it is wise to first consult with an experienced whistleblower attorney to evaluate your case and ensure that your rights are protected.