Monthly Archives: April 2014

Physical Therapist, Physical Therapy Assistant and Unlicensed Doctor Convicted for $15 Million Fraud Scheme

A federal jury convicted a physical therapist, a physical therapy assistant and an unlicensed doctor today for their involvement in a scheme to defraud Medicare of nearly $15 million. Physical therapist Shahzad Mirza, 43; physical therapy assistant Jigar Patel, 30; and 38-year-old Srinivas Reddy, foreign medical student graduate without a license to practice medicine were all found guilty of conspiracy to commit health care fraud.

According to the Justice Department, the three defendants engaged in the scheme between 2008 and 2011 at companies in the Detroit area, including Physicians Choice Home Health Care LLC, Quantum Home Care Inc., First Care Home Health Care LLC, Moonlite Home Care Inc. and Phoenix Visiting Physicians.

Evidence presented at the trial indicated that Physicians Choice, Quantum, First Care and Moonlite all operated a fraud scheme to bill Medicare for home health care services that were never provided. The fraudulent companies would pay kickbacks to recruiters who would then pay cash to Medicare beneficiaries and promise them narcotics prescriptions.

The conspirators created Phoenix Visiting Physicians, which employed Reddy and other unlicensed individuals, to visit patients, provide them with narcotic prescriptions and obtain necessary information to fill out paperwork to refer patients for home health care services that were medically unnecessary. Patients pre-signed medical paperwork that the conspirators would fill in to indicate that medical care was provided when it wasn’t.

In addition to the conspiracy to commit health care fraud, Patel and Mirza were each found guilty of submitting false claims to Medicare in connection with home health visits, Reddy was found guilty of submitting false claims to Medicare in connection with home health visits and doctor home visits and Patel was found guilty of money laundering the proceeds of the fraud scheme into his company, MI Healthcare Staffing. Sentencing for the three defendants has not been scheduled.

OHSA Head: Some Valid Whistleblower Claims Dismissed

The head of the Occupational Health and Safety Administration (OHSA) said that strict time frames mandated by an older whistleblower law cause the agency to dismiss over 200 whistleblower claims per year, some of which have merit.

oshalogo1“There are [more than] 200 cases a year which we dismiss simply because they’re untimely,” said assistant secretary for labor for occupational safety and health David Michaels. “Some of them involve what we think are meritorious cases of workers who file 32, 34, 35 days after the event. That simply isn’t fair.” The statute of limitations can be as short as 30 days for some whistleblowers, according to the Wall Street Journal. “The statute of limitations is a very serious problem,” added Michaels.

In an effort to address this problem, Michaels is asking lawmakers to provide prospective whistleblowers with more time to file complaints. Michaels is also asking for various changes to the Occupational Safety and Health Act of 1970, which established the agency and contains whistleblower protections.

OSHA has tried to improve its whistleblower program over the last few years, during which time it has continued to face scrutiny. Just today, two Republican Senators sent a letter to the Department of Labor inquiring about the effectiveness of its whistleblower program. Independent watchdogs have also been critical of the OSHA whistleblower program, suggesting various improvements.

The Rise of the Whistleblower in China

Exposing corporate wrongdoing is becoming a fast-growing industry in China. A Wall Street whistleblower received a $14 million reward last year for exposing fraud as part of the recently bulked up whistleblower provisions in China. In the same year, the U.S. Securities and Exchange Commission (SEC) received, on average, a tip a week from whistleblowers in China. This is double the amount from the previous year and five times more than in 2011.

Many point to potentially lucrative financial rewards as the driving force behind the whistleblower boom in China. Whistleblowers can receive 30 percent of any penalty if their information leads to a successful recovery, and Chinese leaders have expressed their support for anti-corruption efforts. President of China Xi Jinping told government officials to “sweat” out corruption by putting a spotlight on fraud.

The pharmaceutical industry has been particularly vulnerable to Chinese whistleblowers. GlaxoSmithKline is one of many international companies with operations in China to be investigated based on whistleblower claims. According to the Chicago Tribune, Glaxo’s China sales dropped dramatically after at least one high ranking whistleblower accused the pharmaceutical giant of handing over roughly $483 million to travel agencies to facilitate bribes to doctors in an attempt to boost drug sales.

The rise of whistleblowing in China has already forced businesses to take notice. Many have added compliance experts to their payrolls to ensure that internal procedures are being followed, especially in the pharmaceutical industry. While there is still much to be done to ensure that whistleblowers are protected (those who come forward often face retaliation from either local officials or businesses that have been named in accusations), the early success stories of whistleblowers coming forward to combat fraud can be seen as a very encouraging development.

Medical Center of Southeastern Oklahoma to Pay $1.5 Million to Settle Whistleblower Lawsuit

The Medical Center of Southeastern Oklahoma (MCSO) and its parent company, Health Management Associates Inc., have agreed to pay $1.5 million to resolve a whistleblower lawsuit claiming that the hospital billed government health care programs for services that were either medically unnecessary or never performed. MSCO will pay the federal government $1,065,000 and $435,000 to SoonerCare, Oklahoma’s state Medicaid program.

hma-newAccording to the lawsuit, MCSO otolaryngologist Daniel Castro performed functional endoscopic sinus surgeries on children that were not medically necessary. Dr. Castro and the hospital then submitted false claims to SoonerCare for reimbursement for the medically unnecessary surgeries and related hospital services. Additionally, the hospital allegedly submitted claims for services related to surgical procedures that were never performed.

“Heath-care fraud is a tremendous problem in eastern Oklahoma as well as across the nation. Fraud, such as billing for services that aren’t necessary, costs the taxpayers of Oklahoma thousands of dollars. The False Claims Act is a valuable weapon in the government’s arsenal to combat these types of abuses,” said Mark Green, U.S. Attorney for the Eastern District of Oklahoma. The hospital has denied any wrongdoing in the case. Dr. Castro has not been on the medical staff at MCSO since 2010.

The allegations in this case were initially raised by whistleblower Sandra Simmons. According to the Durant Democrat, she will receive $159,750 as part of the settlement.

Whistleblower Suing Takeda Pharmaceuticals Asks Supreme Court to Revive Lawsuit

takeda_485Dr. Helen Ge, a former medical reviewer at Takeda Pharmaceuticals Company Ltd., is asking the U.S. Supreme Court to revive the whistleblower lawsuit she filed against her former employer in 2010. Dr. Ge claims that Takeda hid safety risks associated with Actos (pioglitazone), one of the pharmaceutical company’s largest profit generators.

The U.S. District Court for the District of Massachusetts, First Circuit dismissed her lawsuit against Takeda on pleading grounds. Last week, Dr. Ge and her whistleblower attorneys at Baum, Hedlund, Aristei & Goldman filed a petition asking the Supreme Court to revive her case on the grounds that the circuit courts have inconsistent standards allowing whistleblowers to amend. Dr. Ge and her attorneys argue that her case is the perfect vehicle to address these inconsistencies.

“The petition raises a really important circuit split regarding what rights a plaintiff has to seek amendment to a complaint once the case has been dismissed,” said R. Brent Wisner, one of Ge’s attorneys. “Our system should not be about meeting specific technicalities but getting to the merits of the case.”

The Supreme Court has not yet made a decision on whether Dr. Ge’s case will be heard.

Government Intervenes in Lawsuit Claiming Medical Equipment Supplier Forged Prescriptions for Power Wheelchairs

The government has decided to intervene in a False Claims lawsuit against Utah-based Orbit Medical Inc. and Jake Kilgore, the company’s former vice president and sales manager for the western region of the U.S. The lawsuit was originally filed by two whistleblowers who claim Orbit Medical boosted the sales of powered wheelchairs and accessories by altering and forging physician prescriptions and supporting documentation.

logoMedicare pays for power wheelchairs for beneficiaries that can’t perform mobility-related activities using a cane or a walker. In order to qualify for a power wheelchair, a physician must conduct a face-to-face exam of the beneficiary and provide a power wheelchair supplier with a written prescription for the equipment within 45 days of the exam. The physician that conducted the exam must also provide documentation supporting the need for the power wheelchair as well as what diagnoses the wheelchair is expected to alleviate.

According to the Justice Department, Orbit Medical sales representatives, under the direction and encouragement of Kilgore, knowingly altered physician prescriptions and supporting documentation in order to get Medicare, the Federal Employees Health Benefits Plan and the Defense Health Agency to pay for Orbit’s powered wheelchairs and accessories. For example, Orbit sales reps allegedly created documents falsely establishing that certain beneficiaries had been seen by physicians for the necessary face-to-face exam when they hadn’t. Additionally, sales reps allegedly changed physicians’ prescriptions to falsely establish medical necessity for powered wheelchairs, forged physicians’ signatures, and added facsimile stamps to supporting documentation that made it appear as though physicians’ offices had sent documents to Orbit Medical.

“The government is intervening in this matter seeking to restore Medicare trust funds taken through the alleged use of falsified records and fraudulent billings, among other things,” said David B. Barlow, U.S. Attorney for the District of Utah. “Health care fraud is aggressively pursued in Utah. Every effort is made to restore taxpayers’ dollars taken through fraudulent conduct.”

A federal grand jury in Utah indicted Jake Kilgore last October on three counts of health care fraud, three counts of false statements related to health care and three counts of wire fraud, all arising out of his tenure with Orbit Medical. Tyler Jackson and Dustin Clyde, two former Orbit Medical employees, originally filed the allegations against Orbit Medical and Kilgore under the False Claims Act. Both men are eligible to receive a reward if their allegations lead to any money recovered by the government.


The Top Five Most Wasteful Medicare Spending States

California, with its five million Medicare beneficiaries on its roll sheet, is the most wasteful Medicare spending state in the country, according to a recently released government audit, which looked at improper Medicare spending in 2012. The audit was conducted by the Recovery Audit Contractors (RAC) program, which was instituted as a pilot program for the Centers for Medicare and Medicaid Services (CMS) in 2005 and later expanded as a national effort to identify and correct improper Medicare payments through the detection and collection of overpayments made on claims of health care services provided to Medicare beneficiaries.

The audit found that the amount of improper Medicare billings at the national level was a whopping $2.4 billion in 2012. Out of that total, Medicare paid out $2.3 billion in overpayments and made roughly $109.4 million in underpayments. The audit also found that 90 percent of that waste came from inpatient hospital claims. Though it can’t be measured precisely, a significant portion of wasteful spending may well be attributable to health care fraud and abuse.

After subtracting fees and costs, the amount of improper Medicare payments recovered for the Medicare trust fund was roughly $1.9 billion in 2012. The amount recovered by the government is bolstered in part by whistleblowers that expose improper Medicare payments.

Below are the top five most wasteful states for Medicare spending, according to CMS:

            State                           Medicare Overbilling 2012

  1. California                   $366.95 million
  2. New York                   $138.5 million
  3. Florida                        $124.1 million
  4. Pennsylvania             $107.1 million
  5. Tennessee                  $96 million

According to the San Francisco Business Times, audits such as the one prepared for CMS, are in jeopardy because Congress recently instituted an 18-month stop to Medicare audits as part of the “Protecting Access to Medicare Act”, also referred to as the Doc-Fix bill. A spokeswoman for a coalition of Medicare auditors called the 18-month hiatus, “deeply concerning,” considering the “rates of waste are going up across the country.”


Hewlett-Packard to Pay $108 Million to Settle Bribery Charges

A Russian subsidiary of Hewlett-Packard has entered a guilty plea today on charges of conspiracy and substantive violations of the Foreign Corrupt Practices Act (FCPA). HP subsidiaries in Poland and Mexico also admitted to related misconduct, according to the Justice Department. In total, Hewlett-Packard and its international subsidiaries will pay $108 million in U.S. criminal and regulatory penalties for paying bribes in order to secure lucrative contracts.

hp_logo_1ZAO Hewlett-Packard A.O.’s (HP Russia) admitted to its role in bribing officials in the Russian government in order to secure a large technology contract with the Office of the Prosecutor General of the Russian Federation, which constituted violations of the anti-bribery and accounting provisions of the FCPA. Additionally, the Justice Department entered into a deferred prosecution agreement with Hewlett-Packard Polska, Sp. Z.o.o. (HP Poland) regarding bribes paid to secure contracts with the national police agency. A non-prosecution agreement was also struck with Hewlett-Packard Mexico, S. de C.V. (HP Mexico) regarding bribes paid to secure contracts where HP Mexico would provide hardware, software and licenses to a state-owned petroleum company. All three entities will pay a total of $76,760,224 in criminal penalties and forfeiture.

Hewlett-Packard Co. also settled a related FCPA matter with the U.S. Securities and Exchange Commission (SEC), which adds an additional $31,472,250 in disgorgement and prejudgment interest, bringing the total owed to $108 million.

“Hewlett-Packard subsidiaries created a slush fund for bribe payments, set up an intricate web of shell companies and bank accounts to launder money, employed two sets of books to track bribe recipients, and used anonymous email accounts and prepaid mobile telephones to arrange covert meetings to hand over bags of cash,” said Deputy Assistant Attorney General Swartz. “Even as the tradecraft of corruption becomes more sophisticated, the department is staying a step ahead of those who choose to violate our laws, thanks to the diligent efforts of U.S. prosecutors and agents and our colleagues at the SEC, as well as the tremendous cooperation of our law enforcement partners in Germany, Poland and Mexico.”

California Masonry Companies to Pay $1.9 Million to Settle False Claims Accusations

Five California masonry companies and two individuals have agreed to pay the government $1.9 million to settle accusations that they misrepresented their disadvantaged small business status in connection with military construction contracts in North Carolina and California. The defendants in the case are Frazier Masonry Corp., F-Y Inc., CTI Concrete & Masonry Inc., Masonry Technology Inc., Masonry Works Inc., Russell Frazier and Robert Yowell.

The allegations made against the defendants stem from contracts to construct facilities at Marine Corps bases at Camp Lejeune, North Carolina and Camp Pendleton, California. Under the rules of the Small Business Administration, these contracts required that some of the work be performed by disadvantaged small businesses. The requirement aims to benefit small companies owned by women, minorities and other disadvantaged groups.

According to the Justice Department, the defendants and their principles misrepresented themselves as small businesses to the prime contractors, which caused the prime contractors to falsely certify that they had complied with the small business provisions in the contract. Russell Frazier, one of the two individuals named in this case, previously pleaded guilty in related criminal proceedings to causing false statements.

“This settlement demonstrates our continuing vigilance to ensure that those doing business with the military do so legally and honestly and that taxpayer funds are not misused,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery. “Among the rules that military contractors and subcontractors must follow are those relating to the use and hiring of small businesses.”

The settlement resolves claims filed in two lawsuits by whistleblower Rickey Howard, who formerly worked for Frazier Masonry Corp. The False Claims Act allows private citizens to sue on the government’s behalf for any false claims, and share in a percentage of the funds recovered. In this case, Howard will receive $393,383, according to the Justice Department.

The claims resolved by the settlement are allegations only. No determination of liability has been made. The cases are United States ex rel. Howard v. Harper Construction Co., et al., Case No. 7:12-CV-215-D (E.D.N.C.) and United States ex. rel. Howard v. RQ Construction LLC, et al., Case No. 7:13-CV-48-D (E.D.N.C.).

OSHA Releases Interim Rules for Dodd-Frank Whistleblowers

The U.S. Occupational Safety and Health Administration (OSHA) released the interim final rules concerning whistleblower retaliation provisions under the Consumer Financial Protection Act of 2010 (CFPA). The interim rules, which were published on Wednesday, establish procedures for the handling of whistleblower retaliation complaints under the CFPA.

As a part of the Dodd-Frank Act, the CFPA extends whistleblower protections to workers that report violations of financial consumer protection laws to their employer, the Consumer Financial Protection Bureau (CFPB) or any local, state or federal government authority. The CFPA also protects employees (or whistleblowers) who “object to, or refuse to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believes to be in violation of any law, rule, order, standard, or prohibition, subject to the jurisdiction of the [CFPB].”

The responsibility for receiving and investigating any whistleblower complaints of retaliation under the CFPA has been handed over to OSHA, which has crafted a regulation that is consistent with other whistleblower provisions under the CFPA. Whistleblowers will be protected as long as they have both a subjective, good faith belief and an objectively reasonable belief that they have been fired or retaliated against in violation of the CFPA.

OSHA’s interim rules establish procedures and time frames for the handling of retaliation complaints under the CFPA.