Monthly Archives: October 2014

Former General Counsel for Minnesota Hospital Association Offered $150k as ‘Hush Money’ to Stay Silent on Healthcare Fraud

In 2010, David Feinwachs was asked to look into what he describes as a lack of transparency and accountability in Minnesota’s Medicaid program. As general counsel for the Minnesota Hospital Association, Feinwach found that certain hospitals were being reimbursed well below their costs while four HMOs were making an astounding amount of money off the state’s Medicaid program.

ambulance-1334534-mAs he learned more, the figures struck Feinwachs as nearly impossible, leading him to conclude that fraud must somehow be involved. His suspicions were legitimized when, later in 2010, he was on a conference call in which a woman with the Department of Human Services admitted that the state was “playing with the books,” in effect bilking federal dollars.

After the call, Feinwachs went to his boss and said that what he heard was not only inappropriate, it was Medicaid fraud. Shortly thereafter, he was put on administrative leave and ultimately fired for insubordination.

Here’s where the story takes a weird turn: not long after he was terminated, Feinwachs was offered $30,000 in exchange for signing a severance agreement saying he wouldn’t speak about the Medicaid fraud to anyone. He refused. Three weeks later, he was again approached, this time by the person who fired him. Feinwachs was this time offered $150,000. He again refused, but this time took action by filing a lawsuit against the HMOs.

At the beginning of 2011, one of the four HMOs made a strange admission. UCare told the state that it was refunding $30 million, describing the sum as a donation because Minnesota was in the middle of a budget crisis. But UCare also sent a letter to the committees in charge of oversight for HMOs and the state Medicaid program, saying they were giving back the money because they were paid at an inflated rate.

According to Feinwachs, this admission, “together with the statement on the conference call, virtually cemented the notion that this was fraudulent.” In spite of this, Feinwachs lost his lawsuit against the HMOs. Still, he believes he continues to fight the good fight by lobbying his issue at the state capitol. “If you are within the system, you play the game,” Feinwachs told the Corporate Crime Reporter. At some point, every once in a while, somebody decides – enough is enough. If nothing else, I’d like to be remembered as the guy who didn’t take the money and spoke out.”


House Democrats to SEC: Address Corporate Practices that Deter Whistleblowers

securities-and-exchange-commissionThe Securities and Exchange whistleblower program has gained steam since its launch in 2011. The agency has received upwards of 6,000 tips on financial fraud from every state in the union, as well as 55 countries. In the last fiscal year alone, the SEC has issued 139 judgments and orders, priming it to be the most successful year since the program began.

While these successes point to a program heading in the right direction, House Democrats see trouble down the road. Many have expressed concerns about overly restrictive nondisclosure agreements that employees at financial firms are forced to sign. These NDA’s, as well as other actions financial firms impose on their employees, deter whistleblowers from coming forward if they see fraud in the workplace.

According to a letter sent by high-ranking Democratic members of the House Committees on Financial Services and Oversight and Government Reform, the SEC whistleblower program is in danger of losing its effectiveness if corporate actions designed to chill the environment for whistleblowers are not adequately addressed. The letter, which was sent to SEC Chairwoman Mary Jo White on Monday, says that employees need to know that NDA’s in no way restrict their right to voluntarily report any fraud or wrongdoing to the SEC. Furthermore, the letter reiterates SEC Rule 21F-17, which states that “nothing shall impede communications to the Commission about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement.”

The letter ends with a call to action, urging the SEC to send a strong message to the finance industry that actions designed to block whistleblowers from coming forward will not be tolerated, and that enforcement action should be used if necessary.

Reps. Maxim Waters (D-CA), Elijah Cummings (D-MD), Gwen Moore (D-WI), Matt Cartwright (D-PA), Tammy Duckworth (D-IL), Stephen Lynch (D-MA), Keith Ellison (D-MN) and Jackie Speier (D-CA) were all signatories on the letter to Chairwoman White.

Dialysis Services Company Settles Illegal Kickback Allegations for $350 Million

One of the nation’s leading dialysis services companies will pay $350 million to resolve claims that it paid illegal kickbacks to physicians and physician groups in an effort to boost patient referrals. The Justice Department announced today that it had reached the settlement agreement with DaVita Healthcare Partners, Inc., which has dialysis clinics in 46 states and Washington D.C.

davitalogonew_300The settlement resolves claims initially filed by whistleblower David Barbetta, who worked for DaVita as a Senior Financial Analyst in the company’s Mergers and Acquisitions Department. Mr. Barbetta will receive a share of the settlement amount, though the exact portion has not yet been determined.

The government claims that between March 2005 and February 2014, DaVita identified physicians and physician groups with large renal disease patient populations and offered them partnership interests in DaVita’s dialysis clinics in return for referring patients. DaVita used a three-prong approach in perpetrating this alleged fraud:

  • DaVita would identify physicians or a physician group they considered a “winning practice” in a specific area. A “winning practice” could mean that the physicians were young and in debt, leading DaVita to assume that most, if not all of the physicians’ patients would be referred to DaVita clinics.
  • Once DaVita targeted a practice, they would offer them a lucrative opportunity to enter into a joint venture in which DaVita would either acquire an interest in a dialysis center owned by the practice, or DaVita would sell interest in one of its dialysis centers to the practice. In some cases, the Justice Department maintains that DaVita was able to manipulate the value of clinics it was selling interest in, which allowed the practice DaVita partnered with to realize exceedingly high returns, all but ensuring that the practices would refer patients to DaVita.
  • DaVita paid doctors they partnered with to serve as medical directors on the joint venture clinics. DaVita also used non-compete agreements with all of the practices it partnered with, ensuring that the practices could not send business to competing dialysis clinics.

As part of the settlement, DaVita agreed to a $39 million civil forfeiture based on two specific joint ventures in Denver, Colorado. The company has also entered into a Corporate Integrity Agreement with the Office of the Inspector General, which requires some business arrangements to be changed or restructured.


Medical Business Service, Inc. to Pay $1.95 Million to Settle Health Care Fraud Charges

The Justice Department announced last week that a Florida-based radiology billing company will pay nearly $2 million to settle claims that it knowingly changed billing codes to Medicare and Medicaid in order to get previously rejected claims paid out. The settlement resolves a whistleblower claim filed by relator, Katlisa N. Vaughn, who will receive a share of the recoveries for her role in exposing the fraud.

usa-dollar-bills-1431130-mMedicare and Medicaid have guidelines stating that neither will pay for certain procedure s that are provided to patients with specific diagnoses. In an effort to avoid these restrictions, Vaughn claims that Medical Business Service, Inc. changed the codes for claims that Medicare and Medicaid had previously rejected. The alleged fraud took place between 2008 and 2010.

According to the FBI, the federal government will receive $1.917 million, with the states of Texas, New York, Florida and Georgia splitting much of the remaining portion. Vaughn will also receive a whistleblower reward, though the amount has not yet been revealed.

Since 2009, the Justice Department has recovered over $20 billion from False Claims Act cases. This case demonstrates the need for whistleblowers to come forward and expose health care fraud. If you have information concerning health care fraud at your place of work, it is in your best interest to contact an experienced whistleblower attorney to discuss your case. If your information leads to the successful recovery of government funds, you may be entitled to compensation.

Government Intervenes in Defense Company Whistleblower Lawsuit

sikorsky_0The Justice Department announced today that it has intervened in a whistleblower lawsuit accusing Sikorsky Aircraft Corporation and subsidiaries Sikorsky Support Services Inc. and Derco Aerospace Inc. of overcharging the U.S. Navy on aircraft maintenance costs by using an illegal subcontract.

The lawsuit claims that Sikorsky approved an illegal subcontract called a “cost-plus-a-percentage” contract in which compensation is based on the cost of performing a service plus a percentage. These contracts are prohibited because the cost associated with the contract is unknown in advance and contractors don’t have any incentive to control costs. According to the Milwaukee Journal-Sentinel, the cost-plus-a-percentage contract caused the Navy to pay nearly $50 million in false billings for parts and materials used to maintain Navy aircraft.

The complaint was initially filed by whistleblower Mary J. Patzer, a former employee with Derco. Patzer started with the company as a financial analyst in 2002. By the time her tenure at the company ended in 2010, she was the point of contact for Derco’s defense contract audits. In her lawsuit, Patzer says she was fired shortly after reporting the alleged markups to a supervisor. The company’s reasoning for firing her: a “reduction in force.” She felt that filing her whistleblower complaint and holding her former employer accountable was simply the right thing to do.

If her case is successful, Patzer will be entitled to a whistleblower reward between 15 and 25 percent of any money the government recovers.

Organon Settles False Claims Allegations for $34 Million

imagesOrganon, a pharmaceutical company with assets now owned by Merck, has agreed to pay $34 million to settle false claims allegations filed by two whistleblowers. The settlement resolves claims that Organon promoted the off label use of antidepressants, provided improper financial incentives to “nursing home pharmacy companies” and made misstatements about drug pricing which caused New York’s Medicaid program to overpay for drugs.

The settlement resolves four different claims:

  • Organon allegedly promoted Remeron and Remeron SolTab – both antidepressants – for uses not specifically approved by the Food and Drug Administration (FDA). According to the Corporate Crime Reporter, Organon marketed the side effects of both drugs as benefits. According to the lawsuits, the company even marketed the drugs to minors.
  • The lawsuits claim that Organon provided discounts and rebates to “nursing pharmacy companies” to entice them to prescribe Remeron and Remeron SolTab over other antidepressants.
  • Medicaid requires that drug makers provide the government with the best possible price available for a given drug. The lawsuits claim that Organon failed to include discounts and rebates the company was offering to other customers, which resulted in New York’s Medicaid program overpaying for drugs.
  • Organon allegedly used the inflated drug costs paid by the government to offset the discounts the company was offering nursing home pharmacy companies.

The whistleblower claims were filed in U.S. District Court for the Southern District of Texas and U.S. District Court for the District of Massachusetts. The allegations were made before Merck acquired Organon. Merck did not admit to any wrongdoing per the terms of the settlement.

DRS Technical Services to Pay $13.7 Million to Resolve Fraud Allegations

DRS Technical Services Inc. (DRS) will pay the government $13.7 million to settle fraud allegations, the Justice Department announced today. DRS, a Virginia-based subsidiary of DRS Defense Solutions LLC, provides a variety of wireless network solutions, security systems and telecommunication services for both the government and the private sector.

dept_justiceThe Defense Department awarded time and materials contracts to DRS between 2003 and 2012 to provide services and supplies to the U.S. Army’s Communication and Electronics Command (CECOM) in Iraq and Afghanistan. DRS allegedly submitted bills to CECOM for work that was supposed to be performed by individuals with qualifications described under the terms of the contract. According to the Justice Department, the services were performed by individuals who did not possess the necessary qualifications, causing the government to overpay for the services.

Similarly, between 2009 and 2011, DRS allegedly billed the U.S. Coast Guard’s Aviation Logistics Center for services rendered by individuals that did not have the necessary qualifications to perform the services, per the terms of the contract. This too caused the government to pay an inflated price for the services.

The claims resolved under the terms of today’s settlement announcement are based solely on allegations and carry no determination of guilt. This case demonstrates the need for defense contractor whistleblowers to come forward if they have knowledge of fraud. In this type of case, a whistleblower that helps expose fraud is entitled to up to 25 percent of any money successfully recovered by the government.

Glaxo Investigating Corruption Allegations in the United Arab Emirates

gsk-logoPharmaceutical giant GlaxoSmithKline (GSK) announced on Monday that they are looking into allegations of corruption in the United Arab Emirates. The announcement comes roughly a month after the drugmaker was hit with a $489 million fine for corruption charges in China.

Reuters got wind of the corruption allegations through an anonymous email purportedly sent by a Glaxo sales manager in the UAE. The whistleblower claims that GSK made improper payments to hospitals, clinics, pharmacies and healthcare providers in an effort to get more business. The improper payments were made in the form of educational meetings – some of which may or may not have actually occurred – and schemes that paid customers for using GSK products by giving them extra over-the-counter products.

A GSK spokesman told the media that the British drugmaker is conducting its own internal investigation into the matter. GSK is currently under investigation for similar allegations in a number of other countries in the Middle East.

These investigations come at a time when American and British authorities are making a push to stop overseas corruption by international companies. French drugmaker, Sanofi, said the company has informed American officials of corruption allegations of its own in East Africa and the Middle East. Novartis, a Swiss company, is also facing kickback accusations in the U.S.