Author Archives: Diane Marger Moore

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.

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.


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.

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.

Biotronik Agrees to Pay $4.9 Million to Resolve Whistleblower Lawsuit

The Justice Department announced late last week that an Oregon-based biotech company will pay nearly $5 million to settle whistleblower claims filed by a former employee. Biotronik allegedly made improper payments to doctors in an effort to entice them to use medical devices that the company manufactured and sold.

Logo_BIOTRONIKThe alleged improper payments caused hospitals and ambulatory surgery centers to submit false claims to both Medicaid and Medicare for the implantation of Biotronik products, specifically defibrillators, pacemakers and cardiac resynchronization devices. According to the Justice Department, Biotronik paid physicians in Arizona and Nevada in the form of meals at expensive restaurants or inflated payments for membership on a physician advisory board.

Brian Sant, a former Biotronik employee, initially filed the allegations in a qui tam lawsuit. The government decided to intervene and take over Sant’s case. Still, he is entitled to compensation for his role in the successful recovery and will receive approximately $840,000.

The lawsuit is United States ex rel. Sant v. Biotronik, Inc., No. 2:09-CV-03617 KJM EFB (E.D. Cal.)


Owner and Operator of Florida Home Health Care Companies Sentenced to 80 Months Behind Bars, Will Pay $45 Million in Restitution

The Miami-based owner and administrator of two home health care companies was sentenced to 80 months in prison today and will pay $45 million in restitution after pleading guilty to one count of conspiracy to commit health care fraud. Elsa Ruiz, the 45-year-old owner of Professional Home Health Care Solutions Inc. and administrator of LTC Professional Consultants Inc., pleaded guilty in July for her role in a Medicare fraud scheme worth $74 million.

1314902_medical_doctorBoth of Ruiz’s companies purported to provide home health care and therapy services to Medicare beneficiaries. According to the Justice Department, Ruiz and others involved in the scheme fraudulently billed Medicare between 2006 and 2012 for expensive physical therapy and home care services that were not medically necessary or never provided. According to her own testimony, Ruiz negotiated and paid out kickbacks to patient recruiters in exchange for patient referrals, prescriptions, plans of care and certifications for physical therapy and home care services that were not medically necessary. During the time when both companies were fraudulently billing Medicare, the government paid out approximately $45 million.

Individuals who file a False Claims complaint and report fraud schemes like this to the United States may be entitled to a reward of up to 25% of any money that the government recovers. It’s an opportunity to be rewarded for doing what’s right. Anyone thinking about reporting fraud to the government should consult with an attorney experienced in this area of law.

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.”


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.


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.

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.