Author Archives: Mark Schlein

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.

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.

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?

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.


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.

New York Nursing Service Agrees to Pay $35 Million to Settle Fraud Claims

logo.vnsnyA New York nursing service accused of sending improper reimbursement claims to the state’s Medicaid program will pay $35 million to settle civil fraud charges. Visiting Nursing Service of New York, VNS Choice and VNS Choice Community Care (collectively VNS) allegedly enrolled roughly 1,740 Medicaid members into a managed long-term care plan when the needs of these patients did not qualify them for the care plan. In spite of their ineligibility, VNS passed the bills for caring for these patients onto New York’s Medicaid program.

Health care providers like VNS are responsible for managing long-term care services for Medicaid members, for which they are paid roughly $3,800 per month, per each member enrolled in the health plan. In order to qualify for a managed long-term health plan, Medicaid members must be eligible for nursing home level of care, and require at least 120 days of community-based long-term care.

VNS admitted that 1,740 patients were improperly referred to them by social adult day care centers (known as SADCC’s). None of the patients were eligible for the managed long-term health plan. In some cases, these patients received care primarily through the SADCC’s, many of which provided minimal or substandard care.

According to the U.S. Attorney’s Office for the Southern District of New York, the SADCC’s merely served as “a conduit” for VNS to induce the enrollment of more Medicaid members. In addition to the $35 million payment, VNS will be required to credential only with SADCCs that have been properly certified and are capable of providing levels of care consistent with regulatory requirements, monitor SADCCs in network to ensure compliance and prohibit improper marketing practices.


Ocean Dental Pays $5 Million to Settle Medicaid Fraud Claims

An Oklahoma-based dental company has agreed to pay $5.05 million to resolve a lawsuit claiming it submitted false Medicaid claims. Ocean Dental, which operates 28 dental clinics in seven states, provides dental services to children eligible for Medicaid. The company agreed to the settlement without admitting any wrongdoing, however, a former Ocean Dental employee named in the lawsuit was sentenced to prison time after pleading guilty to health care fraud charges.

511af1fae241eAccording to News OK, Ocean Dental employee Robin Lockwood allegedly submitted false claims to Oklahoma’s Medicaid program between 2005 and 2010 for dental work that was either never provided or billed at a higher rate than the state allows. After pleading guilty in 2012, Lockwood was sentenced to 18 months in prison. She was released in April and will pay $375,000 in restitution.

After the settlement was announced, Ocean Dental released a statement saying that the allegations were centered on an employee (Lockwood) who had not worked at the company since 2010. The company added that it was “glad to get the matter resolved.”

The Ocean Dental case demonstrates that healthcare fraud, specifically Medicaid fraud, extends into the field of dentistry. Dentists are no different than other healthcare practitioners in that they are susceptible to the same kinds of fraud that regularly catch headlines, including:

  • Billing for services never provided
  • Misrepresenting services provided
  • Waiving deductibles or copayments in an effort to build or retain patients
  • Overcharging or upcoding for services
  • Providing unnecessary or incorrect treatments that bring in more money

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.

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.