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.
According 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.
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.
Prosecutors 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.
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.
Unfortunately, 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.
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.
According 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.
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).
The 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.
The 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.
Organon, 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.
U.S. Attorney General Eric Holder would like to see the government boost rewards given to whistleblowers in the financial sector who come forward with inside information on corporate wrongdoing. Holder gave a speech last week at New York University in which he called the current maximum payout for a financial whistleblower under the Financial Institutions Reform, Recover and Enforcement Act (FIRREA) a “paltry sum.” Larger rewards are needed, according to A.G. Holder, in order to induce high paying executives to come forward.
At present, financial whistleblowers that come forward with fraud tips can only receive a maximum payout of $1.6 million, which is a far cry from what whistleblowers are eligible to receive under False Claims Act lawsuits, which reward whistleblowers with 15 to 25 percent of any recovered money. When one considers that the median pay for an executive in the financial sector is upwards of $15 million per year, it doesn’t take a genius to see that $1.6 million simply isn’t enough for someone to risk such a lucrative career.
Despite the Department of Justice (DOJ) bringing over 60 fraud cases against financial firms over the last five years resulting in recoveries of roughly $85 billion, DOJ realizes the need to go after individuals responsible for fraud rather than just going after the companies that employ them. This, according to Holder, enhances accountability because companies don’t exclusively commit corporate fraud by themselves, company officials who engage in misconduct commit corporate fraud, and they need to be held responsible for their decision-making.
This is where the Justice Department finds itself hamstringed: discovering prosecutable evidence of an individual’s intent to deceive in a financial fraud case is usually only possible if there are cooperating witnesses, and cooperating witnesses are only going to come forward if they have incentive to do so. “Many financial criminals are savvy enough to avoid using email, which may leave a trail for investigators to follow,” said Holder in his speech. “And intent may only be evidenced sometimes in the form of verbal instructions – evidence that can provide the sort of “smoking gun” that is needed to secure a conviction: but that can only be attained from a cooperating witness.”
Holder closed his speech by highlighting the need to change the whistleblower provision in FIRREA (“perhaps to False Claims Act levels”) in order to incentivize financial whistleblower cooperation. “This could significantly improve the Justice Department’s ability to gather evidence of wrongdoing while complex financial crimes are still in progress – making it easier to complete investigations and to stop misconduct before it becomes so widespread that it foments the next crisis.”
The Securities and Exchange Commission (SEC) announced today that a whistleblower will receive a $30 million reward for providing valuable information that led to a successful enforcement action. The action in question and the whistleblower’s identity have not been made public, though the SEC noted Monday that the reward was the fourth for an international whistleblower participating in the SEC program. The $30 million total is more than double the previous record for highest reward given to an SEC whistleblower.
According to Andrew Ceresney, director of the SEC’s enforcement team, the unidentified whistleblower came forward with valuable information about ongoing fraud that would have been exceedingly difficult for the SEC to detect. He added that such a large reward should go a long way toward demonstrating the SEC’s “commitment to whistleblowers and the value they bring to law enforcement.”
The total reward for SEC whistleblowers commonly falls between 10 and 30 percent of any money recovered by the government in their case against the fraud perpetrator. If the government later recovers additional money from the defendant, the whistleblower could be eligible to receive future payments.
In this particular case, the percentage allotted to the whistleblower was not disclosed, though according to Fortune, the whistleblower challenged the percentage claiming that it was below average for an SEC whistleblower reward. In response, the SEC said the award percentage would have been higher had the whistleblower brought the information to the government’s attention in a more timely fashion
The whistleblower law firm of Baum, Hedlund, Aristei & Goldman has announced a multi-million dollar settlement with San Diego Hospice & Palliative Care Corporation. The settlement resolves a 2012 qui tam lawsuit filed by whistleblower attorneys Mark H. Schlein and Diane Marger Moore on behalf of a former hospice nurse who claimed that San Diego Hospice knowingly submitted false claims for Medicare reimbursement.
San Diego Hospice billed for and received Medicare reimbursement based on care provided to patients that did not meet federal eligibility criteria for hospice care. In order to qualify for Medicare’s $172-per-day hospice care, a patient must have a diagnosis of six months or less to live. According to the San Diego Union Tribune, San Diego Hospice officials occasionally changed patient records to make it appear as though patients were dying when in fact they were getting better. The hospice also had an “open access” policy in 2005, opening their doors to “virtually all” patients, even if they were not eligible for hospice care according to federal rules.
The qui tam law suit led to a federal investigation and a comprehensive audit of patient records. The audit and investigation, coupled with admissions by its officers, resulted in the San Diego Hospice filing for bankruptcy and ceasing operations. Despite the bankruptcy, the U.S. has received an initial recovery of $1 million pursuant to the terms of the settlement agreement. When distribution of all bankruptcy funds is completed, it is expected that the government will recover millions more.