Monday, July 24, 2006

Another whistleblower suit involving Custer Battles filed

An Associated Press report carried by the Detroit Free Press on July 22, 2006 says that former Pentagon officials have been accused of conspiring to help Custer Battles obtain Iraq rebuilding contracts, despite the fact that the firm had been suspended by the military in 2004 for submitting millions of dollars in fake invoices.

The allegations are part of a whistle-blower suit that claims that the former acting Navy Secretary and the former acting Navy Undersecretary plotted with Custer Battles to set up sham companies to get around the suspension order. These shell companies allegedly sold weapons on the Iraqi black market, creating a possibility that they would be bought by insurgents.

One of the whistle-blowers in the current suit won a $10-million judgment in another suit when a federal jury agreed that Custer Battles had swindled the government by billing for work that was never done and by padding invoices.

Computer vendor settles Ohio qui tam suit for $1.53 million

AMS, a computer vendor formerly known as American Management Systems, has agreed to pay $1.53 million to resolve charges that it overbilled the Ohio Department of Human Services. The suit, originally brought as a qui tam action under the Federal False Claism Act, alleged that the company billed the state for unrelated work and billed at an inflated rate for work done by unqualified employees.

AMS had been hired in 1997 to install a computer system to streamline the data-entry tasks of county caseworkers.

The agency, whicch is now called the Department of Job and Family Services, used federal money to pay for the computer system.

The Cincinnati Enquirer ran a July 24, 2006 story on the settlement.

Friday, July 21, 2006

GE and subcontractors settle fraud suit for $11.5 million

General Electric Co. and two of its subcontractors have paid $11.5 million to settle a qui tam lawsuit that alleged that GE sold defective engine parts to the U.S. military. The parts were used in military airplanes and helicopters.

According to the lawsuit quality-control problems at GE's Aircraft Engines division facility in Madisonville, Kentucky resulted in the shipping of nonconforming parts. Two subcontractors, Howmet Corp., a subsidiary of Alcoa, and Precision Castparts Corp. manufactured unfinished castings for the blades, which GE then finished at the Madisonville facility.

The Corporate Crime Reporter ran a story on the settlement on July 21, 2006.

Wednesday, July 19, 2006

South Carolina medical center settles health care fraud case

Marion County Medical Center in Marion County, S.C. will pay $3.75 million to the federal government to resolve charges that it submitted false claims to government health care programs. The allegations involved payments made by Marion to two physicians which the government contended exceeded the fair market value of their services and violated the Stark Law and the Anti-Kickback Statute. the settlement also resolves allegations of upcoding.
against the potential for fraud and abuse posed by such prohibited relationships."

The suit was the result of a whistle-blower action brought by a former Marion employee.
Under the False Claims Act, private individuals can bring whistleblower actions for fraud on behalf of the United States and collect a share of any proceeds recovered by the suit as well as attorney fees.

U.S. Newswire published a press release on July 18, 2006.

Medtronic settles kickback allegations for $40 million

The U.S. Dept. of Justice announced that Medtronic's Sofamor Danek Division will pay $40 million to settle allegations that it violated the Anti-Kickback Statute and the False Claims Act.

The suit, which began as a qui tam action filed by a whistleblower, alleged that Medtronic paid kickbacks to physicians in a number of forms to induce them to use the company's spinal implant devices.

The Jutsice Department's press release is available at their website. The New York Times (subscription required) carried a story in their July 19, 2006 issue.

For additional background on the suit, see the January 31, 2006 entry at

Monday, July 17, 2006

Air freight company investigated for overcharging government

The U.S. Attorney's Office in Buffalo, N.Y., the FBI and the Defense Criminal Investigative Service are investigating charges that National Air Cargo overcharged the government by millions of dollars. The company, which delivers equipment world-wide for the U.S. military, allegedly charged the government a premium for air delivery when the deliveries were made by truck and charged for overnight delivery when the deliveries took several days.

The probe is said to have begun as a whistle-blower action, filed by a former National Air Cargo employee who claims the company overcharged the Defense Department by millions of dollars over a period of several years.

Investigators are focusing on deliveries that were made by the company within the United States. The deliveries of overseas shipments are not part of the investigation.

See the July 17, 2006 issue of the Buffalo News for additional details.

Thursday, July 13, 2006

Hospice provider pays $12.9 million to settle whistleblower suits

The U.S. Justice Department announced that Odyssey HealthCare has paid the government $12.9 million to settle allegations that the company submitted false claims to Medicare. The statement said that Odyssey was accused of having billed Medicare for services provided to hospice patients who were not terminally ill and therefore were ineligible for Medicare hospice benefits.

Reuters reported on developments on July 13, 2006.

Gabelli will pay $130 million to settle wireless auction fraud suit

The U.S. Dept. of Justice announced in a July 13, 2006 press release that Mario Gabelli and affiliated entities will pay $130 million to settle charges he defrauded the Federal Communications Commission. The suit, which originated as a whistleblower action brought under the qui tam provisions of the False Claims Act, alleged that Gabelli set up sham companies to qualify as "small businesses." These businesses would then be able to bid at FCC wireless spectrum license auctions when those auctions were limited to small businesses or where small businesses were given bidding credits and favorable financing.

The whistleblower, R.C. Taylor III, was represented by the law firms of Phillips & Cohen and Williams & Connelly. As a result of the government’s intervention in the suit and settlement of the claims against the defendants, Taylor will be entitled to $32.2 million of the recovery.

Monday, July 10, 2006

More hospital outlier settlements expected

Modern Healthcare reports that the recent settlements by Tenet Healthcare and St. Barnabas Health Care System may be only the start of a flurry of hospital settlements.

Tenet and St. Barnabas settled False Claims Act suits that alleged they used the Medicare outlier payment system, designed to compensate hospitals for caring for the sickest patients, to fraudulently increase their revenue.

While it is not known how many hospitals are under investigation for abusing the outlier system, former CMS Administrator Tom Scully guessed between 700 and 800 in a December 2005 court affidavit. A CMS report estimated 450 hospitals.

The July 10, 2006 article says that healthcare consulting firms may also be targeted in the probe. CBIZ KA Consulting Services and Besler Consulting have been implicated in the Justice Department investigation and were named in whistle-blower lawsuits, which remain under seal. Sources say that the two firms and several other consulting groups allegedly approached hospitals to demonstrate how to exploit loopholes in the outlier statute that would increase reimbursements without treating greater numbers of sicker patients.