Thursday, June 28, 2007

Mellon Bank pays $16.5 million to settle False Claims Act case involving destruction of tax returns

Mellon Bank has agreed to pay $16.5 million to settle claims brought under the False Claims Act that it destroyed thousands of tax returns and tax payment checks to avoid penalties for failing to meet a contract deadline for processing those documents, the Department of Justice announced today.

The government said Mellon violated the False Claims Act when it falsely reported to the Internal Revenue Service (IRS) that it had completed a special program to process the tax returns and checks received during the peak April 2001 tax period.

Instead, Mellon employees destroyed more than 77,000 tax returns, vouchers and checks it had received from individual taxpayers to deceive federal agencies about Mellon's timely completion of its contract, according to the government.

The settlements brings Mellon's total payments to the government in this case to $34 million. In 2002, Mellon paid $18 million as part of a separate administrative settlement with the Treasury Department to reimburse the government for the value of the interest lost on the destroyed checks until replacement checks were received from taxpayers as well as the costs incurred by the government in obtaining the replacement checks.

For more information read the Department of Justice's press release about this False Claims Act case.

Wednesday, June 27, 2007

Univ. of Phoenix asks judge to dismiss FCA suit

The University of Phoenix, the nation's largest vocational school chain, asked a federal judge in Sacramento, California, to dismiss a suit brought against it under the qui tam provisions of the False Claims Act. The suit alleges that the university violated federal rules by offering incentives to employees, including higher salaries and more benefits, based on the number of students they enrolled.

The university claims that it already paid $9.8 million to the U.S. Department of Education to settle allegations similar to those made in the lawsuit and that this constituted an "alternate remedy." The government and the whistleblowers dispute this, saying that the Dept. of Education settlement explicitly stated that the Department did not have the authority to "waive, compromise, restrict or settle … any past, present or future violations" by the university of either criminal laws or any action initiated against the school for fraud under the False Claims Act.

These developments were reported in the June 26, 2007 issue of the Los Angeles Times. Earlier stories on this suit were posted here on September 8, 2006 and April 26, 2007.

Government joins whistleblower lawsuit alleging sale of faulty flares

The U.S. Dept. of Justice has joined a whistleblower lawsuit that charges that ATK Thiokol Inc., a wholly owned subsidiary of Alliant Techsystems, Inc., knowingly sold the U.S. military
flares that could ignite if dropped from low heights, creating a major safety hazard.

The flares, used to illuminate nighttime combat and rescue missions, were required to meet safety standards that assured they wouldn't ignite while they were being handled. The whistleblower, a manager of the flare program, learned of the safety problem and alerted the company. The company was already aware of the potential danger but never communicated this to the government and never tested the flares.

The whistleblower, Kendall Dye, is represented by the law firm of Phillips & Cohen LLP, which specializes in representing whistleblowers in qui tam suits under the False Claims Act.

The PR News release of June 25, 2007 has additional details, as does the Dept. of Justice press release.

Thursday, June 21, 2007

Freight company will pay to resolve FCA claims

EGL, Inc. of Houston, Texas, has paid the United States $300,000 to settle allegations that the company’s local agent in Kuwait overcharged the military for rental charges on shipping containers to Iraq.

The suit arose from a whistleblower action filed under the qui tam provisions of the False Claims Act.

EGL was a subcontractor of KBR, the prime contractor for logistical support of overseas military operations.

The Dept. of Justice's June 19, 2007 press release contains additional details.

Congressional witness testifies about FCA seal provision

Alan Grayson, the attorney of record for plaintiffs who accuse KBR of defrauding the government in Iraq War contracts, testified before the House Judiciary Subcommittee on Crime Terrorism and Homeland security. Grayson urged Congress to limit the time that False Claims Act cases can remain under seal. The law provides for a 60 day period, but the government can request extensions.

Grayson was one of several witnesses who appeared before the Subcommittee on June 19, 2007 to testify on "War Profiteering and Other Contractor Crimes Committed Overseas."

Grayson's concern is that the government fails to pursue these cases and "buries" them under seal. The Justice Department disputes that characterization.

Wednesday, June 06, 2007

Texas hospital district will pay over $15 million to settle qui tam suit

The U.S. Attorney for the Southern District of Texas announced that the Harris County Hospital District will pay $15,449,126 to settle allegations that it violated the False Claims Act by submitting reimbursement claims that did not comply with Medicare and Medicaid requirements.

The suit was originally filed by an employee of the District's patient billing unit, who alleged that the District submitted claims to the Medicare and Medicaid programs without first seeking reimbursement from primary carriers as required by each program’s rules and regulations. This meant that the government paid claims that should have been paid by other responsible third party insurers. The suit also alleged that the Hospital District improperly submitted claims to Medicare and Medicaid for services provided to incarcerated individuals.


The press release, dated June 5, 2007, can be found on the website of the Office of the U.S. Attorney for the Southern District of Texas. More information about the qui tam case also is posted at the website of Phillips & Cohen LLP, which represented the whistleblower.