Thursday, November 29, 2007

TVA settles FCA suit

The Tennessee Valley Authority Inspector General and the Dept. of Justice have announced a settlement in excess of $25 million for an alleged violation of the civil False Claims Act.

Three Kinder Morgan limited partnerships are alleged to have defrauded the TVA and other private companies for whom they supplied coal handling and transport services. The Kinder Morgan companies are alleged to have taken coal from their customers' stockpiles and sold it under the name of “Red Lightning” from 1997 through 2001.

The coal was weighed by certified scales before it was shipped to Kinder Morgan terminals but was weighed by barge draft when it was shipped from the terminals to the customers. The barge draft method usually weighed two to three percent heavier than the certified scales, resulting in less coal being shipped from the terminal than received.

TVA's portion of the $25 million recovery will be nearly $8 million, making it the largest total recovery in the history of the TVA OIG. The Treasury will receive $12 million in penalties, with the rest of the settlement going to private customers.

IG Richard Moore said, “This case was initiated based on information provided from a concerned individual," but the article in the November 28, 2007 Chattanoogan did not mention a relator's share.

Monday, November 26, 2007

State of California and City of San Francisco sue voting systems vendor

San Francisco City Attorney Dennis Herrera has filed suit against Election Systems & Software, Inc., the City's voting systems vendor, according to a November 20, 2007 press release.

The suit alleges that the company violated California's Elections Code, False Claims Act and Unfair Competition Law and engaged in fraud, breach of contract and negligent misrepresentation.

Herrera claims that ES&S' misrepresentations and voting system problems caused the California Secretary of State to impose restrictions on the City's use of the company's voting machines in November elections. The restrictions forced election officials to tabulate ballots centrally, to remake thousands of ballots by hand, and to borrow equipment from another county.

A copy of the complaint is available at the City Attorney's website.

The New York Times reported that the California secretary of state, Debra Bowen, has also filed a lawsuit against ES&S for selling uncertified machines to five northern California counties, including San Francisco.

The state suit seeks $9.72 million from the company for the sale of 972 machines with internal hardware changes that were not reported or submitted for re-certification. It also asks for an additional $5 million for each county, Colusa, Marin, Merced, San Francisco and Solano.

Arkansas files FCA suit against Johnson & Johnson

Arkansas Attorney General Dustin McDaniel announced on November 20, 2007 that he has filed a suit against Johnson & Johnson Inc. and two of its subsidiaries, accusing the drug makers of illegally promoting an antipsychotic medication.

According to the Arkansas Democrat Gazette the state alleges that the drug, Risperdal, is being prescribed to treat illnesses it isn’t approved for and the manufacturers have been misrepresenting its risks to patients.

The suit was filed under the state's Medicaid Fraud False Claims Act.

Sleep diagnostic clinic accused of FCA violations

HMS Diagnostics, Inc., a sleep disorder center, reported that it is being investigated for improper Medicare billing.

The company's press release characterizes their alleged mischarging as a possible violation of "little known regulations." Medicare regulations require that the sleep tests be administered by properly certified technicians in order to qualify for reimbursement.

The company disputes the government's interpretation of the regulations.

Tuesday, November 20, 2007

Government joins FCA suit against Lockheed

The U.S. Dept. of Justice has announced it will intervene in a qui tam suit filed against Lockheed Martin Corp. and its supplier, Tools & Metals Inc.

The suit alleges that TMI overcharged for manufacturing tools sold to Lockheed Martin, which resulted in Lockheed Martin submitting false claims to the Defense Department from January 1998 through February 2006.

Lockheed is also alleged to be independently liable for TMI’s violation of the FCA due to its reckless oversight of TMI, according to a November 19, 2007 Dept. of Justice press release.

Monday, November 19, 2007

Hospital purchasing whistleblower profiled in NY Times

Cynthia Fitzgerald, whose False Claims Act suit against Novation and other defendants was unsealed in September, is the subject of an article in the November 18, 2007 issue of the New York Times.

Ms. Fitzgerald, a former Novation employee, alleges that improper sales practices and erroneous accounting are draining millions of dollars out of Medicare through overcharges or unauthorized uses. The suit claims that Novation received kickbacks from suppliers it was negotiating with. The cost of these kickbacks was passed on to the hospitals in the form of higher prices. These higher prices were then passed on to the government when the hospitals sought reimbursement from Medicare and Medicaid.

Both federal and Texas state authorities are currently investigating Ms. Fitzgerald's allegations, but have not yet decided to join her suit.

Thursday, November 15, 2007

Medicaid: Thousands of Medicaid Providers Abuse the Federal Tax System

Medicaid: Thousands of Medicaid Providers Abuse the Federal Tax System is the title of a new report from the Government Accountability Office.

The GAO found that of "over 30,000 Medicaid providers, about 5 percent of those paid in fiscal year 2006, had over $1 billion of unpaid federal taxes. These 30,000 providers were identified from a nonrepresentative selection of providers from seven states: California, Colorado, Florida, Maryland, New York, Pennsylvania, and Texas. This $1 billion estimate is understated because some Medicaid providers may have understated their income or not filed their tax returns. "

A Wall Street Journal article says that Medicaid abuses present a greater challenge than Medicare. Medicare is a strictly federal program, but Medicaid is a joint program with more layers of bureaucracy. "Washington sends funding to states, which administer the program and make payments to providers.... [F]ederal tax officials say it is difficult to include Medicaid payments in a federal levy system.... The GAO said it is 'concerned that CMS stated it would be inappropriate' to keep tax cheaters out of Medicaid."

The November 14, 2007 report was requested by the U.S. Senate Committee on Homeland Security and Governmental Affairs, Permanent Subcommittee on Investigations.

Stryker Corp. and Physiotherapy Assoc. settle whistleblower suit

Stryker Corporation and its former outpatient therapy division, Physiotherapy Associates Inc., will pay $16.6 million to the federal government to settle allegations that Physiotherapy submitted false claims to Medicare and other federal health care programs,.

The suit, which was originally filed by two whistleblowers under the qui tam provisions of the False Claims Act, alleged that Physiotherapy submitted claims that were falsely billed as one-on-one services and that Physiotherapy improperly retained excess or duplicate payments it received from federal health care programs.

The relators' share of the recovery will be nearly $3 million, according to the November 14, 2007 U.S. Dept. of Justice press release.

Thursday, November 08, 2007

Government Printing Office defrauded by contractor

In a False Claims Act suit filed by the federal government, a printing company is accused of overcharging the Government Printing Office for work performed by a subcontractor, according to a report in the November 8, 2007 issue of the Washington Times.

The suit alleges that Controlled Quality Corp. charged the GPO almost $500,000 for work it paid a subcontractor to do for $61,000. The printing company was hired to perform work for the IRS. The contract required the company to perform the bulk of the work itself, but it subcontracted work, overcharged the government, and submitted vouchers that falsely certified compliance with the contract.

Tuesday, November 06, 2007

Massachusetts accuses lab of filing false claims

Massachusetts Attorney General Martha Coakley has accused Boston Clinical Laboratories of violating the state's False Claims Act.

The suit alleges that the lab has intentionally filed improper claims for urine drug screens. According to the state, nearly all of the lab's 66,000 Medicaid claims for urine drug screens were either not properly ordered by an authorized prescriber or were for nonmedical purposes, such as sobriety monitoring.

Coakley's office settled a similar suit against Willow Street Medical Laboratory last month, according to an October 22, 2007 article in the Waltham Daily News Tribune.

D.C. extends contract of firm tied to fraud

Maximus Inc., a consulting company that paid $30.5 million in July to resolve a False Claims Act suit, is being retained as a management consultant by the District of Columbia.

The District's Department of Human Services will pay Maximus $1.9 million through next year. The extension of the firm's contract was ratified Oct. 12 — apparently on “passive review,” which allows contracts to take effect automatically if no one on the District Council objects to it.

The San Francisco Examiner reported on the Maximus contract on October 30, 2007.

The July payment and agreements resolved an investigation of Maximus’ activities under a contract with the District of Columbia’s Child and Family Services Agency (CFSA). Maximus helped CFSA submit claims to Medicaid for services provided by the District to children in its foster care program. A whistleblower suit, filed under the qui tam provisions of the federal False Claims Act, alleged that the company's employees caused CFSA to submit claims to the Medicaid program for services for each child who had been placed in the care of CFSA whether or not services had in fact been provided to those children.

California mental health care firm settles whsitleblower suit

Stars Behavioral Health Group will pay $1 million for allegedly charging Medi-Cal for treatment at a San Leandro clinic on days when the youths were home with their families.

The suit originated as a whistleblower suit filed under the qui tam provisions of the federal and California False Claims Acts. The whistleblower, Joseph Krzesni, will receive $200,000. He was represented by the law firm of Phillips & Cohen LLP.

Stars, headquartered in Oakland, provides mental health services for youths referred by the juvenile court system in criminal cases and by family courts in cases of abuse and neglect. The settlement was reported in the November 6, 2007 issue of the San Francisco Chronicle.

WellCare offices raided in investigation of Medicaid fraud

WellCare Health Plan's Tampa, Florida, headquarters were searched by state and federal agents investigating allegations brought in a whistleblower suit.

The whistleblower, a former employee of a WellCare subsidiary, claimed that the company inflated the amount it spent on mental health care in order to keep money it should have refunded to Florida's Medicaid program. The fraudulent practices allegedly resulted in over $35 million in overcharges, according to an article in the November 3, 2007 issue of the Wall Street Journal.

Connecticut lab will pay $1.5 million in whistleblower suit

Dianon Systems Inc., a reference lab in Stratford, Connecticut, has agreed to pay $1.5 million to resolve claims under the False Claims Act that the company mischarged Medicare and TRICARE for certain tests it performed.

The suit originated as a qui tam suit filed under the whistleblower provisions of the False Claims Act by a pathologist formerly employed by the company. He will receive $300,000 as his relator's share.

The complaint alleged that Dianon billed for medically unnecessary tests in that it performed 26 flow cytometry tests on every sample sent to the company for diagnosis regardless of whether all 26 were medically necessary for a particular patient.

The Dept. of Justice press release was issued on October 30, 2007.

Hexcel will pay $15 million in FCA suit

Hexcel, an aerospace supplier, will pay $15 million to settle allegations it violated the federal False Claims Act.

The government alleged that Hexcel supplied defective bulletproof vests to law enforcement agencies. The vests contained Zylon fiber that the government claimed Hexcel knew was defective. The fibers degraded quickly when exposed to heat, light and humidity.

As part of the settlement with the Justice Department, Hexcel agreed to cooperate in the government's ongoing investigation of other participants involved in actions alleged to have violated the False Claims Act, according to the Department's October 30, 2007 press release.

DOJ obtained $2 billion in fraud recoveries in FY 2007

The United States Dept. of Justice announced that it obtained $2 billion in settlements in fraud cases during fiscal year 2007, with most of the recoveries resulting from whistleblower lawsuits.

The whistleblower lawsuits resulted in $1.45 billion in settlements. The whistleblowers received a total of $177 million as their "relator's share." The False Claims Act, which allows private individuals with knowledge of fraud against the government to file suit on the government's behalf, provides for a reward to the whistleblower, usually between 15 and 30 percent.

The DOJ statistics were reported in the Houston Chronicle of November 1, 2007.

Arizona Heart Hospital settles False Claims Act suit

Arizona Heart Hospital will pay approximately $5.8 million to resolve allegations that they improperly billed Medicare for non-covered procedures. Two doctors groups, Arizona Heart Institute and AHI Cardiovascular Surgeons, have paid $900,00 in the same matter.

The procedures used artificial graft devices to treat patients with aortic aneurisms. Some of the procedures involved experimental devices and others did not comply with approved procedures for devices that were in clinical trials. In neither case would Medicare cover the procedures.

Corporate Crime Reporter and CNN both reported on the November 5, 2007 settlement.

Air cargo company admits defrauding military

National Air Cargo of Orchard Park, New York, has admitted defrauding the Defense Department out of million of dollars.

The company agreed to pay $28 million in fines, restitution and forfeitures to resolve charges that it submitted inflated bills to the government. Allegations included charging the government an air cargo delivery rate for equipment that was delivered by truck and overcharging the government for ontime delivery of items that were delivered late.


The Buffalo News ran an October 26, 2007 story on National Air Cargo.

Supreme Court will hear whistleblower case on "presentment"

The United States Supreme Court has granted cert in the case of Allison Engine Company, Inc. et. al. v. United States ex rel Roger Sanders, Supreme Court Docket No. 07-214.


Defendants, including the General Motors Corporation, and its former division Allison Engine Company, are challenging the government's ability to recover damages in a suit involving government contractor fraud. At issue is a loophole in the False Claims Act that was first articulated by Chief Justice John Roberts when he was an appellate court judge. Known as the "Totten" rule or the "presentment requirement," it could allow contractors to escape civil liability for their fraudulent actions if they were not the party who formally presented their claim to the government for payment.

The Sixth Circuit held the subcontractors liable in this case for supplying defective parts meant for use in Navy destroyers. The subcontractors claims they are not liable under the False Claims Act because they billed the shipyards, not the Navy, for the parts.

The Federal Times ran a story on developments on October 30, 2007 and WebWire on October 29, 2007.