ILLIONOIS MAN CHARGED BY SEC WITH OFFERING UNREGISTERED SECURITIES IN THREE COMPANIES

The following excerpt is from the SEC website:

“On February 6, 2012, the Securities and Exchange Commission charged Glencoe, Illinois resident Kenneth A. Dachman with misappropriating over $1.8 million in investor funds and making false and misleading statements to investors in offerings for three companies for which he was the Chairman – Central Sleep Diagnostics, LLC (Central Sleep), Central Sleep Diagnostics of Florida, LLC (Central Sleep Florida), and Advanced Sleep Devices, LLC (Advanced Sleep). The SEC also charged Scott A. Wolf and his company, Stone Lion Management, Inc., the brokers for the three offerings, for their roles in selling unregistered securities to investors.

Filed in the U.S. District Court for the Northern District of Illinois, the SEC’s complaint alleges that between July 2008 and June 2010, Dachman raised at least $3,594,709 from investors located in 13 states and 12 foreign countries on behalf of Central Sleep, a purported provider of outpatient diagnostic sleep studies. Between December 2008 and April 2010, Dachman raised an additional $567,399 on behalf of Central Sleep Florida, a purported expansion of Central Sleep into Florida, and Advanced Sleep, a purported provider of medical devices. According to the complaint, Dachman made numerous misrepresentations to investors in each of the companies, including misrepresentations about how their funds would be used and his academic and business backgrounds. Dachman also failed to tell investors that he misappropriated at least $1,875,739 of their funds, over 45% of the total funds raised. According to the SEC’s complaint, among other things, Dachman used investor funds to rent-to-own a 10,000 square foot home, to pay for family vacations to Alaska, Europe and elsewhere, to purchase a new Range Rover, books, collectibles and antiques, and for personal expenses and credit card bills. Dachman also diverted investor funds to a tattoo parlor that he co-owned with his son-in-law.
The SEC’s complaint further alleges that Wolf and Stone Lion acted as unregistered brokers in selling unregistered securities to investors without qualifying for an exemption from the SEC’s registration provisions. The SEC alleges that Dachman violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and that Wolf and Stone Lion violated Sections 5(a) and 5(c) of the Securities Act and Section 15(a)(1) of the Exchange Act. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, civil penalties, and penny stock bars.

Wolf and Stone Lion each have agreed to settle the SEC’s charges without admitting or denying the allegations against them. Wolf and Stone Lion have consented to the entry of final judgments permanently enjoining them from violating Sections 5(a) and 5(c) of the Securities Act and Section 15(a)(1) of the Exchange Act. Wolf also has agreed to pay disgorgement of $335,216, prejudgment interest of $16,268, and a penalty of $20,000, and to be barred from participating in an offering of penny stock for one year. The proposed settlements are subject to the approval of the District Court.
The SEC thanks the U.S. Attorney’s Office for the Northern District of Illinois and the Federal Bureau of Investigation for their assistance in this matter.”

U.S. SUBSIDIARY OF SMITH & NEPHEW PLC IS CHARGED BY SEC WITH BRIBING GREEK DOCTORSI

The following excerpt is from a Securities and Exchange Commission e-mail:

“Washington, D.C., Feb. 6, 2012 — The Securities and Exchange Commission today charged London-based medical device company Smith & Nephew PLC with violating the Foreign Corrupt Practices Act (FCPA) when its U.S. and German subsidiaries bribed public doctors in Greece for more than a decade to win business.

Smith & Nephew PLC and its U.S. subsidiary Smith & Nephew Inc. agreed to pay more than $22 million in agreements with the SEC and U.S. Department of Justice. The charges stem from the SEC’s and DOJ’s ongoing proactive global investigation of bribery of publicly-employed physicians by medical device companies.

The SEC’s complaint against Smith & Nephew PLC alleges that its subsidiaries used a distributor to create a slush fund to make illicit payments to public doctors employed by government hospitals or agencies in Greece. On paper, it appeared as though Smith & Nephew’s subsidiaries were paying for marketing services, but no services were actually performed. The scheme basically created off-shore funds that were not subject to Greek taxes to pay bribes to public doctors to purchase Smith & Nephew products.

“Smith & Nephew’s subsidiaries chose a path of corruption rather than fair and honest competition,” said Kara Novaco Brockmeyer, Chief of the SEC Enforcement Division’s Foreign Corrupt Practices Act Unit. “The SEC will continue to hold companies liable as we investigate the medical device industry for this type of illegal behavior.”

According to the SEC’s complaint against Smith & Nephew PLC filed in federal court in Washington D.C., U.S. subsidiary Smith & Nephew Inc. and German subsidiary Smith & Nephew Orthopaedics GmbH has sold orthopedic products in Greece since the 1970s through the Greek distributor. Greece has a national health care system in which most Greek hospitals are publicly-owned and operated, and doctors who work at those publicly-owned hospitals are government employees and “foreign officials” as defined in the FCPA.

The SEC alleges that the misconduct began in 1997, when Smith & Nephew’s subsidiaries developed a scheme to make payments to three shell entities in the United Kingdom controlled by the distributor. Those funds were used by the distributor to pay bribes to the Greek doctors on behalf of the Smith & Nephew subsidiaries. Smith & Nephew failed to act on numerous red flags of bribery as employees at the company and its subsidiaries became aware of the payments. In one e-mail exchange between employees at the U.S. subsidiary and the distributor concerning whether to reduce the distributor’s commissions, the distributor stated, “… In case it is not clear to you, please understand that I am paying cash incentives right after each surgery…” Smith & Nephew Inc. determined not to reduce the commissions.

Smith & Nephew PLC agreed to settle the SEC’s charges by paying more than $5.4 million in disgorgement and prejudgment interest. Its subsidiary Smith & Nephew Inc. agreed to pay a $16.8 million fine as part of a deferred prosecution agreement with the Department of Justice. Smith & Nephew PLC consented without admitting or denying the SEC’s allegations, to the entry of a court order permanently enjoining it from future violations of Sections 30A, 13(b)(2)(A), and 13(b)(2)(B) of the Securities Exchange Act of 1934 and ordering it to retain an independent compliance monitor for a period of 18 months to review its FCPA compliance program.

The SEC’s investigation was conducted by Tracy L. Price of the Enforcement Division’s FCPA Unit along with Brent S. Mitchell and Reid A. Muoio. The SEC acknowledges the assistance of the U.S. Department of Justice Fraud Section and the Federal Bureau of Investigation. The SEC’s investigation into the medical device industry is continuing.”

THE HOUSING MORTGAGE SERVICE SETTLEMENT TOTALS $25 BILLION

The following excerpt is from the Department of Justice website: February 9, 2012 “WASHINGTON – U.S. Attorney General Eric Holder, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney General Tom Miller and Colorado Attorney General John W. Suthers announced today that the federal government and 49 state attorneys general have reached a landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses.  The agreement provides substantial financial relief to homeowners and establishes significant new homeowner protections for the future.    The unprecedented joint agreement is the largest federal-state civil settlement ever obtained and is the result of extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country.  The joint federal-state group entered into the agreement with the nation’s five largest mortgage servicers: Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC).   “This agreement – the largest joint federal-state settlement ever obtained – is the result of unprecedented coordination among enforcement agencies throughout the government,” said Attorney General Holder.  “It holds mortgage servicers accountable for abusive practices and requires them to commit more than $20 billion towards financial relief for consumers.  As a result, struggling homeowners throughout the country will benefit from reduced principals and refinancing of their loans.  The agreement also requires substantial changes in how servicers do business, which will help to ensure the abuses of the past are not repeated.”    “This historic settlement will provide immediate relief to homeowners – forcing banks to reduce the principal balance on many loans, refinance loans for underwater borrowers, and pay billions of dollars to states and consumers,” said HUD Secretary Donovan. “ Banks must follow the laws.  Any bank that hasn’t done so should be held accountable and should take prompt action to correct its mistakes.  And it will not end with this settlement.  One of the most important ways this settlement helps homeowners is that it forces the banks to clean up their acts and fix the problems uncovered during our investigations.  And it does that by committing them to major reforms in how they service mortgage loans.  These new customer service standards are in keeping with the Homeowners Bill of Rights recently announced by President Obama – a single, straightforward set of commonsense rules that families can count on.”   “This monitored agreement holds the banks accountable, it provides badly needed relief to homeowners, and it transforms the mortgage servicing industry so now homeowners will be protected and treated fairly,” said Iowa Attorney General Miller.   “This settlement has broad bipartisan support from the states because the attorneys general realize that the partnership with the federal agencies made it possible to achieve favorable terms and conditions that would have been difficult for the states or the federal government to achieve on their own,” said Colorado Attorney General Suthers.   The joint federal-state agreement requires servicers to implement comprehensive new mortgage loan servicing standards and to commit $25 billion to resolve violations of state and federal law.  These violations include servicers’ use of “robo-signed” affidavits in foreclosure proceedings; deceptive practices in the offering of loan modifications; failures to offer non-foreclosure alternatives before foreclosing on borrowers with federally insured mortgages; and filing improper documentation in federal bankruptcy court.   Under the terms of the agreement, the servicers are required to collectively dedicate $20 billion toward various forms of financial relief to borrowers.  At least $10 billion will go toward reducing the principal on loans for borrowers who, as of the date of the settlement, are either delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth.  At least $3 billion will go toward refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth.  Borrowers who meet basic criteria will be eligible for the refinancing, which will reduce interest rates for borrowers who are currently paying much higher rates or whose adjustable rate mortgages are due to soon rise to much higher rates.  Up to $7 billion will go towards other forms of relief, including forbearance of principal for unemployed borrowers, anti-blight programs, short sales and transitional assistance, benefits for service members who are forced to sell their home at a loss as a result of a Permanent Change in Station order, and other programs.  Because servicers will receive only partial credit for every dollar spent on some of the required activities, the settlement will provide direct benefits to borrowers in excess of $20 billion.      Mortgage servicers are required to fulfill these obligations within three years.  To encourage servicers to provide relief quickly, there are incentives for relief provided within the first 12 months.  Servicers must reach 75 percent of their targets within the first two years.  Servicers that miss settlement targets and deadlines will be required to pay substantial additional cash amounts.   In addition to the $20 billion in financial relief for borrowers, the agreement requires the servicers to pay $5 billion in cash to the federal and state governments.  $1.5 billion of this payment will be used to establish a Borrower Payment Fund to provide cash payments to borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria.  This program is separate from the restitution program currently being administered by federal banking regulators to compensate those who suffered direct financial harm as a result of wrongful servicer conduct.  Borrowers will not release any claims in exchange for a payment.  The remaining $3.5 billion of the $5 billion payment will go to state and federal governments to be used to repay public funds lost as a result of servicer misconduct and to fund housing counselors, legal aid and other similar public programs determined by the state attorneys general.    The $5 billion includes a $1 billion resolution of a separate investigation into fraudulent and wrongful conduct by Bank of America and various Countrywide entities related to the origination and underwriting of Federal Housing Administration (FHA)-insured mortgage loans, and systematic inflation of appraisal values concerning these loans, from Jan. 1, 2003 through April 30, 2009.  Payment of $500 million of this $1 billion will be deferred to partially fund a loan modification program for Countrywide borrowers throughout the nation who are underwater on their mortgages.  This investigation was conducted by the U.S. Attorney’s Office for the Eastern District of New York, with the Civil Division’s Commercial Litigation Branch of the Department of Justice, HUD and HUD-OIG.  The settlement also resolves an investigation by the Eastern District of New York, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the Federal Housing Finance Agency-Office of the Inspector General (FHFA-OIG) into allegations that Bank of America defrauded the Home Affordable Modification Program.    The joint federal-state agreement requires the mortgage servicers to implement unprecedented changes in how they service mortgage loans, handle foreclosures, and ensure the accuracy of information provided in federal bankruptcy court.  The agreement requires new servicing standards which will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create dozens of new consumer protections.  The new standards provide for strict oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court.    The new servicing standards make foreclosure a last resort by requiring servicers to evaluate homeowners for other loss mitigation options first.  In addition, banks will be restricted from foreclosing while the homeowner is being considered for a loan modification.  The new standards also include procedures and timelines for reviewing loan modification applications and give homeowners the right to appeal denials.  Servicers will also be required to create a single point of contact for borrowers seeking information about their loans and maintain adequate staff to handle calls.   The agreement will also provide enhanced protections for service members that go beyond those required by the Servicemembers Civil Relief Act (SCRA).  In addition, the four servicers that had not previously resolved certain portions of potential SCRA liability have agreed to conduct a full review, overseen by the Justice Department’s Civil Rights Division, to determine whether any servicemembers were foreclosed on in violation of SCRA since Jan. 1, 2006.  The servicers have also agreed to conduct a thorough review, overseen by the Civil Rights Division, to determine whether any servicemember, from Jan. 1, 2008, to the present, was charged interest in excess of 6% on their mortgage, after a valid request to lower the interest rate, in violation of the SCRA.  Servicers will be required to make payments to any servicemember who was a victim of a wrongful foreclosure or who was wrongfully charged a higher interest rate.  This compensation for servicemembers is in addition to the $25 billion settlement amount.   The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia.  Compliance with the agreement will be overseen by an independent monitor, Joseph A. Smith Jr.  Smith has served as the North Carolina Commissioner of Banks since 2002.  Smith is also the former Chairman of the Conference of State Banks Supervisors (CSBS).  The monitor will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations); and publish regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement.    The agreement resolves certain violations of civil law based on mortgage loan servicing activities.  The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers.  The agreement does not prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group.  The United States also retains its full authority to recover losses and penalties caused to the federal government when a bank failed to satisfy underwriting standards on a government-insured or government-guaranteed loan.  The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits.  State attorneys general also preserved, among other things, all claims against the Mortgage Electronic Registration Systems (MERS), and all claims brought by borrowers.          Investigations were conducted by the U.S. Trustee Program of the Department of Justice, HUD-OIG, HUD’s FHA, state attorneys general offices and state banking regulators from throughout the country, the U.S. Attorney’s Office for the Eastern District of New York, the U.S. Attorney’s Office for the District of Colorado, the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina, the U.S. Attorney’s Office for the District of South Carolina, the U.S. Attorney’s Office for the Southern District of New York, SIGTARP and FHFA-OIG.  The Department of Treasury, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Justice Department’s Civil Rights Division, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Department of Veterans Affairs and the U.S. Department of Agriculture made critical contributions.   For more information about the mortgage servicing settlement, go towww.NationalMortgageSettlement.com.  To find your state attorney general’s website, go towww.NAAG.org and click on “The Attorneys General.”    The joint federal-state agreement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.”

AFFORDABLE HEALTH CARE ACT SHOULD SIMPLIFY INSURANCE COMPANY JARGON

The following excerpt is from the U.S. Department of Health and Human Services: "People in the market for health insurance will soon have clear, understandable and straightforward information on what health plans will cover, what limitations or conditions will apply, and what they will pay for services thanks to the Affordable Care Act – the health reform law – according to final regulations published today. The marketing materials that insurers use can sometimes make it difficult for consumers to understand exactly what they are buying.  The new rules, published jointly by the Departments of Health and Human Services, Labor and Treasury, require health insurers and group health plans to provide concise and comprehensible information about health plan benefits and coverage to the millions of Americans with private health coverage.  The new rules will also make it easier for people and employers to directly compare one plan to another. “All consumers, for the first time, will really be able to clearly comprehend the sometimes confusing language insurance plans often use in marketing,” said HHS Secretary Kathleen Sebelius.  “This will give them a new edge in deciding which plan will best suit their needs and those of their families or employees.” Under the rule announced today, health insurers must provide consumers with clear, consistent and comparable summary information about their health plan benefits and coverage. The new explanations, which will be available beginning, or soon after, September 23, 2012 will be a critical resource for the roughly 150 million Americans with private health insurance today. Specifically, these rules will ensure consumers have access to two key documents that will help them understand and evaluate their health insurance choices: A short, easy-to-understand Summary of Benefits and Coverage ( or “SBC”); and A uniform glossary of terms commonly used in health insurance coverage, such as “deductible” and “co-payment.” All health plans and insurers will provide an SBC to shoppers and enrollees at important points in the enrollment process, such as upon application and at renewal.  A key feature of the SBC is a new, standardized plan comparison tool called “coverage examples,” similar to the Nutrition Facts label required for packaged foods.  The coverage examples will illustrate sample medical situations and describe how much coverage the plan would provide in an event such as having a baby (normal delivery) or managing Type II diabetes (routine maintenance, well-controlled)  These examples will help consumers understand and compare what they would have to pay under each plan they are considering. Today’s rules finalize the proposed rules issued in August 2011.  Input was received from such stakeholders as the National Association of Insurance Commissioners (NAIC) and a working group composed of health insurance-related consumer advocacy organizations, health insurers, health care professionals, patient advocates including those representing people with limited English proficiency, and others.  The final rules aim to ensure strong consumer information while minimizing paperwork and cost.”

USDA FIGHTS CASH FOR SNAP BENEFITS BY FOOD STORES

he following excerpt is from an e-mail sent out by the USDA:

"USDA Announces Latest Actions to Combat Fraud and Enhance SNAP Program Integrit
Strengthened Measures Help Fight Fraud in Nation’s Most Critical Nutrition Assistance Program
The following excerpt is from the USDA website:

WASHINGTON, Feb. 6, 2012 – USDA Under Secretary Kevin Concannon today announced first quarter results for fiscal year 2012 in the effort to identify and eliminate fraudulent retailers from the Supplemental Nutrition Assistance Program (SNAP). From October 1 through December 31, 2011, USDA staff took final actions to:
Sanction, through fines or temporary disqualifications, more than 225 stores found violating program rules; and
Permanently disqualify over 350 stores for trafficking in SNAP benefits (i.e. exchanging SNAP benefits for cash).
These enforcement actions are part of the Obama Administration's ongoing Campaign to Cut Waste and root out fraud and abuse in federal programs, including SNAP. While fraud is a relatively limited problem in SNAP – the violating stores represent less than ½ of one percent of more than 230,000 food stores authorized to redeem benefits – no level of fraud is tolerated. USDA's Food and Nutrition Service conducts ongoing surveillance and investigation, to find bad actors and remove them from the program. In fiscal year 2011, FNS reviewed over 15,000 stores, and permanently disqualified over 1,200 for program violations.

"I'm pleased to report today to American taxpayers the first quarter results of our anti-fraud efforts in 2012," said Under Secretary for Food, Nutrition and Consumer Services Kevin Concannon. "Americans expect and deserve a government that ensures their hard-earned tax dollars are managed with accountability and integrity. We are committed to ensuring these dollars are spent as intended - helping millions of people in need through tough economic times until they can get back on their feet."

USDA is building upon strategies recently announced to further strengthen anti-fraud efforts in the retailer application process. To help reduce the number of disqualified stores that return to the program by falsifying information in their applications, USDA is announcing new measures to strengthen the program:
Increasing documentation required for high-risk stores applying to redeem SNAP benefits to better verify their identity and assure their business integrity. High-risk stores are those located at the site of a previous disqualification.

Verifying high-risk stores to confirm application information. High-risk stores are those located at the site of a previous disqualification. Store owners found to have falsified information with the intent to hide ownership or past violations will be charged, disqualified and may be liable for a $10,000 fine or imprisonment for as long as 5 years or both.
Continuing to notify state departments and federal agency partners about violators to better protect our public programs. This includes information on program recipients with suspicious transactions at stores known to be trafficking for further investigation by States.
In addition, USDA will soon publish a proposed rule strengthening sanctions and penalties for retailers who commit fraud in SNAP. USDA's new Fighting SNAP Fraud website (www.fns.usda.gov/fightingsnapfraud) will also help raise awareness of the issues and provide a direct portal to report suspicious activities.

"Fraud is not a static concept – we know that where there is a will to commit malfeasance, bad actors will try to find a way," said Concannon. "That's why USDA is constantly striving to stay ahead of the curve. The comparison I frequently make is in the area of cyber security. The need for continuously updating information security measures is frequently noted in the private sector, because hackers and other bad actors are always looking for ways to exploit systems."

"However, it is important not to demonize SNAP participants and retailers when referencing fraud because the vast majority of people participating in the program, both retailers and SNAP participants, abide by the rules. Our goal is to eliminate fraud and we will continue to crack down on individuals who violate the program and misuse taxpayer dollars," Concannon noted.

Concannon announced new anti-fraud activities in December. Today's announcement continues the USDA's commitment to promote integrity in SNAP, in order to assure the public's confidence in this critical nutrition assistance program that serves over 46 million low-income and working Americans.

USDA's Food and Nutrition Service administers 15 nutrition assistance programs that in addition to SNAP include the National School Lunch Programs, Special Supplemental Nutrition Program for Women, Infants and Children, and the Summer Food Service Program. Taken together, these programs serve as America's nutrition safety net.

14 HOSPITALS PAY UP FOR ALLEGED MEDICARE FRAUD

The following excerpt is from the Department of Justice website:

Tuesday, February 7, 2012
“Fourteen Hospitals to Pay U.S. More Than $12 Million to Resolve False Claims Act Allegations Related to Kyphoplasty
Fourteen hospitals located in New York, Mississippi, North Carolina, Washington, Indiana, Missouri and Florida have agreed to pay the United States a total of more than $12 million to settle allegations that the health care facilities submitted false claims to Medicare, the Justice Department announced today.

The settling facilities include the following: Plainview Hospital, Plainview, N.Y. ($2,307,265); North Shore Syosset Hospital, Syosset, N.Y. ($192,735); North Mississippi Medical Center, Tupelo, Miss. ($1,894,683.30); Mission Hospital, Asheville, N.C. ($1.5 million); Wenatchee Valley Medical Center, Wenatchee, Wash. ($1,224,709.96); Community Hospital Anderson, Anderson, Ind. ($500,561.36); St. John’s Mercy Hospital, Creve Coeur, Mo. ($365,000); Gulf Coast Hospital, Fort Myers, Fla. ($173,005.86); Lee Memorial Hospital, Fort Myers, Fla. ($159,571.87); and Cape Coral Hospital, Cape Coral, Fla. ($73,279.47). Four hospitals affiliated with Adventist Health System/Sunbelt Inc. in Florida will pay a total of $3.9 million, and these include Florida Hospital Orlando, Florida Hospital-Oceanside, Florida Hospital Fish Memorial and Florida Hospital Heartland Medical Center.  
         
The settlements resolve allegations that these hospitals overcharged Medicare between 2000 and 2008 when performing kyphoplasty, a minimally-invasive procedure used to treat certain spinal fractures that often are due to osteoporosis. In many cases, the procedure can be performed safely as a less costly outpatient procedure, but the government contends that the hospitals performed the procedure on an inpatient basis in order to increase their Medicare billings.

“Patients want reassurance that their health care provider is making treatment decisions based on the patient’s best interests, not an interest in maximizing profits,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division. “By recovering taxpayer dollars lost to improper billing, this settlement will help support the vital public health care programs we depend on.”

The Justice Department has now reached settlements with more than 40 hospitals totaling over $39 million to resolve false claims allegations related to kyphoplasty claims submitted to Medicare. These settlements follow the government’s 2008 settlement with Medtronic Spine LLC, corporate successor to Kyphon Inc., which paid $75 million to settle allegations that the company defrauded Medicare by counseling hospital providers to perform kyphoplasty procedures as an inpatient procedure even though the minimally-invasive procedure should have been done in many cases on an outpatient basis.

“These hospitals put profits ahead of sound medical judgment, making decisions based on a desire to maximize Medicare reimbursement rather than on individualized assessments of medical necessity,” said William J. Hochul Jr., U.S. Attorney for the Western District of New York in Buffalo. “The U.S. Attorney’s Office is committed to protecting the Medicare program by ensuring that medicine, and not financial profit, is used to determine the best course of medical care in all cases.”  

All of the settling facilities were named as defendants in a qui tam, or whistleblower, lawsuit brought under the False Claims Act, which permits private citizens, known as “relators,” to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment awarded against a defendant. The lawsuit was filed in 2008 in federal district court in Buffalo, N.Y., by Craig Patrick and Charles Bates.   Mr. Patrick is a former reimbursement manager for Kyphon, and Mr. Bates was formerly a regional sales manager for Kyphon in Birmingham, Ala.  The relators will receive a total of approximately $2.1 million from the settlements.

This resolution is part of the government’s emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $6.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department’s total recoveries in False Claims Act cases since January 2009 are more than $8.8 billion.

The settlement with these hospitals was the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of New York, the Commercial Litigation Branch of the Justice Department’s Civil Division, and the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General.”

SEN. LEVIN UNCOVERS U.S. CORPORATE SHENANIGANS

he following article is from the Senator Carl Levin Newsletter from December 14, 2011: 

WASHINGTON –New data released today by Sen. Carl Levin, D-Mich., chairman of the U.S. Senate Permanent Subcommittee on Investigations, show that large multinational U.S. corporations with substantial offshore funds have already placed nearly half of those funds in U.S. bank accounts and U.S. investments without paying any U.S. tax on those foreign earnings.

“Some multinational corporations say they want to bring foreign funds back to America, but can do it only if they get a special tax break,” said Levin.  “They claim their foreign funds are otherwise ‘trapped’ abroad, but new data show that is not true.  Many U.S. multinationals have already invested a large portion of their foreign funds right here in the United States, taking full advantage of the safety and security of the U.S. financial system to protect their money while paying no U.S. taxes on those funds to support the U.S. system.”

Earlier this year, a survey was sent to 27 U.S. multinational corporations and found they held more than half a trillion dollars in tax-deferred foreign earnings at the end of FY2010.  The survey also found that 46% of those foreign earnings – almost $250 billion – was maintained in U.S. bank accounts or invested in U.S. assets such as U.S. Treasuries, U.S. stocks other than their own, U.S. bonds, or U.S. mutual funds.

The survey also found that corporations varied widely in the extent to which they placed foreign earnings in U.S. assets.  Nine of the 27 companies, or one-third, including Apple, Cisco, Google, and Microsoft, held between 75 and 100% of their tax-deferred foreign earnings in U.S. assets.  Eleven corporations invested 25% or less of their tax-deferred foreign earnings in U.S. assets. This survey information is the first to provide data showing the amount of tax-deferred offshore corporate earnings that are maintained in the United States.

When asked why they invested their foreign funds in U.S. assets, several of the surveyed corporations offered explanations centering on the economic strength of the United States compared to the rest of the world.  They pointed to the safety and security of the U.S. dollar and other U.S. assets, suppliers who preferred to be paid in U.S. dollars, and the ability of the U.S. currency to maintain its value over time better than other currencies.

“Right now, U.S. multinationals are benefiting from the stability and security that U.S. banks, U.S. investments, and U.S. dollars provide without paying their fair share to sustain our economy,” said Levin.

Corporations are able to invest their foreign earnings in U.S. assets without treating them as “repatriated” and subject to taxation, because the federal tax code, specifically Section 956(c)(2), already allows U.S. corporations to use foreign funds to make a wide range of U.S. investments without incurring tax liability.  If those U.S. investments then produce income, that additional income may be subject to taxation.

That $250 billion of foreign funds are invested in U.S. assets shows U.S. corporations are already well aware of the tax code provision allowing them to return foreign earnings to the United States on a tax-free basis.

“Not content with that existing tax benefit, a group of multinational corporations is fueling a major lobbying effort to obtain still another repatriation tax break,” said Levin.  It would allow them to return earnings to the United States, without the same investment restrictions, at a dramatically reduced tax rate, as low as 5.25% instead of the normal rate of up to 35%.

Corporations that use Section 956(c)(2) of the tax code to bring tax-deferred foreign earnings to the United States can already make a wide range of investments on a tax-free basis, but cannot purchase their own corporate stock or invest in their own businesses, such as by building a new plant.  Foreign earnings used for those purposes would instead be treated as repatriated and subject to normal corporate tax rates.  An earlier report released by Levin showed, however, that corporations were unlikely to use repatriated funds for those purposes.  Corporations wishing to make such investments could also use their domestic cash holdings.

The 27 U.S. multinationals surveyed by the Subcommittee reported holding a total of $538 billion in tax-deferred foreign earnings at the end of FY2010.  By comparison, in mid-2011, all U.S. corporations held tax-deferred foreign earnings totaling an estimated $1.4 trillion.

Those tax-deferred foreign earnings are in addition to the overall domestic cash holdings of U.S. corporations, which the Federal Reserve has recently estimated at $2 trillion. “U.S. multinationals, as a whole, have record amounts of domestic and offshore cash,” said Levin.  “American companies who say their funds are ‘trapped’ abroad ought to be investing their domestic funds to get the economy rolling, instead of pushing for still more tax breaks.”

The survey results are presented in an addendum to an earlier report in October 2011.  As a result of the survey data, the addendum concludes that U.S. corporations are already returning offshore funds to the United States without paying taxes on those funds, they are already taking advantage of the security and stability of the U.S. financial system without paying U.S. taxes on those offshore funds, and a new repatriation tax break would raise additional tax fairness issue.

The October report focused on a previous repatriation tax break, in 2004, examining the 15 corporations that claimed the largest repatriation tax deductions.  The October report found that, despite repatriating $150 billion at the extremely low tax rate of 5.25%, the 15 repatriating corporations did not add jobs or increase research expenditures, and instead increased their spending on stock buybacks and executive pay.  The report concluded that a repeat repatriation tax break also would not boost jobs or research expenditures, but would encourage firms to keep more cash overseas in hopes of future tax breaks.  The report also found that multinationals had significantly increased their offshore cash holdings since the 2004 tax break.

“Some multinational corporations say they want to bring foreign funds back to America, but can do it only if they get a special tax break,” said Levin.  “They claim their foreign funds are otherwise ‘trapped’ abroad, but new data show that is not true.  Many U.S. multinationals have already invested a large portion of their foreign funds right here in the United States, taking full advantage of the safety and security of the U.S. financial system to protect their money while paying no U.S. taxes on those funds to support the U.S. system.”  

Earlier this year, a survey was sent to 27 U.S. multinational corporations and found they held more than half a trillion dollars in tax-deferred foreign earnings at the end of FY2010.  The survey also found that 46% of those foreign earnings – almost $250 billion – was maintained in U.S. bank accounts or invested in U.S. assets such as U.S. Treasuries, U.S. stocks other than their own, U.S. bonds, or U.S. mutual funds. 

The survey also found that corporations varied widely in the extent to which they placed foreign earnings in U.S. assets.  Nine of the 27 companies, or one-third, including Apple, Cisco, Google, and Microsoft, held between 75 and 100% of their tax-deferred foreign earnings in U.S. assets.  Eleven corporations invested 25% or less of their tax-deferred foreign earnings in U.S. assets. This survey information is the first to provide data showing the amount of tax-deferred offshore corporate earnings that are maintained in the United States.

When asked why they invested their foreign funds in U.S. assets, several of the surveyed corporations offered explanations centering on the economic strength of the United States compared to the rest of the world.  They pointed to the safety and security of the U.S. dollar and other U.S. assets, suppliers who preferred to be paid in U.S. dollars, and the ability of the U.S. currency to maintain its value over time better than other currencies.  

“Right now, U.S. multinationals are benefiting from the stability and security that U.S. banks, U.S. investments, and U.S. dollars provide without paying their fair share to sustain our economy,” said Levin.

Corporations are able to invest their foreign earnings in U.S. assets without treating them as “repatriated” and subject to taxation, because the federal tax code, specifically Section 956(c)(2), already allows U.S. corporations to use foreign funds to make a wide range of U.S. investments without incurring tax liability.  If those U.S. investments then produce income, that additional income may be subject to taxation. 

That $250 billion of foreign funds are invested in U.S. assets shows U.S. corporations are already well aware of the tax code provision allowing them to return foreign earnings to the United States on a tax-free basis.  

“Not content with that existing tax benefit, a group of multinational corporations is fueling a major lobbying effort to obtain still another repatriation tax break,” said Levin.  It would allow them to return earnings to the United States, without the same investment restrictions, at a dramatically reduced tax rate, as low as 5.25% instead of the normal rate of up to 35%.  

Corporations that use Section 956(c)(2) of the tax code to bring tax-deferred foreign earnings to the United States can already make a wide range of investments on a tax-free basis, but cannot purchase their own corporate stock or invest in their own businesses, such as by building a new plant.  Foreign earnings used for those purposes would instead be treated as repatriated and subject to normal corporate tax rates.  An earlier report released by Levin showed, however, that corporations were unlikely to use repatriated funds for those purposes.  Corporations wishing to make such investments could also use their domestic cash holdings. 

The 27 U.S. multinationals surveyed by the Subcommittee reported holding a total of $538 billion in tax-deferred foreign earnings at the end of FY2010.  By comparison, in mid-2011, all U.S. corporations held tax-deferred foreign earnings totaling an estimated $1.4 trillion. 

Those tax-deferred foreign earnings are in addition to the overall domestic cash holdings of U.S. corporations, which the Federal Reserve has recently estimated at $2 trillion. “U.S. multinationals, as a whole, have record amounts of domestic and offshore cash,” said Levin.  “American companies who say their funds are ‘trapped’ abroad ought to be investing their domestic funds to get the economy rolling, instead of pushing for still more tax breaks.”

The survey results are presented in an addendum [PDF] to an earlier report in October 2011.  As a result of the survey data, the addendum concludes that U.S. corporations are already returning offshore funds to the United States without paying taxes on those funds, they are already taking advantage of the security and stability of the U.S. financial system without paying U.S. taxes on those offshore funds, and a new repatriation tax break would raise additional tax fairness issues.

The October report focused on a previous repatriation tax break, in 2004, examining the 15 corporations that claimed the largest repatriation tax deductions.  The October report found that, despite repatriating $150 billion at the extremely low tax rate of 5.25%, the 15 repatriating corporations did not add jobs or increase research expenditures, and instead increased their spending on stock buybacks and executive pay.  The report concluded that a repeat repatriation tax break also would not boost jobs or research expenditures, but would encourage firms to keep more cash overseas in hopes of future tax breaks.  The report also found that multinationals had significantly increased their offshore cash holdings since the 2004 tax break."

DOVER CHEMICAL CORPORATION TO PAY $1.4 MILLION FOR MANUFACTURE OF UNAUTHORIZED SUBSTANCES

The following excerpt is from an EPA e-mail:

February 7, 2012
“WASHINGTON – The U.S. Environmental Protection Agency (EPA) and the U.S. Department of Justice announced that Dover Chemical Corporation has agreed to pay $1.4 million in civil penalties for the unauthorized manufacture of chemical substances at facilities in Dover, Ohio and Hammond, Ind. The settlement resolves violations of the Toxic Substances Control Act (TSCA) premanufacture notice obligations for its production of various chlorinated paraffins. Dover Chemical produces the vast majority of the chlorinated products sold in the United States. As part of the settlement, Dover Chemical has ceased manufacturing short-chain chlorinated paraffins, which have persistent, bioaccumulative and toxic (PBT) characteristics. PBTs pose a number of health risks, particularly for children, including genetic impacts, effects on the nervous system, and cancer. Dover Chemical will also submit premanufacture notices to EPA for various medium-chain and long-chain chlorinated paraffin products.

“Assuring the safety of chemicals is one of EPA’s top priorities,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “Today’s action reinforces the need for chemical manufacturers to follow the law and protects Americans from chemicals that could be harmful to their health.”

“This settlement will require Dover to participate in an EPA review of all types of chlorinated paraffin products sold by the company and bring Dover into compliance with the Toxic Substances Control Act,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice. “By halting production of short-chain chlorinated paraffins, this settlement will reduce undue risks to human health and the environment.”

Chlorinated paraffins are a family of chemical substances with different properties depending on their carbon chain lengths and are generally identified as short, medium, or long-chain. Chlorinated paraffins are used as a component of lubricants and coolants in metal cutting and metal forming operations, as a secondary plasticizer and flame retardant in plastics, and as an additive in paints. Short-chain chlorinated paraffins, however, have been found to be bioaccumulative in wildlife and humans, persistent and transported globally in the environment, and toxic to aquatic animals at low concentrations. EPA has developed an action plan for these chemicals based on the potential for significant impacts on the environment. The environmental and health concerns relating to medium-chain chlorinated paraffins and long-chain chlorinated paraffins may be similar to those associated with short-chain chlorinated paraffins. Those chemicals may also be persistent and bioaccumulative based on their physical-chemical properties, bioaccumulation modeling, and because they are also found in the environment.

In 1978, EPA compiled the initial TSCA Inventory of chemical substances from industry submissions and those substances were grandfathered onto the TSCA Inventory without additional human health or environmental review. Chemical substances not on the TSCA Inventory constitute “new chemical substances” for which a premanufacture notice (PMN) must be submitted to EPA at least 90 days before a company begins producing the substance. A PMN includes information such as the specific chemical identity, use, anticipated production volume, exposure and release information, and existing available test data. EPA identifies risks associated with new chemicals through the PMN process. In the PMN process, EPA can require additional testing or issue orders prohibiting or limiting the production or commercial use of such substances.”

OWNER OF FRAUDULENT REHABILITATION SERVICES COMPANY CONVICTED OF MEDICARE FRAUD

The following excerpt is from the Department of Justice Website:

"WASHINGTON - The owner of a rehabilitation agency in Dearborn, Mich., was convicted today by a federal jury in Detroit for his leading role in a fraudulent Medicare therapy scheme, announced the Department of Justice, FBI and the Department of Health and Human Services (HHS).

Detroit-area resident Tariq Mahmud, 55, was convicted of one count of conspiracy to commit health care fraud and six counts of health care fraud. At sentencing, Mahmud faces a maximum penalty of 10 years in prison on the conspiracy count and each count of health care fraud, as well as a $250,000 fine per count. A sentencing date has not yet been set by the court.   

According to evidence presented during the four-day trial, Mahmud was the owner of Comprehensive Rehabilitation Services Inc (CRS), a fraudulent rehabilitation agency located in Dearborn. Between January 2003 and February 2007, CRS purchased pre-packaged, falsified physical and occupational therapy files from more than 30 therapy and rehab companies and used them to fraudulently bill Medicare for more than $2 million. 

As part of the scheme, Medicare beneficiaries were paid cash kickbacks and given prescription drugs to sign forms and visit sheets that were later falsified to indicate that they received therapy service that they had never received. Physical and occupational therapists created false evaluations, progress notes and discharge papers indicating that the therapy services were given, when in fact they never were. Evidence at trial showed that the therapists never met the beneficiaries and Mahmud never provided or supervised the therapy billed to Medicare. 

In addition to submitting more than $2 million in false therapy claims, Mahmud made additional false statements to Medicare regarding services that were never rendered. For instance, when Medicare inquired regarding a beneficiary who complained that he had not received the services for which CRS billed Medicare, Mahmud returned the payment and told Medicare that he consulted with his professional staff and the beneficiary had not been satisfied with services. In fact, CRS had no professional staff; the therapists who signed the beneficiary’s file never rendered any services; and the beneficiary never received services. Evidence at trial established that the beneficiary’s identity was stolen and used by CRS and a fraudulent file-making company to bill Medicare.

Today’s conviction was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Eastern District of Michigan Barbara L. McQuade; Special Agent in Charge Andrew G. Arena of the FBI’s Detroit Field Office; and Special Agent in Charge Lamont Pugh III of the HHS Office of Inspector General’s (OIG) Chicago Regional Office.

This case was prosecuted by Assistant Chief Benjamin S. Singer and Trial Attorney Catherine K. Dick of the Criminal Division’s Fraud Section.  It was investigated by the FBI and HHS-OIG, and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan. 

Since their inception in March 2007, the strike force operations in nine districts have charged more than 1,160 individuals who collectively have falsely billed the Medicare program for more than $2.9 billion.  In addition, HHS’s Centers for Medicare and Medicaid Services, working in conjunction with the HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers."

T

HOW TO AVOID USED CAR SCAMS: COURTESY OF THE DEPARTMENT OF JUSTICE

February 3rd, 2012 Posted by Tracy Russo

The following excerpt  is from the Department of Justice website: 


"10 Tips to Avoid Being Scammed by Unscrupulous Practices in the Used Car Industry

The following post appears courtesy of Ken Jost, Deputy Director, Consumer Protection Branch, Civil Division

A man in Seattle purchased a pickup truck with 68,900 miles on the odometer.  One of the truck’s wheels fell off while his son was driving. A small business owner in Wyoming purchased a pickup truck with 101,000 miles showing on the odometer. After paying $10,000 for the truck and another $3,000 for repairs, the truck still needed a lot of work. He was stuck trying to operate his business with an unreliable vehicle and no cash for a replacement.

Were these people merely unfortunate, or were they victims of crime?  The truck the Seattle man purchased actually had more than 190,000 miles on it. An odometer rollback specialist, or “clocker,” had turned back the odometer over 100,000 miles to inflate the truck’s value.  The truck in Wyoming had over 204,000 miles, but had fallen into the hands of a clocker who rolled back the odometer and cheated the buyer. 

Each year Americans buy and sell around 40 million used vehicles with a total value in the hundreds of billions of dollars. 

The Civil Division’s Consumer Protection Branch brings both civil and criminal charges against wrongdoers, prosecuting a wide variety of frauds ranging from fraudulent business opportunities to mortgage frauds to these types of criminal car fraud schemes.

This multi-state odometer fraud activity makes it difficult or impossible for most local law enforcement agencies to investigate effectively. That’s why most cases are state-federal joint efforts, pairing local and state law enforcement agents with criminal investigators from the Office of Odometer Fraud Investigation of the National Highway Traffic Safety Administration in an effort to gather evidence from multiple jurisdictions. 

Two common types of odometer tampering schemes are (1) Large-scale rings buy huge numbers of vehicles at wholesale, roll back the odometers, wash the titles and resell the vehicles wholesale. These cars can end up anywhere, including a used car lot of a local new car dealer; and (2) People who pretend to be selling personal vehicles through classified ads or Internet advertisements sites might tell you it’s their car, or a relative’s that they are selling. In fact, the car may be something they bought at auction or from some other commercial source and have rolled back the odometer.

Be wary of any personal sale involving someone other than the owner named on the title. Run as fast as you can from any sale where the seller won’t show you the title, where the title has any indication of alteration of names or numbers, or where the title is newly issued, especially if it is an out-of-state title. 

Wherever you buy a used car, have a trusted mechanic check it out to see if the odometer reading is consistent with what the mechanic sees under the hood and in the dash. Ask the mechanic to check the dash for loose, removed or blown out light bulbs. Odometer tampering can set off warning lights and correct manufacturer codes are required to reset them. Also, ask the shop to check for any signs of a rebuilt wreck or water damage. 

Here are some additional tips to guard against odometer tampering:

1. Look for loose screws or scratch marks around the dashboard. This may signal that a mechanical odometer which has been manipulated with tools.
2. Also on mechanical odometers, check to make sure that the digits in the odometer are lined up straight — particularly the 10,000 digit.
3. Test drive the car and see if the speedometer sticks.
4. Check for service stickers inside the door or under the hood that may give the actual mileage. The bad guys try to find these as well, but sometimes miss one.
5. Look in the owner’s manual to see if maintenance was listed or if pages that might have shown high mileage were removed.
6. Ask the dealer whether a computer warranty check has been run on the car.
7. Use a commercially-available computer search program that checks for mileage alterations.  Some car dealers will give you one of these for free if you ask for it. 
8. Ask to see the title documents and look to see if the mileage reading on the documents has been altered.
9. Look to see if the steering wheel was worn smooth.  Look for other signs of excessive wear on the arm-rest, the floor mats, the pedals for the brakes and gas, and the area around the ignition. If these items were recently replaced, that could also indicate efforts to hide the car’s true use and mileage.
10. Don’t assume that mileage is accurate just because the vehicle has an electronic odometer. 

Most important, and worth repeating: have a mechanic you trust check out the car.

For more information on odometer tampering, see The National Highway Traffic Safety Administration Office of Odometer Fraud Investigation  and The National Odometer and Title Fraud Enforcement Association"