FROM: U.S. DEPARTMENT OF JUSTICE
Wednesday, December 26, 2012
Illinois-based Hardware Distributor W.W. Grainger Pays US $70 Million to Resolve False Claims Act Allegations
W.W. Grainger Inc. has agreed to pay the United States $70 million to resolve allegations that it submitted false claims under contracts with the General Services Administration (GSA) and the U.S. Postal Services (USPS), the Department of Justice announced today. Grainger is a national hardware distributor headquartered in Lake Forest, Illinois.
Grainger entered into a contract to sell hardware products and other supplies to government customers through the GSA’s Multiple Award Schedule (MAS) program. The MAS program provides the government and other GSA-authorized purchasers with a streamlined process for procurement of commonly-used commercial goods and services. To be awarded a MAS contract, and thereby gain access to the broad government marketplace, contractors must agree to disclose their commercial pricing policies and practices to assist the government in negotiating the terms of the MAS contract.
Today’s settlement resolves issues discovered during a GSA post-award audit of Grainger’s MAS contract. The GSA Office of Inspector General learned that Grainger failed to meet its contractual obligations to provide the GSA with current, accurate and complete information about its commercial sales practices, including discounts afforded to other customers. As a result, government customers purchasing items under the Grainger MAS contract paid higher prices than they should have.
In addition, today’s settlement resolves allegations that Grainger failed to meet its contractual obligations to provide "most-favored customer" pricing under two USPS contracts for sanitation and maintenance supplies. The USPS contracts required Grainger to treat USPS as Grainger’s "most-favored customer" by ensuring that USPS received the best overall discount that Grainger offered to any of its commercial customers. Agents and auditors from the USPS Office of Inspector General (OIG) investigated Grainger’s pricing practices and discovered that Grainger did not consistently adhere to this requirement, causing USPS to pay more than it should have for purchases made under the two contracts.
"Misrepresentations during contract negotiations undermine the integrity of the government procurement process," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division. "The Justice Department is committed to ensuring that government purchasers of commercial products receive the prices to which they are entitled."
"The substantial payment by Grainger reflects the Justice Department’s focused and productive work in the economic interests of our citizen constituents," commented United States Attorney James L. Santelle of the Eastern District of Wisconsin. "This settlement shows that we are committed to ensuring that false claims are investigated fully and pursued effectively so that government monies are used properly and the integrity of our contracting system is upheld."
"This case is another demonstration of the value of the work performed by Inspectors General ," said GSA Inspector General Brian D. Miller. "Our auditors and agents worked tirelessly to reach this critical settlement."
"The U.S. Postal Service Office of Inspector General aggressively pursues instances of contracting improprieties that negatively impact the Postal Service and cause unnecessary expenses. We appreciate the partnership of the Civil Divisions of the Department of Justice and the United States Attorney’s Office for their support in this case," said Joanne Yarbrough, Special Agent-in-Charge of the OIG’s Major Fraud Investigations Division.
This settlement was the result of a coordinated effort by the Commercial Litigation Branch of the Justice Department’s Civil Division; the U.S. Attorney’s Office for the Eastern District of Wisconsin; the GSA Office of Inspector General; and the USPS Office of Inspector General and Office of General Counsel. The claims settled by this agreement are allegations only, and there has been no determination of liability.
Saturday, December 29, 2012
Friday, December 28, 2012
WHEELCHAIR MANUFACTURER AGREES TO RESOLVE ALLEGATIONS OF FOOD, DRUG AND COSMETIC ACT VIOLATIONS
FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, December 20, 2012
Ohio-Based Wheelchair Manufacturer Agrees to Consent Decree to Resolve Allegations of Food, Drug and Cosmetic Act Violations
The Justice Department, at the request of the Food and Drug Administration (FDA), today filed a complaint and a proposed consent decree in the U.S. District Court for the Northern District of Ohio against Invacare Corp., Gerald B. Blouch and Ronald J. Clines. The complaint and proposed consent decree are being filed today in accordance with an agreement with the defendants resolving numerous allegations of violations of the Food, Drug and Cosmetic Act (FDCA).
The defendants design, manufacture and distribute powered wheelchairs and powered hospital beds, which are medical devices under the FDCA. Medical device manufacturers are required to comply with the FDA’s Current Good Manufacturing Practices (CGMP) regulatory requirements in order to ensure the safety and effectiveness of their devices.
The FDA conducted multiple inspections of Invacare’s corporate headquarters and Taylor Street manufacturing facility, both located in Elyria, Ohio, between September 2002 and August 2011. Those inspections revealed significant violations of the CGMP regulatory requirements. Many of the violations related to design controls, complaint handling, and corrective and preventive action (CAPA). Those regulations ensure that when a device manufacturer learns that one of its devices has malfunctioned or has caused injury to a patient, the complaint is thoroughly investigated and necessary design changes are implemented. Without such controls, recurring defects may not be identified or corrected, endangering patients who rely on the defendants’ powered wheelchairs and beds.
Under the terms of the agreement reached with the government, the defendants cannot resume manufacturing power wheelchairs or conducting design activities related to wheelchairs and power beds at the two Ohio facilities until an independent expert inspects the company’s operations and certifies that the defendants are in compliance with the law. FDA can then evaluate that certification. Until FDA provides written notification that the facilities are in compliance with the law, they cannot resume operations.
"Today’s proposed consent decree would require Invacare to establish procedures that will help ensure their products are safe and effective for the patients who rely on them," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice. "Consumers who need wheelchairs or powered hospital beds should not have to risk being harmed by the very products meant to help them."
"This resolution underscores the commitment of our office and this department to protecting consumers, particularly those who have to use wheelchairs or hospital beds," said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.
Thursday, December 20, 2012
Ohio-Based Wheelchair Manufacturer Agrees to Consent Decree to Resolve Allegations of Food, Drug and Cosmetic Act Violations
The Justice Department, at the request of the Food and Drug Administration (FDA), today filed a complaint and a proposed consent decree in the U.S. District Court for the Northern District of Ohio against Invacare Corp., Gerald B. Blouch and Ronald J. Clines. The complaint and proposed consent decree are being filed today in accordance with an agreement with the defendants resolving numerous allegations of violations of the Food, Drug and Cosmetic Act (FDCA).
The defendants design, manufacture and distribute powered wheelchairs and powered hospital beds, which are medical devices under the FDCA. Medical device manufacturers are required to comply with the FDA’s Current Good Manufacturing Practices (CGMP) regulatory requirements in order to ensure the safety and effectiveness of their devices.
The FDA conducted multiple inspections of Invacare’s corporate headquarters and Taylor Street manufacturing facility, both located in Elyria, Ohio, between September 2002 and August 2011. Those inspections revealed significant violations of the CGMP regulatory requirements. Many of the violations related to design controls, complaint handling, and corrective and preventive action (CAPA). Those regulations ensure that when a device manufacturer learns that one of its devices has malfunctioned or has caused injury to a patient, the complaint is thoroughly investigated and necessary design changes are implemented. Without such controls, recurring defects may not be identified or corrected, endangering patients who rely on the defendants’ powered wheelchairs and beds.
Under the terms of the agreement reached with the government, the defendants cannot resume manufacturing power wheelchairs or conducting design activities related to wheelchairs and power beds at the two Ohio facilities until an independent expert inspects the company’s operations and certifies that the defendants are in compliance with the law. FDA can then evaluate that certification. Until FDA provides written notification that the facilities are in compliance with the law, they cannot resume operations.
"Today’s proposed consent decree would require Invacare to establish procedures that will help ensure their products are safe and effective for the patients who rely on them," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice. "Consumers who need wheelchairs or powered hospital beds should not have to risk being harmed by the very products meant to help them."
"This resolution underscores the commitment of our office and this department to protecting consumers, particularly those who have to use wheelchairs or hospital beds," said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.
Thursday, December 27, 2012
CFTC COMMISSIONER BART CHILTON REFLECTS ON HAVING A CONSCIENCE
FROM: U.S. COMMODITY FUTURES EXCHANGE COMMISSION
Statement of Commissioner Bart Cilton on UBS Settlement"A Conscience Isn't Nonsense"
December 19, 2012
Every so often, folks wonder if some in the financial sector believe that having a business conscience is nonsense. Financial sector violations are hurtling toward us like a spaceship moving through the stars. All too often, penalties have been a simple cost of doing business. That needs to change.
The UBS settlement is serious and significant and will provide a definite deterrent.
This $700 million settlement is the granddaddy of CFTC penalties. Combined with other regulator settlements, UBS will pay $1.5 billion. Even for a mega-bank, that amount serves as a direct deterrent. It serves as a deterrent not only for UBS, but for the biggest of the big schemers in the financial world.
One of the most egregious aspects of this case was that even when the bank knew it was being investigated for these violations of the law, it continued the wrongdoing. It was a corrupt culture.
One of the crooked characters in this debacle went so far as to pay off brokers at other firms in return for falsifying rates. All told, he made at least 2,000 attempts to manipulate the benchmark in a three-year period.
Whether the manipulated rates moved higher or lower (and rates went both ways) really isn’t what matters. They were not true rates. They were fictitious and that can throw off the normal balance of the global economy. When somebody is making false profits, somebody else pays the price.
These interest rate benchmarks are extremely important affecting virtually anything consumers purchase with credit. The entire benchmark rate regime needs to be revisited. We need to ensure that the rates are based upon transparent, actual trades. The numbers should not be consolidated by a trade association and there should never be a profit motive involved in submitting rates.
Finally, I’ve asked Congress to revisit this issue of puny penalty authority for the CFTC. Our authority needs to be revised and enhanced to ensure we continually protect consumers from violations of the law.
Statement of Commissioner Bart Cilton on UBS Settlement"A Conscience Isn't Nonsense"
December 19, 2012
Every so often, folks wonder if some in the financial sector believe that having a business conscience is nonsense. Financial sector violations are hurtling toward us like a spaceship moving through the stars. All too often, penalties have been a simple cost of doing business. That needs to change.
The UBS settlement is serious and significant and will provide a definite deterrent.
This $700 million settlement is the granddaddy of CFTC penalties. Combined with other regulator settlements, UBS will pay $1.5 billion. Even for a mega-bank, that amount serves as a direct deterrent. It serves as a deterrent not only for UBS, but for the biggest of the big schemers in the financial world.
One of the most egregious aspects of this case was that even when the bank knew it was being investigated for these violations of the law, it continued the wrongdoing. It was a corrupt culture.
One of the crooked characters in this debacle went so far as to pay off brokers at other firms in return for falsifying rates. All told, he made at least 2,000 attempts to manipulate the benchmark in a three-year period.
Whether the manipulated rates moved higher or lower (and rates went both ways) really isn’t what matters. They were not true rates. They were fictitious and that can throw off the normal balance of the global economy. When somebody is making false profits, somebody else pays the price.
These interest rate benchmarks are extremely important affecting virtually anything consumers purchase with credit. The entire benchmark rate regime needs to be revisited. We need to ensure that the rates are based upon transparent, actual trades. The numbers should not be consolidated by a trade association and there should never be a profit motive involved in submitting rates.
Finally, I’ve asked Congress to revisit this issue of puny penalty authority for the CFTC. Our authority needs to be revised and enhanced to ensure we continually protect consumers from violations of the law.
Wednesday, December 26, 2012
COURT ACTS TO STOP SALE OF SALMONELLA TAINTED PEANUT BUTTER PRODUCTS
FROM: U.S. DEPARTMENT OF JUSTICE
Friday, December 21, 2012
District Court Enters Permanent Injunction Against New Mexico-Based Producer of Peanut Butter Products and Company’s President and Chief Executive Officer
WASHINGTON - U.S. District Court Judge William P. Johnson entered a consent decree of permanent injunction against Sunland Inc., a Portales, N.M.-based producer of peanut butter, and Jimmie D. Shearer, president and chief executive officer of Sunland, the Justice Department announced today. The department, at the request of the Food and Drug Administration (FDA), asked the court to enter the consent decree.
The Centers for Disease Control and Prevention (CDC) has reported that since September 2012 at least 35 people from 19 states have been infected with a strain of Salmonella Bredeney. Eight of these individuals were hospitalized as a result of their infection. Peanut butter manufactured by Sunland was identified by FDA and the CDC as a likely source of this outbreak.
As set forth in the complaint filed by the United States on December 20, FDA conducted an inspection of defendants’ facility from Sept. 9 to Oct. 16, 2012. According to the complaint, FDA analyses of samples collected during the 2012 inspection confirmed that certain of Sunland’s nut products were contaminated with Salmonella Bredeney and established the widespread presence of Salmonella Bredeney in Sunland’s facility. Salmonella Bredeney is a pathogenic organism that has a reasonable probability of causing serious adverse health consequences or death to humans.
FDA suspended the registration of Sunland’s food facility on Nov. 26, 2012. As the FDA’s suspension letter explained, the FDA’s analysis found that the Salmonella Bredeney detected at Sunland was indistinguishable from the Salmonella Bredeney identified in the multistate outbreak and the FDA’s investigation uncovered a number of practices that likely result in cross-contamination between raw peanuts and peanuts that had been roasted or brined. Specifically, packaging equipment was not effectively cleaned to prevent contamination; collapsible mesh totes used to store and transport nuts were not cleaned and sanitized between uses; employees came into contact with ready to package, roasted, in-shell peanuts with their bare hands; and processing equipment had unused connections that could facilitate the growth of pathogenic bacteria by allowing food material and water to accumulate.
The FDA concluded that unless and until Sunland implemented a number of corrective actions, and FDA evaluated the completed corrective actions to assure their adequacy, food manufactured and held by Sunland would continue to pose a reasonable probability of causing serious adverse health consequences or death to humans or animals.
Shortly after the suspension of Sunland’s registration, the United States filed suit to permanently enjoin Sunland and Shearer from delivering adulterated foods into interstate commerce. The consent decree entered resolves that suit by requiring Sunland to take a wide range of actions to correct its violations and ensure that they do not happen again. Among other actions, Sunland must develop and implement sanitation control programs; provide FDA the opportunity to inspect the facilities to assure Sunland’s compliance with the consent decree, the Food, Drug and Cosmetic Act, and applicable regulations; and receive written authorization from FDA to resume operations. Sunland must also implement testing, monitoring and remediation protocols.
"This consent decree prohibits Sunland from selling processed foods to consumers until it fully complies with the law," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. "As this case demonstrates, the Department of Justice and FDA will work together to protect the health and safety of Americans by making sure that those who produce and sell the food we eat follow the law."
Principal Deputy Assistant Attorney General Delery thanked the FDA for referring this matter to the Department of Justice. Roger Gural, Trial Attorney at the Consumer Protection Branch of the Justice Department, in conjunction with Assistant U.S. Attorney Michael Hoses in the District of New Mexico, and Scott Kaplan and Jillian Wein Riley, Counsel at FDA’s Office of the Chief Counsel, brought this case on behalf of the United States.
Friday, December 21, 2012
District Court Enters Permanent Injunction Against New Mexico-Based Producer of Peanut Butter Products and Company’s President and Chief Executive Officer
WASHINGTON - U.S. District Court Judge William P. Johnson entered a consent decree of permanent injunction against Sunland Inc., a Portales, N.M.-based producer of peanut butter, and Jimmie D. Shearer, president and chief executive officer of Sunland, the Justice Department announced today. The department, at the request of the Food and Drug Administration (FDA), asked the court to enter the consent decree.
The Centers for Disease Control and Prevention (CDC) has reported that since September 2012 at least 35 people from 19 states have been infected with a strain of Salmonella Bredeney. Eight of these individuals were hospitalized as a result of their infection. Peanut butter manufactured by Sunland was identified by FDA and the CDC as a likely source of this outbreak.
As set forth in the complaint filed by the United States on December 20, FDA conducted an inspection of defendants’ facility from Sept. 9 to Oct. 16, 2012. According to the complaint, FDA analyses of samples collected during the 2012 inspection confirmed that certain of Sunland’s nut products were contaminated with Salmonella Bredeney and established the widespread presence of Salmonella Bredeney in Sunland’s facility. Salmonella Bredeney is a pathogenic organism that has a reasonable probability of causing serious adverse health consequences or death to humans.
FDA suspended the registration of Sunland’s food facility on Nov. 26, 2012. As the FDA’s suspension letter explained, the FDA’s analysis found that the Salmonella Bredeney detected at Sunland was indistinguishable from the Salmonella Bredeney identified in the multistate outbreak and the FDA’s investigation uncovered a number of practices that likely result in cross-contamination between raw peanuts and peanuts that had been roasted or brined. Specifically, packaging equipment was not effectively cleaned to prevent contamination; collapsible mesh totes used to store and transport nuts were not cleaned and sanitized between uses; employees came into contact with ready to package, roasted, in-shell peanuts with their bare hands; and processing equipment had unused connections that could facilitate the growth of pathogenic bacteria by allowing food material and water to accumulate.
The FDA concluded that unless and until Sunland implemented a number of corrective actions, and FDA evaluated the completed corrective actions to assure their adequacy, food manufactured and held by Sunland would continue to pose a reasonable probability of causing serious adverse health consequences or death to humans or animals.
Shortly after the suspension of Sunland’s registration, the United States filed suit to permanently enjoin Sunland and Shearer from delivering adulterated foods into interstate commerce. The consent decree entered resolves that suit by requiring Sunland to take a wide range of actions to correct its violations and ensure that they do not happen again. Among other actions, Sunland must develop and implement sanitation control programs; provide FDA the opportunity to inspect the facilities to assure Sunland’s compliance with the consent decree, the Food, Drug and Cosmetic Act, and applicable regulations; and receive written authorization from FDA to resume operations. Sunland must also implement testing, monitoring and remediation protocols.
"This consent decree prohibits Sunland from selling processed foods to consumers until it fully complies with the law," said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. "As this case demonstrates, the Department of Justice and FDA will work together to protect the health and safety of Americans by making sure that those who produce and sell the food we eat follow the law."
Principal Deputy Assistant Attorney General Delery thanked the FDA for referring this matter to the Department of Justice. Roger Gural, Trial Attorney at the Consumer Protection Branch of the Justice Department, in conjunction with Assistant U.S. Attorney Michael Hoses in the District of New Mexico, and Scott Kaplan and Jillian Wein Riley, Counsel at FDA’s Office of the Chief Counsel, brought this case on behalf of the United States.
Sunday, December 23, 2012
SEC FILES FCPA CHARGES AGAINST ELI LILLY AND COMPANY
FROM: U.S. SECURITIES AND EXCHANGE COMMISSION
The Securities and Exchange Commission today charged Eli Lilly and Company with violations of the Foreign Corrupt Practices Act (FCPA) for improper payments its subsidiaries made to foreign government officials to win millions of dollars of business in Russia, Brazil, China and Poland.
The SEC alleges that the Indianapolis-based pharmaceutical company’s subsidiary in Russia used offshore "marketing agreements" to pay millions of dollars to third parties chosen by government customers or distributors, despite knowing little or nothing about the third parties beyond their offshore address and bank account information. These offshore entities rarely provided any services, and in some instances were used to funnel money to government officials in order to obtain business for the subsidiary. Transactions with off-shore or government-affiliated entities did not receive specialized or closer review for possible FCPA violations. Paperwork was accepted at face value and little was done to assess whether the terms or circumstances surrounding a transaction suggested the possibility of foreign bribery.
The SEC alleges that when the company did become aware of possible FCPA violations in Russia, Lilly did not curtail the subsidiary’s use of the marketing agreements for more than five years. Lilly subsidiaries in Brazil, China, and Poland also made improper payments to government officials or third party entities associated with government officials. Lilly agreed to pay more than $29 million to settle the SEC’s charges.
As alleged in the SEC’s complaint filed in federal court in Washington D.C.:
Lilly’s subsidiary in Russia paid millions of dollars to off-shore entities for alleged "marketing services" in order to induce pharmaceutical distributors and government entities to purchase Lilly’s drugs, including approximately $2 million to an off-shore entity owned by a government official and approximately $5.2 million to off-shore entities owned by a person closely associated with an important member of Russia’s Parliament. Despite the company’s recognition that the marketing agreements were being used to "create sales potential" with government customers and that it did not appear that any actual services were being rendered under the agreements, Eli Lilly allowed its subsidiary to continue using the agreements for years.
Employees at Lilly’s subsidiary in China falsified expense reports in order to provide spa treatments, jewelry, and other improper gifts and cash payments to government-employed physicians.
Lilly’s subsidiary in Brazil allowed one of its pharmaceutical distributors to pay bribes to government health officials to facilitate $1.2 million in sales of a Lilly drug product to state government institutions.
Lilly’s subsidiary in Poland made eight improper payments totaling $39,000 to a small charitable foundation that was founded and administered by the head of one of the regional government health authorities in exchange for the official’s support for placing Lilly drugs on the government reimbursement list.
Lilly agreed to pay disgorgement of $13,955,196, prejudgment interest of $6,743,538, and a penalty of $8,700,000 for a total payment of $29,398,734. Without admitting or denying the allegations, Lilly consented to the entry of a final judgment permanently enjoining the company from violating the anti-bribery, books and records, and internal controls provisions of the FCPA, Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act. Lilly also agreed to comply with certain undertakings including the retention of an independent consultant to review and make recommendations about its foreign corruption policies and procedures. The settlement is subject to court approval.
The Securities and Exchange Commission today charged Eli Lilly and Company with violations of the Foreign Corrupt Practices Act (FCPA) for improper payments its subsidiaries made to foreign government officials to win millions of dollars of business in Russia, Brazil, China and Poland.
The SEC alleges that the Indianapolis-based pharmaceutical company’s subsidiary in Russia used offshore "marketing agreements" to pay millions of dollars to third parties chosen by government customers or distributors, despite knowing little or nothing about the third parties beyond their offshore address and bank account information. These offshore entities rarely provided any services, and in some instances were used to funnel money to government officials in order to obtain business for the subsidiary. Transactions with off-shore or government-affiliated entities did not receive specialized or closer review for possible FCPA violations. Paperwork was accepted at face value and little was done to assess whether the terms or circumstances surrounding a transaction suggested the possibility of foreign bribery.
The SEC alleges that when the company did become aware of possible FCPA violations in Russia, Lilly did not curtail the subsidiary’s use of the marketing agreements for more than five years. Lilly subsidiaries in Brazil, China, and Poland also made improper payments to government officials or third party entities associated with government officials. Lilly agreed to pay more than $29 million to settle the SEC’s charges.
As alleged in the SEC’s complaint filed in federal court in Washington D.C.:
Employees at Lilly’s subsidiary in China falsified expense reports in order to provide spa treatments, jewelry, and other improper gifts and cash payments to government-employed physicians.
Lilly’s subsidiary in Brazil allowed one of its pharmaceutical distributors to pay bribes to government health officials to facilitate $1.2 million in sales of a Lilly drug product to state government institutions.
Lilly’s subsidiary in Poland made eight improper payments totaling $39,000 to a small charitable foundation that was founded and administered by the head of one of the regional government health authorities in exchange for the official’s support for placing Lilly drugs on the government reimbursement list.
Lilly agreed to pay disgorgement of $13,955,196, prejudgment interest of $6,743,538, and a penalty of $8,700,000 for a total payment of $29,398,734. Without admitting or denying the allegations, Lilly consented to the entry of a final judgment permanently enjoining the company from violating the anti-bribery, books and records, and internal controls provisions of the FCPA, Sections 30A, 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act. Lilly also agreed to comply with certain undertakings including the retention of an independent consultant to review and make recommendations about its foreign corruption policies and procedures. The settlement is subject to court approval.
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