ROBOCALLING, MOBILE CRAMMING SCHEME DEFENDANTS TO PAY $10 MILLION TO SETTLE FTC CHARGES

FROM:  U.S. FEDERAL TRADE COMMISSION 

October 22, 2014

Defendants in Massive Spam Text Message, Robocalling and Mobile Cramming Scheme to Pay $10 Million to Settle FTC Charges

A series of defendants will pay approximately $10 million to the Federal Trade Commission to settle charges that they operated a massive scam that sent unwanted text messages to millions of consumers, many of whom later received illegal robocalls, phony “free” merchandise offers, and unauthorized charges crammed on their mobile phone bills.

The settlement marks the completion of a major effort by the FTC to crack down on the senders of unwanted text messages offering consumers “free” gift cards to retailers such as Best Buy, Walmart and Target. The messages contained links to websites that led consumers through a process that the FTC alleges was designed to get consumers’ personal information for sale to marketers, their mobile phone numbers to cram unwanted charges on their bill, and to drive them to paid subscriptions for which the scammers received affiliate referral fees.

“The operators of this scam bombarded consumers for months with deceptive text messages offering ‘free’ items, but the costs to consumers were very real – including the misuse of their personal information to cram unwanted charges on  their phone bills,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “I am pleased that these scammers will be forced to turn over millions of the dollars they took from consumers and banned from repeating these actions in the future.”

The settlement resolves the FTC’s allegations against three groups of defendants:

The first set of defendants is required to pay the FTC $7.8 million. The FTC alleged that this group of defendants was responsible for millions of illegal text messages, made deceptive claims about “free” merchandise, was responsible for unauthorized charges on mobile phone bills, and assisted and facilitated the sending of illegal robocalls. Under the terms of the settlement, these defendants will be banned from sending consumers unwanted text messages, as well as from placing charges of any kind onto a consumer’s telephone bill, whether landline or mobile. The settlement also bans the defendants from misrepresenting whether a product is free through a text message or webpage, and also requires the defendants to ensure that any affiliates working for them abide by the same provisions. In addition, the settlement requires the defendants to obtain consumers’ express informed consent before billing them and bans them from participating in illegal telemarketing. The defendants in this settlement are Acquinity Interactive, LLC; 7657030 Canada Inc., Garry Jonas, Gregory Van Horn, Revenue Path E-Consulting Pvt, Ltd.; Revenuepath Ltd.; and Sarita Somani.

The second set of defendants is required to pay the FTC $1.4 million. The FTC alleged that this set of defendants was responsible for cramming unauthorized charges on consumers’ mobile phone bills. Under the terms of the settlement, the defendants will be banned from placing charges of any kind on consumers’ telephone bills, as well as being banned from making any misrepresentations to consumers about a product or service, including the cost or a consumer’s obligation to pay. In addition, the defendants will be required to obtain consumers’ express informed consent before billing them for any good or service. The defendants in this settlement are Burton Katz, individually and also doing business as Polling Associates Inc. and Boomerang International, LLC, and Jonathan Smyth, individually and also doing business as Polling Associates Inc.

In the third settlement, an $8 million judgment is being suspended due to the defendants’ inability to pay, after they turn over available assets. The FTC alleged that this set of defendants was responsible for making millions of illegal robocalls. Under the settlement, the defendants are required to pay the FTC $100,000, as well as the surrender value of a life insurance policy and proceeds from the sale of: a 2013 Cadillac Escalade, two motorcycles, and a real estate holding in Southern California. The settlement also bans the defendants from illegally telemarketing consumers through robocalling. The defendants in this settlement are Firebrand Group S.L., LLC, Worldwide Commerce Associates, LLC, and Matthew Beucler.

In addition to these settlements, the Commission dropped charges against two defendants in the cases, Joshua Greenberg and Scott Modist.

The Commission vote approving the proposed stipulated final orders was 5-0. Judge Robert N. Scola, Jr. of the U.S. District for the Southern District of Florida entered the stipulated final orders on Oct. 16, 2014

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.

FOUNDER DETROIT-AREA HOME HEALTH AGENCIES PLEADS GUILTY FOR ROLE IN HEALTH CARE FRAUD CONSPIRACY

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, October 22, 2014

The founder of three Detroit-area home health agencies pleaded guilty today in federal court for his role in a $22 million home health care fraud scheme.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, Special Agent in Charge Paul M. Abbate of the FBI’s Detroit Field Office, Special Agent in Charge Lamont Pugh III of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Chicago Regional Office and Special Agent in Charge Jarod Koopman of the Internal Revenue Service Criminal Investigation (IRS-CI) Detroit Field Office made the announcement.

Tayyab Aziz, 45, of Homer Glen, Illinois, pleaded guilty today before U.S. District Judge Bernard A. Friedman in the Eastern District of Michigan to one count of conspiracy to commit health care fraud.  His sentencing is scheduled for March 3, 2015.

According to admissions in his plea agreement, Aziz founded three Detroit-area home health care agencies, Prestige Home Health Services Inc. (Prestige), Royal Home Health Care Inc., and Platinum Home Health Services Inc. (Platinum).  Using these companies, Aziz admitted that he orchestrated a conspiracy to defraud Medicare through fraudulent billings for home health care services.  

Specifically, Aziz admitted that he and his co-conspirators submitted fraudulent claims to Medicare for services that were medically unnecessary or never performed.  They also submitted claims for services purportedly provided to Medicare beneficiaries who were recruited through illegal kickbacks paid to the patients and recruiters.  To conceal the fraud, Aziz admitted that he and his co-conspirators created fictitious physical therapy files to document physical therapy and other services that had not actually been provided and were not medically necessary.  Aziz also created and submitted falsified records to the Michigan Community Health Accreditation Program (CHAP) in order for Prestige and Platinum to remain accredited Medicare providers.

As a result of Aziz’s fraudulent conduct, Medicare paid approximately $1,915,513.  Five of six other defendants in this case have also previously pleaded guilty.

This case was investigated by the FBI, HHS-OIG and IRS-CI and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Eastern District of Michigan.  This case is being prosecuted by Trial Attorneys Niall M. O’Donnell and James P. McDonald of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged nearly 2,000 defendants who have collectively billed the Medicare program for more than $6 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.

TEXAS BUSINESS OWNER INDICTED FOR FAILING TO REPORT OVR $1.6 MILLION IN CASH TRANSACTIONS

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, October 20, 2014

Owner of Texas Perfume Business Indicted for Violating Cash Reporting Requirements Involving More Than $1.6 million

The owner and president of a wholesale and retail perfume store in Laredo, Texas, was indicted by a federal grand jury today on 44 counts of causing his business to fail to report cash transactions of more than $10,000.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Magidson of the Southern District of Texas made the announcement.

The indictment alleges that Virender Sharma, 59, of Laredo, Texas, was the owner and president of T.M. Perfumes, and was responsible for complying with the cash reporting requirements for the company.  Despite knowing of his filing obligations since 2006, Sharma allegedly caused the business to fail to report at least 44 cash transactions exceeding $10,000 between June 2009 and July 2010, which totaled more than $1.6 million.

The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.

The case was investigated by the Internal Revenue Service – Criminal Investigation and the Drug Enforcement Administration.  The case is being prosecuted by Trial Attorney Keith Liddle of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorney Ted Imperato of the Southern District of Texas.

Labor Department News Releases Update

Labor Department News Releases Update

CFTC SETTLES ACTION AGAINST FUTURES COMMISSION MERCHANT

FROM:  U.S. COMMODITY FUTURES TRADING COMMISSION 

CFTC Settles Action against Friedberg Mercantile Group, Inc., a Registered Futures Commission Merchant, for Secured Amount Deficiency, Commingling of Customer Funds and Failure to Timely Report Secured Amount Deficiency

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today announced that it entered an order requiring Friedberg Mercantile Group, Inc. (Friedberg), a registered Futures Commission Merchant (FCM) in Toronto, Canada, to pay a $70,000 civil monetary penalty for a secured amount deficiency of approximately $240,000 on February 5, 2013, commingling of customer funds with its proprietary funds on February 6, 2013, and failure to timely notify the CFTC of the February 5, 2013 secured amount deficiency as required.

Friedberg is a subsidiary of Canadian broker-dealer Friedberg Mercantile Group, Ltd., also in Toronto. The company maintains a futures business to accommodate its securities customers who wish to trade futures and is one of the smallest FCMs as measured by customer assets required in segregation.

The CFTC Order finds that Friedberg’s handling of a customer request to transfer $300,000 of segregated funds to secured funds caused Friedberg to be under its secured amount requirement by approximately $240,000 on February 5, 2013, and its subsequent movement of funds to its secured account in connection with the same customer request resulted in Friedberg improperly commingling customer funds with its proprietary funds on February 6, 2013.

According to the CFTC Order, Friedberg failed to timely notify the CFTC of the February 5, 2013 secured amount deficiency as required.

The CFTC’s Order requires Friedberg to cease and desist from further violations of the CFTC Regulations charged in the Order, and imposes a $70,000 civil monetary penalty.

The CFTC staff members responsible for this matter are Division of Enforcement staff Susan Gradman, Allison Passman, Joseph Patrick, Scott Williamson, Rosemary Hollinger, and Richard Wagner, and Division of Swap Dealer and Intermediary Oversight staff Nicholas Chiacchere, Robert Loeber, Gerald Nudge and Kevin Piccoli.

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NURSING CARE COMPANY TO PAY $38 MILLION TO SETTLE FALSE CLAIMS ACT ALLEGATIONS

FROM:  U.S. JUSTICE DEPARTMENT

Friday, October 10, 2014

Extendicare Health Services Inc. Agrees to Pay $38 Million to Settle False Claims Act Allegations Relating to the Provision of Substandard Nursing Care and Medically Unnecessary Rehabilitation Therapy

Extendicare Health Services Inc. (Extendicare) and its subsidiary Progressive Step Corporation (ProStep) have agreed to pay $38 million to the United States and eight states to resolve allegations that Extendicare billed Medicare and Medicaid for materially substandard nursing services that were so deficient that they were effectively worthless and billed Medicare for medically unreasonable and unnecessary rehabilitation therapy services, the Justice Department and the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) jointly announced today.  This resolution is the largest failure of care settlement with a chain-wide skilled nursing facility in the department’s history.

As part of this settlement, Extendicare has also been required to enter into a five year chain-wide Corporate Integrity Agreement with HHS-OIG.  Extendicare is a Delaware corporation that, through its subsidiaries, operates 146 skilled nursing facilities in 11 states.  ProStep provides physical, speech, and occupational rehabilitation services.

“Our seniors rely on the Medicare and Medicaid programs to provide them with quality care, ensuring that they are treated with dignity and respect when they are most vulnerable,” said Acting Associate Attorney General Stuart F. Delery.  “It is critically important that we confront nursing home operators who put their own economic gain ahead of the needs of their residents.  Operators who bill Medicare and Medicaid while failing to provide essential services or bill for services so grossly substandard as to be effectively worthless will be pursued for false claims.”

This settlement resolves allegations that between 2007 and 2013, in 33 of its skilled nursing homes in eight states, Extendicare billed Medicare and Medicaid for materially substandard skilled nursing services and failed to provide care to its residents that met federal and state standards of care and regulatory requirements.  The government alleges, for example, that Extendicare failed to have a sufficient number of skilled nurses to adequately care for its skilled nursing residents; failed to provide adequate catheter care to some of the residents and failed to follow the appropriate protocols to prevent pressure ulcers or falls.  The eight states involved in this component of the settlement are Indiana, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania, Washington and Wisconsin.  

“The continued viability of Medicare depends, in large part, on the honesty and integrity of the program participants,” said Acting Assistant Attorney General Joyce R. Branda for the Civil Division.  “Health care providers must make decisions regarding the level of services to be provided based solely on their patients’ clinical needs, and not corporate financial targets.”  

“This investigation and settlement highlights the importance of leveraging the joint resources and expertise of the states and federal government,” said Ohio Attorney General Mike DeWine.  “Working together allowed us to focus our efforts nationally on protecting the most vulnerable in our population who rely on quality care in our nursing homes.”

Additionally, this settlement resolves allegations that between 2007 and 2013, in 33 of its skilled nursing homes, Extendicare provided medically unreasonable and unnecessary rehabilitation therapy services to its Medicare Part A beneficiaries, particularly during the patients’ assessment reference periods, so that it could bill Medicare for those patients at the highest per diem rate possible.  

As a result of today’s settlement, the federal government will receive $32.3 million and the eight state Medicaid programs will receive $5.7 million.  The Medicaid program is funded jointly by the federal and state governments.

“The United States remains committed to demanding the highest quality of care for nursing home and skilled facility residents,” said U.S. Attorney Carter M. Stewart for the Southern District of Ohio.  “We are proud of our efforts to work cooperatively with our partners at the Ohio Attorney General’s Medicaid Fraud Control Unit, as well as with other U.S. Attorney’s offices across the country.  We will remain vigilant in our efforts to combat healthcare fraud, especially when it impacts the most vulnerable in our society, including seniors and others requiring significant long term care.”

“Nursing home residents should not be subject to unreasonable or unnecessary rehabilitation therapy that is dictated by a company’s profits rather than patient needs,” said U.S. Attorney Zane David Memeger for the Eastern District of Pennsylvania.  “It is critical to the integrity of a system that benefits millions of Americans that we do as much as possible to hold accountable those who commit fraudulent acts.  The Eastern District of Pennsylvania will continue its efforts to prevent Medicare fraud and protect government beneficiaries.”

In addition, as part of this resolution, Extendicare and ProStep are required to enter into a five year chain-wide Corporate Integrity Agreement.  It is a priority of the OIG to investigate and pursue cases involving abuse or grossly deficient care of Medicare or Medicaid beneficiaries and to recommend improvements to the systems intended to promote quality of care.  To protect the Federal healthcare programs and its beneficiaries, OIG required Extendicare to agree to a Corporate Integrity Agreement under which Extendicare must have a comprehensive compliance program with systems to address the quality of resident care.  Extendicare’s compliance program must include, among other things, corporate-level committees to address compliance and quality, including a committee to assess staffing, and an internal audit program to assess the quality of care provided to its residents.  Extendicare must retain an independent monitor, selected by the OIG, who will regularly visit Extendicare’s facilities and report to the OIG.  In addition, an independent review organization will perform annual reviews of Extendicare’s claims to Medicare.

“This case demonstrates that the government will aggressively pursue allegations of abuse and grossly deficient care,” said Inspector General Daniel R. Levinson of the U.S. Department of Health and Human Services.  “Our five-year corporate integrity agreement with Extendicare requires a government-selected quality of care monitor be retained by Extendicare, and additional rigorous provisions designed to ensure Extendicare provides appropriate staffing and monitors the quality of care provided to its residents.”

Under the False Claims Act, private citizens, known as relators, can bring suit on behalf of the United States and share in any recovery.  Two relators brought separate cases against Extendicare.  Relator Tracy Lovvron will receive more than $1.8 million as her share of the recovery in the RUGS upcoding case, and Relator Donald Gallick will receive more than $250,000 as his share of the recovery in the Ohio worthless services case.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  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 this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $22.5 billion through False Claims Act cases, with more than $14.3 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was the result of a coordinated federal and state effort by the Civil Division, the U.S. Attorney’s Office for the Eastern District of Pennsylvania, the U.S. Attorney’s Office for the Southern District of Ohio, HHS-OIG and the Attorneys General for the states of Indiana, Kentucky, Michigan, Minnesota, Ohio, Pennsylvania, Washington and Wisconsin.  This investigation was also supported by the department’s Elder Justice Initiative, which coordinates the department’s activities combating elder abuse, neglect and financial exploitation, especially as they impact beneficiaries of Medicare, Medicaid and other federal health care programs.

The two qui tam cases are docketed as United States ex rel. Lovvorn v. EHSI, et. al. C.A. 10-1580 (E.D. Pa) and United States ex rel. Gallick et al., v. EHSI et al., C.A. 2:13cv-092 (S.D. Ohio).  The claims resolved by the settlement are allegations only; there has been no determination of liability.

OVER-BILLING ALLEGATIONS LEADS DEFENSE CONTRACTOR TO PAY $13.7 MILLION

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, October 7, 2014

Defense Contractor Agrees to Pay $13.7 Million to Settle Allegations of Overbilling

DRS Technical Services Inc. (DRS) has agreed to pay $13.7 million to settle allegations that it violated the False Claims Act by knowingly overbilling the government for work performed by DRS personnel who lacked the job qualifications required by the contract, the Justice Department announced today.  DRS is located in Herndon, Virginia, and is a subsidiary of DRS Defense Solutions LLC.

DRS designs, integrates, operates and maintains satellite and wireless network solutions and telecommunication services and security systems for government and private sector customers.  DRS C3 & Aviation Company, which is headquartered in Gaithersburg, Maryland, is an indirect subsidiary of DRS and provides services to government agencies, including aircraft maintenance, logistics and depot support, and engineering support.  Between March 2003 and Dec. 31, 2012, DRS and its predecessors were awarded time and materials contracts for services and supplies to be provided to the Army’s Communication and Electronics Command (CECOM) in Iraq and Afghanistan, and to the Coast Guard for aircraft maintenance.

“Contractors that fail to provide qualified labor as promised are not entitled to bill the government as though they had,” said Acting Assistant Attorney General Joyce R. Branda for the Justice Department’s Civil Division.  “The Department of Justice will pursue contractors that claim taxpayer funds to which they are not entitled.”

The alleged labor mischarging occurred on the Rapid Response or “R2” contract issued by the U.S. Army Communication and Electronics Command (CECOM) located at the Aberdeen Proving Ground in Maryland.  The U.S. Army used the R2 contract to purchase a variety of goods and services needed to support U.S. forces in Iraq, Afghanistan and elsewhere on a quick turnaround basis.  The settlement also resolves labor mischarging on a similar U.S. Coast Guard contract.

The government contends that from Jan. 1, 2003, to Dec. 31, 2012, DRS billed CECOM for work performed by individuals whose job qualifications did not meet all the qualifications prescribed by the contracts for the labor categories under which their efforts were billed, thereby falsely increasing the amount of money DRS claimed and CECOM paid.  Similarly, from Dec. 19, 2009, to Dec. 18, 2011, the government contends that DRS charged the Coast Guard’s Aviation Logistics Center for work performed by individuals whose job qualifications did not meet the qualifications prescribed by the contract, again, thereby inflating the cost of the services provided.    

“Companies that submit false bills to the government must be held accountable,” said U.S. Attorney Rod J. Rosenstein for the District of Maryland.

“This settlement is yet another example of the tenacity and hard work of our Army CID agents,” said Director Frank Robey of the U.S. Army Criminal Investigation Command's Major Procurement Fraud Unit (MPFU).  “It is a testament to MPFU's continued resolve to hold companies accountable for the work they do for the U.S. government.”

The settlement was the result of a coordinated effort by the U.S. Attorney’s Office for the District of Maryland, the Civil Division, the Defense Contract Audit Agency, the Army’s Criminal Investigative Command’s MPFU and the Department of Defense Office of Inspector General’s Defense Criminal Investigative Service.  

The claims resolved by the settlements are allegations only and there has been no determination of liability.