U.S. GOV CONTRACTOR AGREES TO PAY $5 MILLION TO SETTLE ALLEGATIONS OF FALSE CLAIMS VIOLATIONS INVOLVING SERVICE-DISABLED VETERANS

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, March 14, 2016

The Hayner Hoyt Corporation to Pay $5 Million to Resolve False Claims Act Liability

Government Contractor and Several Individuals Admit That They Violated Laws Designed to Enhance Contracting Opportunities for Our Nation’s Service-Disabled Veterans

Syracuse-based Hayner Hoyt Corporation has agreed to pay $5 million, plus interest, to resolve allegations that its chairman and chief executive officer, Gary Thurston, its president, Jeremy Thurston, employees, Ralph Bennett and Steve Benedict and Hayner Hoyt affiliates LeMoyne Interiors and Doyner Inc., engaged in conduct designed to exploit contracting opportunities reserved for service-disabled veterans.

The United States has long used government contracting to promote small businesses in general and specifically small businesses owned by veterans who have service-connected disabilities.  Congress has established a targeted procurement program for the U.S. Department of Veterans Affairs (VA), which requires the VA to set annual goals for contracting with service-disabled veteran-owned small businesses.  To be eligible for these contracts, an applicant must qualify as a “small business.”  In addition to being a small business, a service-disabled veteran must own and control the business and handle its strategic decisions and day-to-day management.

The settlement resolves allegations that the defendants orchestrated a scheme designed to take advantage of the service-disabled veteran-owned small business program to secure government contracts for a now-defunct company, 229 Constructors LLC, that Gary and Jeremy Thurston created and controlled and subcontracts for Hayner Hoyt and its affiliates.  The Thurstons – neither of whom is a veteran – exerted significant influence over 229 Constructors’ decision-making during the bid, award and performance of these contracts in various ways, including by staffing the company entirely with then-current and former Hayner Hoyt employees and their spouses.  They also provided 229 Constructors with considerable resources, which provided it with a competitive advantage over legitimate service-disabled veteran-owned small businesses neither affiliated with nor controlled by a larger, non-veteran owned corporation.  Hayner Hoyt officials caused false certifications and statements to be made to the government representing that 229 Constructors met all requirements to be a service-disabled veteran-owned small business when they knew, or should have known, that 229 Constructors did not meet such requirements.  By diverting contracts and benefits intended for our nation’s service-disabled veterans to Hayner Hoyt and its affiliates, the defendants undercut Congress’s intent of encouraging contract awards to legitimate service-disabled veteran-owned small businesses.

The investigation revealed that Bennett – a service-disabled veteran who allegedly ran 229 Constructors, served as its president and oversaw its $14.4 million government-contracts portfolio – was not involved in making important business decisions for the company.  He was instead responsible for overseeing Hayner Hoyt’s tool inventory and plowing snow from Hayner Hoyt’s property.  Jeremy Thurston set up an email account in Bennett’s name in such a way that all emails received by the veteran were automatically forwarded to him.  After the government began to question 229 Constructors’ affiliation with Hayner Hoyt, Gary Thurston wrote others that he and Jeremy Thurston would likely terminate operations of 229 Constructors.  A few months later, service-disabled veteran Bennett and Benedict, who was simultaneously the “co-owner” of 229 Constructors and listed on Hayner Hoyt’s website as one of its five “key” officials, transferred a total of $52,000 to Gary Thurston’s personal bank account allegedly to show their appreciation for the assistance he had provided.

Defendants make various admissions in the settlement agreement, including that their conduct violated federal regulations designed to encourage contract awards to legitimate service-disabled veteran-owned small businesses.  They also admit that 229 Constructors provided more than $1.3 million in service-disabled veteran-owned small business subcontracts to Hayner Hoyt, LeMoyne Interiors and Doyner and that those companies generated $296,819 in gross profits as a result.

“Those who do business with the federal government must do so honestly,” said U.S. Attorney Richard S. Hartunian for the Northern District of New York  “As today’s settlement demonstrates, this office will vigorously pursue those individuals and entities who game programs designed to help our nation’s veterans succeed in starting small businesses.”

“Federal contracting programs designed to help service-disabled veteran-owned small businesses should never be undermined by actions such as the ones taken by Hayner Hoyt Corporation officials to divert contracts to ineligible large firms,” said Inspector General Peggy E. Gustafson for the Small Business Administration (SBA).  “The Office of Inspector General (OIG) will continue to work with the U.S. Department of Justice and partnering agencies in using all available remedies to deter parties from taking advantage of contracting programs designed to assist deserving service-disabled veteran-owned small businesses.”

“This settlement demonstrates the Department of Veterans Affairs, Office of Inspector General’s continued commitment to aggressively pursue individuals and companies that misrepresent themselves as service-disabled veteran-owned small businesses and deny legitimate disabled veterans the opportunity to obtain VA set-aside contracts,” said Special Agent in Charge Jeff Hughes for the Office of Inspector General for the Department of Veteran Affairs (VA-OIG).  “The VA-OIG will continue to work diligently to protect the integrity of this important program, which is designed to aid disabled veterans.  I also want to thank the U.S. Attorney’s Office and our law enforcement partners in this effort.”

“This civil settlement is a positive result of a joint investigation that proved Department of Defense contractor Hayner Hoyt executed a scheme to exploit and violate SBA and VA regulations in order to obtain service-disabled veteran-owned small business set aside contracts,” said Special Agent in Charge Craig W. Rupert of the Defense Criminal Investigative Service’s (DCIS) Northeast Field Office for the U.S. Department of Defense Office of the Inspector General.  “Through these schemes, Hayner Hoyt denied small businesses, owned by legitimate service-disabled veterans, the opportunity to obtain government contracts.  Such schemes erode public confidence and undermine the mission of our government.  The DCIS and its law enforcement partners will continue to tirelessly pursue and investigate procurement fraud allegations in order to safeguard the American taxpayer and its military veterans.”

The government’s investigation was triggered by a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act, which allows private persons, known as “relators,” to file civil actions on behalf of the United States and share in any recovery.  The relator in this case will receive $875,000 of the settlement proceeds.  The case is docketed with the U.S. District Court for the Northern District of New York under number 14-cv-830.

The investigation and settlement were the result of a coordinated effort among the U.S. Attorney’s Office for the Northern District of New York, SBA-OIG, VA-OIG and DCIS.  The United States was represented by Assistant U.S. Attorney Adam J. Katz.

CA HOSPITAL TO PAY OVER $3.2 MILLION TO SETTLE ALLEGATIONS RELATED TO PHYSICIAN SELF-REFERRAL LAW VIOLATION

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, January 15, 2016

California Hospital to Pay More Than $3.2 Million to Settle Allegations That It Violated the Physician Self-Referral Law

Tri-City Medical Center, a hospital located in Oceanside, California, has agreed to pay $3,278,464 to resolve allegations that it violated the Stark Law and the False Claims Act by maintaining financial arrangements with community-based physicians and physician groups that violated the Medicare program’s prohibition on financial relationships between hospitals and referring physicians, the Justice Department announced today.

The Stark Law generally forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital unless that relationship falls within an enumerated exception.  The exceptions generally require, among other things, that the financial arrangements do not exceed fair market value, do not take into account the volume or value of any referrals and are commercially reasonable.  In addition, arrangements with physicians who are not hospital employees must be set out in writing and satisfy a number of other requirements.

“The settlement of this matter reflects not only our commitment to protect the integrity of the healthcare system through enforcement of the Stark Law, but also our willingness to work with providers who disclose their own misconduct,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.

The settlement announced today resolves allegations that Tri-City Medical Center maintained 97 financial arrangements with physicians and physician groups that did not comply with the Stark Law.  The hospital identified five arrangements with its former chief of staff from 2008 until 2011 that, in the aggregate, appeared not to be commercially reasonable or for fair market value.  The hospital also identified 92 financial arrangements with community-based physicians and practice groups that did not satisfy an exception to the Stark Law from 2009 until 2010 because, among other things, the written agreements were expired, missing signatures or could not be located.

“Patient referrals should be based on a physician’s medical judgment and a patient’s medical needs, not on a physician’s financial interests or a hospital’s business goals,” said U. S. Attorney Laura E. Duffy of the Southern District of California.  “This settlement reinforces that hospitals will face consequences when they enter into financial arrangements with physicians that do not comply with the law. We will continue to hold health care providers accountable when they shirk their legal responsibilities to the detriment of tax payer-funded health care programs.”

“Together with our law enforcement partners, our agency’s investigators and attorneys will continue to work with health care providers who use the self-disclosure protocol to resolve their billing misconduct,” said Special Agent in Charge Chris Schrank of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Los Angeles region.”

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 $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.

This matter was handled by the U.S. Attorney’s Office of the Southern District of California, the Civil Division’s Commercial Litigation Branch and HHS-OIG.  The claims settled by this agreement are allegations only, and there has been no determination of liability.

NURSING HOME THERAPY PROVIDER AGREES TO PAY $125 MILLION TO RESOLVE ALLEGATIONS OF FALSE CLAIMS ACT VIOLATIONS

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, January 12, 2016

Nation’s Largest Nursing Home Therapy Provider, Kindred/Rehabcare, to Pay $125 Million to Resolve False Claims Act Allegations

Four Nursing Homes Using Kindred/RehabCare to Pay an Additional $8.225 Million

Contract therapy providers RehabCare Group Inc., RehabCare Group East Inc. and their parent, Kindred Healthcare Inc., have agreed to pay $125 million to resolve a government lawsuit alleging that they violated the False Claims Act by knowingly causing skilled nursing facilities (SNFs) to submit false claims to Medicare for rehabilitation therapy services that were not reasonable, necessary and skilled, or that never occurred, the Department of Justice announced today.

RehabCare Group Inc. and RehabCare Group East Inc. were purchased by the Louisville, Kentucky-based Kindred Healthcare Inc. in 2011 and they now operate under the name RehabCare as a division of Kindred.  RehabCare is the largest provider of therapy in the nation, contracting with more than 1,000 SNFs in 44 states to provide rehabilitation therapy to their patients.

“Medicare beneficiaries are entitled to receive care that is dictated by their clinical needs rather than the fiscal interests of healthcare providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “All providers, whether contractors or direct billers of taxpayer-funded federal healthcare programs, will be held accountable when their actions cause false claims for unnecessary services.”

The government’s complaint alleged that RehabCare’s policies and practices, including setting unrealistic financial goals and scheduling therapy to achieve the highest reimbursement level regardless of the clinical needs of its patients, resulted in Rehabcare providing unreasonable and unnecessary services to Medicare patients and led its SNF customers to submit artificially and improperly inflated bills to Medicare that included those services.  Specifically, the government’s complaint alleged that RehabCare’s schemes included the following:

Presumptively placing patients in the highest therapy reimbursement level, rather than relying on individualized evaluations to determine the level of care most suitable for each patient’s clinical needs;
During the period prior to Oct. 1, 2011, boosting the amount of reported therapy during “assessment reference periods,” thereby causing and enabling SNFs to bill for the care of their Medicare patients at the highest therapy reimbursement level, while providing materially less therapy to those same patients outside the assessment reference periods, when the SNFs were not required to report to Medicare the amount of therapy RehabCare was providing to their patients (a practice known as “ramping”);
Scheduling and reporting the provision of therapy to patients even after the patients’ treating therapists had recommended that they be discharged from therapy;
Arbitrarily shifting the number of minutes of planned therapy among different therapy disciplines (i.e., physical, occupational and speech therapy) to ensure targeted therapy reimbursement levels were achieved, regardless of the clinical need for the therapy;
Especially after Oct. 1, 2011 and continuing through Sept. 30, 2013, providing significantly higher amounts of therapy at the very end of a therapy measurement period not due to medical necessity but rather to reach the minimum time threshold for the highest therapy reimbursement level, to enable SNFs to bill for the care of their Medicare patients accordingly, even though the patients were receiving materially less therapy on preceding days;
Inflating initial reimbursement levels by reporting time spent on initial evaluations as therapy time rather than evaluation time;
Reporting that skilled therapy had been provided to patients when in fact the patients were asleep or otherwise unable to undergo or benefit from skilled therapy (e.g., when a patient had been transitioned to palliative end-of-life care); and
Reporting estimated or rounded minutes instead of reporting the actual minutes of therapy provided.
“This False Claim Act settlement addresses allegations that RehabCare and its nursing facility customers engaged in a systematic and broad-ranging scheme to increase profits by delivering, or purporting to deliver, therapy in a manner that was focused on increasing Medicare reimbursement rather than on the clinical needs of patients,” said U.S. Attorney Carmen M. Ortiz for the District of Massachusetts.  “The complaint outlines the extent and sophistication of this fraud, and the government’s continuing work to ensure that the provision of care in skilled nursing facilities is based on patients’ clinical needs.”

“Health providers seeking to increase Medicare profits, rather than providing suitable, high-quality care, will be investigated and prosecuted,” said Inspector General Daniel R. Levinson for the U.S. Department of Health and Human Services (HHS).  “Under our robust compliance agreement, an outside review organization will scrutinize a random sample of medical records annually to assess the medical necessity and reasonableness of therapy services provided by RehabCare.”

In addition to RehabCare, the Department of Justice also announced settlements today with four SNFs for their role in submitting claims to Medicare that were false because they were based in part on therapy provided by RehabCare that was not reasonable, necessary and skilled, or that did not occur.  These settlements include:  A $3.9 million settlement with Wingate Healthcare Inc. and 16 of its facilities in Massachusetts and New York; A $2.2 million settlement with THI of Pennsylvania at Broomall LLC and THI of Texas at Fort Worth LLC; A $1.375 million settlement with Essex Group Management and two of its Massachusetts facilities, Brandon Woods of Dartmouth and Blaire House of Milford and a $750,000 settlement with Frederick County, Maryland, which formerly operated the Citizens Care skilled nursing facility.  The department had previously reached settlements with a number of other SNFs for similar conduct.  See http://www.justice.gov/opa/pr/two-companies-pay-375-million-allegedly-causing-submission-claims-unreasonable-or-unnecessary; http://www.justice.gov/opa/pr/episcopal-ministries-aging-inc-pay-13-million-allegedly-causing-submission-claims; http://www.justice.gov/usao-ma/pr/new-york-catholic-nursing-chain-pay-35-million-resolve-allegations-concerning-claims; http://www.justice.gov/usao-ma/pr/maine-nursing-home-pay-12-million-resolve-allegations-concerning-rehabilitation-therapy.

The settlement with RehabCare resolves allegations originally brought in a lawsuit filed under the qui tam, or whistleblower, provisions of the False Claims Act by Janet Halpin, a physical therapist and former rehabilitation manager for RehabCare and Shawn Fahey, an occupational therapist who worked for RehabCare.  The act permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery.  The government may intervene and file its own complaint in such a lawsuit, as it has done in this case.  The whistleblowers will receive nearly $24 million as their share of the recovery from RehabCare.

The settlements announced today illustrate 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 $27.1 billion through False Claims Act cases, with more than $17.1 billion of that amount recovered in cases involving fraud against federal health care programs.  Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, including the conduct described in the United States’ complaint, can be reported to the Department of Health and Human Services, at 800-HHS-TIPS (800-447-8477).

This matter was handled by the Civil Division’s Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Massachusetts; HHS Office of Inspector General and the FBI.

16 HOSPITALS RESOLVE FALSE CLAIMS ACT ALLEGATIONS BY AGREEING TO PAY $15.69 MILLION

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, May 7, 2015

Sixteen Hospitals to Pay $15.69 Million to Resolve False Claims Act Allegations Involving Medically Unnecessary Psychotherapy Services

The Justice Department announced today that 16 separate hospitals and their respective corporate parents have agreed to collectively pay $15.69 million to resolve False Claims Act allegations that the providers sought and received reimbursement from Medicare for services that were not medically reasonable or necessary, the U.S. Department of Justice announced today.

“Hospitals that participate in the Medicare program must ensure that the services they provide and bill for are based on the medical needs of patients rather than the desire to maximize profits,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Department of Justice is committed to ensuring that those who seek to abuse the Medicare program will be held accountable for their actions.”

This case concerns claims to Medicare for Intensive Outpatient Psychotherapy (IOP) services.  IOP services represent a continuation of ambulatory psychiatric services and provide active treatment to individuals with mental disorders using a variety of treatment methods.  Medicare will pay for an appropriate course of IOP treatment provided a number of specific requirements are met including, most notably, that the services in question are reasonable and necessary for the diagnosis and treatment of the patient’s condition.

These settlements resolve allegations that, beginning as early as 2005 and in some cases continuing into 2013, the hospitals knowingly submitted claims for IOP services that did not qualify for Medicare reimbursement because: the patient’s condition did not qualify for IOP; the patient’s treatments were not provided pursuant to an individualized treatment plan designed to help the patient address specific mental health needs and reach achievable goals; the patient’s progress was not being adequately tracked or documented; the patient received an inappropriate level of treatment; and/or the therapy provided was primarily recreational or diversional in nature, and not therapeutic.  The IOP services in question were typically performed on the providers’ behalf by Allegiance Health Management (Allegiance), a post-acute healthcare management company based in Shreveport, Louisiana, but billed to Medicare by the providers.

The providers who have reached agreements to resolve these allegations with the United States include:

Health Management Associates Inc. (HMA), and the following 14 hospitals formerly owned and operated by HMA: Central Mississippi Medical Center in Mississippi, Crossgate River Oaks in Mississippi, Dallas Regional Medical Center in Texas, Davis Regional Medical Center in North Carolina, East Georgia Regional Medical Center in Georgia, Gilmore Regional Medical Center in Mississippi, Lake Norman Regional Medical Center in North Carolina, Lehigh Regional Medical Center in Florida, Medical Center of Southeastern Oklahoma in Oklahoma, Natchez Community Hospital in Mississippi, Northwest Mississippi Regional Medical Center in Mississippi, Santa Rosa Medical Center in Florida, Southwest Regional Medical Center in Arkansas, and Summit Medical Center in Arkansas, which agreed to collectively pay $15 million;

Community Health Systems and its subsidiary Wesley Medical Center in Mississippi, which agreed to pay $210,000; and

North Texas Medical Center in Texas, which agreed to pay $480,000.

In October 2013, the United States resolved similar allegations with LifePoint Hospitals Inc. and two of its subsidiaries, PHC-Minden L.P., doing business as Minden Medical Center, and PHC-Cleveland Inc., doing business as Bolivar Medical Center, which collectively paid $4,672,469.80.

“This case demonstrates that the U.S. Attorney’s Office for the Eastern District of Arkansas will aggressively pursue civil health care fraud cases, where the integrity of the Medicare system has been undermined,” said U.S. Attorney Christopher R. Thyer of the Eastern District of Arkansas.  “Medical care providers who abuse Medicare hurt all taxpayers, and today’s announcement highlights our commitment to protecting our national health care system, as well as the Arkansans who depend on it.”

“Our agency is dedicated to investigating health care fraud schemes such as this, which divert scarce taxpayer funds meant to provide for legitimate patient care, including services for the often underserved mentally ill population,” said Special Agent in Charge Mike Fields of U.S. Department of Health and Human Services-Office of Inspector General (HHS-OIG).

The allegations resolved by today’s settlements arose from a lawsuit filed under the False Claims Act.  The act allows private individuals known as “relators” to sue on behalf of the United States and to share in the proceeds of any settlement or judgment that may result.  The relator in this case will receive $2,667,300.

These settlements were the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Eastern District of Arkansas and HHS’ Office of Audit Statistics and OIG.

These settlements illustrate 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 $24 billion through False Claims Act cases, with more than $15.3 billion of that amount recovered in cases involving fraud against federal health care programs.

The claims settled by these agreements are allegations only, and there has been no determination of liability.

HOME HEALTH CARE COMPANY TO PAY $1.1 MILLION TO RESOLVE ALLEGATIONS OF IMPROPERLY PAYING DOCTORS FOR REFERRALS

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, March 9, 2015

Florida Home Health Care Company Agrees to Pay $1.1 Million to Resolve False Claims Act Allegations

Recovery Home Care Inc., Recovery Home Care Services Inc. (collectively Recovery Home Care) and National Home Care Holdings LLC have agreed to pay $1.1 million to resolve allegations that the Recovery Home Care entities violated the False Claims Act by improperly paying doctors for referrals of home health care services provided to Medicare patients, the Department of Justice announced today.  The Recovery Home Care entities provide home health care services to Medicare beneficiaries and were purchased by National Home Care Holdings LLC in 2012, after the conduct addressed by the settlement occurred.

“Health care providers that attempt to profit by providing illegal inducements will be held accountable,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “We will continue to advocate for the appropriate use of Medicare funds and the proper care of our senior citizens.”

From 2009 through 2012, Recovery Home Care, headquartered in West Palm Beach, Florida, allegedly paid dozens of physicians thousands of dollars per month to perform patient chart reviews.  According to the government’s lawsuit, the physicians were over-compensated for any actual work they performed and, in reality, payments to the physicians were used to induce them to refer their patients to Recovery Home Care, in violation of the Anti-Kickback Statute and the Stark Law.

“Inducements of this kind are designed to improperly influence a physician’s independent medical judgment,” said U.S. Attorney A. Lee Bentley III of the Middle District of Florida.  “This lawsuit and today’s settlement attests to our office’s on-going commitment to safeguard federal health care program beneficiaries from the effects of such illegal conduct.”

The Anti-Kickback Statute and the Stark Law are intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives.  The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare.  The Stark Law forbids a home health care provider from billing Medicare for certain services referred by physicians who have a financial relationship with the entity.

The settlement partially resolves allegations made in a lawsuit filed in federal court in Tampa, Florida, by Gregory Simony, a former employee of Recovery Home Care.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The act also allows the government to intervene and take over the action, as it did in part in this case.  Simony will receive $198,000 of the recovered funds.  The government continues to litigate this case against Recovery Home Care’s previous owner, Mark Conklin.

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 $23.8 billion through False Claims Act cases, with more than $15.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Middle District of Florida and HHS-OIG.    

The case is captioned United States ex rel. Simony v. Recovery Home Care, et al., Case No. 8-12-cv-2495-T-36TBM (M.D. Fla.).  The claims resolved by the settlement are allegations only and there has been no determination of liability.

HEALTHCARE COMPANY TO PAY $350 MILLION TO SETTLE FALSE CLAIMS ACT ALLEGATIONS

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, October 22, 2014

DaVita to Pay $350 Million to Resolve Allegations of Illegal Kickbacks

DaVita Healthcare Partners, Inc., one of the leading providers of dialysis services in the United States, has agreed to pay $350 million to resolve claims that it violated the False Claims Act by paying kickbacks to induce the referral of patients to its dialysis clinics, the Justice Department announced today. DaVita is headquartered in Denver, Colorado and has dialysis clinics in 46 states and the District of Columbia.

The settlement today resolves allegations that, between March 1, 2005 and February 1, 2014, DaVita identified physicians or physician groups that had significant patient populations suffering renal disease and offered them lucrative opportunities to partner with DaVita by acquiring and/or selling an interest in dialysis clinics to which their patients would be referred for dialysis treatment. DaVita further ensured referrals of these patients to the clinics through a series of secondary agreements with the physicians, including  entering into agreements in which the physician agreed not to compete with the DaVita clinic and non-disparagement agreements that would have prevented the physicians from referring their patients to other dialysis providers.

“Health care providers should generate business by offering their patients superior quality services or more convenient options, not by entering into contractual agreements designed to induce physicians to provide referrals,” said Deputy Assistant Attorney General for the Justice Department’s Civil Division Jonathan F. Olin. “The Justice Department is committed to protecting the integrity of our healthcare system and ensuring that financial arrangements in the healthcare marketplace comply with the law.”

The government alleged that DaVita used a three part joint venture business model to induce patient referrals.  First, using information gathered from numerous sources, DaVita identified physicians or physician groups that had significant patient populations suffering renal disease within a specific geographic area. DaVita would then gather specific information about the physicians or physician group to determine if they would be a “winning practice.” In one transaction, a physician’s group was considered a “winning practice” because the physicians were “young and in debt.”  Based on this careful vetting process, DaVita knew and expected that many, if not most, of the physicians’ patients would be referred to the joint venture dialysis clinics.

Next, DaVita would offer the targeted physician or physician group a lucrative opportunity to enter into a joint venture involving DaVita’s acquisition of an interest in dialysis clinics owned by the physicians, and/or DaVita’s sale of an interest in its dialysis clinics to the physicians. To make the transaction financially attractive to potential physician partners, DaVita would manipulate the financial models used to value the transaction.  For example, to decrease the apparent value of clinics it was selling, DaVita would employ an assumption it referred to as the “HIPPER compression,” which was based on a speculative and arbitrary projection that future payments for dialysis treatments by commercial insurance companies would be cut by as much as half in future years. These manipulations resulted in physicians paying less for their interest in the joint ventures and realizing returns on investment which were extraordinarily high, with pre-tax annual returns exceeding 100 percent in some instances.

Last, DaVita ensured future patient referrals through a series of secondary agreements with their physician partners. These included paying the physicians to serve as medical directors of the joint venture clinics, and entering into agreements in which the physicians agreed not to compete with the clinic. The non-compete agreements were structured so that they bound all physicians in a practice group, even if some of the physicians were not part of the joint venture arrangements. These agreements also included provisions prohibiting the physician partners from inducing or advising a patient to seek treatment at a competing dialysis clinic. These agreements were of such importance to DaVita that it would not conclude a joint venture transaction without them.

The Government’s complaint identifies a joint venture with a physicians’ group in central Florida as one of several examples illustrating DaVita’s scheme to improperly induce patient referrals. The group had previously been in a joint venture arrangement involving dialysis clinics with Gambro, Inc., a dialysis company acquired by DaVita in 2005. Prior to the acquisition, Gambro had entered into a settlement with the United States to resolve alleged kickback allegations that, among other things, required Gambro to unwind its joint venture agreements. As a consequence, Gambro purchased the group’s interest in the joint venture clinics and agreed to a “carve-out” of the associated non-competition agreement which allowed the group to open its own dialysis clinic nearby, which it did. After acquiring Gambro, DaVita bought a majority position in the group’s newly established dialysis clinic, and sold a minority position in three DaVita-owned clinics. Despite the fact that each of the clinics involved were roughly comparable in terms of size and profits, DaVita agreed to pay $5,975,000 to acquire a 60 percent interest in the group’s clinic, while selling a 40 percent interest in the three clinics it owned for a total of $3,075,000. As part of this joint venture, the group agreed to enter into new non-compete agreements.

“This case involved a sophisticated scheme to compensate doctors illegally for referring patients to DaVita’s dialysis centers.   Federal law protects patients by making buying and selling patient referrals illegal, so as to ensure that the interest of the patient is the exclusive factor in the referral decision,” said U.S. Attorney John Walsh.  “When a company pays doctors and/or their practice groups for patient referrals, the company’s focus is not on the patient, but on the profit to be extracted from providing services to the patient.”

In conjunction with today’s announcement, the U.S. Attorney’s Office noted that after extensive review, it is closing its criminal investigation of two specific joint ventures.

As part of the settlement announced today, DaVita has also agreed to a Civil Forfeiture in the amount of $39 million based upon conduct related to two specific joint venture transactions entered into in Denver, Colorado.   Additionally, DaVita has entered into a Corporate Integrity Agreement with the Office of Counsel to the Inspector General of the Department of Health and Human Services which requires it to unwind some of its business arrangements and restructure others, and includes the appointment of an Independent Monitor to prospectively review DaVita’s arrangements with nephrologists and other health care providers for compliance with the Anti-Kickback Statute.

“Companies seeking to boost profits by paying physician kickbacks for patient referrals – as the government contended in this case – undermine impartial medical judgment at the expense of patients and taxpayers,” said Daniel R. Levinson, Inspector General for the U.S. Department of Health and Human Services.  “Expect significant settlements and our continued investigation of such wasteful business arrangements.”

The settlement resolves allegations originally brought in a lawsuit filed under the qui tam or whistleblower provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The suit was filed by David Barbetta, who was previously employed by DaVita as a Senior Financial Analyst in DaVita’s Mergers and Acquisitions Department. Mr. Barbetta’s share of the recovery has yet to be determined.          

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 $22.4 billion through False Claims Act cases, with more than $14.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The case was handled by the United States Attorney’s Office for the District of Colorado, the Civil Division of the United States Department of Justice, and the U.S. Department of Health and Human Services, Office of Inspector General.

The lawsuit is captioned United States ex rel. David Barbetta v. DaVita, Inc. et al., No. 09-cv-02175-WJM-KMT (D. Colo.).  The claims settled by this agreement are allegations only; there has been no determination of liability.

RELOCATION SERVICES COMPANY WILL PAY NEARLY $510,000 TO SETTLE OVERBILLING CHARGES

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, July 8, 2014

Virginia-Based Move Management Company Pays More Than $500,000 to Settle Overbilling Claims in Connection with Transportation of Personal Property in Relocating Federal Employees

RE/MAX Allegiance Relocation Services, a Virginia-based move management company, has agreed to pay the government $509,807 to resolve allegations that it violated the False Claims Act by overbilling for transportation services, the Department of Justice announced today.

 “Today’s settlement demonstrates our continuing vigilance to ensure that those doing business with the government do so legally and honestly and that taxpayer funds are not misused,” said Assistant Attorney General for the Civil Division Stuart F. Delery.  “Government contractors who seek to profit at the expense of taxpayers will be held accountable.”

The settlement relates to allegations involving contracts to transport personal property of federal employees relocating duty stations within the United States and between the United States and Canada.  The government alleged that the defendant charged for move management services that were not provided and overbilled agencies on other moves by charging inapplicable tariff rates.

“We encourage whistleblowers to provide us with useful information to help us combat all manners of fraud on the U.S. Government,” said U.S. Attorney for the Eastern District of Virginia Dana J. Boente.

“We will continue to investigate allegations of federal contractors fraudulently maximizing their profits at the expense of American taxpayers,” said U.S. General Services Administration Acting Inspector General Robert C. Erickson.
         
The settlement resolves allegations filed in a lawsuit by Michael Angel, a former employee of RE/MAX Allegiance Relocation Services, in federal court in Alexandria, Virginia.  The lawsuit was filed under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery.  The act also allows the government to intervene and take over the action, as it did in this case.  Angel will receive $86,667.

The settlement was the result of a coordinated effort by the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the Eastern District of Virginia, the General Services Administration Office of Inspector General, U.S. Department of Homeland Security Office of Inspector General, Department of Agriculture Office of Inspector General and NASA Office of Inspector General.    

The case is captioned United States ex rel. Michael Angel v. Franconia Real Estate Services, Inc., d/b/a RE/MAX Allegiance Relocation Services; No. 1:12cv764 (E.D.Va.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.

U.S. GOVERNMENT FILES COMPLAINT AGAINST CA INC. FOR ALLEGED FALSE CLAIMS ACT VIOLATIONS

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, May 29, 2014

Government Files Complaint Against CA Inc. for False Claims on GSA Contract

The government has filed a complaint against CA Inc. (CA) for violations of the False Claims Act in connection with a General Services Administration (GSA) contract, the Justice Department announced today.  CA manufactures and sells information technology products and is headquartered in Islandia, New York.

“We expect companies that do business with the government to comply with their contractual obligations,” said Assistant Attorney General of the Justice Department’s Civil Division Stuart F. Delery.   “As this case demonstrates, we will take action against those who seek to abuse the government’s procurement process.”      

“Too many federal contractors think they can get away with overcharging the government,” said U.S. Attorney for the District of Columbia Ronald C. Machen Jr.  “Our complaint alleges that CA broke its promise to give the government the same prices it was giving commercial customers.  We look forward to vigorously pressing these claims in court and recovering every dollar that is owed to the American taxpayer.”

In September 2002, CA entered into a GSA contract to provide software licenses, software maintenance, training and consulting services to various government agencies.  The government’s complaint alleges that, since at least 2006, CA knowingly overcharged the government for software licenses and maintenance in various ways.  For example, the government alleges that CA provided incomplete and inaccurate information to GSA contracting officers during negotiation of contract extensions.  At the time CA negotiated these extensions, applicable regulations and contract provisions required CA to fully and accurately disclose how it conducted business in the commercial marketplace, so GSA could use that information to negotiate a fair price for government customers.  The government also alleges that CA failed to truthfully update its discounting practices during the life of the GSA contract.  CA repeatedly certified to GSA that its discounting policies and practices had not changed, when in fact its discounts to commercial customers had increased.

The government’s complaint also alleges that, since 2002, CA failed to apply properly the contract’s price reduction clause.  The contract required CA to monitor discounts to certain commercial customers, compare these discounts to the discounts given to the government and, if the commercial discounts were higher, pass on those higher discounts to the government.  The government alleges that CA failed to make those comparisons or, when it did make such comparisons, failed to do so correctly, resulting in the government overpaying for CA’s information technology.

CA’s contract is a Multiple Award Schedule (MAS) contract.  Under the MAS program, GSA pre-negotiates prices and contract terms for subsequent orders by federal agencies.  Agencies that purchase under CA’s contract include the Department of Defense, the Department of Energy, the Department of Health and Human Services and the Department of Labor.

“Companies doing business with the federal government on a GSA schedule must disclose current, accurate, and complete commercial discounts, so that GSA can get the best prices on behalf of American taxpayers,” said GSA Acting Inspector General Robert C. Erickson.  “We will continue to investigate all allegations indicating that the federal government may have been overcharged by a contractor.”

Some of the allegations that are the subject of the government’s complaint were filed in a lawsuit originally brought by Dani Shemesh, a former employee of CA Israel Ltd., under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private parties to sue on behalf of the government and to share in any recovery.  The Act also authorizes the government to intervene and assume primary responsibility for litigating the lawsuit, as the government has done in this case.  The government had previously notified the court that it intended to join in Shemesh’s lawsuit and file its own complaint.

This investigation reflects a coordinated effort among the Commercial Litigation Branch of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Columbia and the GSA’s Office of Inspector General.

The qui tam case is captioned United States ex rel. Dani Shemesh v. CA Inc., No. 09-1600 (D.D.C.).  The complaint filed by the government contains allegations only; there has been no determination of liability.

TWO COMPANIES TO PAY $61 MILLION FOR NOT PROVIDING DISCOUNTS TO GOVERNMENT

FROM:  U.S. JUSTICE DEPARTMENT 
Wednesday, August 28, 2013

RPM International Inc. and Tremco Inc. Pay Nearly $61 Million for Failing to Provide Government Discounts Provided to Others
Companies Allegedly Submitted False Claims Under Defectively-priced Roofing Contracts

Ohio-based RPM International Inc. and its subsidiary, Tremco Inc., have paid $60.9 million to resolve allegations that Tremco filed false claims in connection with two multiple award schedule (MAS) contracts with the General Services Administration (GSA) for roofing supplies and services, the Justice Department announced today.  Tremco failed to provide the government with price discounts provided to non-federal government customers.   Tremco also allegedly marketed expensive materials to government purchasers without disclosing the availability of the same materials at lower cost that were manufactured and sold by the company.   Tremco is a manufacturer of construction products and services and is a subsidiary of the RPM Building Solutions Group.

“Companies that knowingly skirt the rules for securing government business undermine the integrity of the procurement process and create an unfair advantage against companies that are playing by the rules,” said Stuart F. Delery, Assistant Attorney General for the Justice Department’s Civil Division.   “We are committed to ensuring a level playing field and protecting taxpayer dollars.”

Allegedly, from January 2002 to March 2011, Tremco knowingly violated its contractual obligations to provide GSA with current, accurate and complete information about its commercial sales practices, to report changes in discounts to comparable commercial customers and to pass those discounts on to government customers.  As a result, the government allegedly paid more than it should have for Tremco’s services and products.   In addition, Tremco allegedly improperly marketed generic products as a superior line of the same product and used a defective adhesive formula in its roofing systems.

The GSA MAS program provides government 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 and ease of administration that comes from selling to hundreds of government purchasers under one contract, contractors must agree to disclose commercial pricing policies and practices.

GSA Inspector General Brian Miller said, “GSA OIG auditors and investigators worked diligently to make sure the taxpayers got the benefit of required price reductions, and received a fair price for the products and services purchased with taxpayer funds.”

“These companies are paying the price for trying to cheat the American taxpayer out of a fair deal,” said Ronald C. Machen Jr., U.S. Attorney for the District of Columbia.   “We thank this whistleblower for coming forward to reveal this wrongdoing.   Other contractors who are considering bilking the government should take heed:  false and fraudulent claims on the U.S. Treasury will not be tolerated.”

The settlement resolves a qui tam, or whistleblower, lawsuit filed on behalf of the government by former Tremco vice president Gregory Rudolph, who will receive more than $10.9 million as his share of the recovery in the case.  Under the whistleblower provisions of the False Claims Act, private citizens can bring lawsuits on behalf of the government and share in any recovery.   Rudolph’s lawsuit also includes allegations on behalf of several states under their false claims statutes.   The settlement with the federal government does not resolve the state actions.

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 District of Columbia and GSA’s Office of Inspector General to investigate the allegations and resolve the case.   The claims settled by this agreement are allegations only, and there has been no determination of liability.

LAWSUIT FILED AGAINST PHARMERCIA CORP. FOR VIOLATING FALSE CLAIMS ACT

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, August 9, 2013

United States Files Lawsuit Against PharMerica Corporation for Violations of the False Claims Act and the Controlled Substances Act
Government Alleges That Long-term Care Pharmacy Billed Medicare for Schedule II Controlled Substances That Were Dispensed Without a Valid Prescription
The United States has filed suit against PharMerica Corp. in the U.S. District Court for the Eastern District of Wisconsin, the Justice Department announced today.   The lawsuit alleges that PharMerica violated the False Claims Act and the Controlled Substances Act by dispensing controlled drugs without valid prescriptions and causing claims for illegally dispensed drugs to be submitted to the Medicare program.

PharMerica is a long-term care pharmacy that dispenses drugs to residents of long-term care facilities, including nursing homes and skilled nursing facilities. PharMerica services approximately 300,000 residents of long-term care facilities and fills approximately 40 million prescriptions annually.   Many of the prescriptions filled by PharMerica are for controlled substances listed in Schedule II under the Controlled Substances Act.   Schedule II drugs, such as oxycodone and fentanyl, can cause significant harm if used improperly and have a high potential for abuse.

“Pharmacies are prohibited by law from dispensing Schedule II narcotics, which have the highest potential for abuse of any prescription drug, without a valid prescription from a physician,” said Stuart Delery, Assistant Attorney General for the Civil Division of the Department of Justice.  “As we have done today, the Department of Justice will take action to protect the integrity of Federal health care program funds and hold those who violate the law accountable.”

The government’s complaint alleges that PharMerica routinely dispensed Schedule II controlled drugs in non-emergency situations without first obtaining a written prescription from a treating physician.   According to the complaint, PharMerica’s actions violated both the spirit and the letter of the Controlled Substances Act by enabling nursing home staff to order narcotics, and pharmacists to dispense narcotics, before confirming that a physician had made a medical judgment about whether these narcotics were necessary and should be used by the resident.   The complaint alleges that PharMerica knowingly caused the submission of false claims to Medicare for these improperly dispensed Schedule II drugs, in violation of the False Claims Act.

The lawsuit was initiated by former PharMerica employee Jennifer Denk who filed a complaint against PharMerica in July 2009.   The complaint was filed under the qui tam provisions of the False Claims Act, which permit parties, known as “relators,” to sue on behalf of the United States when they believe that defendants submitted false claims for government funds.   Under the False Claims Act, the government may intervene in the suit and recover three times its damages plus civil penalties.   Denk’s complaint was later consolidated with a subsequent complaint filed in May 2010 by Eric Beeders and Lesa Martino.

“ The complaint that we are filing today reflects the abiding commitment of the Justice Department to the qui tam process, encouraging people with information about alleged fraud and abuse to report it in a timely and effective manner,” said James L. Santelle, U.S. Attorney for the Eastern District of Wisconsin.  “The False Claims Act allegations in this case, which involve Medicare billings for the dispensing of Schedule II controlled substances absent valid prescriptions, are precisely the type of allegations that our office and the Civil Division examine carefully, investigate fully, and prosecute vigorously—to protect taxpayer monies and to promote the delivery of professional health care to all of our constituents.”

The investigation was conducted by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Eastern District of Wisconsin, the Drug Enforcement Administration (DEA), and the Office of Inspector General of the Department of Health and Human Services.

"When the most restrictive class of pharmaceutical controlled substances are dispensed by a pharmacy it is crucial to patient safety, as well as mandatory by federal law, to ensure that the patient's physician prescribed and intended for the drug to be administered. As alleged in this complaint, PharMerica did not perform that standard of patient care by failing to obtain a valid prescription prior to dispensing and is now being held accountable," stated Jack Riley, Special Agent in Charge of the DEA’s Chicago Field Division.

The government’s involvement in this case is part of the United States’ 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 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 this effort is the False Claims Act.   Since January 2009, the Justice Department has recovered a total of more than $14.8 billion through False Claims Act cases, with more than $10.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The lawsuit is captioned U.S. ex rel. Denk v. PharMerica Corporation, Case No. 09-cv-720.   The claims asserted in the complaint against PharMerica are allegations only, and there has been no determination of liability.

COMTRAK INTERNATIONAL INC. AGREES TO PAY $3.5 MILLION TO RESOLVE FALSE CLAIMS ACT ALLEGATIONS

FROM:  U.S. DEPARTMENT OF JUSTICE 
Friday, July 12, 2013
Contrack International Inc. Agrees to Pay $3.5 Million to Resolve False Claims Act Allegations

Contrack International Inc., a global design and construction company headquartered in McLean, Va., has agreed to pay $3.5 million to settle allegations that it submitted false claims in connection with U. S. Agency for International Development (USAID) contracts, the Justice Department announced today.

“Misrepresentations during contract negotiations undermine the integrity of the government procurement process,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division.  “The Justice Department will take action where contractors misrepresent their qualifications for government contracts and programs.”

The settlement concerns USAID-funded contracts for the construction of water and wastewater infrastructure projects in the Arab Republic of Egypt in the 1990s.  The bidders for these contracts were required to receive prequalification and, in some cases, establish that they were U. S. companies.  However, the contracts were ultimately performed by a joint venture partnership among Contrack; Washington Group International, Inc., a subsidiary of URS Corporation; and Misr Sons Development S.A.E. (Hassan Allam Sons), an Egyptian company.  The government filed suit under the False Claims Act and the Foreign Assistance Act alleging that the joint venture partners evaded the prequalification requirement by concealing the identity of the joint venture partners, which prevented USAID from accurately evaluating their qualifications.  As a result, the government alleged that Contrack and its partners received USAID-funded contracts for which they were ineligible.

“Proper public contracting, government efficiency and government accountability rely on complete information from contractors,” said Wendy J. Olson, U.S. Attorney for the District of Idaho.  “Along with our partners at USAID and the Department of Justice’s Commercial Litigation Branch, we will aggressively seek to recover improperly awarded taxpayer dollars.”

This settlement – which resolves only Contrack’s liability – was the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney’s Office for the District of Idaho; and the USAID Office of Inspector General.  The government is continuing to pursue its claims against the other two defendants in the suit.

The case is United States v. Washington Group International Inc. f/k/a/ Morrison Knudsen, Corporation; Contrack International, Inc.; and Misr Sons Development S.A.E. a/k/a Hassan Allam Sons, No. 04-555 (N.D. Idaho).  The claims resolved by this settlement are allegations only, and there has been no determination of liability.

C.R. BARD INC. WILL PAY OVER $48 MILLION TO RESOLVE ALLEGED FALSE CLAIMS ACT VIOLATIONS

FROM: U.S. DEPARTMENT OF JUSTICE
Monday, May 13, 2013
C.R. Bard Inc. to Pay U.S. $48.26 Million to Resolve False Claims Act Claims

C.R. Bard Inc. has agreed to pay the U nited States $48.26 million to resolve claims that it knowingly caused false claims to be submitted to the Medicare program for brachytherapy seeds used to treat prostate cancer in violation of the False Claims Act. Bard is a New Jersey based corporation that develops, manufacturers, and markets medical products used for a variety of conditions, including prostate cancer.

The settlement requires that Bard pay $48.26 million and it resolves claims relating to Bard’s sale of brachytherapy seeds, a form of radiation therapy, to hospitals. The United States alleged that from 1998 to 2006, Bard provided illegal remuneration to customers and physicians to induce them to purchase Bard’s seeds, in violation of the Anti-Kickback Statute. The illegal remuneration allegedly took the form of certain grants, guaranteed minimum rebates, conference fees, marketing assistance and/or free medical equipment that Bard paid to customers and/or physicians who used the seeds to perform treatment for prostate cancer. Hospitals ultimately submitted bills to Medicare for these seeds, which the government alleged were rendered false by Bard’s illegal kickback activity. The government alleged that Bard was liable under the False Claims Act for causing the submission of those false claims.

"This settlement is part of the United States’ on-going effort to comb at the payment of illegal kickbacks to health care providers," said Stuart F. Delery, Acting Assistant Attorney General for the Department of Justice’s Civil Division. "Such illegal payments subvert the medical marketplace and provide an unfair advantage to those who break the law."

"Illegal kickbacks in any form pervert our health care system, which is designed to insure that health care providers make decisions based solely on what is best for the patient," said U.S. Attorney for the Northern District of Georgia Sally Quillian Yates.

"We will continue to work with our various law enforcement partners in the pursuit of those who abuse publicly funded health care programs such as Medicare and Medicaid, through criminal prosecutions or civil settlements under the False Claims Act," stated Mark F. Giuliano, Special Agent in Charge, FBI Atlanta Field Office. "Such abuses as we’ve seen in this case will not be tolerated."

"Medicare beneficiaries should never have to question whether treatment recommendations are based on their doctors’ best financial interests rather than their best medical advice," said Daniel R. Levinson, Inspector General of the U.S. Department of Health and Human Services. "Companies paying these kickback bribes should expect aggressive investigation and prosecution."

The civil settlement resolves a lawsuit filed in the U.S. District Court for the Northern District of Georgia by Julie Darity, a former Bard manager for brachytherapy contracts administration under the qui tam, or whistleblower provisions, of the False Claims Act. United States ex rel. Darity v. C.R. Bard, Inc., et al., Civ. Action No. 1:06-cv-0208-SCJ (N.D. Ga.). Under the False Claims Act, private citizens may bring suit for false claims on behalf of the United States and share in any recovery obtained by the government. The former manager will receive $10,134,600 as her share of the civil settlement.

In addition, according to a non-prosecution agreement with the United States, Bard has agreed to pay an additional $2.2 million and to take numerous remedial steps, many of which the company identified and began to implement prior to the criminal investigation, to enhance its corporate compliance program to prevent similar illegal actions in the future. For example, Bard has agreed to refine its Code of Conduct and other written policies and procedures that promote Bard’s commitment to full compliance with all Federal health care program requirements and to develop an effective program to monitor medical education grants provided by Bard to ensure compliance with those requirements.

The resolutions announced today are 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 nearly $10.3 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 over $14.3 billion.

These settlements were the result of a coordinated effort by the U.S. Attorney’s Office for the Northern District of Georgia; the Department of Justice, Civil Division, Commercial Litigation Branch; the FBI and HHS-OIG, in investigating the allegations in this case.

MONTANA HOSPITALS TO PAY NEARLY $4 MILLION TO RESOLVE FALSE CLAIM ACT VIOLATIONS

FROM: U.S. DEPARTMENT OF JUSTICE

Wednesday, May 1, 2013
Montana Hospitals Agree to Pay $3.95 Million to Resolve Alleged False Claims Act and Stark Law Violations
Hospitals Allegedly Compensated Physicians for Improper Referrals

St. Vincent Healthcare, a hospital located in Billings, Mont., and Holy Rosary Healthcare, a hospital located in Miles City, Mont., have agreed to pay $3.95 million plus interest to resolve allegations that they violated the Stark Law and the False Claims Act by improperly providing incentive pay to physicians that made referrals to the hospitals, the Justice Department announced today.

The Stark Law forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital unless that relationship falls within certain exceptions. A prohibited financial relationship includes a hospital’s agreement to compensate a physician in a manner that takes into account the volume of the physician’s referrals or the revenue realized through those referrals.

The settlement announced today resolves allegations that the hospitals paid several physicians incentive compensation that took into account the value or volume of their referrals by improperly including certain designated health services in the formula for calculating physician incentive compensation. These issues were disclosed by the hospitals to the government.

"The resolution of this matter underscores our commitment to ensure that services reimbursable by federal health care programs are based on the best interests of patients rather than the personal financial interests of referring physicians," said Stuart F. Delery, Acting Assistant Attorney General for the Department’s Civil Division.

"Combating health care fraud is a top priority of the Department of Justice and the Montana U.S. Attorney’s Office. St. Vincent Healthcare and Holy Rosary Healthcare allegedly put their financial interest ahead of their responsibility to provide cost effective health care. The United States recovered $3,950,000 of taxpayers’ dollars from the hospitals. The U.S. Attorney’s Office is committed to enforcing the Stark Law and False Claims Act, as well as other health care laws and regulations against wrongdoers. This case also demonstrates how the Department of Justice will work with those health care providers who disclose their misconduct," said Michael W. Cotter, U.S. Attorney for the District of Montana.

"There is an expectation that corporations providing services to Medicare and Medicaid beneficiaries adhere to the provision of the Stark Law. I applaud St. Vincent Healthcare and Holy Rosary Healthcare for recognizing their potential liability in this matter and making a disclosure," said Gerry Roy, Special Agent in Charge for the Office of Inspector General of the U.S. Department of Health and Human Services region including Montana. "Working closely with our partners at the Department of Justice, we will vigilantly protect federal health care programs against violations of the Stark Law."

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 on 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 $10.3 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 over $14.2 billion.

HEALTHCARE COMPANY PAYS OUT $14.1 MILLION TO RESOLVE FALSE CLAIMS ACT ALLEGATIONS

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, May 3, 2013
Adventist Health Pays United States and State of California $14.1 Million to Resolve False Claims Act Allegations

Adventist Health System/West, dba Adventist Health, and its affiliated hospital White Memorial Medical Center have agreed to pay the United States and the state of California $14.1 million to settle claims that they violated the False Claims Act, the Justice Department announced today. Adventist Health is headquartered in Roseville, Calif., in the Eastern District of California, and operates 19 hospitals and over 150 clinics in California, Hawaii, Oregon and Washington. White Memorial Medical Center is a teaching hospital located in Los Angeles.

The settlement announced today resolves allegations that Adventist Health improperly compensated physicians who referred patients to the White Memorial facility by transferring assets, including medical and non-medical supplies and inventory, at less than fair market value. Additionally, Defendant White Memorial paid referring physicians compensation that the United States contended was above fair market value to provide teaching services at its family practice residency program. The United States alleged that these payments violated the Anti-Kickback Act and Stark Statute, and by extension, the False Claims Act. Approximately $11.5 million of the settlement will be paid to the U.S. Government, most of which will benefit the Medicare Trust Fund. The remaining $2.6 million will be paid to California’s Department of Health Care Services.

The Anti-Kickback Act prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by Medicare, Medicaid and/or other federally-funded programs. The Stark Statute prohibits a hospital from submitting claims for patient referrals made by a physician with whom the hospital has an improper financial arrangement. Both the Anti-Kickback Act and Stark Statute are intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives and is instead based on the best interests of the patient.

"Kickbacks and other unlawful financial arrangements cost taxpayer dollars and undermine the integrity of medical judgments," said Stuart F. Delery, the Acting Assistant Attorney General for the Civil Division. "The Department of Justice is committed to making sure that physician referrals do not involve payments made in violation of federal law."

"The setttement announced today underscores one of the key purposes of the Stark and Anti-Kickback laws – to ensure that the judgment exercised by health care providers is based on legitimate patient needs and is not influenced by illegal payments," said Benjamin B. Wagner, U.S. Attorney for the Eastern District of California.

"Payouts made by hospitals and clinics – as the government alleged in this case – raise substantial concerns about physician independence and objectivity," said Ivan Negroni, Special Agent in Charge of the Office of Inspector General, U.S. Department of Health and Human Services San Francisco region. "Taxpayers and vulnerable patients rightfully expect such payments to be investigated and pursued."

The settlement announced today resolves a lawsuit filed in the Eastern District of California under the qui tam, or whistleblower, provisions of the False Claims Act. These provisions allow private citizens to bring civil actions on behalf of the United States and share in any recovery. The whistleblowers in this case will collectively receive $2,839,219 of the recovery. The lawsuit is captioned U.S. ex rel. Hector Luque et al. v. Adventist Health et al. No. 2:08CV1271 (E.D. Cal.).

As part of the settlement, White Memorial has entered into a comprehensive five-year Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services to ensure its continued compliance with federal health care benefit program requirements.

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 $10.3 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 over $14.2 billion.

This case was handled by the United States Attorney’s Office for the Eastern District of California, the Justice Department’s Civil Division, and the Office of Inspector General of the Department of Health and Human Services. The claims settled by this agreement are allegations only, and there has been no determination of liability.

U.S. GOVERNEMENT RADIOACTIVE WASTE CONTRACTOR ALLEGEDLY ENGAGED IN TIME CARD FRAUD

FROM: U.S. DEPARTMENT OF JUSTICE
Friday, September 28, 2012

U.S. Government Intervenes in False Claims Suit Against CH2M Hill Hanford Group

Colorado-based Company Allegedly Engaged in Widespread Time Card Fraud At Department of Energy Nuclear Site

The government has intervened in a lawsuit against CH2M Hill Hanford Group Inc. (CH2M Hill) in the U.S. District Court for the Eastern District of Washington, the Department of Justice announced today. CH2M Hill is a subsidiary of CH2M Hill Companies Ltd., a Colorado-based engineering and construction services company.

Between 1999 and 2008, CH2M Hill was a U.S. Department of Energy prime contractor responsible for the management and cleanup of over 170 underground storage tanks containing mixed radioactive and hazardous waste at the Department of Energy’s Hanford Nuclear Site in southeastern Washington. The lawsuit filed by Mr. Schroeder alleges that numerous CH2M Hill hourly employees regularly and substantially overstated the number of hours that they worked. The complaint also alleges that CH2M Hill management knowingly condoned this practice and submitted inflated claims to the Department of Energy that included the fraudulently claimed hours.

Eight former CH2M Hill employees, including Mr. Schroeder, have pleaded guilty to felony charges stemming from the time card fraud. The lawsuit was originally filed under the False Claims Act by Carl Schroeder, a former employee of CH2M Hill.

The False Claims Act authorizes private parties to sue on behalf of the United States and authorizes the United States to intervene in such a suit and take over responsibility for litigating it. Although the act generally authorizes the whistleblower who initiated the suit to share in any recovery, it also bars recovery by any whistleblower who is convicted of criminal conduct for his role in the fraud/ The United States has notified the court that it expects to file a motion to dismiss Mr. Schroeder from the action on the basis of is criminal conduct. Mr. Schroder’s lawsuit is captioned U.S. ex rel. Schroeder v. CH2M Hill, 09-cv-5038.

The claims asserted in this case are allegations only, and there has been no determination of liability. The case is being handled by the Civil Division of the Department of Justice and the U.S. Attorney’s Office for the Eastern District of Washington, with the assistance of the Department of Energy Office of Inspector General.

CONNECTICUT BASED CO. RESOLVES ALLEGED FALSE CLAIMS ACT REGARDING PURCHASES OF NAT. GAS FROM U.S. GOVERNMENT

FROM:  U.S. DEPARTMENT OF JUSTICE
Tuesday, July 3, 2012
Louis Dreyfus Energy Services Pays $4 Million to Resolve Allegations That It Violated the False Claims ActConnecticut-based Company Allegedly Failed to Pay Money Owed on Natural Gas Acquired from Government

Louis Dreyfus Energy Services has paid the United States $4,084,000 to settle allegations that it violated the False Claims Act by failing to pay money owed on natural gas acquired from the Department of the Interior, the Justice Department announced today.   Louis Dreyfus, which is based in Connecticut, is an energy company that is involved in merchandising, transportation, trading and storage of natural gas.

The settlement agreement resolves contentions by the United States that from December 2004 to March 2008, Louis Dreyfus Energy Services made false claims or misleading statements to the Department of the Interior involving contracts to buy natural gas produced from federal oil and gas leases in the Gulf of Mexico.   Starting in 2004, Louis Dreyfus agreed to pay the Interior Department for natural gas based on a price associated with the delivery of the gas at a fixed point along a natural gas pipeline. After its contracts with the Interior Department were executed, the company requested and received a discount in the price it would pay the Interior Department for the natural gas obtained under the contracts.   The United States contends that this price discount applied only when there was a complete or near-complete constraint in the natural gas pipeline such that Louis Dreyfus was unable to transport natural gas along the pipeline.   However, the energy services company claimed and obtained the price discounts even on days when it was able to ship natural gas along the pipeline.   Thus, the United States contends that Louis Dreyfus was not entitled to the price discounts that it sought and received from the Department of the Interior.

“Companies that deal with the United States have to live up to their commitments, whether they relate to the use of the nation’s natural resources or to other government programs or benefits,” said Stuart F. Delery, Acting Assistant Attorney General for the Justice Department’s Civil Division.   “The American taxpayers will not tolerate those that claim price discounts from the United States to which they are not entitled.”
“Oil and natural gas companies must understand that using false or misleading claims to get a better price is unfair and unlawful.   For companies that make such claims, there are significant consequences,” said John Walsh, U.S. Attorney for the District of Colorado.  

“This settlement is a message to industry and the public that federal government agencies, working together, are focused on the promise that the American taxpayers will get their fair share of all monies owed from public resources,” said Mary L. Kendall, Acting Inspector General of the Department of the Interior.

“Energy companies have a responsibility to respect the public trust in their efforts to help fuel this nation’s energy needs,” said Paul Mussenden, the Department of the Interior’s Deputy Assistant Secretary for Natural Resources Revenue Management.   “It is imperative they honor that trust and pay the appropriate revenues that are due to American taxpayers for these precious natural resources.”   Mussenden added that “ONRR will remain diligent in its efforts to collect every dollar due to the public and the U.S. Government.”

In addition to resolving the company’s False Claims Act liability, the settlement today also resolves certain administrative claims between the Interior Department’s Office of Natural Resources Revenue and Louis Dreyfus.

The investigation and settlement of this matter were jointly handled by the U.S. Attorney for the District of Colorado, the Justice Department’s Civil Division, the Office of Natural Resources Revenue, the Department of the Interior’s Office of the Solicitor and the Energy Investigations Unit of the Department of the Interior’s Office of Inspector General.   The claims settled by this agreement are allegations only.   There has been no determination of liability.

JUSTICE DEPARTMENT OFFICIAL COMMENTS ON $3 BILLION GSK SETTLEMENT

FROM:  U.S. DEPARTMENT OF JUSTICE
Acting Assistant Attorney General for the Civil Division Stuart F. Delery Speaks at the GSK Press Conference Washington, D.C. ~ Monday, July 2, 2012
Thank you, Bill, for that introduction.

As Deputy Attorney General Cole mentioned, today’s $3 billion resolution resolves several major investi gations of the company.  Specifically, t he global settlement resolves allegations relating to three major issues:

First, GSK will pay $1.8 billion to resolve criminal and civil liability related to off-label marketing.   This includes $757 million in criminal fines and forfeitures for misbranding the drugs Paxil and Wellbutrin, and $1.043 billion under the False Claims Act to resolve civil allegations regarding off-label promotion and the payment of kickbacks involving these and other drugs.

The second investigation resolved today relates to the diabetes drug Avandia.   GSK will pay a $243 million criminal fine for failing to report required safety data to FDA.   In the related civil settlement, GSK will pay $657 million to resolve allegations about representations it made concerning Avandia’s safety and efficacy.

The third investigation involves allegations of false best prices and the underpaying of rebates owed under the Medicaid Drug Rebate Program. GSK will pay $300 million to resolve civil liability under the False Claims Act related to these allegations.

In a moment, U.S. Attorney Carmen Ortiz will describe the conduct revealed by our investigations.   But today’s resolution is significant not just because GSK’s conduct was egregious or because it is the largest health care fraud settlement in the Department’s history.
 
Health care fraud is an epidemic that touches every aspect of our lives. And yet, for far too long, we have heard that the pharmaceutical industry views these settlements merely as the cost of doing business.   That is why this Administration is committed to using every available tool to defeat health care fraud.

As we did with Abbott Laboratories a few weeks ago, today’s resolution seeks not only to punish wrongdoing and recover taxpayer dollars, but to ensure GSK’s future compliance with the law.  The Corporate Integrity Agreement, which Department of Health and Human Services Inspector General Dan Levinson will describe in a moment, exemplifies best practices in compliance.  Both that agreement and the plea agreement require GSK to maintain certain compliance policies that the company has recently put into effect.

In addition, for the next five years, the plea agreement requires GSK to report to the Department of Justice any probable violations of the Federal Food, Drug, and Cosmetic Act concerning promotional activities and reporting obligations.   And GSK’s U.S. President and Board of Directors must personally certify the company’s compliance with the law every year.
And for every day that one of these reports or certifications is late, or one of these policies is not maintained, GSK agrees to pay the government $20,000 in stipulated damages.

The changes we are requiring of GSK and others may not end health care fraud, but they will go a long way to bringing about much-needed change in the way the pharmaceutical industry conducts business.   And because we know that many companies already play by the rules, these changes will help level the playing field, reduce the incentives to cut corners, and make clear that good compliance is also good business.

I want to echo the Deputy Attorney General’s comments about all of the many public servants in Boston, Colorado and across the country that contributed to this matter.   In particular, I want to recognize the dedicated attorneys, investigators and support staff of the Civil Division – here in Washington – who are the backbone of all of our health care fraud enforcement efforts.

Now, it’s my pleasure to introduce Carmen Ortiz, the U.S. Attorney for the District of Massachusetts.

DEFENSE CONTRACTOR PAYS MILLIONS TO RESOLVE FALSE CLAIMS ACT LAWSUIT

FROM:  U.S. DEPARTMENT OF JUSTICE
Friday, June 1, 2012
Virginia-based Defense Contractor Calnet to Pay $18.1 Million to Resolve False Claims Act Lawsuit
Calnet Inc. has agreed to pay the United States $18.1 million to resolve allegations that the company submitted false claims to the Department of Defense, the Justice Department announced today.  Calnet Inc., an intelligence analysis, information technology and language services company, is headquartered in Reston, Virginia.

The settlement with Calnet relates to three contracts under which the company supported the United States? war effort by providing translation and linguist services at Guantanamo Bay and several other facilities beginning in 2005.  Calnet was a subcontractor on one of the contracts, and the prime contractor on the other two contracts.  The United States alleged that Calnet overstated its provisional indirect or overhead rates on each of these contracts and thus submitted inflated claims for payment to the United States.

?Contractors are expected to comply with their statutory obligations and act in good faith when dealing with the United States government,? said Stuart F. Delery, Acting Assistant Attorney General for the Department of Justice?s Civil Division.  ?We will not tolerate false statements and failure to disclose information that is important to the government?s contracting processes.?

?We?re using every tool available to assure the integrity of government contracting,? said U.S. Attorney MacBride. ?This is one of several cases we have pursued to protect against procurement fraud in the Eastern District of Virginia.?

The settlement with Calnet resolves a lawsuit filed in the U.S. District Court for the Eastern District of Virginia under the False Claims Act by former Calnet employee, Kimthy Chao.  Under the False Claims Act, private citizens can bring suit on behalf of the United States and share in any recovery obtained by the government.  Mr. Chao?s share of the Calnet settlement will be $2,669,724.

This settlement was the result of a coordinated effort by the Department of Justice, Civil Division, Commercial Litigation Branch; the U.S. Attorney?s Office for the Eastern District of Virginia; the Defense Criminal Investigative Service and the Defense Contract Audit Agency.  The claims settled by this agreement are allegations only and there has been no determination of liability.

COMPANY SETTLES WITH JUSTICE OVER SELLING CERTAIN FOREIGN PRODUCTS TO AGENCIES

FROM:  U.S. DEPARTMENT OF JUSTICE
Tuesday, May 8, 2012
Direct Resource Inc. Agrees to Pay $450,000 to Settle Allegations of Selling Foreign Products to Federal AgenciesColumbus, Ohio Firm Allegedly Sold Products from Country That Does Not Have Reciprocal Trade Agreement with U.s.

Direct Resource Inc. has agreed to pay the government $450,000 to resolve allegations that the company falsely claimed payment in violation of the Trade Agreements Act (TAA), which prohibits the sale of products to federal agencies from countries that do not have a reciprocal trade agreement with the United States, the Justice Department announced today.    The Columbus, Ohio, company allegedly knowingly sold products from China, a country that does not have such an agreement with the United States.  

Direct Resource sells a variety of products to U.S. agencies, including office supplies. The General Services Administration (GSA) contracts at issue require that all products sold to the U.S. government be manufactured in one of a list of designated countries deemed to trade fairly with the United States.    
     
“It is central to the mission of the Department of Justice to protect the federal procurement process from improper charges and false claims,” said Stuart F. Delery, Acting Assistant Attorney General for the Department of Justice’s Civil Division. “Contractors who undermine U.S. trade interests will be held accountable for their actions.”

The allegations regarding the company arose from a whistleblower lawsuit filed in a federal court in the District of Columbia under the qui tam, or whistleblower, provisions of the False Claims Act. Those provisions allow private individuals known as “relators” to sue on behalf of the United States and to share in the proceeds of any settlement or judgment if the suit is successful. The relator, Louis Scutellaro, in this case will receive $67,500 of the total recovery as a statutory award.

“American businesses must get a fair shake in the government contracting process,” said Ronald C. Machen Jr., U.S. Attorney for the District of Columbia. “When contractors violate the Trade Agreements Act, we will step in to hold them accountable. This settlement makes clear the depth of our commitment to ensuring that government contractors play by the rules.”  
         
“Passing off unauthorized foreign products to GSA contract users cheats them out of the products they actually contracted for,” declared GSA Inspector General Brian Miller.

The claims settled by this agreement are allegations only, and there has been no determination of liability.    The matter was investigated by GSA’s Office of the Inspector General, the U.S. Attorney’s Office for the District of Columbia and the Justice Department’s Civil Division.

ATK LAUNCH SYSTEMS INC. SETTLES FALSE CLAIMS CASE FOR ALMOST $37 MILLION

FROM:  U.S. JUSTICE DEPARTMENT
Monday, April 23, 2012
Atk Launch Systems Inc. Settles False Claims Product Substitution Case for Nearly $37 Million Allegedly Delivered Unsafe Illuminating Para-flares Under Department of Defense Contracts

ATK Launch Systems Inc. has agreed to a $36,967,160 settlement with the United States to resolve allegations that ATK sold dangerous and defective illumination flares to the Army and the Air Force.   According to the government’s allegations, from 2000 to 2006, ATK delivered LUU-2 and LUU-19 illuminating para-flares to the Defense Department.   These flares, which burn in excess of 3,000 degrees Fahrenheit for over five minutes, are used for nighttime combat, covert and search and rescue operations and have been used extensively by American forces in Iraq and Afghanistan in the global war on terror.  The government alleged that the flares delivered by ATK were incapable of withstanding a 10-foot drop test without exploding or igniting, as required by specifications, and that ATK was aware of this when it submitted claims for payment.

ATK has agreed to pay the United States $21 million in cash and provide necessary in-kind services worth $15,967,160 to fix the 76,000 unsafe para-flares remaining in the government’s inventory.   The settlement resolves a False Claims Act suit filed in the U.S. District Court for the District of Utah.

The lawsuit was initially filed by an ATK employee under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private individuals, called “relators” to bring lawsuits on behalf of the United States and receiv e a portion of the proceeds of a settlement or judgment awarded against a defendant.

“Our men and women in combat deserve equipment that meets critical safety and performance requirements,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division. “This case demonstrates that the Department of Justice will pursue cases where contractors knowingly provide defective equipment that puts the safety of American military service members at risk.”

“This settlement demonstrates our commitment to aggressively go after contractors who recklessly disregard and deliberately ignore critical safety defects in munitions used by America’s uniformed fighting men and women on the front lines of the war on terror,” said David B. Barlow, U.S. Attorney for the District of Utah.  “This office fully supported the federal investigators in their efforts to uncover these fraudulent claims and recover the ill-gotten gains for the American taxpayers.”

The investigation team, which was led by the Defense Criminal Investigative Service, included the Air Force Office of Special Investigation, the Navy Naval Criminal Investigative Service, the Army Criminal Investigative Command and auditors from the Defense Contract Audit Agency and the Defense Contract Management Agency.  Additional technical support was provided by the Army Research Laboratory in Aberdeen, Md., the Army Aviation and Missile Command in Huntsville, Ala., the Naval Sea Systems Command at Crane, Ind. and Portsmouth, R.I., the Defense Standardization Program Office at Fort Belvoir, Va., the Air Force Materiel Command at Wright Patterson Air Force Base, Ohio and Hill Air Force Base, Utah, and the Army Materiel Command at Rock Island Arsenal, Ill.