SHIPPING COMPANY WILL PAY $2.5 MILLION FOR OIL DISCHARGE

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, April 8, 2016

Norwegian Shipping Company Sentenced in Alabama to Pay $2.5 Million for Illegally Discharging Oil into the Ocean

The Norwegian shipping company DSD Shipping (DSD) was sentenced to pay a total corporate penalty of $2.5 million as a result of its convictions in Mobile, Alabama, for obstructing justice, violating the Act to Prevent Pollution from Ships (APPS), tampering with witnesses and conspiring to commit these offenses.  The company was ordered to pay $500,000 of the penalty to the Dauphin Island Sea Lab Foundation to fund marine research and enhance coastal habitats in the Gulf of Mexico and Mobile Bay.

In addition, DSD was placed on a three year term of probation and was ordered to implement an environmental compliance plan to ensure the company’s vessels obeyed domestic and international environmental regulations in the future.  The sentence was announced by Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division and U.S. Attorney Kenyen R. Brown for the Southern District of Alabama.

The operation of commercial marine vessels generates large quantities of waste oil, oil-contaminated waste water and garbage.  International and U.S. law forbid the discharge of waste oil and garbage into the ocean and require that these vessels use pollution prevention equipment, known as an oily-water separator, to prevent the discharge of oil-contaminated waste water.  Should any overboard discharges occur, they must be documented in either an oil record book or a garbage record book, logs that are regularly inspected by the U.S. Coast Guard.

The evidence demonstrated at trial that DSD operated the M/T Stavanger Blossom, a 56,000 gross ton crude oil tanker, from 2010 to 2014 without an operable oily-water separator as required by law.  On Jan. 29, 2010, an internal corporate memorandum written by a vessel engineer warned DSD that the pollution prevention equipment did not work.  The memo further warned that if the problem was not addressed, “some day, it might end up that someone is getting caught for polluting.”  However, rather than repair or replace the oily-water separator, DSD operated the vessel illegally for the next 57 months before the conduct was identified by U.S. Coast Guard inspectors in November 2014.  As the testimony at trial revealed, DSD illegally discharged approximately 20,000 gallons of oil-contaminated waste water and plastic bags containing 270 gallons of sludge into the ocean during the last two-and-a-half months of the vessel’s operation.

The evidence also established that DSD lied about these activities by maintaining fictitious record books aboard the vessel.  These records omitted the illegal discharges of oil and garbage and falsely claimed that pollution prevention equipment was used when it was not.  Further, when the U.S. Coast Guard examined the ship, DSD’s senior ship officers lied about the discharges and ordered their subordinates to do the same.

In court documents filed prior to sentencing, prosecutors informed the court that despite convictions for eight felony offenses, DSD continued to deny wrongdoing in Norwegian press accounts.  Prosecutors also noted that previous deficiencies in the operation of pollution prevention equipment had been identified in other DSD vessels while they were in international ports.

Three senior engineering officers employed by DSD to operate the ship were also sentenced.  Defendant Bo Gao, chief engineer of the vessel, and Xiaobing Chen, second engineer of the vessel, were both sentenced to six months imprisonment as a result of their conduct.  Defendant Xin Zhong, fourth engineer of the vessel, was sentenced to two months imprisonment.  All three also face the loss of their marine engineering license and exclusion from employment in the merchant marine.  A fourth DSD employee, Daniel Paul Dancu, pleaded guilty in October 2015, and will be sentenced on April 11, 2016.

“We will continue to aggressively prosecute and hold accountable those shipping companies who flout the laws that protect our oceans and coastal waterways from harmful vessel pollution and waste,” said Assistant Attorney General Cruden.  “It is fitting that a portion of this penalty will go towards repairing and protecting the Gulf coastal environment that is threatened by these illegal discharges.  This egregious abuse of the seas we share as a nation and an international community must stop.”

“We are very pleased with the fines and custody sentences imposed by the court in the case today,” announced U.S. Attorney Brown. “The fine and probation imposed against DSD, and the custody sentence imposed on the engineering officers reflect the seriousness of the offenses committed against the United States and the environment.  The U.S. Attorney’s Office will continue to investigate and prosecute environmental crimes.  It is incumbent upon all individuals and corporations to protect our environment and the resources along the Northern Gulf of Mexico.”

“The Coast Guard will not tolerate the pollution of our marine environment,” said Rear Admiral Dave Callahan for the Eighth Coast Guard District Commander.  “The individuals committing environmental crimes are putting our natural resources at risk and they must be held accountable.  I am thankful for the hard work and dedication that Coast Guard Sector Mobile, the Coast Guard Investigative Service, the Department of Justice, and the Environmental Protection Agency have put into the investigation and prosecution of this case.”

“The Coast Guard Investigative Service is deeply committed to protecting our nation’s waters and ensuring that those within the commercial shipping industry are good stewards of the marine environment,” said Director Michael Berkow for the Coast Guard Investigative Service.  “Sadly, although entirely preventable, pollution from vessels remains all too common. We hope the sentences in this case deter others from committing similar conduct.  We are grateful to our investigative partners for their assistance in the prosecution of this case.”

“When a company fails to comply with our nation’s environmental laws, it can have a devastating effect on both public health and wildlife,” said Special Agent in Charge Andy Castro of EPA’s criminal enforcement program in Alabama.  “The defendants knowingly discharged oily waste from a vessel into the open water and then tried to cover up their crimes by falsifying entries in the vessel’s log books.  This successful prosecution is another example of the effective partnership between the Department of Justice, the Coast Guard and EPA to protect the environment and our natural resources.”

This case was investigated by the U.S. Coast Guard Sector Mobile, U.S. Coast Guard District Eight, the Coast Guard Investigative Service, and the EPA’s Criminal Investigations Division.  Assistant U.S. Attorney Michael D. Anderson, with the U.S. Attorney’s Office for the Southern District of Alabama, and Trial Attorney Shane N. Waller, with the Department of Justice’s Environmental Crimes Section, prosecuted the case.

AG LYNCH'S STATEMENT ON BP DEEPWATER HORIZON OIL SPILL AGREEMENT

FROM:  U.S. JUSTICE  DEPARTMENT A

Monday, April 4, 2016

Attorney General Loretta E. Lynch Statement on Agreement with BP to Settle for the Deepwater Horizon Oil Spill

Following the order today by U.S. District Judge Carl J. Barbier to enter the consent decree settling United States of America v. BP Exploration & Production Inc., et al., Attorney General Loretta E. Lynch released the following statement:

“The approval of this agreement will open a final, hopeful chapter in the six-year story of the Deepwater Horizon tragedy,” said Attorney General Loretta Lynch.  “Today’s action holds BP accountable with the largest environmental penalty of all time while launching one of the most extensive environmental restoration efforts ever undertaken.  I want to thank everyone who made this outcome possible, including my predecessor, Attorney General Eric Holder, and the federal agencies and states that developed the comprehensive restoration plan.  The Department of Justice will continue to stand with the people of the Gulf as they seek to rebuild and protect the marine life, coastal systems, and beautiful beaches that have made the region a treasured natural resource.”

SLEEP APNEA MASK COMPANY RESOLVES FALSE CLAIMS CASE FOR $34.8 MILLION

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, March 23, 2016

Respironics to Pay $34.8 Million for Allegedly Causing False Claims to Medicare, Medicaid and Tricare Related to the Sale of Masks Designed to Treat Sleep Apnea

Respironics Inc., based in Murrysville, Pennsylvania, has agreed to pay $34.8 million to resolve alleged False Claims Act violations for paying kickbacks in the form of free call center services to durable medical equipment (DME) suppliers that bought its masks for patients with sleep apnea, the Department of Justice announced today.  

“The payment of illegal remuneration in any form to induce patient referrals threatens public confidence in the health care system,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Americans deserve to know that when they are prescribed a device to treat a serious health care problem, the supplier’s judgment has not been compromised by illegal payments from equipment manufacturers.

The Anti-Kickback Statute prohibits the knowing and willful payment of any remuneration to induce the referral of services or items that are paid for by a federal healthcare program, such as Medicare, Medicaid or TRICARE.  Claims submitted to these programs in violation of the Anti-Kickback Statute are also false claims under the False Claims Act.

The United States alleged that Respironics violated the Anti-Kickback Statute and the False Claims Act by providing free services to DME suppliers to induce them to purchase Respironics masks that treat sleep apnea.  Respironics allegedly provided DME companies with call center services to meet their patients’ resupply needs at no charge as long as the patients were using masks that Respironics manufactured; otherwise, the DME companies would have to pay a monthly fee based on the number of patients who used masks manufactured by a competitor of Respironics.  The government alleged that the conduct began in April 2012 and continued until November 2015.

“This office has made a substantial commitment to combating fraud,” said U.S. Attorney Bill Nettles of the District of South Carolina. “Our commitment has made this district one of the leaders on behalf of whistleblowers.  We hope that those who commit fraud will recognize that it is our goal to make the consequences more than just the cost of doing business.”

Respironics will pay roughly $34.14 million to the federal government and roughly $660,000 to various state governments based on their participation in the Medicaid program.

The settlement resolves a lawsuit originally brought by Dr. Gibran Ameer, who has worked for different DME companies, under the qui tam provisions of the False Claims Act.  The Act permits private citizens with knowledge of fraud against the government to bring a lawsuit on behalf of the United States and to share in any recovery.   Under the civil settlement announced today, Dr. Ameer will receive $5.38 million out of the federal share of the recovery.

“Medical equipment manufacturers that boost profits by providing kickbacks to suppliers will be held accountable for their improper conduct,” said Special Agent in Charge Derrick L. Jackson of the Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “We will continue to investigate such business arrangements, which threaten the integrity of federal health care programs.”

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 $27.4 billion through False Claims Act cases, with more than $17.4 billion of that amount recovered in cases involving fraud against federal health care programs.

This settlement was the result of a coordinated effort by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the District of South Carolina, and HHS Office of Counsel to the Inspector General and Office of Investigations and the National Association of Medicaid Fraud Control Units.

The lawsuit is captioned United States et al. ex rel. Dr. Gibran Ameer v. Philips Electronics North America, et al., Case No. 2:14-cv-2077-PMD (D.S.C.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability.

DOJ ANNOUNCES ENFORCEMENT ACTION AGAINST FOOD MANUFACTURER FOR ALLEGEDLY DISTRIBUTING ADULTERATED FOOD PRODUCTS

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, March 21, 2016

United States Files Enforcement Action Against Kansas Food Manufacturer and Company’s Managers to Stop Distribution of Adulterated Food Products

A civil complaint was filed today in the U.S. District Court for Kansas against Native American Enterprises LLC, of Wichita, Kansas; its Vice President and part-owner, William N. McGreevy and is production manager, Robert C. Conner, to stop the distribution of adulterated food, the Department of Justice announced today.

Native American Enterprises LLC (NAE), manufactures and distributes food, namely ready-to-eat (RTE) refried beans and sauces.  The complaint alleges that the company’s RTE refried beans and sauces are adulterated in that they have been prepared, packed and/or held under insanitary conditions whereby the food may have become contaminated with filth or have been rendered injurious to health.  According to the complaint, the insanitary conditions include the presence of Listeria Monocytogene (L. mono) in NAE’s facility and insanitary employee practices.  The department filed the complaint at the request of the U.S. Food and Drug Administration (FDA).

“Insanitary conditions at food processing facilities can present significant risks to consumers and food manufacturers must take steps to minimize those risks,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will continue to work aggressively with the FDA to combat and deter conduct that leads to the distribution of adulterated food to consumers.”

According to the complaint, FDA inspected NAE’s facility, located at 230 N. West Street in Wichita, in August 2015 and collected environmental samples and observed numerous insanitary practices, including the defendants’ failure to manufacture and package food under conditions necessary to minimize microorganism growth, take necessary precautions to protect against contamination and maintain buildings in good repair.  Specifically, according to the complaint, FDA observed rain water leaking through the roof in the packaging room, directly above where NAE employees packaged RTE refried beans.  In addition, FDA observed cracks and holes in the walls and floor junctures that allow water and debris to collect, prohibit adequate cleaning and could harbor Listeria, according to the complaint.

FDA inspected NAE’s facility twice in 2014.  As alleged in the complaint, FDA collected environmental samples during RTE refried bean production during each of the 2014 inspections and found Listeria in the facility.  In addition, as alleged in the complaint, FDA also observed a failure to maintain equipment in an acceptable condition through appropriate cleaning and sanitizing.

As alleged in the complaint, L. mono thrives in moist environments, such as food-manufacturing environments.  Unless proper precautions are taken, L. mono may become established and grow, and it is difficult to eliminate once it becomes established in a food-manufacturing environment.  It is capable of surviving and growing at refrigerated temperatures and in high-salt environments.  The complaint alleges that L. mono is a significant public health risk in RTE refried beans and sauces.

The government is represented by Trial Attorney Heide L. Herrmann of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorney Emily Metzger of the U.S. Attorney’s Office for the District of Kansas, with the assistance of Associate Chief Counsel for Enforcement Sonia W. Nath of the Food and Drug Division, Office of General Counsel, Department of Health and Human Services.

A complaint is merely a set of allegations that, if the case were to proceed to trial, the government would need to prove by a preponderance of the evidence.

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.

U.S. SUES TELEMARKETER TO HALT ILLEGAL ROBOCALLS

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, March 10, 2016

United States Files Suit Against California Telemarketer to Halt Unlawful Robocalls Promoting Solar Panel Sales

The Department of Justice filed a civil complaint in the U.S. District Court for the Central District of California, to halt a telemarketing campaign that allegedly resulted in over a million illegal phone calls to consumers who had placed their phone numbers on the Do Not Call Registry, the Department of Justice announced today.

The complaint charges that KFJ Marketing, Sunlight Solar Leads LLC, Go Green Education and the owner of those companies, Francisco Salvat, violated the Telemarketing Sales Rule by operating a telemarketing campaign that delivered pre-recorded “robocall” messages warning consumers about a purported looming “14 percent increase” in their energy bill. The calls invited consumers to “press one” to lower their electric bill. Consumers who did were connected with one of the defendants’ employees, who asked about the consumer’s interest in solar panels.

If the consumer expressed interest in solar panels, the telemarketer scheduled an appointment with a private solar installation company and sold the consumer’s information to that company as a customer lead. When consumers asked the defendants not to call them again, the complaint alleges their requests were often ignored.

The complaint alleges that the defendants violated federal law by placing 1.3 million calls to phone numbers on the Do Not Call Registry and by failing to transmit accurate caller ID information.  

“Federal law protects the privacy interests of American consumers by prohibiting calls made to numbers on the national Do Not Call Registry and otherwise limiting calls made by telemarketers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “The Department of Justice will continue to work with the Federal Trade Commission (FTC) to ensure entities like those named in today’s lawsuit are penalized when they make unwanted and unlawful phone calls.”

“Mr. Salvat’s companies ignored the Do Not Call Registry and made illegal robocalls,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Breaking the law isn’t a great way for a company to introduce itself to potential customers.”

The matter was investigated by the FTC and referred to the Department of Justice’s Consumer Protection Branch after the FTC determined it had reason to believe the defendants’ conduct was violating the law and that a proceeding would be in the public interest.  The complaint seeks civil penalties as well as injunctive relief.

The matter is being handled by Trial Attorney Jacqueline Blaesi-Freed of the Civil Division’s Consumer Protection Branch, with assistance from Sarah Schroeder and Sylvia Kundig from the FTC.

MAKING ILLEGAL PAYMENTS TO DOCTORS, HOSPITALS WILL COST MEDICAL EQUIPMENT COMPANY $646 MILLION

FROM:  U.S. JUSTICE DEPARTMENT 

Tuesday, March 1, 2016

Medical Equipment Company Will Pay $646 Million for Making Illegal Payments to Doctors and Hospitals in United States and Latin America

Olympus Corp. of the Americas, Nation’s Largest Distributor of Endoscopes, Also Agrees to Reforms and Subsidiary Admits to Foreign Bribery

The United States’ largest distributor of endoscopes and related equipment will pay $623.2 million to resolve criminal charges and civil claims relating to a scheme to pay kickbacks to doctors and hospitals, U.S. Attorney Paul J. Fishman of the District of New Jersey and Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division announced today.  U.S. Attorney Fishman and Principal Deputy Assistant Attorney General David Bitkower of the Justice Department’s Criminal Division also announced that a subsidiary of the distributor will pay $22.8 million to resolve criminal charges relating to the Foreign Corrupt Practices Act (FCPA) in Latin America.

Anti-Kickback Statute Violations

Olympus Corp. of the Americas (OCA) was charged in a criminal complaint filed today in Newark, New Jersey, federal court with conspiracy to violate the Anti-Kickback Statute (AKS), which prohibits payments to induce purchases paid for by federal health care programs.  OCA has entered into a three-year deferred prosecution agreement (DPA) that will allow it to avoid conviction if it complies with the reform and compliance requirements outlined in the agreement.

“For years, Olympus Corporation of the Americas and Olympus Latin America dropped the compliance ball and failed to have in place policies and practices that would have prevented the substantial kickbacks and bribes they paid,” said U.S. Attorney Fishman. “It is appropriate that they be punished for that.  At the same time, the deferred prosecution agreement takes into account the companies’ cooperation and commitment to fully functional corporate compliance.”

As a result of the conduct outlined in the government’s criminal complaint and DPA, OCA has agreed to pay a $312.4 million criminal penalty and an additional $310.8 million to settle civil claims under the federal and various state False Claims Acts, the largest total amount paid in U.S. history for violations involving the AKS by a medical device company.

“The Department of Justice has longstanding concerns about improper financial relationships between medical device manufacturers and the health care providers who prescribe or use their products,” said Principal Deputy Assistant Attorney General Mizer.  “Such relationships can improperly influence a provider’s judgment about a patient’s health care needs, result in the use of inferior or overpriced equipment, and drive up health care costs for everybody.  In addition to yielding a substantial recovery for taxpayers, this settlement should send a clear message that we will not tolerate these types of abusive arrangements, and the pernicious effects they can have on our health care system.”

In a separate DPA, Olympus Latin America Inc. (OLA), a subsidiary of OCA, will pay a $22.8 million criminal penalty for violations of the FCPA.

The criminal complaint against OCA, which OCA agrees is true, charges that OCA won new business and rewarded sales by giving doctors and hospitals kickbacks, including consulting payments, foreign travel, lavish meals, millions of dollars in grants and free endoscopes.  For example:

OCA gave a hospital a $5,000 grant to facilitate a $750,000 sale;

OCA held up a $50,000 research grant until a second hospital signed a deal to purchase Olympus equipment;

OCA paid for a trip for three doctors to travel to Japan in 2007 as a quid pro quo for their hospital’s decision to switch from a competitor to Olympus; and

a doctor with a major role in a New York medical center’s buying decisions received free use of $400,000 in equipment for his private practice.

These and other kickbacks helped OCA obtain more than $600 million in sales and realize gross profits of more than $230 million.

The criminal complaint alleges that the improper payments happened while Olympus lacked training and compliance programs.  Unlike other medical and surgical products companies, Olympus did not create the position of compliance officer until 2009 and did not hire an experienced compliance professional until August 2010.

The DPA requires OCA to adopt several compliance measures to remedy its problems:

OCA must enhance its compliance training and maintain an effective compliance program;

OCA must maintain a confidential hotline and website for OCA employees and customers to report wrongdoing;

OCA’s chief executive officer and board of directors must certify annually that the program is effective; and

OCA must adopt an executive financial recoupment program requiring executives who engage in misconduct or fail to promote compliance to forfeit up to three years of performance pay.

Larry Mackey, a former federal prosecutor best known for trying the Oklahoma City bombing cases, has been selected as an independent monitor to evaluate and oversee Olympus’ compliance with the DPA.  He was selected by U.S. Attorney Fishman under department guidelines and approved by the Deputy Attorney General.  The DPA and monitor will remain in place for three years and can be extended for another two years if Olympus violates the DPA.

In the civil settlement, Olympus agrees to pay $310.8 million to the federal government and the states to resolve claims that Olympus’s payment of kickbacks caused false claims to be submitted to federal health care programs Medicare, Medicaid and TRICARE, and thus violated not only the AKS but also the federal and various state False Claims Acts.  The federal share of the civil settlement is $267,288,323, and Olympus will pay $43,512,053 million to participating states that contributed to the falsely claimed Medicaid payments at issue.

The civil settlement resolves a lawsuit filed by John Slowik, the former chief compliance officer of OCA, in the District of New Jersey, under the federal and various state False Claims Acts.  The acts permit whistleblowers to file suit for false claims against the government entities and to share in any recovery.  Mr. Slowik will receive $44,102, 573 million from the federal share and $7 million from the state share of the civil settlement amount.

FCPA Violations

In a separate criminal complaint filed today in Newark federal court, OCA’s Miami-based subsidiary OLA was charged with FCPA violations in connection with improper payments to health officials in Central and South America, and OLA entered into a separate three-year DPA.  According to court documents, from 2006 until August 2011, OLA implemented a plan to increase medical equipment sales in Central and South America by providing payments to health care practitioners at government-owned health care facilities.  These payments included cash, money transfers, personal grants, personal travel and free or heavily discounted equipment.  The primary method to deliver these illicit benefits was through “training centers,” nominally set up to educate and train doctors, but which OLA used to provide benefits to pre-selected practitioners.  OLA and its conspirators paid nearly $3 million to practitioners to induce the purchase of Olympus products and recognized more than $7.5 million in profits as a result.

“Olympus Latin America admitted to bribing publicly employed health care providers and hospital officials across Central and South America so that it could illegally win business and sell its products,” said Principal Deputy Assistant Attorney General Bitkower.  “OLA’s illegal tactics in Central and South America mirrored Olympus’s conduct in the United States.  The FCPA resolution announced today demonstrates the department’s commitment to ensuring the integrity of the health-care equipment market, regardless whether the illegal bribes occur in the U.S. or abroad.”

OLA entered into the DPA with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the District of New Jersey.  The agreement requires OLA to pay a criminal penalty of $22.8 million, retain the same compliance monitor as for OLA (Mr. Mackey) for a period of three years and implement a number of compliance measures.  The department reached this resolution based on a number of factors, including that OLA did not voluntarily disclose the misconduct in a timely manner, but OLA did receive credit of a 20 percent reduction on its penalty for its cooperation, including its extensive internal investigation, translation of numerous foreign language documents and collecting, analyzing and organizing voluminous evidence.

Corporate Integrity Agreement

In addition to the criminal and civil resolutions, Olympus executed a corporate integrity agreement (CIA) with the Department of Health and Human Services-Office of Inspector General (HHS-OIG).  The CIA details the compliance program OCA must maintain, which must include:

compliance responsibilities for OCA management and the board of directors;

a health care compliance code of conduct that includes certain standards;

training and education that includes specified standards;

requirements for consulting arrangements, grants and charitable contributions, management of field assets and review of travel expenses;

risk assessment and mitigation process; and

review procedures for testing the compliance program.

“Olympus Corp. of the Americas’ and its subsidiaries’ greed-fueled kickback scheme threatened the impartiality of medical decision-making and the financial integrity of Medicare and Medicaid,” said Special Agent in Charge Scott J. Lampert of the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG).  “Working with our law enforcement partners, we remain vigilant and committed to protecting beneficiaries and taxpayers from those seeking to unlawfully enrich themselves.”

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The U.S. Attorney’s Office of the District of New Jersey prosecuted the criminal case under the AKS against Olympus and, with the Civil Division’s Commercial Litigation Branch, reached the civil settlement.  The U.S. Attorney’s Office of the District of New Jersey and the Criminal Division’s Fraud Section prosecuted the criminal case under the FCPA against OLA.  The HHS Office of Counsel to the Inspector General, the FBI, HHS-OIG Office of Criminal Investigations and the National Association of Medicaid Fraud Control Units provided assistance.

The FBI’s Newark Field Office, HHS-OIG and the FBI Allentown, Pennsylvania, Field Office investigated the case.

Assistant U.S. Attorneys R. David Walk Jr. and Deborah J. Gannett of the District of New Jersey’s Health Care and Government Fraud Unit in Newark represented the government in the AKS criminal prosecution.  Assistant U.S. Attorney David E. Dauenheimer of the District of New Jersey and Senior Trial Counsel David T. Cohen of the Civil Division’s Commercial Litigation Branch represented the government in the prosecution of the civil case.  Mary Riordan and Nicole Caucci of the HHS-OIG negotiated the CIA.

Fraud Section Trial Attorney James P. McDonald and Assistant U.S. Attorneys Walk and Gannett prosecuted the FCPA case.  The Criminal Division’s Office of International Affairs provided significant assistance in this matter.

U.S. Attorney Fishman reorganized the health care fraud practice at the U.S. Attorney’s Office of the District of New Jersey, including creating a stand-alone Health Care and Government Fraud Unit, which handles both criminal and civil investigations and prosecutions of health care fraud offenses.  Since 2010, the office has recovered more than $1.29 billion in health care fraud and government fraud settlements, judgments, fines, restitution and forfeiture under the False Claims Act, the Food, Drug and Cosmetic Act and other statutes.

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 $27.4 billion through False Claims Act cases, with more than $17.4 billion of that amount recovered in cases involving fraud against federal health care programs.