Contract Conspiracy Brings Prison Sentence

   ALEXANDRIA, Va. – 10/27/2016 - Kenneth Apple, 65, of Beaverton, Oregon, was sentenced to 50 months in prison on October 14 for his role in awarding $2 million in micro-dairy contracts from the U.S. government for use in Iraq. The court also ordered Apple to serve three years of supervised release, pay approximately $1.9 million in restitution, and forfeit $551,838.73.
   According to the court documents and evidence presented at trial, Apple, a former employee with the U.S. Department of State, helped to steer the sole-sourcing of $2 million in micro-dairy contracts to a company in which his son, Jonathan Apple, owned a 50 percent interest. However, Jonathan Apple and his partner had no technical experience in the industry. Kenneth Apple conspired to use his official position to pass on non-public information to his son in order to fraudulently award and administer government contracts. The conspirators further provided false information to, and concealed material details from the U.S. government.
   According to the court documents and evidence presented at trial, Kenneth Apple provided templates and technical specifications used in the proposal submitted by Jonathan Apple and his partner to the U.S. government. In addition, Kenneth Apple caused false and misleading statements to be made to the U.S. government regarding his experience, ownership interest, and the status of the projects. For example, Kenneth Apple directed a conspirator to keep Jonathan Apple’s name off the company’s website and any ownership documents. When federal law enforcement agents confronted Kenneth Apple about the scheme, he made false statements, including that he could not recall the owner of the company that won the micro-dairy contracts and that he did not receive any money from the contracts.
   Dana J. Boente, U.S. Attorney for the Eastern District of Virginia; Paul M. Abbate, Assistant Director in Charge of the FBI’s Washington Field Office; Frank Robey, Director of the U.S. Army Criminal Investigation Command’s Major Procurement Fraud Unit (MPFU); and Robert E. Craig, Special Agent in Charge for the Defense Criminal Investigative Service’s (DCIS) Mid-Atlantic Field Office, made the announcement. Assistant U.S. Attorneys Uzo Asonye and Katherine Wong are prosecuting the case.
   Source: Financial Fraud Enforcement Task Force  (October 14, 2016)

More Documents Released On Torture Program

   (ACLU) – NEW YORK - June 14, 2016 - In response to a lawsuit filed by the American Civil Liberties Union, the Central Intelligence Agency released over 50 documents on June 14 detailing the agency’s torture and rendition program under the Bush administration.
   The ACLU filed the Freedom of Information Act lawsuit seeking documents that were referenced in the Senate report on the CIA program made public in December 2014. The report found that torture did not work and the agency lied about it to Congress, the White House, the Justice Department, and the public.
   “These newly declassified records add new detail to the public record of the CIA's torture program and underscore the cruelty of the methods the agency used in its secret, overseas black sites,” ACLU Deputy Legal Director Jameel Jaffer said. “It bears emphasis that these records document grave crimes for which no senior official has been held accountable.”
   The documents include new records about the death of Gul Rahman, who died at a CIA secret prison in Afghanistan in 2002. The CIA “Death Report” on Rahman released on June 14 details the horrific conditions he was subjected to: “Often, prisoners who possess significant or imminent threat information are stripped to their diapers during interrogation and placed back into their cells wearing only diapers. This is done solely to humiliate the prisoner for interrogation purposes. When the prisoner soils a diaper, they are changed by the guards. Sometimes the guards run out of diapers and the prisoners are placed back in their cells in a handcrafted diaper secured by duct tape. If the guards don't have any available diapers, the prisoners are rendered to their cell nude.”
Rahan froze to death in his cell, naked from the waist down. The ACLU represents Rahman’s family in a lawsuit against the two CIA-contracted psychologists who designed and implemented the torture program, James Mitchell and John “Bruce” Jessen.
   “In a visceral way, these raw documents drive home the inhumanity of the torture conceived and carried out by Mitchell and Jessen in collaboration with the CIA,” said Dror Ladin, a staff attorney with the ACLU National Security Project. “The documents reveal that Rahman was brutalized in part because his torturers decided that complaining about his torture was a form of resistance and he needed to be ‘broken.’”
   Also included is a draft letter from the CIA to the Justice Department — cc-ing Mitchell — concluding that the torture they intended to inflict on Abu Zubaydah “normally would appear to be prohibited under the provisions” of the Torture Act, a federal law against torturing people. The draft letter is a “request” that the attorney general “grant a formal declination of prosecution” for torture.
   Other new disclosures reveal the CIA’s concerns that detainees who had been tortured should be kept hidden from representatives of the International Committee of the Red Cross for the rest of their lives.
“We’re seeing just how much Mitchell, Jessen, and their CIA co-conspirators knew that what they were doing was wrong and illegal. They talked about seeking a get-out-of-jail-free card for torturing people, and then discussed how to make sure their victims were silenced forever, even if they survived their torture,” Ladin added.
   In April, a federal court ruled that the ACLU’s lawsuit against the psychologists could proceed. On June 22, Mitchell and Jessen must provide their answer to each of the allegations in the legal complaint.
   The documents also include a 2007 CIA inspector general’s report finding that the kidnapping and torture of German citizen Khalid El-Masri was a case of mistaken identity. The report referenced CIA cables on El-Masri’s despair:
   “The cable cited that al-Masri compared his situation to a Kafka novel—he could not possibly prove his innocence because he did not know what he was being charged with. The cable reported al-Masri as saying he had nearly reached the end of what he could bear and as of May 2004 he would begin a total hunger strike to his death.”
   A 2005 ACLU lawsuit on behalf of El-Masri against former CIA Director George Tenet was dismissed by lower courts on the grounds that it would reveal “state secrets,” and the Supreme Court declined to hear the case. The ACLU now represents El-Masri in a pending case against the U.S. before the Inter-American Commission on Human Rights.
   At least two of the documents concerning Gul Rahman — the IG report and the detainee death investigation — were simultaneously provided to Vice News in response to its FOIA request.

Four Army National Guardsmen Indicted

   5/28/2016 - Greenbelt, Maryland – Three guardsmen from the District of Columbia Army National Guard have been indicted on charges arising from a scheme to use Bitcoin to buy stolen credit and debit card numbers from foreign websites, re-encode cards issued in their names with those stolen numbers, and then fraudulently purchase items at Army and Air Force Exchange Service (AAFES) stores on military bases and elsewhere for use and resale (Shelton Stewart Indictment). Those indicted included Derrick K. Shelton, II, 28, of Washington, D.C.; James C. Stewart, III, (J. Stewart) 25, of District Heights, Maryland; and Quentin T. Stewart, 28, of Parkville, Maryland.
   A fourth national guardsman, Vincent Anthony Grant, 27, of Laurel, Maryland was also indicted in a separate case involving a similar fraud scheme (Grant Indictment). The indictments were returned on May 9 and unsealed on May 20 following the arrests of the defendants.
   The indictments were announced by United States Attorney for the District of Maryland Rod J. Rosenstein, Special Agent in Charge Robert Craig of the Defense Criminal Investigative Service - Mid-Atlantic Field Office (DCIS); and Special Agent in Charge Kevin Perkins of the Federal Bureau of Investigation, Baltimore Field Office.
   Shelton, J. Stewart and Grant were specialists, and Q. Stewart was a former sergeant, all in the District of Columbia Army National Guard.
   “Bitcoin” is a digital currency that operates through an online, decentralized ledger system. Bitcoin is not issued by any government, bank, or company, but rather is generated and controlled through computer software operating through a decentralized network. Bitcoin can be exchanged for other currencies, products, or services.
   The Shelton Stewart Indictment alleges that from July 2014 to May 2015, Shelton, J. Stewart and Q. Stewart, along with co-conspirator Jamal Moody and others, used Bitcoin to purchase stolen credit and debit card numbers of individuals and businesses from foreign internet websites. They selected and purchased stolen credit and debit card numbers of individuals and businesses holding federal credit union accounts, and those with billing addresses in or near Maryland. They bought magnetic strip card-encoding devices and software to re-encode credit, debit and other cards with the stolen credit and debit card numbers.
   According to the Shelton Stewart Indictment, the defendants used the cards they fraudulently re-encoded to buy merchandise, including gift cards, electronic items, and luxury goods, from AAFES stores on U.S. military bases, and other locations in Maryland and elsewhere. They used the merchandise themselves or resold the merchandise.
   The Grant Indictment alleges that from July 2014 to April 2015, Grant, along with co-conspirator Moody and others, engaged in a scheme similar to the one described above.
   Shelton, J. Stewart and Q. Stewart face a maximum sentence of 20 years in prison for conspiring to commit wire fraud, and wire fraud. Grant faces a maximum sentence of seven and half in prison for conspiring to commit access device fraud. All four defendants also face a mandatory minimum of two years in prison for aggravated identity theft, consecutive to any other sentence imposed. The defendants had their initial appearances last week and were released under pretrial supervision, except for Quentin Stewart who is scheduled to have a detention hearing tomorrow, May 24, 2016, at noon before U.S. Magistrate Judge Charles B. Day in U.S. District Court in Greenbelt.
   An indictment is not a finding of guilt. An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceedings.
   In a separate proceeding, Jamal Alexander Moody, age 28, of Oxon Hill, Maryland, and Waynesboro, Pennsylvania, who was also a specialist in the District of Columbia Army National Guard, pleaded guilty to conspiring to commit access device fraud and aggravated identity theft. Moody admitted that from July 2014 to April 2015, he purchased a magnetic-strip card-encoding device which he used to re-encode credit and debit cards issued in his name with more than 100 stolen credit and debit card numbers of other individuals that he purchased through Bitcoin transactions. Moody used the fraudulently re-encoded cards to purchase – often from AAFES stores - gift cards or electronic and luxury goods for resale. Moody is awaiting sentencing.
   The Maryland Identity Theft Working Group has been working since 2006 to foster cooperation among local, state, federal, and institutional fraud investigators and to promote effective prosecution of identity theft schemes by both state and federal prosecutors. This case, as well as other cases brought by members of the Working Group, demonstrates the commitment of law enforcement agencies to work with financial institutions and businesses to address identity fraud, identify those who compromise personal identity information, and protect citizens from identity theft.
   Source: Financial Fraud Enforcement Task Force

Lawsuit Seeks Data On BOP, CIA Detention Site

By Steve Rensberry
   (RPC) - 4/28/2016 - Although it has received scant attention in the news, The American Civil Liberties Union filed a lawsuit this past month against the Federal Bureau of Prisons, citing the bureau's failure to comply with a Freedom of Information Act request involving documents pertaining to a 2002 visit to a CIA detention site in Afghanistan, code-named COBALT. The operation and site, also known as “the Salt Pit,” was used to confine and torture terrorism suspects, according to the declassified torture report provided to the U.S. Senate Intelligence Committee in 2014. Although the practices described in the report were referred to as “not inhumane,” it nevertheless was a shock to the senses for many of those who read it.
   The ACLU's initial Freedom of Information Act request, filed in 2015, was brushed aside by prisons officials, who claimed that “no records exist" -- a response which the civil rights organization has questions.
   “What business did the Bureau of Prisons have with a torture site in Afghanistan?” ACLU National Prison Project Staff Attorney Carl Takei stated in a recent news release. “The bureau controls conditions for the 200,000 federal prisoners in the United States while teaching its methods to jails and state prisons around the country. We have to wonder why a team from that institution would give its approval to a place where prisoners are kept in solitary confinement in near-total darkness 24-7, shackled to the wall standing up, and with a bucket for human waste.”
   The ACLU's suit was filed on April 14, 2016. A link to an executive summary of the report on the CIA's Detention and Interrogation Program, given to the Senate Select Committee on Intelligence on December 9, 2014, is available here:
   The executive summary is 525 pages long, and the full committee study is 6,700 pages in length.
   As stated in the forward to the summary, written by Committee Chairman Dianne Feinstein: “The full report has been provided to the White House, the CIA, the Department of Justice, the Department of Defense, the Department of State, and the Office of the Director of National Intelligence in the hopes that it will prevent further coercive interrogation practices and inform the management of covert action programs.”
   Recalling the days after 9-11, when political leaders and the public felt the impulse to do whatever it could to stop another attack, Feinstein said that such pressure and fear did no “justify, temper, or excuse improper actions taken by individuals or organizations in the name of national security.”
   Feinstein referred to the lessons of history and the need to subject decisions to internal and external review, then lambasted those who oversaw the COBALT operation.
   “Instead, CIA personnel, aided by two outside contractors, decided to initiate a program of indefinite secret detention and the of brutal interrogation techniques in violation of U.S. law, treaty obligations, and our values,” Feinstein wrote.
    Her statement begs the question: If such techniques were in violation of U.S. law and treaty obligations, why has no one connected with such abuse been prosecuted?
   The short answer is because those doing the prosecuting, that is, the Justice Department, would indirectly be prosecuting themselves. The Justice Department cited in its investigation the advice given by the Office of Legal Council, which itself is part of the U.S. Justice Department. Both are part of the executive branch of the U.S. government. Together with the attorney general, both groups provide advice and guidance to the president and all other executive branch agencies, including the C.I.A.
   Following the release of the 2014 report, justice department spokespersons and the administration have remained unified and steadfast in their redirection of the subject, not surprisingly, with President Obama citing a desire to "look forward, not backward," and the justice department citing the fact that such interrogation techniques had been fully reviewed and considered legal under the previous administration. In other words, it goes all the way to the top.
   One of the most damning assessments of the administration's failure to prosecute those responsible has come from the organization Human Rights Watch, and from UN Special Rapporteur on Counterterrorism Ben Emmerson.
   The Human Rights Watch report can be found here:
   To quote: “As set out in this report, Human Rights Watch concludes there is substantial evidence to support the opening of new investigations into allegations of criminal offenses by numerous US officials and agents in connection with the CIA program. These include torture, assault, sexual abuse, war crimes, and conspiracy to commit such crimes. In reaching this conclusion, we have drawn on our own investigations, media and other public reports, and the declassified information in the Senate Summary. But more evidence exists that has yet to be made public. . . . US officials who played a role in the process of creating, authorizing, and implementing the CIA program should be among those investigated for conspiracy to torture as well as other crimes. They include: Acting CIA General Counsel John Rizzo, Assistant Attorney General for Office of Legal Counsel (OLC) Jay Bybee, OLC Deputy Assistant Attorney General John Yoo, an individual identified as “CTC Legal” in the Senate Summary, CIA Director George Tenet, National Security Legal Advisor John Bellinger, Attorney General John Ashcroft, White House Counsel Legal Advisor Alberto Gonzales, Counsel to the Vice President David Addington, Deputy White House Counsel Timothy Flanigan, National Security Advisor Condoleezza Rice, Defense Department General Counsel William Haynes II, Vice President Dick Cheney, and President George W. Bush. In addition, James Mitchell and Bruce Jessen, CIA psychologist contractors who devised the program, proposed it to the CIA, and helped carry it out, should also be investigated for their role in the initial conspiracy.”
   In a surprise ruling, Federal Judge Justin L. Quackenbush denied on April 22, 2016, a motion to dismiss a suit brought against psychologists James Mitchell and Bruce Jessen, who aided in the CIA's torture practices and COBALT operation, and for which they were paid $81 million. More about the case and ruling can be found here:

Report: Medical Errors Injure Upwards Of 488,900

By Steve Rensberry
   (RPC) - 2/19/2016 - A recent report by the Heartland Health Research Institute estimates that between 281,000 and 488,900 patients in Illinois hospitals are injured each year to do preventable medical errors or events. The estimate nationally is between 6.6 million and 11.5 million patients.
Preventable injuries occurring in Illinois hospitals.
    “If the Centers for Disease Control (CDC) were to include preventable medical errors in U.S. hospitals as a category, it would be the third leading cause of death in the United States, behind heart disease and cancer,” an HHRI press release about the report states.
   Fatalities occur in Illinois hospitals due to preventable adverse events (PAE) at an estimated rate of about 1 death for every 139 hospital admissions. By comparison, 11 patients die in hospitals from such errors for every vehicle fatality, 15 patients die for every murder committed in the state, and altogether nearly 3 percent of the state's entire population is harmed each year by PAEs. The frequency and volume translates into about one fatality every 50 minutes in the state due to such errors.
   The annual cost of such errors? The HHRI report estimates that in Illinois the annual social cost of such fatalities is about $5.2 billion. Nationally the cost is estimated between $23.1 billion and $103.4 billion. The number of injured patients annually in Illinois, based on the most common types of preventable medical errors, is as follows: adverse drug events (72,600 patients); venous thromboembolisms/, VTEs – blood clots that form within a vein (48,800); decubitus ulcers, bed soars (36,400); catheter-related urinary tract infections (17,500); falls in the hospital (16,200); nosocomial pneumonia (12,600); catheter, related bloodstream infections (6,300).  
   "Preventable medical errors in our hospitals is clearly alarming, both in the number of lives affected and in cost." Heartland Health Research Institute President David Lind stated. "Is Illinois making progress on preventable medical errors? The quick answer is, we don't really know because reporting yields a healthy dose of under-counting and under-reporting of medical errors. Without having stringently-coordinated regulations and policies that effectively hold providers accountable through transparent reporting, medical errors will continue and the public will remain in the dark. The Federal Aviation Administration has such regulations - shouldn't our safety be just as important when we enter a hospital as it is when we board an airplane? The public deserves transparency and accountability on this issue."
   A study by USA Today in 2013, using data from the National Practitioner Data Bank and other sources, point to an additional worry for potential patients – unnecessary surgeries, which the article states might account for as much as 10-20 percent of all operations in some specialties. Cites are cardiac procedures such as stents, angioplasty and pacemaker implants, spinal surgeries, hysterectomies, cesarean sections, and knee replacements.
   “Tens of thousands of times each year, patients are wheeled into the nation's operating rooms for surgery that isn't necessary,” authors Peter Eisler and Barbara Hensen write.
   What makes the size of the problem difficult to calculate is that only the worse cases are likely to become public knowledge, and if a surgery by chance takes care of a problem that could have been alleviated with lesser therapy or a non-surgical procedure, little suspicion is raised because the problem is gone.
   “Hospitals around the country do not report PAEs accurately and consistently - if at all,” the HHRI report states. “National experts acknowledge that most PAEs are either under reported or unreported. The Department of Health and Human Services Office of Inspector General issued a report in 2012 stating, 'Hospital staff did not report 86 percent of [patient harm] events to incident reporting systems, partly because of staff misperceptions about what constitutes patient harm.' This behavior reflects our culture of silence.”
   An October 27, 2015 Harvard Business Review report, written by Rebecca Wentraub, Yannis K. Valtis and Peter Bonis, claims there are many as 44,000 deaths in the Unites States each year due to preventable medical errors, with a price tag of roughly $17 billion.

U.S. Health Insurers Eye Bigger Profits In 2016

By Steve Rensberry
   (RPC) - 2/12/2016 - The Affordable Care Act not withstanding, health insurance companies across the United States have been seeking to raise their rates. Some companies, such as Blue Cross and Blue Shield of Minnesota, have sought increases of more than 50 percent in recent months. (1)
   In a Jan. 26 commentary written by CIGNA executive Wendell Porter and published by the Center for Public Integrity, that author notes that the nation's largest health insurer, UnitedHeathCare, posted profits of $10.3 billion in 2014, against revenues of $130.5 billion -- pushing its share price to $113.85. This is in sharp contract to a price of $30.40 in March of 2010.
   UnitedHealthCare isn't alone.
   “Every one of the big six saw their shares reach or come close to reaching historic highs. Although they haven’t done quite as well as United, the other five have seen the price of their stock more than double or triple. Health Net’s share price has increased 224 percent since March 2010. Anthem’s is up 238 percent over the same time period. Aetna’s 290 percent. Cigna’s 305 percent. And Humana’s 309 percent,” Porter writes. He cites the industry practice of purging unprofitable accounts--in particular small business accounts--as a contributing factor. (2)
   A Jan. 21 story by Paul R. La Monica, published by CNN and entitled “Thanks, Obamacare! Health insurer stocks soar,” cites the same record highs. “Many health care companies have yields that are significantly higher than the puny yields investors get from buying long-term U.S. Treasury bonds,” La Monica writes. (3)
   Kevin McCoy of USA Today suggests in a February 2 story that Aetna's fourth-quarter profits beat Wall Street forecasts, in part, because of an increase in the number of Medicare and Medicaid health plans it sells. (4)
   “The company said net income for the October -December quarter rose 38 percent to $320.8 million, or 91 cents a share,” McCoy writes. “That was up from $232 million, or 65 cents a share, for the same period last year.”
   New profits from Cigna Corp, meanwhile, were down 9 percent in the first quarter of 2015 (Mara Lee, Hartford Courant, Feb. 4), with the company citing higher costs associated with individual health insurance plans as one reason for the drop. A $48 million purchase by Anthem, announced last summer, is pending.
   Bob Herman, writing for Modern Healthcare, highlights other movements in the industry after years of uncertainty toward government programs and other types of investments, apart from traditional health plans. He cites data from Securities and Exchange Commission filings which show the percentage of UnitedHealthCare revenue from Medicare and Medicaid in 2009 at 49 percent, and it's share of commercial plan revenue at 50 percent, compared to 2014 revenues of 59 percent and 36 percent respectively. Aetna derived 24 percent of its profits from Medicare and Medicaid in 2009, and 76 percent from commercial accounts, compared to 42 percent and 58 percent in 2014 respectively. (5)
   “Federal spending on healthcare surpassed Social Security for the first time in 2015, thanks in large part to Medicaid expansion and the ACA's public exchanges, according to the Congressional Budget Office. Investor-owned HMOs that focus almost exclusively on outsourced Medicaid—such as Centene Corp. and Molina Healthcare—have thrived,” Heman states. “Medicare Advantage, perhaps more than any other federal program, has attracted the most interest because of the substantial revenue prospects from the growing numbers of baby boomers becoming Medicare-eligible. Almost 18 million people have a private Medicare Advantage plan, up from 10.5 million in 2009.”
   An analysis of 2016 premium changes and insurer participation in the Affordable Care Act's Health Insurance Marketplace, conducted by the Kaiser Family Foundation, looked at changes in the two lowest-priced Silver Plans for 11 major metropolitan areas and found an average, pre-tax credit increase of 4.4 percent. Those cities were: Portland, Oregon; Albuquerque, New Mexico; Richmond, Virginia; Burlington, Vermont; Baltimore, Maryland; Portland, Maine; Washington D.C.; Hartford, Connecticut; New York City, NY; Detroit, Michigan; and Seattle, Washington.
   “Our analysis is based on the 10 states plus the District of Columbia where we were able to find comprehensive filings or other information about the rates of the lowest-cost plans. Other states have released summary information, but not sufficient detail to identify the lowest-cost silver plans. In many cases, premiums are still under review by insurance departments and may change prior to the start of open enrollment,” the KFF report stated.

False Claims Act Reaps $3.5 Billion in FY 2015

   WASHINGTON – 1/1/2016 - The U.S. Department of Justice obtained more than $3.5 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, announced in December, 2015. This is the fourth year in a row that the department has exceeded $3.5 billion in cases under the False Claims Act, and brings total recoveries from January 2009 to the end of the fiscal year to $26.4 billion.
    “The False Claims Act has again proven to be the government’s most effective civil tool to ferret out fraud and return billions to taxpayer-funded programs,” Mizer said. “The recoveries announced today help preserve the integrity of vital government programs that provide health care to the elderly and low income families, ensure our national security and defense, and enable countless Americans to purchase homes.”
    Of the $3.5 billion recovered last year, $1.9 billion came from companies and individuals in the health care industry for allegedly providing unnecessary or inadequate care, paying kickbacks to health care providers to induce the use of certain goods and services, or overcharging for goods and services paid for by Medicare, Medicaid, and other federal health care programs. The $1.9 billion reflects federal losses only. In many of these cases, the department was instrumental in recovering additional millions of dollars for consumers and state Medicaid programs.
   The next largest recoveries were made in connection with government contracts. The government depends on contractors to feed, clothe, and equip our troops for combat; for the military aircraft, ships, and weapons systems that keep our nation secure; as well as to provide everything that is needed to fund myriad programs at home. Settlements and judgments in cases alleging false claims for payment under government contracts totaled $1.1 billion in fiscal year 2015.
  The False Claims Act is the government’s primary civil remedy to redress false claims for government funds and property under government contracts, including national security and defense contracts, as well as under government programs as varied as Medicare, veterans’ benefits, federally insured loans and mortgages, highway funds, research grants, agricultural supports, school lunches, and disaster assistance. In 1986, Congress strengthened the Act by amending it to increase incentives for whistleblowers to file lawsuits on behalf of the government.
    Most false claims actions are filed under the Act’s whistleblower, or qui tam, provisions that allow individuals to file lawsuits alleging false claims on behalf of the government. If the government prevails in the action, the whistleblower, also known as the relator, receives up to 30 percent of the recovery. Whistleblowers filed 638 qui tam suits in fiscal year 2015 and the department recovered $2.8 billion in these and earlier filed suits this past year. Whistleblower awards during the same period totaled $597 million.
Health Care Fraud
    Including this past year’s $1.9 billion, the department has recovered nearly $16.5 billion in health care fraud since January 2009 to the end of fiscal year 2015 – more than half the health care fraud dollars recovered since the 1986 amendments to the False Claims Act. These recoveries restore valuable assets to federally funded programs such as Medicare, Medicaid, and TRICARE – the health care program for the military. But just as important, the department’s vigorous pursuit of health care fraud prevents billions more in losses by deterring others who might otherwise try to cheat the system for their own gain. The department’s success is a direct result of the high priority the Obama Administration has placed on fighting health care fraud. In 2009, the Attorney General and the Secretary of the Department of Health and Human Services, the department that administers Medicare and Medicaid, announced the creation of an interagency task force called the Health Care Fraud Prevention and Enforcement Action Team (HEAT), to increase coordination and optimize criminal and civil enforcement. Additional information on the government’s efforts in this area is available at, a webpage jointly established by the Departments of Justice and Health and Human Services.
    Two of the largest health care recoveries this past year were from DaVita Healthcare Partners, Inc., the leading provider of dialysis services in the United States. DaVita paid $450 million to resolve allegations that it knowingly generated unnecessary waste in administering the drugs Zemplar and Venofer to dialysis patients, and then billed the government for costs that could have been avoided. DaVita paid an additional $350 million to resolve claims that it violated the False Claims Act by paying kickbacks to physicians to induce patient referrals to its clinics. DaVita is headquartered in Denver, Colorado, and has dialysis clinics in 46 states and the District of Columbia.
   Hospitals were involved in nearly $330 million in settlements and judgments this past year. A cardiac nurse and a health care reimbursement consultant filed a qui tam suit against hundreds of hospitals that were allegedly implanting cardiac devices in Medicare patients contrary to criteria established by the Centers for Medicare and Medicaid Services in consultation with cardiologists, professional cardiology societies, cardiac device manufacturers, and patient advocates. The department settled with nearly 500 of these hospitals for a total of $250 million, including $216 million recovered in the past fiscal year. For details, see 500 Hospitals.
    Several settlements involved violations of the Stark Law. The Stark Statute prohibits certain financial relationships between hospitals and doctors that could improperly influence patient referrals. Services provided in violation of the Stark Statute are not reimbursable by Medicare or Medicaid. Hospitals settling false claims involving Stark violations include Adventist Health System for $115 million, an organization that operates hospitals and other health care facilities in 10 states; North Broward. Hospital District for $69.5 million, a special taxing district of Florida that operates hospitals and other health care facilities in Broward County, Florida; and Georgia hospital system Columbus Regional Healthcare System and Dr. Andrew Pippas for $25 million plus contingent payments up to an additional $10 million The Adventist settlement also involved allegations of miscoding claims to obtain higher reimbursements for services than allowed by Medicare and Medicaid
    Claims involving the pharmaceutical industry accounted for $96 million in settlements and judgments. Daiichi Sankyo Inc., a global pharmaceutical company with its U.S. headquarters in New Jersey, paid $39 million to resolve allegations of false claims against the United States and state Medicaid programs. Daiichi allegedly paid kickbacks to physicians to induce them to prescribe Daiichi drugs, including Azor, Benicar, Tribenzor and Welchol. Medicare and Medicaid prohibit reimbursement for drugs involved in kickback schemes. AstraZeneca LP and Cephalon Inc. paid the United States $26.7 million and $4.3 million, respectively, in separate settlements for allegedly underpaying rebates owed under the Medicaid Drug Rebate Program. As part of those settlements, the two drug manufacturers agreed to pay an additional $23 million to state Medicaid programs for their losses. And in another settlement, PharMerica Corp., the nation’s second largest nursing home pharmacy, agreed to pay the United States $9.25 million to resolve allegations that it solicited and received kickbacks from pharmaceutical manufacturer Abbott Laboratories in exchange for promoting the drug Depakote for nursing home patients. PharMerica is headquartered in Louisville, Kentucky.
    Skilled nursing homes and rehabilitation facilities have also been fertile ground for civil fraud and false claims actions. In the largest failure of care settlement with a skilled nursing home chain in the department’s history, Extendicare Health Services Inc. and its subsidiary, Progressive Step Corporation, agreed to pay the United States $32.3 million to resolve allegations that Extendicare billed Medicare and Medicaid for deficient nursing services and billed Medicare for medically unreasonable and unnecessary rehabilitation therapy services. Extendicare and Pro-Step paid an additional $5.7 million to eight states for their Medicaid losses. The department has ongoing litigation against additional nursing home chains and rehabilitation centers based on similar allegations of false claims for medically unreasonable or unnecessary rehabilitation therapy. For example, see HCR ManorCare.
Housing and Mortgage Fraud
    The department has recovered over $5 billion in housing and mortgage fraud from January 2009 to the end of fiscal year 2015, including this past year’s recoveries of $365 million. Notable recoveries this past year include a $212.5 million settlement with First Tennessee Bank N.A. First Tennessee admitted that from 2006 to 2008, through its subsidiary, First Horizon Home Loans Corporation, it originated and endorsed mortgages for federal insurance by the Federal Housing Administration (FHA) that did not meet eligibility requirements. First Tennessee also admitted failing to report such deficiencies to the authorities as required under the program despite widespread knowledge by its senior managers by early 2008. In August 2008, First Tennessee sold First Horizon to MetLife Bank N.A., a wholly-owned subsidiary of MetLife Inc. Metlife admitted similar misconduct regarding the loans it originated and endorsed from September 2008 to March 2012. MetLife paid the United States $123.5 million to resolve liability under the False Claims Act arising from its misconduct in endorsing mortgagees for FHA insurance.
    The department also settled claims against Walter Investment Management Corp. for $29.63 million. The government alleged that the company, through subsidiaries Reverse Mortgage Solution Inc., REO Management Solutions LLC, and RMS Asset Management Solutions LLC, caused false claims for fees and other costs in servicing reverse mortgages under the Department of Housing and Urban Development’s (HUD’s) Home Equity Conversion Mortgages (HECM) program. Reverse mortgage loans allow elderly people to access the equity in their homes. The loans provide monthly payments that enable the elderly to meet their day-to-day living expenses while remaining in their homes. To encourage these loans, HUD insures banks and other institutions that service the mortgages against loss, providing the institution complies with requirements to ensure the quality of such loans. Walter Investment allegedly failed to comply with these requirements.
    These recoveries are part of the broader enforcement efforts by President Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency task force in 2009, to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force, visit
Government Contracts
    Government contracts and federal procurement accounted for $1.1 billion in fraud settlements and judgments in fiscal year 2015, bringing procurement fraud totals to nearly $4 billion from January 2009 to the end of the fiscal year. Significant cases include a $146 million settlement with Supreme Group B.V. and several of its subsidiaries for alleged false claims to the Department of Defense (DoD) for food, water, fuel, and transportation of cargo for American soldiers in Afghanistan. Supreme Group is based in Dubai, United Arab Emirates (UAE). In addition, Supreme Group affiliates Supreme Foodservice GmbH, a privately held Swiss company, and Supreme Foodservice FZE, a privately-held UAE company, pleaded guilty to related criminal violations and paid more than $288 million in criminal fines.
    In two other defense contract settlements, Lockheed Martin Integrated Systems, a subsidiary of aerospace giant Lockheed Martin Inc., paid $27.5 million and DRS Technical Services Inc. paid $13.7 million to resolve allegations that their employees lacked required job qualifications while the companies charged for the higher level, qualified employees required under contracts with U.S. Army Communication and Electronics Command (CECOM). The CECOM contracts were designed to give the Army rapid access to products and services for operations in Iraq and Afghanistan.
In a pair of cases involving contracts with the General Services Administration, VMware Inc. and Carahsoft Technology Corporation paid the United States $75.5 million and Iron Mountain Companies paid $44.5 million to settle their respective liability under the False Claims Act. The government alleged that California-based VMware and Virginia-based Carahsoft misrepresented their commercial sales practices, which resulted in overcharging government agencies for their software products and services sold through GSA’s Multiple Award Schedule. Similarly, Iron Mountain, a records storage company headquartered in Massachusetts, misrepresented its commercial sales practices to GSA and failed to give certain discounts given to its commercial customers, as required to gain access to the vast federal marketplace available to contractors through the Multiple Award Schedule.
    The department settled allegations that private contractor U.S. Investigations Services Inc. (USIS) violated the False Claims Act in performing a contract with the Office of Personnel Management (OPM) to perform background investigations of federal employees and those applying for federal service. The government alleged that USIS took shortcuts that compromised its contractually-required quality review and that, had the government known, it would not have paid for the services. USIS agreed to forego at least $30 million in payments legitimately owed to the company to settle the government’s allegations.
Other Fraud Recoveries and Actions
    Although health care, mortgage, and government contract fraud dominated fiscal year 2015 recoveries, the U.S. Justice Department has aggressively pursued fraud wherever it is found in federal programs.The department recovered $44 million from Fireman’s Fund Insurance Company for alleged fraud under the U.S. Department of Agriculture’s federal crop insurance program. The United States alleged that Fireman’s Fund knowingly issued federally reinsured crop insurance policies that were ineligible for federal reinsurance. Specifically, Fireman’s Fund allegedly backdated policies, forged farmers’ signatures, accepted late and altered documents, whited-out dates and signatures, and signed documents after relevant deadlines. The policies were issued by Fireman’s Fund offices in California, Kansas, Mississippi, North Dakota, Texas, and Washington.
    The department also recovered $13 million from Education Affiliates, a for-profit education company based in White Marsh, Maryland, for alleged false claims to the Department of Education for student aid for students whose qualifications for admission were falsified to get them enrolled so they could receive aid which would be paid to the school. Education Affiliates operates 50 campuses throughout the United States under various trade names.
    In other actions, the department filed lawsuits to recover funds disbursed under the Troubled Asset Relief Program (TARP) and payments made under contracts awarded to benefit disadvantaged populations identified under the Small Business Administration’s set-aside programs. In one action, the department sued the estate and trusts of the late Layton P. Stuart, former owner and president of One Financial Corporation, and its operating subsidiary, One Bank & Trust N.A., both based in Arkansas, alleging that Stuart made misrepresentations to induce the Department of the Treasury to invest TARP funds in One Financial as part of Treasury’s Capital Purchase Program. The department recently settled with the Stuart estate and trusts for $4 million, but claims remain pending against One Financial Corporation.
   In a second action, the department filed suit against Florida-based Air Ideal Inc. and its owner, Kim Amkraut. The government alleged that Air Ideal and Amkraut falsely certified that the company qualified for preferences given to small businesses located in a Historically Underutilized Business Zone (HUBZone) when Air Ideal’s HUBZone location was no more than a virtual office and its principal place of business was in a non-HUBZone location. The government further alleged that Air Ideal used its fraudulently-procured HUBZone certification to obtain contracts from the Coast Guard, Army, Army Corps of Engineers, and Department of the Interior that were worth millions of dollars. The department settled with Air Ideal and Amkraut for $250,000 plus five percent of Air Ideal’s gross revenues for five years.
    In addition to those suits involving individuals described above, the department settled or filed suit against individuals in an array of cases. For example, Two Florida couples agreed to pay the United States $1.137 million collectively, to resolve allegations that they accepted kickbacks in exchange for home health care referrals to A Plus Home Health Care Inc. The United States previously settled with A Plus, its owner Tracy Nemerofsky, and five other couples that allegedly accepted payments from A Plus. Dr. Charles Denham, of Laguna Beach, California, paid the United States $1 million to settle allegations that he solicited and accepted kickbacks from CareFusion in return for promoting a CareFusion product and influencing recommendations by the National Quality Forum.
    Denham was a patient safety consultant who co-chaired a National Quality Forum Committee. After settling with two cardiovascular testing laboratories for $48.5 million - Health Diagnostics Laboratory Inc. (HDL) and Singulex Inc., the department intervened in three qui tam suits against another laboratory, Berkeley HeartLab Inc., a marketing company, BlueWave Healthcare Consultants Inc. and three individualsBlueWave’s owners, Floyd Calhoun Dent III and Robert Bradley Johnson and HDL’s co-founder and former chief executive officer, LaTonya Mallory. The department also intervened in two qui tam suits against Florida cardiologist Dr. Asad Qamar and his practice, the Institute for Cardiovascular Excellence PLLC, alleging that Qamar and his practice billed Medicare for medically unnecessary peripheral artery procedures and interventions and paid kickbacks to patients by waiving Medicare copayments irrespective of financial hardship. The department also filed a complaint against H. Ted Cain, Julie Cain, Corporate Management Inc. and Stone County Hospital Inc. for false claims for Medicare reimbursement. The government alleged that Ted and Julie Cain, the hospital and hospital management company owned and controlled by Ted Cain, claimed reimbursement for the hospital’s costs at inflated rates and for ineligible expenses. These matters are ongoing.
    Outside the health care arena, EDF Resource Capital Inc. agreed to transfer assets worth $5.8 million to the United States, and its chief executive officer, Frank Dinsmore, agreed to pay $200,000 to the United States, to settle allegations that they violated the False Claims Act in failing to remit payments to the Small Business Administration under the 504 loan program. The 504 loan program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings. The program operates through local lenders like EDF, who reap benefits from the program in return for shouldering certain financial obligations which Dinsmore and EDF allegedly ignored. The department also entered settlements with two individuals for evasion of Customs duties owed on imports of aluminum extrusions from the People’s Republic of China (PRC). Robert Wingfield, the U.S. sales representative of a Chinese manufacturer, and Bill Ma, owner of an ostensible importer, allegedly misrepresented the country of origin of goods to avoid steep antidumping and countervailing duties imposed by the Department of Commerce and collected by U.S. Customs and Border Protection on imports of aluminum extrusions from the PRC to protect domestic manufacturers from unfair foreign pricing practices. The government previously settled related allegations with four importers, bringing total settlements in the case to $4.6 million, including the $435,000 from Wingfield and Ma.
Recoveries in Whistleblower Suits
    Of the $3.5 billion the government recovered in fiscal year 2015, more than $2.8 billion related to lawsuits filed under the qui tam provisions of the False Claims Act. During the same period, the government paid out $597 million to the individuals who exposed fraud and false claims by filing a qui tam complaint, often at great risk to their careers.
    The number of lawsuits filed under the qui tam provisions of the Act has grown significantly since 1986, with 638 qui tam suits filed this past year. The growing number of qui tam lawsuits, particularly since 2009, has led to increased recoveries. From January 2009 to the end of fiscal year 2015, the government recovered $19.4 billion in settlements and judgments related to qui tam suits and paid whistleblower awards of $3 billion during the same period.
    “Many of the recoveries obtained under the False Claims Act result from courageous men and women who come forward to blow the whistle on fraud they are often uniquely positioned to expose,” said Principal Deputy Assistant Attorney General Mizer.
    In 1986, Senator Charles Grassley and Representative Howard Berman led successful efforts in Congress to amend the False Claims Act to, among other things, encourage whistleblowers to come forward with allegations of fraud. In 2009, Senator Patrick J. Leahy, along with Senator Grassley and Representative Berman, championed the Fraud Enforcement and Recovery Act of 2009, which made additional improvements to the False Claims Act and other fraud statutes. And in 2010, the passage of the Affordable Care Act provided additional inducements and protections for whistleblowers and strengthened the provisions of the federal health care Anti-Kickback Statute.
   Principal Deputy Assistant Attorney General Mizer also expressed his deep appreciation for the many dedicated public servants who investigated and pursued these cases – the attorneys, investigators, auditors and other agency personnel throughout the Department of Justice’s Civil Division and the U.S. Attorneys’ Offices, as well as the agency Offices of Inspector General and the many federal and state agencies that contributed to the department’s recoveries this past fiscal year.
    “The department’s lawyers and staff, together with our law enforcement partners in federal and state governments, work tirelessly and often overcome daunting challenges to achieve these successes on behalf of the taxpayers,” Mizer said.
    The government’s claims in the matters described above are allegations only; except where indicated, there has been no determination of liability.
    Source: U.S. Department of Justice release of 12/19/2015