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 StopMedicareFraud.gov, 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 www.stopfraud.gov.
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 individuals –
BlueWave’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
