Archive for June, 2013

Supreme Court Denies Cert in Allison Engine Retroactivity Case

Supreme CourtAmid a series of high-profile and highly anticipated decisions this week, the Supreme Court made a relatively minor decision with potentially far-reaching consequences for the False Claims Act on June 24, 2013.  The highest court in the United States denied a petition for certiorari in a case called Allison Engine Company v. United States ex rel. Sanders.  The decision, commonly called “denying cert,” means that the Supreme Court decided not to hear an appeal of a Sixth Circuit opinion in the case.  The question before the Court was whether Section 3729(a)(1)(B) of the False Claims Act applies retroactively to cases pending on or after June 7, 2008, where allegedly no false claims for payment were pending on or after that date. Read More…


What Does “Under Seal” Really Mean?

The federal False Claims Act provides that when a new case is filed, there are certain rules that must be followed to keep the case confidential and to prevent the defendant from finding out that the government is conducting an investigation.  The procedure, known as “filing under seal,” requires that a complaint “shall be filed in camera, shall remain under seal for at least 60 days, and shall not be served on the defendant until the court so orders.”  31 U.S.C. § 3730(b)(2).  This part of the False Claims Act seems to be a mostly procedural rule for lawyers to follow, but in reality, it puts very important obligations on the relator too.

So what does “under seal” really mean to a relator?

Relator’s Obligations

The False Claims Act’s filing-under-seal requirement exists to give the government time to investigate the alleged fraud, determine whether it is already investigating the alleged fraud, and decide whether it will prosecute the suit itself before the target is tipped off.   Various court interpretations make clear that the seal requirement does not impart a requirement of absolute silence about the alleged fraudulent conduct.   Such a requirement would place a burden on the Relator that exceeds the language or purpose of the False Claims Act.

As a practical matter, however,  prudent practice is to exercise an abundance of caution when discussing any aspect of a False Claims Act case or the underlying allegations with anyone other than the relator’s counsel and the government agents assigned to the case.  Most importantly, a Relator should never disclose the actual filing of a qui tam case without speaking with their attorney first.  Although a qui tam case is only under seal by statute for the first sixty days, the cases often remain under seal for months or even years while the government investigates, so it is important for a relator to know the exact status of a qui tam case at all times.  During the period of time that a case is under seal, a relator must be prepared to exercise a level of discretion that may be difficult to maintain, but is of utmost importance to the success of a case.

Recent Case Law

The most recent case to analyze a relator’s seal obligation is U.S. ex rel. Gale v. Omnicare out of the Northern District of Ohio, Case No. 1:10-cv-127 (June 7, 2013).  In Gale, the Defendant argued that the Relator had violated the seal requirement by disclosing the lawsuit to his wife in private, and by making vague statements about lawyers or a lawsuit to two former Omnicare colleagues.   Omnicare argued that if the relator so much as mentions any aspect of a qui tam case – even just that he has lawyers or is involved in a lawsuit with the defendants – then the case must be dismissed.  Omnicare relied largely on United States ex rel. Summers v. LHC Group, Inc., a 2010 Sixth Circuit case, to make this argument.  But in Gale, the court ruled that Omnicare’s interpretation of the law went too far.

In Summers, the plaintiff brought a qui tam action for Medicare fraud but did not file her complaint under seal.  Because of this error, the defendants found out about the case and filed a Motion to Dismiss twenty-five days after Summers’s filing, well within the minimum sixty-day seal period.  The district court dismissed the case and the Sixth Circuit affirmed.  The Sixth Circuit held that “violations of the procedural requirements imposed on qui tam plaintiffs under the False Claims Act preclude such plaintiffs from asserting qui tam status.”  In simple terms, that means that if a relator does not follow the filing procedures, he cannot bring the qui tam case.

But, the Summers court did not go so far as to consider exactly how limiting the seal may or may not be.  Two other courts have considered the issue, however.  The Fourth Circuit has found that “the seal provisions limit the relator only from publicly discussing the filing of the qui tam complaint. Nothing in the FCA prevents the qui tam relator from disclosing the existence of the fraud.”  Am. Civil Liberties Union v. Holder, 673 F.3d 245, 254 (4th Cir. 2011).   Years before that, the Ninth Circuit determined that the seal did forbid a relator from “making statements to the Los Angeles Times about the existence and nature of her qui tam suit.”  U.S. ex rel. Lujan v. Hughes Aircraft Co., 67 F.3d 242, 244 (9th Cir.1995).   The legislative history of the modern False Claims Act also reflects that Congress adopted the seal provision “in response to Justice Department concerns that qui tam complaints filed in open court might tip off targets of ongoing criminal investigations.”  S.Rep. No. 99-345, at 16 (1986).

After a detailed discussion,  the Gale court determined that Gale’s comments to his wife do not constitute public statements, even if his wife happened to also work for Omnicare.  Likewise, a vague reference to meeting with attorneys – regardless of what the listener thought the statement meant – was not a disclosure of the filing of the qui tam suit.  Ultimately, the court reached the most recent state of the law on the seal requirements, finding that all of the previous case law is consistent with one overarching principle: “[T]he False Claims Act’s seal requirements prevent the relator from publicly discussing the filing of the qui tam complaint, but not the nature and existence of the fraud.”  

Contact Us ButtonIf you believe you have information regarding fraud against the government and are considering bringing a False Claims Act case, please contact James Hoyer for an evaluation of your claims.

Written by Jesse Hoyer


United Technologies Corporation Liable for Over $473 Million for Inflating Prices on Aircraft Engines Sold to Air Force

The U.S. District Court for the Southern District of Ohio found United Technologies Corporation liable for over $473 million in damages and penalties arising out of a contract to provide the Air Force with fighter aircraft engines for F-15 and F-16 aircraft between 1985 and 1990, the Justice Department announced today. United Technologies, which is based in Connecticut, provides a broad range of high-technology products and services to the global aerospace and building systems industries.

“The department will relentlessly pursue justice against those who knowingly submit false claims to the government and abuse the public contracting process,” said Stuart Delery, Acting Assistant Attorney General for the Civil Division. “It is vital that companies who do business with the government provide full and accurate information, and if they do not, they will pay the consequences.”

The government alleged that UTC’s proposed prices for the engine contract misrepresented how UTC calculated those prices, resulting in the government paying hundreds of millions more than it otherwise would have paid for the engines. Specifically, the government alleged that UTC failed to include in its price proposal historical discounts that it received from suppliers, and instead knowingly used outdated information that excluded such discounts.

The government filed suit against UTC in 1999 under the False Claims Act and the common law, and those claims were tried, without a jury, in 2004. An initial decision by the district court in 2008 found UTC liable under the False Claims Act, but did not award any damages. The district court also dismissed the government’s common law claims. That decision was appealed by both the government and UTC. In 2010, the Court of Appeals for the Sixth Circuit affirmed the district court’s finding that UTC was liable under the False Claims Act, but reversed and remanded the case to the district court to recalculate the government’s damages and to reconsider the government’s common law claims.

In yesterday’s ruling, the district court awarded the government False Claims Act damages and penalties of $364 million, which is the highest recovery obtained by the government in a case tried under the Act. The court also awarded an additional $109 million in damages on the government’s common law claims. With the addition of prejudgment interest on the latter claims, which the court has yet to calculate, the government anticipates that the total judgment against United Technologies could be well in excess of half a billion dollars.
This case is being handled by the Civil Division of the Department of Justice. The lawsuit is captioned United States of America v. United Technologies Corp., No. 3:99-cv-093 (S.D. Ohio).


Kenny Msiakii, Owner of Joy Supply and General Services, a Louisiana-based Health Care Company Sentenced to 97 Months in Connection with $6.7 Million Medicare Fraud

The owner and operator of a Louisiana-based durable medical equipment (DME) company was sentenced today to serve 97 months in prison for his role in a $6.7 million Medicare fraud scheme, announced Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Kenneth Magidson of the Southern District of Texas; and Special Agent in Charge Mike Fields of the Dallas Regional Office of the U.S. Department of Health and Human Service’s Office of the Inspector General (HHS-OIG).

Kenny Msiakii, 45, of Houston, was sentenced by U.S. District Judge Nancy Atlas in the Southern District of Texas. In addition to his prison term, Msiakii was sentenced to serve three years of supervised release and ordered to pay $2.5 million in restitution. On Dec. 13, 2012, a federal jury found Msiakii guilty of eight counts of health care fraud.

According to court documents, Msiakii was the owner and operator of Joy Supply and General Services, a company based in Shreveport, La., that purported to provide orthotics and other DME, including power wheelchairs, to Medicare beneficiaries.

Msiakii used Joy Supply’s Medicare provider number to submit claims to Medicare for DME, including orthotic devices, that were medically unnecessary and, in some cases, never provided. Many of the orthotic devices were components of “arthritis kits” and purported to be for the treatment of arthritis-related conditions; however, the devices were neither medically necessary nor appropriate for such conditions. The arthritis kit generally contained a number of orthotic devices including braces for both sides of the body and related accessories such as heat pads.

Read rest of story here


Chicago Hospital Accused of Cutting Throats for $160,000

A surgeon at Chicago’s Sacred Heart Hospital cut a hole in Earl Nattee’s throat on Jan. 3, the day before he died. It’s not clear why.

The medical file contained no explanation of the need for the procedure, called a tracheotomy, according to a state and federal inspection report that quotes Sacred Heart’s chief nursing officer as saying it happened “out of the blue.”Tracheotomies are typically used to open an air passage directly to the windpipe for patients who can’t breathe otherwise.

Chicago Hospital Seen Cutting Throats for $160,000 From Medicare


 Now, amid a federal investigation into allegations of unneeded tracheotomies at the hospital, Nattee’s daughter, Antoinette Hayes, wonders whether her father was a pawn in what an FBI agent called a scheme to defraud Medicare and Medicaid.

“My daddy said, ‘They’re killing me,’” Hayes recalled, in reference to the care he received at the hospital.

Read rest of story here


Does Signing an Employment Release Have an Effect on a Potential a Qui Tam Case?

 Employment Releases and Impact on Qui Tam Case

Termination of EmploymentPicture this common scenario: A company employee has reported suspicions of fraud up the chain of command and suddenly finds herself the subject of false or unfair allegations of misconduct and poor performance. As the employee is being pushed out the door, the company offers the employee an attractive severance package if the employee signs a broad waiver releasing any claims against the company that the employee may have. Standard procedure? Maybe. A company trying to protect itself from False Claims Act litigation? Probably. So what should the employee do? And what does it mean for the possibility of filing a qui tam case if the employee already signed a release?

There is no prohibition against a relator proceeding with a qui tam case if the relator’s case is filed before the relator signs a release. The False Claims Act – the law which allows for whistleblower or “qui tam” cases – specifically provides that, once a qui tam case has been started, it can only be dismissed with permission of the government and the court. 31 U.S.C. 3730(b)(1); see also U.S. ex rel. Ritchie v. Lockheed Martin Corp., 558 F.3d 1161, 1168 (10th Cir.2009)(“[T]he statute only governs the enforceability of settlement agreements made after the filing of a qui tam claim.”) This means that even if a relator signs a release after filing a qui tam case, the release cannot impact the status of the case, regardless of what the release language says.

However, there may be significant obstacles for a relator who signs a release before filing a qui tam case. (These documents are called “prefiling releases” in legal-speak.) The False Claims Act statute does not provide guidance on prefiling releases and the United States Supreme Court has yet to weigh in on this issue in the False Claims Act context. But, in 1987, the Supreme Court did issue a ruling about contracts in general which heavily influences how releases are evaluated in a qui tam case. The Supreme Court held that “a promise is unenforceable if the interest in its enforcement is outweighed in the circumstances by a public policy harmed by enforcement of the agreement.” Town of Newton v. Rumery, 480 U.S. 386, 392 (1987) This created the “Rumery test,” which is a balancing test to ensure public policy is not jeopardized by enforcement of any contract or agreement.

The Rumery test has guided how courts evaluate whether to allow a qui tam case to proceed if a prefiling release was signed. There are two main cases which have used the Rumery test to set up the balancing test that exists for qui tam cases today.

In a 1995 case called U.S. ex rel. Green v. Northrop Corp., a court evaluated a release that an employee signed following an employment termination lawsuit against Northrop, but before the employee brought a qui tam case. 59 F.3d 953 (9th Cir.1995). The Ninth Circuit held that it would be against public policy to enforce the settlement agreement and prohibit Green’s qui tam suit, largely because “the government only learned of the allegations of fraud and conducted its investigation because of the filing of the qui tam complaint.” Id. at 966.

Just a few years later, the same court did enforce a release that an employee had signed before filing a qui tam case. U.S. ex rel. Hall v. Teledyne Wah Chang Albany, 104 F.3d 230 (9th Cir.1997). In that case, the government knew about the allegations prior to the qui tam suit, so the court found that there was no public policy reason to allow the case to go forward in violation of the release agreement. The court in Hall found, “The federal government was aware of Hall’s allegations regarding false certifications. Therefore, the public interest in having information brought forward that the government could not otherwise obtain is not implicated.”

The result of the Rumery, Hall, and Green decisions is a so-called “government knowledge exception.” In 2010, the “government knowledge exception” was explained very concisely:

When the government is unaware of potential FCA claims, the public interest favoring the use of qui tam suits to supplement federal enforcement weighs against enforcing prefiling releases. But when the government is aware of the claims prior to suit having been filed, public policies supporting the private settlement of suits heavily favor enforcement of a prefiling release.

U.S. ex rel. Radcliffe v. Perdue Pharma., L.P., 600 F.3d 319, 332 (4th Cir.2010).

In practice, this means that whether a prefiling release will stop a potential relator from bringing a qui tam a case depends on whether the government would have had knowledge of the fraud if the case was not filed. This is a difficult evaluation to make in any case. As a result, a very careful fact-specific evaluation needs to be done prior to filing a qui tam case, so it is very important that a relator immediately tells his or her lawyer about the existence of any release, or about any pending release that the relator is considering signing.

If you believe you have information regarding fraud against the government and are considering bringing a False Claims Act case, contact James Hoyer for an evaluation of your claims. Click here for more information about the firm and to submit your information electronically, or you may contact our office at 813-397-2300.

Written by Jillian Estes


Orlando TV Investigates Halifax Hospital

The ABC TV station in Orlando reported on allegations that Halifax Hospital put patient’s safety at risk, through unnecessary surgeries and inappropriate admissions, in order to get more money from Medicare and Medicaid. The allegations are part of a whistleblower lawsuit, in which the James Hoyer Law Firm is co-counsel.  The suit was filed by Halifax employee  Elin Kunz.  Kunz discovered the company was over-billing Medicare and tried to get the administration to correct the problem, but she says when they refused, she decided to blow the whistle.  WFTV 9 talked to Kunz in this investigative report to expose the allegations.


The Whistleblower Experience

Whistleblowers make a brave decision to reject silence in order to expose wrongdoing and fraud against the government.  It’s not easy, but it is important.  Successful whistleblower cases return hundreds of millions of taxpayer dollars to the government each year.  Whistleblowers are compensated with a percentage of those returns, but moving forward with a case is no guarantee and should not be taken lightly.


60 Minutes Investigates Medical Fraud

Over-billing, unnecessary surgeries and procedures, improper admissions — these are serious issues of concern driving up the cost of medical care for all of us.  They are also the key issues in a growing number of whistle-blower lawsuits being filed by medical workers and hospital employees who witness this type of fraud. It costs taxpayers billions of dollars a year in improper Medicare and Medicaid payments.  60 Minutestook a hard look at one hospital chain accused of pressuring doctors to admit patients regardless of their medical needs.  Watch the story here to learn more.

If you know of Medicare or Medicaid fraud against the government contact the James Hoyer whistleblower law firm for an evaluation of your case.


Former Wellcare Executives Found Guilty of Fraud Charges

Four WellCare Executives were found guilty on several criminal counts in a case that started, in part, with a whistleblower suit filed by James Hoyer Law Firm client Clark Bolton.  Qui tam cases filed by Bolton and three other whistleblowers led to a civil settlement of $137.5 million between the Department of Justice and WellCare.  That settlement resolved claims that WellCare overcharged Medicaid and knowingly kept over-payments from Florida’s Medicaid program.

The criminal trial now brings the case full circle with this jury verdict. The four WellCare Corporate Executives were charged with multiple counts of medical fraud, conspiracy and making false statements.  While the defendants were found guilty of medical fraud, the jury was unable to reach verdicts on the conspiracy charges.

The Tampa Tribune reports that the trial of the four former WellCare executives on federal Medicaid fraud charges lasted two-and-a-half months. Prosecutors listed more than 100 witnesses and presented reams of evidence in the forms of emails and electronic spreadsheets and accounting ledgers.

Those charged in the case were former WellCare Chief Executive Officer Todd Farha; Chief Financial Officer Paul Behrens; William Kale, vice president of Harmony Behavioral Health, a WellCare subsidiary; and Peter Clay, vice president of medical operations.

Read rest of story here.