Archive for August, 2013

Bank Chairman, Darryl Woods, Pleads Guilty to Using Public Funds to Purchase Luxury Vacation Condo in Fort Myers, Fl.

JEFFERSON CITY, Mo. – Tammy Dickinson, United States Attorney for the Western District of Missouri, announced that a Columbia, Mo., bank chairman pleaded guilty in federal court today to misleading federal investigators about his use of $381,000 in bank bailout funds to purchase a luxury condominium in Fort Myers, Fla.

“At a time when many other Americans were losing their homes, he was siphoning off public funds to buy a luxury vacation condo in Florida,” Dickinson said. “These federal funds were intended to help stablilize the economy during a fiscal crisis. Instead, this disgraced business leader took advantage of the situation to benefit himself and other bank executives, then lied to federal investigators in an attempt to hide his scheme.”

Darryl Layne Woods, 48, of Columbia, waived his right to a grand jury and pleaded guilty before U.S. Magistrate Judge Matt J. Whitworth to a federal information that charges him with making a false writing.

Woods was the chairman and chief financial officer of Mainstreet Bank in Ashland, Mo. He was also the chairman, president and majority shareholder of Calvert Financial Corporation, the bank holding company for Mainstreet Bank.

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New York-Based MRI Diagnostic Testing Company, Imagimed LLC, and William Wolf III and Dr. Timothy Greenen,Its Former Owners and Chief Radiologist to Pay $3.57 M to Resolve F.C.A. Allegations

New York-based Imagimed LLC, the company’s former owners, William B. Wolf III and Dr. Timothy J. Greenan, and the company’s former chief radiologist, Dr. Steven Winter, will pay $3.57 million to resolve allegations that they submitted to federal healthcare programs false claims for magnetic resonance imaging (MRI) services, the Justice Department announced today. Imagimed owns and operates fifteen MRI facilities, located primarily in New York state, under the name “Open MRI.”

Allegedly, from July 1, 2001, through April 23, 2008, Imagimed, Greenan, Wolf and Winter submitted claims to Medicare, Medicaid and TRICARE for MRI scans performed with a contrast dye without the direct supervision of a qualified physician. Since a potential adverse side effect of contrast dye is anaphylactic shock, federal regulations require that a physician supervise the administration of contrast dye when it is used for an MRI. Also, allegedly, from July 1, 2005, to April 23, 2008, Imagimed, Greenan, Wolf and Winter submitted claims for services referred to Imagimed by physicians with whom Imagimed had improper financial relationships. In exchange for these referrals, Imagimed entered into sham on-call arrangements, provided pre-authorization services without charge and provided various gifts to certain referring physicians, in violation of the Stark Law and the Anti-Kickback Statute.

“The Department of Justice is committed to guarding against abuse of federal healthcare programs,” said Stuart F. Delery, Assistant Attorney General for the Civil Division. “We will help protect patients’ health by ensuring doctors who submit claims to federal healthcare programs follow proper safety precautions at all times.”

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The Dos and Don’ts of Obtaining and Disclosing Company Documents when Filing a Whistleblower Case

Under the False Claims Act, whistleblowers are required to provide the government with “substantially all material evidence and information” in their possession upon filing a qui tam lawsuit.  This assists the government in performing an early analysis of the merits of the case.  As one would expect, the more compelling evidence of wrongdoing a whistleblower provides to the government, the more likely it is that the case will be successful.

A practical issue confronting whistleblowers who witness fraud by their employer is whether the whistleblower is permitted to gather workplace documents and electronic evidence of the fraud.  Many whistleblowers are still employed by the defendant when they blow the whistle, and they have access to this evidence.  So the question arises: May a whistleblower disclose otherwise confidential business information to his attorney and to the government?

Many defendants accused of defrauding the government believe their best defense is a good offense.  And that “offense” often consists of attacking the whistleblower.  Defendants frequently try to turn the tables on the whistleblower–and in the meantime shift the focus of the case away from their own fraudulent conduct–by accusing the whistleblower of “stealing” company documents and information.  Some even resort to suing the whistleblower once they learn of the lawsuit.

It is true that employees generally owe a duty of loyalty to their employers to keep proprietary business information confidential.  Fortunately, courts have recognized that there is an exception to this duty that permits an employee to gather and retain evidence when the employee has a good faith reason to believe his employer is engaged in fraudulent or illegal conduct.

Whistleblowers must be careful, however, in obtaining evidence to provide to the government.  Some general guidelines have developed over the years concerning to what extent an employee may gather evidence of fraud from his employer.

Whistleblowers should generally avoid obtaining and disclosing any of the following:

Privileged documents.  Communications between a client and his lawyers are considered privileged.  That means those communications are confidential and cannot be used as evidence.  (There are some exceptions to this privilege, such as when the privileged communications are used in furtherance of committing a crime or perpetrating a fraud.)  If the employer asks a lawyer for legal advice, or if the lawyer provides legal advice to the employer, those communications are privileged.  Even if a whistleblower has access to privileged communications in the regular course of his job, the whistleblower generally should not disclose those privileged communications to his lawyer or to the government.  Such a disclosure could torpedo the whistleblower’s case.

Documents and evidence accessed without authority.  Many times whistleblowers, by virtue of their position within a company, have the means to access all sorts of information even though the information is not generally available to them or used by them in the normal course of their job.  Rooting around in files or databases that are outside the scope of the employee’s ordinary duties can lead to problems for the whistleblower and possibly hurt his case.

Random documents and evidence.  A whistleblower is not doing himself any favors by downloading or copying massive amounts of data or documents that have nothing to do with the fraud.  The government wants quality, not quantity, and won’t be impressed simply because a whistleblower shows he is capable of accessing the employer’s databases or document files.

Recorded conversations.  Obviously a recorded conversation where an employee or even officer of a company makes incriminating statements can be a smoking gun.  However, many states (including Florida) do not permit conversations to be recorded unless everyone participating in the conversation consents to the recording.  This applies to phone calls as well as face-to-face conversations.

Whistleblowers should talk to an experienced qui tam lawyer before recording anything or the whistleblower runs a risk of ruining his potential case by illegally obtaining evidence, not to mention the risk of committing a crime.  In some qui tam cases, the government will “wire” a whistleblower who is still employed by the defendant in order to capture spoken evidence of the fraud.  But that is completely different—the government can do certain things that Joe Citizen cannot.  The Reporters Committee for the Freedom of the Press has a helpful overview of the various laws in this area at their website.

Gathering workplace evidence is an important part of successfully prosecuting a qui tam lawsuit, but it is also a potential minefield for whistleblowers.  Anyone who suspects that their employer is committing fraud against the government should promptly seek the advice of a lawyer experienced in qui tam litigation under the False Claims Act before taking any steps that could compromise their case and lead to legal troubles.

If you believe you have information regarding fraud against the government and are considering bring a False Claims Act case, please 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 Christopher Casper


Justice Department Sues South Dakota Drug Manufacturer, Dakota Laboratories LLC, for Improperly Producing Sterile Eye Drops

The government filed suit in the U.S. District Court for South Dakota against Dakota Laboratories LLC and its owner, Charles L. Voellinger, Sr., to block them from violating the Food, Drug and Cosmetic Act (FDCA) in connection with their alleged violations of Current Good Manufacturing Practices (CGMP).  The alleged violations concerned problems with the manufacture of eye drops that may have caused the products to be non-sterile.  The Justice Department filed the suit on behalf of the Food and Drug Administration (FDA).

“Consumers must be able to trust that drugs presented as sterile are, in fact, sterile,” said Stuart F. Delery, Assistant Attorney General for the Justice Department’s Civil Division.  “We cannot take the chance that a manufacturer’s failure to establish proper controls for sterile drug production could result in products becoming contaminated, placing consumers at risk of infection and potentially serious injury.”

In conjunction with the filing of the complaint, Dakota Laboratories agreed to settle the litigation and be bound by a Consent Decree of Permanent Injunction that prohibits them from committing violations of the FDCA.  The consent decree also acknowledges that Dakota Laboratories is no longer in operation, and requires that if they wish to resume manufacturing drug products in the future, the FDA first must determine that Dakota Laboratories’ manufacturing practices have come into compliance with the law.  The proposed consent decree, along with the complaint, has been filed with the court and is awaiting judicial approval.

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Ivan Alejo and Hugo Morales, a Patient Recruiter and Owner, Plead Guilty in $7 Million Health Care Fraud

A patient recruiter and a therapy staffing company owner pleaded guilty today in connection with a $7 million health care fraud scheme involving the now defunct home health care company Anna Nursing Services Corp.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Special Agent in Charge Michael B. Steinbach of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Office of Investigations’ Miami office made the announcement.

Ivan Alejo, 48, and Hugo Morales, 36, pleaded guilty before U.S. District Judge Jose E. Martinez in the Southern District of Florida to one count of conspiracy to commit health care fraud.  At sentencing, scheduled for Nov. 5, 2013, Alejo and Morales each face a maximum penalty of 10 years in prison.

Alejo worked as a patient recruiter at Anna Nursing, a home health care agency in Miami Springs, Fla., that purported to provide home health and therapy services to Medicare beneficiaries but in reality billed Medicare for expensive physical therapy and home health care services that were not medically necessary and/or were not provided.  Morales owned Professionals Therapy Staffing Services Inc., which provided therapists to Anna Nursing.\

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Shands Hospitals Pay $26 Million in Florida Whistleblower Case

The Department of Justice announced today that Shands Hospitals will pay $26 million to settle charges of over-billing to Medicaid/Medicare for inpatient care.  The whistleblower case was filed under the federal False Claims Act and the Florida False Claims Act.  It was unsealed today upon announcement of the settlement.

Attorney Chris Casper of the James Hoyer Law Firm served as co-counsel, along with lead attorney Marlan Wilbanks, for whistleblower Terry Myers.  Meyers is the president of a healthcare consulting firm called YPRO Corp, which conducted financial audits for Shands.

According to the Complaint, in 2006 and 2007, Shands hired Mr. Myers and his company to audit six of its hospitals to determine if Medicare and Medicaid rules were being followed. They were specifically hired to see if Shands’ patients met the necessary requirements set by Medicare and Medicaid before being billed for inpatient services at six different Shands hospitals– Shands Alachua General Hospital, Shands Jacksonville Medical Center, Shands at the University of Florida, Shands at Lakeshore, Shands at Live Oak and Shands at Stark Hospitals.

Serious billing, coding and compliance issues were uncovered by the whistleblower’s company. The overall YPRO results showed that a significant percentage of all of the Medicare and Medicaid patient records audited should not have been admitted to the hospital as inpatients. Hospitalizations are much more expensive to the Government than outpatient services. Accordingly, Shands had a financial incentive to increase hospital admissions because they can charge higher rates than they can charge for outpatient treatments.

Despite recommendations by YPRO to Shands for the hospital to self-report the findings to the government, Shands did not disclose the findings of the audits and continued many of the practices that Mr. Myers believed to be fraudulent and illegal.  That lack of action ultimately led the whistleblower to file suit on behalf of the government, under the False Claims Act, to recover taxpayer money he believed was fraudulently obtained by the company.

The $26 million represents only a partial settlement of the charges in the Complaint. The Government has not yet completed its investigation of Mr. Myer’s allegations regarding outpatient claims.  Litigation regarding those charges will continue.

As allowed under the False Claims Act, Mr. Meyers will be awarded a portion of the settlement for successfully bringing the case to light.


Keeping It Confidential: Can a Relator Remain Anonymous Throughout a Qui Tam Case?

As has been discussed before on this blog, whistleblowers play a critical role in reducing fraud against our government and protecting the American taxpayers, and they should be celebrated for their courage.  But, because of the potential workplace stigma and concerns of retaliation, whistleblowers often ask if they can protect their identity during a case and remain anonymous even after the case is resolved.  While there are some precautions that can be taken, the short answer is, “probably not.”  If a qui tam case is filed, the relator must be prepared that his or her identity will likely be revealed at some point during the process, with very limited exceptions.

Anonymity While Under Seal

The False Claims Act requires that every qui tam case be filed “under seal” which means that the existence of the case and all related information, including the relator’s identity, will be kept confidential during the seal period.  The relator’s identity will be disclosed to the government agents investigating the case, but no one else.  The main purpose of the case being under seal is to allow the government time to investigate the case without tipping off the defendant or the public about the allegations.

After the government completes its initial investigation, the case will be unsealed by the court.  If the government declines to intervene in the case, some relators will decide to dismiss the case rather than pursuing it on their own.  This is the most common time when relators seek anonymity, assuming that if they are not going to go forward with the case then there is no reason the defendant ever needs to know about it.  However, this is much easier said than done.

The decision to leave a case under seal, meaning it would never be put on the public court docket and therefore never discovered by the defendant, comes down to balancing the legal presumption of public access to the courts versus the relator’s needs to remain anonymous.  U.S. ex rel. Wenzel v. Pfizer, 881 F.Supp.2d 217, 221 (D.Mass. 2012).  Theoretically, if a relator has a legitimate and particular concern about personal physical or economic harm, then a court can rule that the complaint should remain under seal or at least redacted to protect the relator’s identity.  Id.  In practice, this burden is almost never met and cases are almost always unsealed.  The reason is that generic or hypothetical concerns are not enough to supersede the public’s right to an open court system.  See U.S. v. King Pharm., 806 F.Supp.2d 833, 841 (D.Md. 2011); U.S. ex rel. Permison v. Superlative Technologies, Inc., 492 F.Supp.2d 561, 564 (E.D. Va. 2007);   Even if the relator’s concerns are realistic but generalized (meaning they do not include specific, valid threats against the relator), the case will be rarely be left sealed or even permanently redacted.

Filing as a John Doe Relator

The most common strategy to avoid identity-disclosure when a case is unsealed is to file the case as a “John Doe relator.”  This means literally using the name “John Doe” or “Jane Doe” instead of the relator’s real name, or creating a corporation or partnership to file the complaint.  While using a pseudonym may alleviate the concerns of the relator’s identity becoming public for some period of time, this strategy can present significant complications and issues if a case is litigated.  Therefore, it should not be employed without great consideration.

If a case is resolved through negotiations and settlement discussions – without the court’s involvement – then the pseudonym strategy may be effective.  For example, James Hoyer was recently involved in an intervened and settled case where a relator was identified only as a corporate partnership with one representative member publicly identified.  The partnership effectively concealed the members’ identities throughout the several-years-long negotiations.  But, when the case was ultimately resolved, each member was required to individually sign the final settlement agreement – thereby revealing their names to the defendant and the public.

If a case is actively litigated, it is unlikely that a relator could maintain anonymity throughout the proceedings even if it is filed under a “John Doe” or anonymous corporate name.  Traditional litigation often involves challenges to a relator’s standing to bring a case, defenses associated with the relator’s knowledge of or involvement in the fraud, depositions of the relator, and extensive discovery requests and production.  A defendant cannot fully defend itself without knowing who brought the allegations and the opportunity to question the individual in person.  Of course, if a case goes trial, the relator is typically the primary witness for the prosecution and would need to reveal him or herself to testify in court.  Accordingly, a relator should expect his or her identity to be disclosed at some point during litigation.


Ultimately, there is simply no way that experienced relator’s counsel can guarantee that a relator’s identity will be kept confidential throughout the life of a qui tam case.  The public disclosure of a relator’s identity is part of the reason why relators are financially incentivized to come forward – to counter-balance the risk that is inherent in being a whistleblower.  A relator’s desire to remain anonymous should be part of a relator’s careful considerations when deciding whether to bring a case and should be discussed in detail with experienced counsel before filing a qui tam case.

If you believe you have information regarding fraud against the government and are considering bring a False Claims Act case, please 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


The Role of a Relator and Relator’s Counsel in a Whistleblower Case

The James Hoyer Qui Tam Team

The James Hoyer Qui Tam Team

Whether from personal experience, reading the news or just watching television, most people have some understanding of the basic legal case: a plaintiff sues a defendant, both sides have lawyers that file pleadings and exchange evidence, eventually the case settles or goes to trial where a judge or jury reaches a verdict.  The process repeats time and again in courtrooms throughout the country in a relatively predictable pattern.

Whistleblower, or qui tam, cases are entirely different.  The roles of a relator and his or her counsel are unique from any other civil case, and being prepared for the unusual role can make a case much more manageable for a relator.  There are several common steps in almost every qui tam case where the relator and relator’s counsel will have specific roles to fulfill:

1.      Preparing and Initiating the Complaint

There is typically a flurry of activity right after a potential relator first contacts his or her attorney because time is of the essence in getting a qui tam case on file.  A relator can greatly assist the process by having all the documents and evidence organized, and by being prepared to do an in-depth factual review of the allegations at one of the first meetings with counsel.

Relator’s counsel will prepare all of the documents, file the complaint, and serve it on the government.  It is very important for the relator to remember that the case initially will not be served on the defendant and that the case will be under seal from the moment it is filed, so the relator’s obligations of confidentiality begin immediately.

2.      Relator’s Meeting

Shortly after filing a complaint – typically within several weeks – the government will contact the relator’s counsel to set up an initial meeting with the relator.  The meeting may be attended by only one government attorney or several attorneys or investigators from different parts of the government, depending on the strength and type of allegations that are raised.  The Relator’s Meeting is arguably the most important moment for the relator – it is his or her opportunity to present the allegations to the government and convey the severity of the fraud.

The Relator’s Meeting is also the relator’s first impression on the government as a potential witness if the case were to go to trial, so the relator and his or her counsel will prepare extensively for this meeting.  The government attorneys are typically very thorough, so the meeting may be long and comprehensive.  A relator should prepare to be very candid in this meeting, so if he or she has any concerns about information that may be disclosed, it is essential to discuss how to handle that with his or her counsel before the meeting.

3.      Government’s Investigation

After the relator’s meeting, the government may have immediate follow up requests from the relator, or it may begin its own investigation.  This step is where experienced relator’s counsel is the most important, as the relator’s counsel will maintain a relationship with the government throughout this phase.  The government’s investigation can take several months or several years.

During this time, the relator may be called on to assist in the investigation in various ways, particularly if the relator is still working for the defendant company.  The government may seek assistance identifying witnesses, reviewing documents or even recording important meetings and conversations.  The relator should remain patient and fully cooperative with the government throughout this phase, in accordance with his or her counsel’s advice.

4.      After a Government Intervention or Declination

If the government chooses to intervene in the case and pursue a recovery, the role of the relator and relator’s counsel will depend entirely on the facts of the case.  It may be frustrating to know that the case is progressing and the relator has little involvement, but that is a reality of qui tam cases and the relator should be prepared for that possibility.

If the government declines, the relator and his or her counsel will decide how to proceed based on the facts of the case and the case’s unique circumstances.  If the case moves forward, the procedure will resemble a typical civil case as the defendants will be served with the complaint and both sides will begin to work towards a final resolution.

If you believe you have information regarding fraud against the government and are considering bring a False Claims Act case, please 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


Dr. Fata, Owner of Michigan Hemotology and Oncology Centers Charged in $35 Million Medicare Fraud Scheme

Dr. Farid Fata, 48, of Oakland Township, Michigan, was arrested this morning and charged in a criminal complaint for his role in a health care fraud scheme which involved submitting false claims to Medicare for services that were medically unnecessary, including chemotherapy treatments.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division, U.S. Attorney Barbara L. McQuade of the Eastern District of Michigan, FBI Special Agent in Charge Robert D. Foley III and Special Agent in Charge Lamont Pugh of the Health and Human Services Office of Inspector General (HHS-OIG) made the announcement.

“Dr. Fata allegedly perpetrated a brazen and dangerous fraud that time and again jeopardized his patients’ wellbeing,” said Acting Assistant Attorney General Raman. “The conduct alleged today is chilling, with the defendant endangering patient safety through misdiagnoses, over- or mis-prescription of chemotherapy and other treatments, and delay of hospital care for patients with serious injuries. Through the work of our dedicated prosecutors and agents, today we have taken swift action to safeguard patient safety and hold the defendant to account.”

“Our first priority is patient care,” said U.S. Attorney McQuade. “The agents and attorneys acted with great attention to detail to stop these allegedly dangerous practices as quickly as possible, and we have set up a victim hotline so that patients can access their files and get questions answered.”

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Department of Justice Sues Bank of America for Defrauding Investors in Connection with Sale of Over $850 Million of Residential Mortgage-Backed Securities

Attorney General Eric Holder and U.S. Attorney for the Western District of North Carolina Anne M. Tompkins announced today that the United States has filed a civil lawsuit against Bank of America Corporation and certain of its affiliates, including Merrill Lynch, Pierce, Fenner & Smith f/k/a/ Banc of America Securities, LLC, Bank of America, N.A., and Banc of America Mortgages Securities, Inc. (collectively “Bank of America”). The complaint alleges that Bank of America lied to investors about the relative riskiness of the mortgage loans backing the residential mortgage-backed securities (RMBS), made false statements after intentionally not performing proper due diligence and filled the securitization with a disproportionate amount of risky mortgages originated through third party mortgage brokers.

This announcement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group and is accompanied by an announcement by the Securities and Exchange Commission (SEC) that it has filed civil charges in federal court in Charlotte, N.C. against Bank of America for defrauding investors.

“Today’s filing marks the latest step forward in the Justice Department’s ongoing efforts to hold accountable those who engage in fraudulent or irresponsible conduct,” said Attorney General Eric Holder. “As this action proves, President Obama’s Financial Fraud Enforcement Task Force will continue to take an aggressive approach to combating financial fraud and uncovering abuses in the residential mortgage-backed securities market. As we proceed with this case, and pursue a range of additional investigations, we will continue to use every tool, resource, and appropriate authority to ensure stability, accountability, and – above all – justice for those who have been victimized.”

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