Archive for August, 2017

The False Claims Act’s Anti-Retaliation Provision Protects Whistleblowers Who Refuse To Take Part in Fraud

Second Circuit Court of AppealsIn late July, the Second Circuit United States Court of Appeals issued an opinion captioned Fabula v. American Medical Response, Inc. that should provide some comfort for whistleblowers who are contemplating bringing a False Claims Act case in connection with their refusal to take part in a potentially fraudulent scheme.

The Fabula court was presented with two issues:

  1. whether the whistleblower had adequately pled that the defendant had submitted false claims for reimbursement to the Medicare and Medicaid programs; and
  2. whether the whistleblower engaged in protected activity when he refused to violate the False Claims Act.

We’re going to focus on issue number two in this blog, as it pertains to the breadth of whistleblower protected activity covered by the False Claims Act’s anti-retaliation provision.

The Whistleblower in Fabula

First, a little background.  The whistleblower in Fabula was an Emergency Medical Technician, or “EMT” for short, who worked for the defendant American Medical Response, Inc., or “AMR.”  He alleged that AMR defrauded Medicare by falsely certifying ambulance transports as medically necessary, and by submitting claims that it knew were not properly reimbursable by Medicare.

For example, Fabula reported that he once assisted in transporting “an obese patient who ‘had no medical reason to be sent to the hospital, he simply wanted to go there.’ The patient was able to walk himself to the stretcher and climb on unassisted.”  Opinion, page 9 (citations omitted).  Despite the lack of medical need, an “AMR supervisor instructed Fabula to insert information about the patient’s previous surgeries to justify his transport to the hospital.”  Id.

This type of instruction was allegedly part of a routine practice where AMR  required EMTs to revise Patient Care Reports, or “PCRs,” to include false statements as to the medical necessity of the service in order to try to get the claims paid.  The Fabula whistleblower knew that these false statements were being used to seek Medicare reimbursement so he refused to revise the PCRs despite being warned that his failure to revise the reports would result in his termination.  Sure enough, AMR made good on its threat and fired Fabula shortly after a final refusal to alter a PCR.

The False Claims Act’s Anti-Retaliation Provision

The False Claims Act’s anti-retaliation provision provides:

[a]ny employee…shall be entitled to all relief necessary to make that employee…whole, if that employee…is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment because of lawful acts done by the employee…in furtherance of an action under this section or other efforts to stop 1 or more violations of [the False Claims Act].

To invoke this provision’s protection, whistleblowers generally have to show that:

  1. he or she engaged in activity protected under the statute,
  2. the employer was aware of such activity, and
  3. the employer took adverse action against the whistleblower because he or she engaged in the protected activity

The Legal Impact of Fabula

In Fabula, the issue was whether the EMT’s refusal to alter the PCRs constituted an “activity protected under the statute.”  The trial court said “no,” finding instead that “mere refusal to complete the PCR, without other affirmative acts to stop the alleged fraud, is not protected activity.”  Opinion, page 54.

The Second Circuit reversed the trial court, relying on the plain language of the anti-retaliation provision quoted above.  The Fabula court held that the whistleblower’s “refusal to engage in the fraudulent scheme, which under the facts as pled was intended and reasonably could be expected to prevent the submission of a false claim to the government, can constitute protected activity under the statute.” Opinion, page 55.

The Fabula court explained that the EMT’s allegation that he refused to falsify the PCR as demanded by his

AMR supervisor was plainly in furtherance of an effort to stop a False Claims Act violation.  This wasn’t a case where the whistleblower “did not simply omit, fail, or neglect to fill out” paperwork used in a fraud scheme. Opinion, page 55.  To the contrary, “he verbally refused to alter the document as requested by AMR and, despite AMR’s threat of termination, failed to subsequently ‘arrange a time for reconciliation and transmission of’ that PCR.”  Opinion, pages 55-56.

AMR argued that the EMT could not state a claim because he did not do enough to try to stop the false claims.  The Fabula court overcame that argument by pointing to the provision that only requires that the whistleblower make efforts “to stop 1 or more violations” of the False Claims Act.  Here, the EMT’s conduct made it “difficult, or even impossible, for AMR to file a false claim for that particular run, thus preventing or hindering at least one violation of the [False Claims Act].” Opinion, page 57.

The Second Circuit also looked to Congressman Howard L. Berman’s congressional testimony, which made the point  that § 3730(h) was amended “so that it is clear that it covers . . . retaliation against not only those who actually file a qui tam action, but also against those who plan to file a qui tam that never gets filed, who blow the whistle internally or externally without the filing of a qui tam action, or who refuse to participate in the wrongdoing.”  Opinion, pages 58-59.

The Fabula court further rejected AMR’s argument that the anti-retaliation provision only applies to “complaints to [an] employer’s management or in-house counsel, reports to the media, or a reasoned explanation to supervisors that what they were asking him to do violated the law and should cease.” Opinion, page 60.  As alluded to above, the Fabula court found that the False Claims Act “broadly protects efforts to stop even a single violation of the FCA.”  Opinion, page 61.

Finally, the Second Circuit rejected AMR’s attempt to “draw an arbitrary boundary between efforts that take the form of ‘internal reporting to a supervisor or company compliance department’ and those that amount to ‘refusals to participate in the misconduct that leads to the false claims,’” noting that “[t]here is, at best, a hair’s-breadth distinction between complaining internally that a practice is illegal under the FCA and advising a supervisor of one’s refusal to engage in that illegal practice.” Opinion, page 59.

The Fabula court’s common sense approach to establish a broad False Claims Act anti-retaliation provision should help encourage more whistleblowers to come forward by providing robust protection for when they refuse to engage in potentially fraudulent conduct.


Acting Manhattan U.S. Attorney Announces $13.4 Million Settlement Of Civil Healthcare Fraud Lawsuit Against US Bioservices Corp

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Scott J. Lampert, Special Agent in Charge of the U.S. Department of Health and Human Services’ Office of Inspector General for the New York Region (“HHS-OIG”), announced that the United States has settled a civil fraud case against US BIOSERVICES CORP. (“US BIO”) pursuant to which US BIO will pay a total of $13.4 million. The settlement resolves claims that US BIO violated the Anti-Kickback Statute and the False Claims Act by participating in a kickback scheme with Novartis PharmaceuticalS Corp. (“Novartis”) relating to the NOVARTIS drug Exjade. Specifically, the United States’ Complaint alleges that US BIO and NOVARTIS entered into a kickback arrangement pursuant to which US BIO was promised additional patient referrals and related benefits in return for refilling a higher percentage of Exjade than the two other pharmacies that also dispensed Exjade. The settlement will also resolve numerous state law civil fraud claims.

Yesterday, Chief U.S. District Judge Colleen McMahon approved a settlement stipulation to resolve the Government’s claims against US BIO. Under the settlement, US BIO is required to pay approximately $10.6 million to the United States and has made extensive admissions regarding its conduct. Further, as part of the settlement, US BIO will pay approximately $2.8 million to resolve the state law civil fraud claims. In prior lawsuits, the Government sued NOVARTIS and the two other pharmacies that participated in this same Exjade kickback scheme. The Government settled those lawsuits, pursuant to which NOVARTIS paid $390 million, the two other pharmacies paid $75 million, and NOVARTIS and the pharmacies made extensive admissions regarding their conduct.

Acting Manhattan U.S. Attorney Joon H. Kim said: “The integrity of the federal healthcare system requires that all providers, including pharmacies like US Bioservices, refrain from entering into kickback relationships. When healthcare providers accept kickbacks, they violate the law, subject what should be health-based decision-making to the influence of profit-seeking drug manufacturers, and thereby put their own financial interests ahead of the interests of their patients. This Office will continue to use its law enforcement tools to pursue healthcare providers who accept kickbacks or otherwise put their profits ahead of patient safety.”

Click here to read the whole story from the Department of Justice.


U.S. Recovers More Than $12 Million In False Claims Act Settlements For Kickback Scheme

Acting United States Attorney Gregory G. Brooker today announced that Sightpath Medical, Inc. (n/k/a Sightpath Medical, LLC) (“Sightpath”), TLC Vision Corporation (n/k/a TLC Vision (USA, LLC)) (“TLC”) (collectively the “Sightpath Entities”) and their former CEO, JAMES TIFFANY, have agreed to pay more than $12 million to the United States to resolve kickback allegations under the False Claims Act (“FCA”). The United States also intervened in an underlying lawsuit against the Cameron-Ehlen Group, Inc. d/b/a Precision Lens (“Precision Lens”), Precision Lens’ owner PAUL EHLEN, and JITENDRA SWARUP.

“Medicare beneficiaries depend on their physicians to make decisions based on sound medical judgment,” said Assistant U.S. Attorney Chad Blumenfield. “Our office will take decisive action to address allegations that medical providers are receiving improper financial benefits that could influence medical decision making. We are grateful to our law enforcement partners for their excellent work in investigating this matter.”

“This settlement is an outstanding result and represents the third major False Claims Act case successfully handled by this Office in the last three months. These types of cases remain a top priority of our Office, I applaud the hard work and dedication of the Civil Frauds Unit and the agencies involved in the case,” said Acting U.S. Attorney Gregory Brooker.

“The FBI together with our law enforcement partners aggressively investigate companies and individuals who engage in kickback schemes at the expense of Medicare and other federal health care programs,” said FBI Special Agent in Charge Richard T. Thornton of the Minneapolis Division. “Those who seek to exploit the nation’s health care system through fraud will be held accountable.”

Click here to read the rest of the story from the Department of Justice.


Mylan Agrees to Pay $465 Million to Resolve False Claims Act Liability for Underpaying EpiPen Rebates

Pharmaceutical companies Mylan Inc. and Mylan Specialty L.P. have agreed to pay $465 million to resolve claims that they violated the False Claims Act by knowingly misclassifying EpiPen as a generic drug to avoid paying rebates owed primarily to Medicaid, the Justice Department announced today. Mylan Inc. and Mylan Specialty L.P. are both wholly owned subsidiaries of Mylan N.V., which is headquartered in Canonsburg, Pennsylvania.

“This settlement demonstrates the Department of Justice’s unwavering commitment to hold pharmaceutical companies accountable for schemes to overbill Medicaid, a taxpayer-funded program whose purpose is to help the poor and disabled,” said Acting Assistant Attorney General Chad A. Readler of the Department of Justice’s Civil Division. “Drug manufacturers must abide by their legal obligations to pay appropriate rebates to state Medicaid programs.”

“Mylan misclassified its brand name drug, EpiPen, to profit at the expense of the Medicaid program,” said Acting United States Attorney William D. Weinreb. “Taxpayers rightly expect companies like Mylan that receive payments from taxpayer-funded programs to scrupulously follow the rules. We will continue to protect the integrity of Medicaid and ensure a level playing field for pharmaceutical companies. ”

Congress enacted the Medicaid Drug Rebate Program to ensure that state Medicaid programs were not susceptible to price gouging by manufacturers of drugs that were available from only a single source. It therefore subjected such single-source, or brand name drugs, to a higher rebate that is payable to Medicaid and that increases to the extent the price of the drug outpaces the rate of inflation. In contrast, generic drugs originating from multiple manufacturers are subject to lower rebates that, at least until recently, were not subject to inflationary adjustments.

Click here to read the rest of the story from the Department of Justice.


Defense Contractor Agrees to Pay $9.2 Million to Settle False Billing Allegations

Huntington Ingalls Industries Inc. (HII), a publicly traded company headquartered in Newport, Virginia, has agreed to a $9.2 million settlement of allegations that it violated the False Claims Act by knowingly overbilling the government for labor on U.S. Navy and Coast Guard ships at its shipyards in Pascagoula, Mississippi. Under the settlement, HII will make a payment of $7.9 million which, combined with earlier repayments, will result in the settlement recovery of approximately $9.2 million.

“Contractors that knowingly bill the government in violation of contract terms will face serious consequences,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “This settlement demonstrates, once again, that we will not tolerate defense contractors who falsely charge the armed forces or any agency of the United States.”

“Our Armed Forces depend on defense contractors to follow the rules, and this civil settlement, the second largest in the District’s history, should remind all those who conduct business with the United States Government that they are expected to abide by the rules,” said Acting U.S. Attorney Harold Brittain, who also noted three earlier guilty pleas in a related criminal matter in the Southern District of Mississippi. Two individuals pleaded guilty in United States v. N. R. Holden & R.G. Gardner, Criminal No 1:15-cr-42 HSO-RHW, and were sentenced in 2015. Another individual pleaded guilty in United States v. R.M. Wilson, Criminal No 1:16-cr-34-LG-RHW, and was sentenced in 2016. According to Acting U.S. Attorney Brittain, “the Southern District of Mississippi will remain vigilant in identifying and prosecuting those involved in nefarious activities and fraudulent billing, which ultimately result in substantial cost overruns on Navy and Coast Guard shipbuilding projects.”

Special Agent in Charge of the Naval Criminal Investigative Service (NCIS) Southeast Field Office, Mike Wiest, says “Corruption, fraud and bribery are not victimless crimes. Overcharging for work not done is not only criminal on its face, investigating those crimes siphoned resources and time which would have been better invested in protecting the nation. Multiple federal agencies spent years investigating this lack of integrity, to help hold accountable those who would squander American taxpayer dollars.”

Click here to read the whole story from the Department of Justice.


Owner of Home Health Agency Sentenced to 75 Years in Prison for Involvement in $13 Million Medicare Fraud Conspiracy

The owner and director of nursing of a Houston home health agency was sentenced today to 75 years in prison for her role in a $13 million Medicare fraud scheme.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office, Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG) Dallas Region and Special Agent in Charge D. Richard Goss of the Houston Field Office of IRS-Criminal Investigation Division (IRS-CI) made the announcement.

Marie Neba, 53, of Sugarland, Texas, was sentenced by U.S. District Judge Melinda Harmon of the Southern District of Texas. In November 2016, Neba was convicted after a two-week jury trial of one count of conspiracy to commit health care fraud, three counts of health care fraud, one count of conspiracy to pay and receive health care kickbacks, one count of payment and receipt of health care kickbacks, one count of conspiracy to launder monetary instruments and one count of making health care false statements.

According to the evidence presented at trial, from February 2006 through June 2015, Neba and others conspired to defraud Medicare by submitting over $10 million in false and fraudulent claims for home health services to Medicare through Fiango Home Healthcare Inc., owned by Neba and her husband, Ebong Tilong, 53, also of Sugarland, Texas. The trial evidence showed that using the money that Medicare paid for such fraudulent claims, Neba paid illegal kickbacks to patient recruiters for referring Medicare beneficiaries to Fiango for home health services. Neba also paid illegal kickbacks to Medicare beneficiaries for allowing Fiango to bill Medicare using beneficiaries’ Medicare information for home health services that were not medically necessary or not provided, the evidence showed. Neba falsified medical records to make it appear as though the Medicare beneficiaries qualified for and received home health services. Neba also attempted to suborn perjury from a co-defendant in the federal courthouse, the evidence showed.

Click here to read the whole story from the Department of Justice


Registered Nurse Who Owned Two Houston Home Health Companies Convicted in $20 Million Medicare Fraud Scheme

A federal jury today convicted a registered nurse who was the owner of two home health companies in Houston for her role in a $20 million Medicare fraud scheme involving fraudulent claims for home health services.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office and Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services-Office of Inspector General’s (HHS-OIG) Dallas Region made the announcement.

After a four-day trial, Evelyn Mokwuah, 52, of Pearland, Texas, was convicted of one count of conspiracy to commit health care fraud and four counts of health care fraud for her conduct at Beechwood Home Health (Beechwood) and Criseven Health Management Corporation (Criseven).  Sentencing has been scheduled for October 6, before U.S. District Judge Gray H. Miller of the Southern District of Texas, who presided over the trial.

According to evidence presented at trial, from 2008 to 2016, Mokwuah and others engaged in a scheme to defraud Medicare of approximately $20 million in fraudulent claims for home health services at Beechwood and Criseven that were not provided or not medically necessary. According to the trial evidence, Mokwuah billed for patients who were not homebound or did not qualify for home health services; Mokwuah and others falsified patient records to show patients were homebound when they were not; Mokwuah paid patient recruiters to recruit Medicare beneficiaries to Beechwood and Criseven; and Mokwuah paid doctors to sign off on falsified plans of care for the recruited beneficiaries so that Beechwood and Criseven could bill Medicare for those services.

Click here to read the rest of the story from the Department of Justice.


Defense Contractor Agrees to Pay $16 Million to Settle False Claims Act Allegations

Virginia Beach, Virginia-based contractor ADS Inc. and its subsidiaries have agreed to pay the United States $16 million to settle allegations that they violated the False Claims Act by knowingly conspiring with and causing purported small businesses to submit false claims for payment in connection with fraudulently obtained small business contracts, the Department of Justice announced today. The settlement further resolves allegations that ADS engaged in improper bid rigging relating to certain of the fraudulently obtained contracts. The settlement with ADS ranks as one of the largest recoveries involving alleged fraud in connection with small business contracting eligibility.

“Small or disadvantaged businesses serve as important engines of economic growth, and the United States utilizes small business set-aside contracts to aide those businesses in their development,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “When ineligible companies improperly obtain set-aside contracts, they prevent the small business community from receiving the assistance that Congress intended.

Click here to read the rest of the story from the Department of Justice.


Academy Medical, LLC and its owners pay $335,000 to resolve False Claims Act liability

West Palm Beach, Florida-based government contractor Academy Medical, LLC (Academy) and its owners, Edward D. Desser and Daniel M. Shaw, have agreed to pay $335,000 to resolve allegations that they took advantage of federal contracting opportunities reserved for certified service-disabled veteran-owned small businesses (SDVOSBs), announced Acting United States Attorney Grant C. Jaquith.  During the time at issue, Academy was not a SDVOSB.

“We will continue to hold accountable individuals and entities who defraud federal programs and take opportunities away from our nation’s service-disabled veterans,” said Acting United States Attorney Jaquith.  “Settlements like this one help to ensure the integrity of programs designed to help our wounded warriors succeed in starting and growing small businesses.”

The United States has long used government contracting to promote small businesses in general, and specifically small businesses owned by veterans who have service-connected disabilities.  Congress has established a targeted procurement program for the U.S. Department of Veterans Affairs (VA), which requires the VA to set annual goals for contracting with SDVOSBs.  To be eligible for these contracts, an applicant must qualify as a small business.  In addition to being a small business, a service-disabled veteran must own and control the business and handle its strategic decisions and day-to-day management.

Read the rest of the story from the Department of Justice here.