Butler Moultrie, 46, was sentenced by U.S. District Judge Donald M. Middlebrooks in the Southern District of Florida. In addition to his prison term, Moultrie was sentenced to three years of supervised release and was ordered to pay $801,000 in restitution.

Moultrie pleaded guilty in December 2011 to one count of conspiracy to commit health care fraud.

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The judge, Anthony Trenga of U.S. District Court for the Eastern District of Virginia, called the statutorily required fine “grossly disproportional” to allegations Gosselin Worldwide Moving N.V. bilked the federal government.

In a decision (PDF) published this week, Trenga further said he doesn’t have the power to fashion a penalty other than the one the statute required him to impose. The U.S. Supreme Court and the U.S. Court of Appeals for the Fourth Circuit have not specifically addressed the issue.

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These findings, released today, in the annual Health Care Fraud and Abuse Control Program (HCFAC) report, are a result of President Obama making the elimination of fraud, waste and abuse a top priority in his administration.   The success of this joint Department of Justice and HHS effort would not have been possible without the Health Care Fraud Prevention & Enforcement Action Team (HEAT), created in 2009 to prevent fraud, waste and abuse in the Medicare and Medicaid programs, and to crack down on the fraud perpetrators who are abusing the system and costing American taxpayers billions of dollars.   These efforts to reduce fraud will continue to improve with the new tools and resources provided by the Affordable Care Act.

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 The United States alleges that Capmark misrepresented material facts critical to the borrowers’ creditworthiness in the two loan applications and that Capmark’s false statements induced HUD to insure the loans, both of which defaulted, causing a loss to the government.   The two nursing homes were Canoga Care Center in Canoga Park, Calif., and Hudson Valley Care Center in Ghent, N.Y.

The allegations arise from investigation and audit work conducted by the HUD Office of Inspector General.   This case was handled by the Justice Department’s Civil Division with the assistance of HUD’s Office of General Counsel, Program Enforcement Branch.

 “Today’s action should be a reminder to all FHA mortgage lenders.   Attesting to things you know to be false is not only lying, it is against the law and there will be consequences,” said Helen Kanovsky, HUD’s General Counsel.

 This law enforcement action is in part sponsored by the interagency Financial Fraud Enforcement Task Force.   The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.   It includes representatives from a broad range of federal agencies, including 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, 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.

The EPLS record cites the action as a proposed debarment pursuant to Federal Acquisition Regulation (FAR) section 9.406-2, which outlines the various causes for debarment: conviction of or civil judgment for commission of fraud or a criminal offense in connection with a contract; violation of federal or state antitrust laws relating to the submission of offers; commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, violating federal criminal tax laws, or receiving stolen property; commission of any offense indicating a lack of business integrity or honesty; or serious violations of the terms of a federal contract or subcontract.

In a statement to Federal News Radio, Booz Allen said the Air Force’s action “relates specifically and solely to the San Antonio office and individually to two current and three former employees based there.” The EPLS notice indicates that the proposed debarment includes four individuals. According to the company, the incident “involved a former government employee who we hired who inappropriately retained and provided government procurement-sensitive information.”

POGO blog readers will remember that Booz Allen recently hired former Pentagon Inspector General Gordon Heddell as a senior advisor. Ironically, we pointed out at the time that Booz Allen has a relatively clean misconduct history.

The purpose of suspension and debarment is to ensure the federal government conducts business only with responsible contractors. Suspended and debarred companies and individuals are not allowed to bid on or receive new contracts or subcontracts. Their names go into the EPLS database, which contracting officials are required to check after the opening of bids and before awarding contracts. An audit of the suspension and debarment process at the Department of Defense released last year found that the Army, Navy, and Air Force are under-utilizing suspension and debarment for poorly performing contractors and have awarded new contracts to companies and individuals listed in the EPLS.

In November, the Senate held a hearing entitled “Weeding Out Bad Contractors: Does the Government Have the Right Tools?” at which Air Force suspension and debarment official (SDO) Steven Shaw said the following:

I firmly believe that the existing suspension and debarment apparatus affords debarring officials like me the tools to not only address allegations of procurement fraud, misconduct and poor contractor performance, but also to be proactive and creative in ways that protect the government, improve our contracting process, and reduce the instances of procurement fraud at the front end.

For years, POGO has stated that the suspension and debarment system is broken and advocated for more “proactive and creative” solutions (here’s a quick trip down memory lane: 2002, 2007, 2008, 2009, 2010, and 2011). The White House understands that an effective suspension and debarment system “is an important part of making sure we live up to our responsibility to maximize the return on every dollar spent and deliver a higher quality of service to the American people.”

We’re not sure how the Air Force’s action against Booz Allen will play out. In instances involving conduct similar to what seems to have occurred at Booz Allen, suspensions have ranged from eight days in the case of IBM to almost two years in the case of Boeing.

Investors were bilked out of more than $168 million from six hedge funds between 1999 and 2009.  The 78-year old Nadel, who’s been dubbed a “mini-Madoff,” plead guilty in 2010 and is now serving a 14-year sentence at Butner Federal Prison near Raleigh, NC.  In 2009, just as his massive Ponzi scheme collapsed, Nadel left behind a suicide note and vanished.  He went on the run cross country for two weeks and followed media reports of his disappearance, before finally turning himself in to the FBI.

“Wachovia had a very cozy relationship with Nadel, and its role in this Ponzi scheme is incredibly egregious,” said James Hoyer Law Firm Partner Terry Smiljanich.  The firm filed suit on behalf of the Nadel Receivership, which is trying to recover funds for the investment victims.  “The bank turned its back on its responsibility under the law and allowed Nadel free rein to steal this money.  He robbed these innocent victims blind, in some cases taking their entire life savings,” Smiljanich said.

The lawsuit alleges that Wachovia Bank had intimate knowledge of Nadel’s fraudulent activities and did nothing to stop them.  Wachovia ignored banking regulations and internal safety procedures and allowed Nadel to commingle funds and transfer money to his own accounts resulting in the theft.

The suit lays out Wachovia’s own participation in two of the hedge funds.  The bank took part in total investments of $550-thousand dollars that nearly doubled in just a year and a half.  And then, raising yet another red flag, Wachovia suspiciously cashed out the investment and profit, just two months before the Ponzi scheme collapsed.

When the Securities and Exchange Commission closed down the hedge funds in 2009, the false books created by Nadel showed the funds had a trumped up value of $330-million, when, in fact, the total assets of all six hedge funds combined was just $400-thousand, including only $15,000 in actual securities.  As a result, hundreds of investors lost their entire investment.

The suit was filed in the 12th Judicial Circuit Court, in Sarasota County on behalf of Tampa Attorney Burton Wiand, the court-appointed receiver for Nadel’s six hedge funds:  Scoop Real Estate, L.P., Valhalla Investment Partners, L.P., Victory IRA Fund, Ltd., Victory Fund, Ltd., Viking IRA Fund, LLC, and Viking Fund, LLC.

Wiand is working to recover funds for the investors damaged by the Ponzi scheme.  He has filed numerous lawsuits seeking a return of funds and property obtained through Nadel’s illegal activities.

If you have any information regarding Wachovia’s relationship with Arthur Nadel and his hedge funds, including former employees or witnesses, please contact the James Hoyer law firm.

 An indictment filed in the Southern District of Texas and unsealed today charges Mohammed Khan, 62, of Houston, with one count of conspiracy to commit health care fraud, one count of conspiracy to pay and receive illegal health care kickbacks and five counts of paying or offering to pay health care kickbacks.  Khan is expected to make his initial appearance in federal court today in Houston. 

“The indictment against Mr. Kahn alleges that he used his position as a hospital assistant administrator to submit millions in false claims to the Medicare program,” said Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division.   “According to the charges, he paid kickbacks to patient recruiters, owners of group homes and assisted living facilities, and beneficiaries so that he could fill his hospital with patients for whom he could bill the government for medically unnecessary services or services that were never provided.   We will continue aggressively to pursue individuals who attempt to enrich themselves at the expense of the Medicare program.”

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The settling facilities include the following: Plainview Hospital, Plainview, N.Y. ($2,307,265); North Shore Syosset Hospital, Syosset, N.Y. ($192,735); North Mississippi Medical Center, Tupelo, Miss. ($1,894,683.30); Mission Hospital, Asheville, N.C. ($1.5 million); Wenatchee Valley Medical Center, Wenatchee, Wash. ($1,224,709.96); Community Hospital Anderson, Anderson, Ind. ($500,561.36); St. John’s Mercy Hospital, Creve Coeur, Mo. ($365,000); Gulf Coast Hospital, Fort Myers, Fla. ($173,005.86); Lee Memorial Hospital, Fort Myers, Fla. ($159,571.87); and Cape Coral Hospital, Cape Coral, Fla. ($73,279.47). Four hospitals affiliated with Adventist Health System/Sunbelt Inc. in Florida will pay a total of $3.9 million, and these include Florida Hospital Orlando, Florida Hospital-Oceanside, Florida Hospital Fish Memorial and Florida Hospital Heartland Medical Center.   

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