Whistleblower Attorneys Blog

Whistleblowers Sue Liberty Medical for $69 Million

June 9, 2012 | Greene LLP

Two former employees of Florida-based Liberty Medical Supply, a supplier of diabetes medication and equipment and a subsidiary of Medco Health Solutions Inc. and Polymedica Corp., have filed a lawsuit against the company and several related subsidiaries under the False Claims Act (“FCA”).

The whistleblowers, both of whom held a variety of positions with the company, allege that Liberty engaged in a fraudulent scheme to conceal $69 million in overpayments from the Medicare and Medicaid programs by tampering with data and in violation of the conditions of a “corporate integrity agreement” that Liberty signed with the Office of the Inspector General of the Department of Health and Human Services. The overpayments included $62 million from payments with inadequate or no supporting documentation, and $7 million from erroneous billing. The defendants in the suit have denied all of the allegations in the complaint. The whistleblowers further allege that company executives Carl Dolan and Arlene Perazella intentionally devised a scheme to create false records in order to erase the cash overpayments. The whistleblowers’ allegations are not the first instance in which Liberty has confronted accusations of misfeasance. In 2004, the company agreed to a $30 million settlement with the Justice Department to resolve an unrelated investigation of Medicare fraud.

Under the FCA, whistleblowers (also known as relators) may sue those who have allegedly defrauded the federal government under the statute’s qui tam provisions. The FCA holds individuals and contractors liable for false claims knowingly or recklessly made in connection with payment from the government or to curtail a liability owed to the government. A frequent source of fraud and abuse against the federal government stems from reimbursements for health care services through the Medicare and Medicaid programs. Although the government may elect to participate in a False Claims litigation, it does not always do so, and relators may move forward with their claims even if the government does not intervene in the suit. Relators may recover 15% to 30% of any settlement or final judgment. False claims suits involving fraud in the health care sector or pharmaceutical fraud are frequently brought in federal court in Boston, which is a hub for many major healthcare providers.

St. Jude Will Pay $3.65 Million in FCA Settlement

June 1, 2012 | Greene LLP

St. Jude Medical, a Canadian medical device manufacturer, announced on Thursday that it would pay $3.65 million as an offer of settlement to dispose of allegations that it was overcharging buyers to replace the company’s pacemakers and defibrillators that were under warranty.

The allegations were initially brought by two whistleblowers in federal district court in Boston under the False Claims Act. The False Claims Act is a federal qui-tam law that permits private whistleblowers (also known as qui-tam relators) to sue contractors that have allegedly engaged in fraudulent practices in connection with payment for goods or services by the government. The Act also covers claims against individuals who engage in fraudulent practices in order to evade payment of liabilities owed to the federal government. In the St. Jude case, the company was accused of submitting invoices to facilities run by the Department of Veterans Affairs and the Department of Defense that overcharged for replacement pacemakers and defibrillators.

While the government has 60 days after relators file a claim under the Act to investigate the allegations and determine whether or not it will intervene in the litigation, private False Claims whistleblowers may move forward with their claims even if the government chooses not to intervene. Relators who prevail may receive between 15% and 30% of a final judgment or settlement. The government investigates cases that range widely in terms of the amount in controversy; the two St. Jude whistleblowers will receive $730,000 from the settlement for coming forward.

Taking Out the Trash: A Garbage Collection Whistleblower and the Need for State FCAs

May 31, 2012 | Greene LLP

An imbroglio involving an alleged kickback scheme perpetrated by employees of a San Francisco-based garbage collection company has shone a spotlight on the perils faced by individuals who go public with information concerning potential fraud committed against the government, and the importance of robust protections at all levels of government for whistleblowers.

Brian McVeigh was initially hired by the garbage collector, Recology, in 2000, and received positive performance evaluations. He was later transferred to a sorting facility to oversee a California Redemption Value (CRV) Buyback Center operated by the company. Recology has a monopoly with the City of San Francisco, and receives millions of dollars in diversion incentive bonuses from the State of California to participate in the buyback program. As a manager at the CRV Buyback Center facility, McVeigh’s responsibilities included preventing fraud and theft of CRV recyclable materials. In that capacity, he became aware of a fraudulent scheme in which Recology employees were inflating CRV weights, manipulating the figures in order to qualify for the bonuses from the state. McVeigh was summarily terminated in 2008 after bringing the fraud to the attention of Recology management and the local authorities.

McVeigh has filed a civil claim against his former employer under California’s False Claims Act (“FCA”), alleging that Recology management was likely involved in the scheme and that the termination was retaliation for his reporting of the wrongful conduct to the authorities. Both the fraudulent scheme on the part of the garbage collection company, a contractor which generates $220 million in annual revenues from local San Francisco ratepayers as an unregulated monopoly, and the retaliation are actionable under California’s False Claims Act.

Seventh Circuit Opinion Gives Broad Reading to Public Disclosure Bar

May 21, 2012 | Greene LLP

In its opinion handed down today in United States ex rel. Goldberg v. Rush University Medical Center, the Seventh Circuit reaffirmed a broad understanding of the public disclosure bar in the False Claims Act (“FCA”).

Prior to 2009, the statutory language barred suits “based upon” allegations which had previously been publicly disclosed by government action or the news media. The “based upon” language has been the source of much controversy as courts have grappled with its meaning, but all of the circuits (with the exception of the Fourth Circuit) have ultimately interpreted it to mean “substantially similar.” In 2009, Congress amended the Act and replaced the “based upon” language with “substantially similar.”

The Seventh Circuit further elaborated the interpretation of “substantially similar” in its recent ruling of May 2012, finding that an FCA suit would not be barred unless the publicly-disclosed claims alleged both a particular act of fraud and a particular defendant. Such an interpretation, the court noted, is consistent with the Act’s broader purpose of ensuring that individual whistleblowers come forward with helpful information that may assist in recovering damages from contractors who have defrauded the federal government.

Federal Appeals Court Rejects Narrow View of “Original Source” Rule

May 16, 2012 | Greene LLP

The United States Court of Appeals for the District of Columbia circuit released its opinion on Tuesday in the case of United States ex rel. Davis v. District of Columbia, No. 11-7039 (D.C. Cir. May, 15 2012), rejecting the Circuit’s previous restrictive reading of the “original source” provision of the False Claims Act and subsequently embracing an understanding of the provision consistent with the Supreme Court’s decision in Rockwell International v.United States, 549 U.S. 457 (2007) and amendments to the provision enacted by Congress in 2010 .

Prior to today’s opinion, the circuit court had held that a qui tam relator, commonly referred to as a whistleblower, must make a disclosure to the government concerning a False Claims Act allegation before the existence of any public disclosure regarding the same allegation. Today’s decision recognizes that such a view of the “original source” provision of the False Claims Act “bars productive suits” and is ultimately inconsistent with the Supreme Court’s recent decision in Rockwell International.

Moreover, the court noted that recent congressional amendments to the False Claims Act definitively answer any questions left open by the prior law, recognizing that the False Claims Act now considers allowable original sources of information to include whistleblower with original knowledge of fraud that materially adds to an investigation, even where an allegation has already been publicly disclosed.

Radiology and Diagnostic Company Confronts Fraud Charges

May 15, 2012 | Greene LLP

The Center for Diagnostic Imaging, Inc., a radiology and diagnostic company based in X and operating facilities in seven states, has agreed to pay $1.5 million to resolve False Claims Act charges against the company. The charges were brought by two whistleblowers, a former executive of the company and a founding partner of one of the company’s outpatient servicers, under the qui tam provisions of the False Claims Act. Under those provisions of the False Claims Act, private citizens with knowledge of fraud may file a lawsuit on behalf of the United States for recovery of treble damages and civil monterary penalties ranging from $5,500 to $11,000 per individual violation.

Prior to the settlement announced on Monday, CDI had agreed to pay $1.3 million to resolve claims brought by the whistleblowers concerning the company’s practice of “upcoding” claims to seek higher reimbursement rates than allowed under federal health programs for covered services. Although the government chose to intervene in pursuing the upcoding charges, it declined to do so over the whistleblower’s remaining claims.

Nonetheless, the whistleblower exercised their right under the law to pursue meritorious False Claims Act allegations even after the government declines intervention. The allegations in this case, concerning unlawful billing practices and the arrangement of lease agreements issued to physicians as illegal kickbacks for the purpose of increasing business with CDI, resulted in the whistleblowers sharing in 30 percent of the $1.5 million recovery. The False Claims Act enables whistleblowers to share in up to 30 percent of the government’s recovery in order to incentivize and compensate whistleblowers for their efforts investigating and reporting fraud on the government.

Abbott Labs Pleads Guilty to Criminal Charges in Landmark Pharmaceutical Fraud Case

May 14, 2012 | Greene LLP

Abbott Labratories Inc., manufacturer of the pharmaceutical drug Depakote, has pleaded guilty to charges that the company misbranded Depakote by promoting unapproved uses of the drug to control schizophrenia as well as agitation and aggression in elderly patient with dementia, when neither use was approved by the Food and Drug Administration (“FDA”).

Abbott Labs maintained a dedicated sales force to promote the drug to nursing homes despite credible scientific evidence that the drug was safe and effective for treating and controlling agitation and aggression in elderly dementia patients. Sales representatives were trained through an unambiguous and direct company effort to promote the drug for the off-label uses, including by suggesting it was not subject to the administrative and regulatory requirements associated with the administration of other antipsychotic drugs. In doing so, the company sought to sidestep federal and state laws concerning the regulation of pharmaceutical drugs inorder to maximize profits at the expense of vulnerable elderly dementia populations.

As to the illegal marketing practices concerning schizophrenia, the case marks the second time the government has reached a major agreement to resolve criminal and civil claims concerning the illegal marketing practices of a manufacturer of an epilepsy drug. Back in 2004, a Pfizer subsidiary pleaded guilty to charges over the off-label marketing of Neurontin, a drug approved for epilepsy but aggressively marketed for a number of conditions the FDA had not clinically approved. In that case, Greene LLP partner Thomas M. Greene litigated a whistleblower complaint ultimately resulting in $430 million in criminal and civil penalties and established the a legal theory applied in hundreds of subsequent False Claims Act cases alleging improper pharmaceutical marketing practices involving off-label and unapproved use of pharmaceutical drugs.

First Circuit Reverses Dismissal of Case Concerning Fraudulent Research Grant Application

May 11, 2012 | Greene LLP

A federal appeals court in Boston, Massachusetts issued a decision on Monday, reversing a federal district court’s earlier decision in a False Claims Act case filed by a whistleblower against Brigham and Women’s Hospital, Massachusetts General Hospital, and two doctors heading the process of researching and preparing an application to the National Institutes of Health for federal funds to research Alzheimer’s disease.

Dr. Jones filed the lawsuit under the qui tam provisions of the False Claims Act which allow private citizens to bring an action on behalf of the United States for violations of the False Claims Act. Jones alleged that the hospital made false statements in the grant application in violation of the False Claims Act. In November of 2010, the federal district court below ruled against Jones and in favor of the hospital, holding that no genuine issue of material fact existed as to whether false statements in the application both existed and were known of. Jones then appealed to the United States Court of Appeals for the First Circuit, finding that the district court did not properly consider certain expert testimony and that genuine issues of material fact existed as to how data was collected and obtained from studies, and if such data was in fact falsified as contended by Jones, whether a reasonable jury would find it material to the alleged false statements and whether the defendants knowingly used the false data in violation of the False Claims Act.

The case ultimately highlights interesting questions concerning what courts may expect from qui tam relators, more commonly referred to as whistleblowers, when seeking to prove False Claims Act liability in cases where fraud infiltrates the research and preparation of information and data submitted in an application for highly sought after federal funds for major medical research projects.

AHA Criticizes Overpayment Reporting Provision of Health Care Law

April 18, 2012 | Greene LLP

The American Hopsital Association (AHA) recently issued critical comments in response to a proposed rule concerning the reporting and returning of overpayments paid to health care providers and suppliers by a federal health care program such as Medicare and Medicaid. The proposed rule, issued on February 16, 2012 and listed in the federal registrar as “CMS-6037-P,” would implement section II28J(d) of the Affordable Care Act. Under the plain text of that statute, a supplier or provider of services must report and return any overpayment within either 60 days of the overpayment’s identification or the date of a corresponding cost report, if applicable. The proposed rule provides procedures and guidance for enforcing the Affordable Care Act’s statutory requirements concerning overpayments.

Nearly every provision of the proposed rule was addressed by the AHA’s letter to CMS, though common to all criticisms of the rule appears to be AHA’s concern that the proposed rule would impose excessive burdens on hospitals to investigate potential overpayments, adminstrative uncertainty, and unreasonable liability for overpayments which may have occured within the past 10 years.

Indeed, the principle concern expressed by the AHA related to the perceived burden the proposed rule would have on hospitals to fully investigate and identify past overpayments in order to avoid liability under the new law. The AHA specifically urged CMS to evaluate the meaning of the word “identify” as it relates to the identification of overpayments required to be reported and returned to the government. The proposed rule construed the word to impose responsibility for reporting and returning an overpayment “if the person has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment.” The AHA is concerned that this understanding of the statute would impose liability upon a hospital “even if no individual was aware of or recognized that it had received an overpayment.”

Minnesota Life Insurance Companies Targeted by Whistleblowers, State Government

April 13, 2012 | Greene LLP

National life insurers MetLife Inc. and Prudential Financial Inc. are the target of a whistleblower lawsuit alleging the two life insurers the Minnesota False Claims Act by failing to notify families of the deceased policy holder or appropriate government officials as required by state law. According to the recently unsealed complaint, the whistleblowers have identified at least 584 unclaimed policies worth millions of dollars wrongfully withheld by MetLife and Prudential.

Under Minnesota state law, insurance companies must notify the state Department of Commerce of life insurance benefits left unclaimed for more than three years and then turn over the value of those benefits to the state’s unclaimed property unit which works to locate the beneficiaries entitled to the money. By failing to turn over the proceeds to the state, MetLife and Prudential are alleged to have violated the state False Claims Act which imposes liability on one who acts to “conceal, avoid, or decrease an obligation to pay or transmit money or property to the state or a political subdivision.” Although the state has not yet decided to intervene in the case, the state attorney general office has aggressively investigated life insurance companies and practices concerning unclaimed benefits due under a deceased policyholder’s life insurance policy.

Similar to the federal False Claims Act, the Minnesota False Claims Act imposes civil monetary penalties up to $11,000 per violation and authorizes recovery of up to three times the amount the state lost due to the fraud. To encourage whistleblowers to come forward and report fraud, qui tam provisions of the federal and Minnesota False Claims Act enable whistleblowers to share in up to 30 percent of the recovery obtained by the government and receive protection from employer retaliation arising from acts in furtherance of an action under the False Claims Act.