Atlanta Injury Lawyer Blog

You may have been hearing the commercials lately. Medicare has been running ads that say they will never call and ask you to give them your Medicare number. Well, now we have an example of why the agency felt it needed to run that ad.

According to a press release from the U.S. Attorney for the Southern District of Texas, the Marcella Herrara, his wife, and a former employee, Ramon De La Garza, have pled guilty to collectively bilking Medicare and Medicaid out of more than $11.1 million. According to the press release, Mission Trio Convicted of Health Care Fraud in Probe by State and Federal Officials, the trio ran a McAllen, Texas, durable medical equipment provider called RGV DME. In order to boost their take from the Government, they hired marketers to pose as Medicare or Medicaid employees and to call unsuspecting people. They asked the victims for their Medicare and Medicaid numbers, and then they used those identification numbers to submit false claims for "power wheelchairs, incontinent supplies, hospital beds and mattresses as well as other DME supplies." In other words, they pretended that their durable medical equipment ("DME") company was providing wheelchairs and other supplies - when in fact those supplies had not been prescribed and were never provided to the "patients" who supposedly needed them.

I follow Medicare and Medicaid fraud closely since I am a lawyer representing whistleblowers. In the past few years, I have seen an astonishing amount of fraud connected to the durable medical equipment field.

The field seems to offer a tantalizing combination of less oversight and big-ticket items that only need to be provided once. The DME providers are much less regulated than, say, hospitals (although there have been instances of similar fraud in medical clinics and hospitals, generally this type of fraud has come from people who stole a doctor's i.d. and pretended to bill for real patients).

Additionally, while a person has to get a medical degree to be a doctor. Having to earn that degree makes most doctors think twice before cheating the Government - they have a license to practice medicine that can be taken away. By contrast, the barriers to entering the durable medical equipment field are very low.

The U.S. Attorney's press release is about the criminal case against these three individulas, The press release does not mention a whistleblower or the False Claims Act, so presumably the Government caught this fraud on its own.

But the fact is that the vast majority of the time, the Government misses the fraud. Most of the claims are with Medicare, and most of the people who receive Medicare are elderly. Many of these elderly people are ill and cannot flyspeck their lengthy Medicare statements to determine whether Medicare is getting billed for care or items they have not received. Under Medicare rules, the patient is supposed to be billed for a portion of the care, but of course these unscrupulous DME providers do not dare bill the patients, knowing the fraud would quickly be exposed.

On several occasions, Medicare fraud cases have been brought to light when an adult child steps in to help an aging parent. The child happens to look through the statement Medicare sends, and starts to ask questions. "What wheelchair?" "What hospital bed?" "What medically-prescribed mattress?"

More often, these claims are revealed when an employee of a DME company recognizes that the company is billing for a good deal more medical equipment than it is providing.

Under the False Claims Act, if these employees or adult children alert the Government to the fraud by filing a qui tam lawsuit, they may be entitled to claim a percentage of the amount the Government recovers (including criminal fines).

I am a lawyer representing whistleblowers, and I'm on a series of blog entries about why businesses are undermining their ability to compete by ignoring - even fighting -- the False Claims Act.

Take, for example, doctors and physician practices. In order to bill Medicare and Medicaid for their work, they have to choose a code level for each procedure they perform. A level 2 procedure is not particularly complicated and takes a relatively short amount of time, 10 minutes in the case of a doctor's office visit. A level 5 procedure, on the other hand, is supposed to be a face-to-face encounter between the doctor and the patient that lasts at least 40 minutes.

An honest doctor will recognize that he can only work safely for 8 hours a day, maybe 10 or 12 if he pushes it. If the doctor works 8 hours a day - and bills all of that, without any breaks at all - then an honest doctor has limitations. The doctor can only bill 12 level five office visits a day, or 48 level 2 office visits, a day. And that's it. Even if the doctor worked around the clock every day -- not a realistic option, but for sake of argument, let's assume it - he still can only bill 36 level 5 visits or 144 level 2 visits.

That is - that's what an honest physician could do.

And then there was Dr. Angel S. Martin, of Newton, Iowa, who apparently had more hours in his day than the rest of us do.

Martin was a general surgeon, and the Government discovered that on 53 different days, Martin had billed Medicare for medical services that would have required him to work more than 24 hours in the day.

What Dr. Martin was doing was upcoding. He was treating patients who did not have complicated medical problems that required significant time from him, but he was billing as if he were treating much more serious medical problems and spending much longer with the patient than he really was. In 2010, Dr. Martin was convicted of health care fraud and went to jail, albeit for only 6 months. He also had to give up his medical license.

But Dr. Martin was the exception to the rule. Most doctors who cheat get away with it. Very few are brought to justice.

And in the meantime, the cheating and fraud damages the entire medical/Medicare reimbursement system. When Medicare starts to pay too much for a given procedure or code, it starts trying to find ways to cut costs. Medicare may lower the reimbursement amount, or refuse to cover certain procedures, etc.

The fraud also can keep individual doctors or physician practices from getting jobs or business opportunities in the market place. When a physician's practice wants to join a larger system, or when a doctor wants to join a new group practice, the honest physician suddenly looks unproductive and is less marketable. Which is more valuable: the anesthesiology practice consisting of doctors who manage to bill 24 level 5 procedures a day, or the practice of anesthesiologists who bill 8 level 5 procedures a day? Who is more likely to get a job: the doctor who used upcoding to bring in $800,000 a year, or the doctor who strictly followed the coding rules and bought in only $500,000 a year?

Given the consequences, to the medical practice and system as well as to individual doctors or physician group practices, every doctor and physician group ought to be embracing the False Claims Act. Doctors who care about their profession, even about their own practices, should be coming forward with information about fraud in the system.

It just makes sense.

As a whistleblower lawyer, I shake my head in disbelief when I hear about businesses lobbying against the False Claims Act.

Are you kidding? So long as they are honest, businesses ought to be the first in line to use the False Claims Act to file qui tam lawsuits. Honest businesspeople are being cheated out of business, even going out of business, because unscrupulous companies are willing to lie, cheat and steal their way to better profitability and business share.

The Government only has so much work it can hand out. Each year, only a certain number of low-income housing units will be built. Only a certain number of guns or tanks will be purchased. Only a certain number of schoolchildren or soldiers will be fed. So If your competitor can bid the contract lower than you can because he is willing to cheat the government once he gets the contract, then you will miss out on getting the government contracts that could keep your business afloat.

For example, take the New York False Claims Act suit against Compass Group USA, Inc. Compass is a company that provides food management services to schools and school districts throughout New York. According to New York Attorney General Eric T. Schneiderman, Compass was getting discounts on the food it was providing, but then concealing those discounts from the schools. It was charging the schools as if it had paid full price, and pocketing the difference between the full price and the discounted price that the food vendor actually was charging Compass. Compass settled the False Claims Act suit, agreeing to repay $ 18,000,000 to the schools it had defrauded.

Now let's say you are a competitor of Compass'. You also provide school lunch programs and you bid for the same contracts Compass does. You might have watched in disbelief as Compass come in with an exceptionally low bid and swept that contract away from you. You may have been dumbfounded as to how Compass continued to report profits when your company was losing money.

Perhaps you wondered - how could they possibly have bid so low? How can we be so inefficient while they obviously are able to deliver services far more cheaply than we can? Maybe you even hired consultants to try to streamline your business, but still - you could not catch up to Compass in terms of the contracts it got or its profitability.

And now you know the real story. You were not competitive because you were only expecting to get the money you were paid by the Government. Compass, on the other hand, got paid by the Government and also profited from the difference between what it charged the Government for the food, and what it actually paid to the food vendors.

But let's say that you find out that a competitor is cheating. In that case, you have three choices. You can give up because you cannot be competitive if you play by the rules and they do not. You can decide you had better cheat on contracts yourself, even though you will be risking your reputation and a long jail sentence. Or you can try to stop the fraud by filing a False Claims Act suit to do something about it. If you file the False Claims Act suit, not only do you have a chance to make the marketplace a level playing field again, but you also have the opportunity to get a percentage of all of the money that the Government collects from the lawsuit.

So why would you want to stop the False Claims Act when it is the very thing that could restore your chance to compete on even footing to earn government contracts?

I guess they were going for creativity points.

I am an attorney who represents whistleblowers in lawsuits, and so I follow qui tam and False Claims Act cases very closely. I am used to seeing cases where a pharmaceutical company has offered enticements to doctors to try to get them to prescribe the company's drugs. But when pharmaceutical company Victory Pharma, Inc. wanted to sell more of its prescription drugs, it did not settle for your everyday, ordinary kickbacks. Instead, the company got creative, offering a variety of "gifts" ranging from lap dances for a doctor's female staff, to trips, to mortgage payments.

The creativity is costing the drug manufacturer, though. Victory Pharma has agreed to pay the federal government $11.4 million to resolve allegations that the company used improper means to try to get doctors to prescribe its drugs. Victory Pharma has agreed to pay $1.4 million to settle Stark Act (Anti-Kickback) allegations, and another $9,938,310 in order to resolve claims filed under the False Claims Act.

The settlement came thanks to a False Claims Act suit filed by whistleblower Chad Miller. Miller was a sales representative for Victory, and he went to the Government to report what he learned while he was working for the drug company. Miller alleged that Victory Pharma was paying kickbacks to doctors to convince them to write prescriptions for four of its products: Naprelan, Xodol, Fexmid and Dolgic.

The Medicare regulations strictly prohibit any type of payment intended to entice a doctor to prescribe a drug. The reason is pretty obvious: it just can't be good to encourage a doctor to prescribe a drug, or a particular drug, for money. Drugs can have dangerous side effects for patients. Furthermore, pharmaceuticals are expensive for Medicare, and often for patients, too. Obviously a drug only should be prescribed when it is necessary, and when it is the best possible drug for a particular patient.

According to the qui tam lawsuit, some of the kickbacks were fairly ordinary gifts, such as tickets to sporting events, plays and concerts; spa passes; golf and ski outings; and fancy dinners. But some of the kickbacks were more unusual, like "giving a doctor money to help make a house payment; paying for a doctor's staff's outing to a strip club, including 'lap dances' for the female staff; and offering a doctor and his staff an all-expense paid trip to Las Vegas."

Under the False Claims Act, a whistleblower is entitled to between 15% and 25% of what the Government gets. In this case, Mr. Miller is going to receive $1.7 million for his part in reporting the fraud and helping the Government recover its money.

Naprolen is a non-steroidal drug prescribed to relieve pain and inflammation of arthritis, tendinitis, etc.

Xodol is an opioid pain reliever that combines acetaminophen and hydrocodone.

Fexmid, also known as cyclobenzaprine, is a muscle relaxant.

Dolgic, a combination of acetaminophen and butalbital, is used to relieve tension headaches.

The Medicare regulations recognize that any time a pharmaceutical company tries to influence a doctor's choice about whether to prescribe a drug and what drug to prescribe, the drug company is interfering with the relationship between the doctor the patient, and may be causing the patient to get less objective medical help than he otherwise would have received. That rationale applies with any drug, of course. In this case, though, I am particularly appalled by the company's use of kickbacks to persuade doctors to prescribe Xodol, because that drug is an opioid and is potentially addictive for patients. It appears that Fexmid also can be addictive. The frightening thing to me is that patients may have been put on addictive drugs as a result of these kickbacks.

I know that many of the doctors involved would argue that, even if they did receive kickbacks, they were making objective decisions about the drugs when they prescribed them to their patients. However, I think it would be the rare patient who would accept that argument coming from a physician who just accepted a house payment from the drug's manufacturer. I can imagine that any patient who received one of these drugs and learned that the doctor was taking kickbacks from the drug company would feel betrayed. In the end, the reason why the kickback statute is so important is that the doctor/patient relationship can only work when the patient trusts the doctor will give him the medical care that the doctor truly believes is best for him.

On January 7, 2013, a Macon, Georgia, federal district court refused to dismiss a whistleblower's False Claims Act claims against Central Georgia Foot and Ankle Center, P.C. The court also refused to dismiss the whistleblower's personal retaliation claims, holding that the whistleblower did not have to plead those claims with particularity.

I am a qui tam attorney who represents whistleblowers, and in today's blog entry I will be discussing a Medicare and Medicaid fraud case that was filed in Georgia. Nichol Salvo originally filed the suit sued under the False Claims Act on behalf of the United States, saying that the federal government had been defrauded by false claims made by the Defendant Central Georgia Foot and Ankle. Ms. Salvo filed her case in the Middle District of Georgia. Under the terminology used for the False Claims Act, Ms. Salvo was the "relator", more popularly known as the "whistleblower" in the case. As a relator, Ms. Salvo sued on behalf of and in the shoes of the Government, to recover money she said Central Georgia Foot and Ankle had gotten from the Government via fraud. Ms. Salvo also filed personal claims, saying that she had been retaliated against when she tried to stop Central Georgia Foot and Ankle from cheating the Government.

The relator alleged that Central Georgia Foot and Ankle was making false claims for payment to the Government. Central Georgia Foot and Ankle filed a motion to dismiss, stating that the relator had not pled the claim sufficiently under Fed. R. Civ. P. 9(b). Under Rule 9(b), the court

The court acknowledged that Rule 9(b) applied to the False Claims Act allegations that Ms. Salvo had filed on behalf of the U.S. Under Rule 9(b), Ms. Salvo had to plead her the charges of fraud "with particularity": "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally."

Quoting from United States ex rel. Clausen v. Laboratory Corp. of America, Inc., 290 F.3d 1301, 1308, 1310 (11th Cir. 2002), which in turn quoted from United States ex rel. Cooper v. Blue Cross & Blue Shield of Fla., 19 F.3d 562, 566-68 (11th Cir. 1994)), the court explained that Ms. Salvo's claims would stand as long as they "'include[d] facts as to time, place, and substance of the [Defendants'] alleged fraud', specifically, "'the details of the [D]efendants' allegedly fraudulent acts, when they occurred, and who engaged in them.'"

The Court pointed out that the Relator's individual retaliation claims did not have to meet the 9(b) standard. A whistleblower who takes acts "to stop 1 or more violations of" the False Claims Act is entitled to job protection. If an employer (subcontractor, etc.) fires the whistleblower or discriminates against him "in the terms of his employment," the employer must pay the whistleblower twice the amount of wages he lost plus other damages. Citing United States ex rel. Sanchez v. Lymphatx, Inc., 596 F.3d 1300, 1303-04 (11th Cir. 2010), the court said the relator merely had to allege that she protested what the employer was doing "at a time when there was a 'distinct possibility that she or the government would sue the [Defendants] under the FCA,' and (2) the Defendants' retaliatory conduct happened after this protest."

Two Savannah, Georgia, hospitals got hoodwinked by an insurance company, and ended up submitting a claim to Medicare that Medicare never should have had to pay. But St. Joseph's Hospital, Inc. and Candler Hospital, Inc., refused to be patsies. Instead, they became whistleblowers. They took the matter to the Government, using the False Claims Act to sue the insurance company on behalf of the Government. The Government intervened in the suit ("intervened" essentially means that the Government took over the lawsuit) on August 1, 2011.

The insurance company moved to dismiss the case, but this past January 11, 2013, the Court in large part denied the insurance companies' motion to dismiss.

As a lawyer for whistleblowers, I wanted to stand up and cheer. The Georgia hospitals did something to benefit themselves - but even more importantly, they did something to stop fraud in the medical system, and that act has benefits that reach far beyond those two hospitals.

The case came about after both Candler and St. Joseph's treated a truck driver who got a head injury at work. After brain surgery, the man had a colon rupture (apparently unrelated), and he died two months later. Over the course of more than one surgery and two months in the hospital, the medical bills ran up over $ 1.3 million.

(The case actually has several defendants: the employer, United Distributors, Inc.; the self-insured health benefits plan of the employer, United Distributors, Inc.'s, Employee Health Benefit Plan; the third-party administrator of the benefits plan, Commerce Benefits Group Agency, Inc.; and two individuals who worked for those companies. For shorthand, I'm using "United" and the "insurance company" to describe the group.)

If the man had COBRA coverage, then Medicare was the primary payer on the account, and United was secondary. If the man had not elected COBRA coverage, then the opposite was true.

According to the allegations by whistleblowers St. Joseph's and Candler, in order to avoid paying the claim, United falsely claimed that the man had elected COBRA coverage. The defendants even claimed that they had documents in which the man had elected COBRA coverage, although in fact he had never done so.

Based on the false claims about COBRA coverage, Medicare paid $341,802.09 to the hospitals and several physicians.

The United States "intervened" in the case, which essentially means that it took over the case from St. Joseph's and Candler. In the motion to dismiss, United argued that the U.S. had not pleaded its claims with sufficient particularity under Fed. R. Civ. P. 9(b). Rule 9(b) says that:"in alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." The Court found that the Government had met this standard because it gave the "who", the "what", "when", "where", and "how". The Court also concluded that the U.S. had stated a sufficient claim as to violations of the False Claims Act. The Court ruled against the U.S. on part (c), Conspiracy to Violate the False Claims Act, however, saying that the U.S. had not offered sufficient facts that the defendants had conspired together to create the false impression that the man had elected COBRA coverage. The Court gave the U.S. additional time to amend its complaint and to add more factual allegations about the conspiracy.

The Court also dismissed U.S. claims for unjust enrichment and payment by mistake, saying that it was unclear whether the claims were based on federal common law or Georgia state law. Again, however, the Court gave the U.S. an opportunity to amend the complaint to clarify the basis for the claims. The Court did express "hesitation" about whether the Government could adequately state a valid unjust enrichment claim" given the exact facts in this case.

As whistleblowers, St. Joseph and Candler will receive a percentage of whatever amount the U.S. recovers from United. But even more importantly, both hospitals deserve recognition for showing that the medical community will not be party to fraud. In an era when whispers of medical fraud abound, these hospitals stood up and said that the medical community was not in favor of that fraud, and would stop it whenever possible.

According to a Department of Justice statement issued yesterday, a dermatologist from Venice, Florida, has agreed to reimburse the Government $26.1 million to resolve accusations that he made false claims to Medicare. The Government noted that the case had set a new record as the largest ever False Claims Act recovery from a single individual. But to me as a whistleblower lawyer, the case was especially noteworthy and shocking because the Government was claiming that the doctor was doing much more than overbilling and cheating; he actually was choosing the medical care he gave to his patients - even to the extent of surgery -- solely in order to gain financially.

The DOJ accused Dr. Steven J. Wasserman, M.D., of taking kickbacks and also performing thousands of unnecessary skin surgeries called "adjacent tissue transfers" or "local flaps." The breadth of that accusation is absolutely astonishing. The doctor operated on thousands of people who never needed surgery at all!!?? Apparently this fraud had been going on since 1997, and obviously it had grown to absolutely astonishing levels - both in terms of the number of patients affected and the number of dollars fraudulently collected - with the passage of time.

The case was originally filed by a whistleblower, Alan Freedman, M.D., as a qui tam lawsuit under the False Claims Act. As a whistleblower, Freedman is entitled to a percentage of what the Government got, and the Government has announced Freedman will get $4,046,000 because he filed the suit.

Freedman had worked for a Florida clinical laboratory called Tampa Pathology Laboratory (TPL). In his qui tam lawsuit, he told the Government and a court in the Middle District of Florida that TPL and Wasserman had struck a deal to increase their profits - at Medicare's expense. TPL wanted to increase its lab work, and Wasserman agreed to send the lab biopsy specimens for his patients. In return, TPL allowed Dr. Wasserman to sign the pathology report, in order to make it look as if Dr. Wasserman had actually performed the diagnostic work of reading the report. Dr. Wasserman then submitted claims to Medicare for pathology work that he himself had not actually done.

DOJ also made the very creepy allegation that Dr. Wasserman had performed unnecessary adjacent skin transfers on his patients. According to DOJ, the surgeries were not medically necessary, and the only reason Dr. Wasserman performed them was to make money. In an adjacent skin transfer, a doctor cuts a flap of skin from the area right next to a skin defect (for example, where a growth has been removed from the skin). The physician then folds the flap of skin over and across the skin defect, and attaches it so that it covers the defect. Doctors sometimes refer to the procedure as a "local flap."

Seriously? That's just gross. How could a doctor do that to his own patient?

DOJ explained that the United States had "intervened" in the case back in 2010. Under the False Claims Act, the whistleblower - also known as a "relator" - files the suit on behalf of the Government. The Government has the right to "intervene", which essentially means to take over the case.

I guess one thing we can be glad for is that the doctor was either a great saver or a great investor. Thank goodness the doctor still had some of the money so that the Justice Department was able to get it back for U.S. taxpayers.

One of the truly great things about being a whistleblower lawyer is that you are always getting to learn something completely different, something completely outside the law practice.

Take today. Today I learned something about the polling industry.

It started when I read an NPR article, Polling Firm Gallup Lands in Legal Hot Water, about a whistleblower who has filed a False Claims Act lawsuit against Gallup. I'm used to the idea that fraud knows no industry boundaries. In fact, one of the things I really like about being a whistleblower's lawyer is the challenge of always learning a new industry. But if fraud has no boundaries, the False Claims Act does, and one of them is that the FCA only addresses fraud against the Government. I was baffled as to just how and why Gallup came to have a contract with the U.S. Government.

Certainly I have heard of the Gallup Organization and the polls it takes - everyone has. And if you are like me, you wonder just who it is who gives all those opinions, because certainly no one ever calls me! As you can tell from that comment, I always associated polling with elections, politicians, and political issues.

Apparently that notion is way out-of-date. Today the political polls are just the smallest part of what has become a huge industry. Companies - and even the government - use polling to find out what consumers would like in a product. Polls are now a major form of marketing and product development. Even the Government is now in on the action, and apparently has a number of contracts with Gallup for the company to do polling research on governmental matters.

The whistleblower in this case worked for Gallup, and he accused Gallup of defrauding the Government on two important contracts, one with the U.S. Mint and the other with the State Department. The U.S. Mint had hired the Gallup Organization to conduct polling about the public's demand for new coins, and the State Department hired Gallup to do polling about what the public wanted with American passports.

According to the whistleblower's lawsuit, Gallup overcharged the U.S. Mint and the State Department for the public research it was doing. The Justice Department says that when Gallup submitted estimates for the work it was going to do, the estimates were inflated.

According to NPR, the United States and Gallup are in talks now to see whether they can settle the False Claims Act suit brought by the whistleblower. If they do, the whistleblower will get a percentage of what the Government collects from Gallup.

Apparently these two contracts are not the only ones that Gallup has with the Government, nor are they the only two that have landed Gallup in hot water. The Federal Emergency Management Agency has accused the company of "a lack of business honesty or integrity." Gallup has been suspended, meaning that it will not be allowed to win any Government contracts for a time. A former FEMA official, Timothy Cannon, has pleaded guilty to steering $ 1,000,000 in contracts to Gallup - in exchange for the promise of a job with Gallup when he left FEMA. Cannon's sentencing is set for April. Meanwhile, the Government has suspended Gallup from any government contracts, and Gallup is fighting to get the suspension removed.

On December 27, 2012, Pfizer and Endo finalized settlements with the State of Texas and the United States Government in a False Claims Act case that alleged the two companies defrauded Medicare and Medicaid. According to the Texas Attorney General's press release, the two pharmaceutical manufacturers agreed to pay a combined total of $50 million to the State of Texas, the U.S., and whistleblower Ven-A-care.

The payments are to settle a False Claims Act lawsuit originally filed by Ven-A-Care, the whistleblower, also known as a qui tam relator, on behalf of the United States and Texas. According to the suit, Endo and Pfizer submitted false statements to Medicare and Medicaid about the prices the companies were charging for some generic drugs that they manufactured. As a result, Medicare and Medicaid wound up paying more than they should have for the drugs.

As a whistleblower lawyer and a taxpayer, I was glad to see the government recovering some of the money it lost to fraud. The shocking part is how often pharmaceutical companies have been front and center in the False Claims Act area in recent years.

This particular fraud relates to how much Medicare and Medicaid have to pay for the drugs that are prescribed to people who are on those plans. If you are a Medicare or Medicaid beneficiary, then when you go to a drug store to pick up a prescription, Medicare or Medicaid reimburses the drug store/pharmacy for the cost of the medication, plus an amount on top of that price. That extra amount on top of the cost of the drug is called a "spread." Usually Medicare and Medicaid agree to pay the drug store chain a specific percentage or "scaled" payment above what the drug store chain itself paid for the drug. In order to do that accurately, of course, Medicare and Medicaid have to know how much the pharmacy, wholesaler or distributor paid for the drug. To fill in that missing piece of information, pharmaceutical companies are required to report how much they charged.

If the pharmaceutical company lies about the amount, and says it was larger than it really was, then Medicaid ends up reimbursing the drug store more than it should have. For example, let's say a drug manufacturer charges a drug store chain $10 for a drug. If Medicaid thinks that the drug store chain actually paid $20 for the drug, Medicaid's calculated payment to the drug store chain will be too high.

Don't get me wrong - usually these cases are not quite as straightforward as in that example. In fact, sometimes a pharmaceutical company will work out a pretty convoluted way to hide the fact that it really charged the drug store chain $10 for the drug. But the concept itself is easy to understand: the pharmaceutical company says it is charging $x for a drug, when it really is charging less than $x for the drug.

The Pfizer suit had initially been filed against three biotechnology companies, ESI Lederle, Lederle Labs, and Pharmacia Corp. Pfizer then bought the three companies.

The "relator" - meaning the party that revealed the fraud to the United States and sued on behalf of the U.S. - was Ven-A-Care of the Florida Keys, Inc. As the whistleblower, Ven-A-Care will get a percentage of what the governments recovered.

Raymond Winter, who is the Chief of the Civil Medicaid Fraud Division in Texas, signed the agreement on behalf of the Texas Attorney General. Dr. Kyle Janek, M.D., signed on behalf of the Texas Health & Human Services Commission.

As taxpayers, we owe Ven-A-Care a debt of gratitude for bringing this matter to the attention of the governments, so that we could get back some of the money that Medicare and Medicaid paid out solely because the drug companies gave a falsely-inflated price for the drug. The Florida company has been involved in exposing a number of schemes to defraud the federal government and the state governments through Medicare and Medicaid fraud.

Sometimes a case about Medicare and Medicaid fraud just makes me through-and-through mad, and the ongoing case about Health Care Solutions Network (HCSN) is one of those cases.

According to a January 24, 2013, Justice Department press release, HCSN ran a mental health center in Miami, as well as a second one in North Carolina. Apparently impatient to get patients, the company paid kickbacks to owners and operators of assisted living facilities to get them to send elderly people for treatments at HCSN. According to DOJ, the services were "medically unnecessary and, in many instances, not even provided." HCSN was not concerned with whether the patients actually needed the treatment. In fact, according to DOJ, some of the patient "suffered from dementia, Alzheimer's disease or mental retardation, or were otherwise unable to benefit from mental health services." Nonetheless, HCSN gave these patients treatments and billed Medicare and Medicaid for the "services" it was providing. HCSN even put some of these patients into a "partial hospitalization program" (PHP), a program that is supposed to involve intensive treatment for severe mental illness. Again, HCSN billed Medicare and Medicaid for the "services" it provided. Per the press release, these patients did not qualify for the partial hospitalization program, and "were only selected because they had Medicare or state of Florida Medicaid benefits."

Wow. Seriously? I am a whistleblower lawyer and so I regularly represent people who are blowing the whistle on fraud against the Government. I see a lot of fraud, and every time I pay my taxes, I think about the fact that when somebody rips off Medicare, Medicaid - or any other government program - they are stealing from all of us who are U.S. taxpayers. But sometimes a defendant does something so out-and-out callous and hurtful to others that it manages to stand out even in a pretty bad crowd - and for me, HCSN fits in that category.

Over a seven-year period between 2004 and 2011, HCSN billed Medicaid $63,000,000 for "purported mental health services."

DOJ issued the press release to announce that the owners of three assisted living facilities and "an affiliated psychologist" were sentenced to prison after they pled guilty to conspiracy to violate the anti-kickback statute. The psychologist reportedly "conspired with other HCSN employees to fabricate medical records to support HCSN's fraudulent billing to the Medicare program." As part of the plea agreement, the psychologist even admitted that many of the patients were not qualified for the treatments. She also agreed to give up her North Carolina mental health treatment license. For their part in the defrauding Medicaid, the three owners of the assisted living facilities are now banned from ever operating assisted living facilities again.

Instead of being able to live out their lives in peace and with tender care, these elderly people were subjected to mental treatments and even partial hospitalizations they did not even need. And the DOJ tells us that the only reason was so somebody could make money from Medicare?

That's outrageous. And it's why I am going to keep representing whistleblowers in qui tam and False Claims Act cases - because things like this ought not happen. Sometimes the Government finds out about fraud on its own - and it may have done so in the case of HCSN, because the press release does not mention a whistleblower. But a large part of the time, the Government needs a relator (whistleblower) to come forward to let it know when and how it is being ripped off.

The Justice Department has released the False Claims Act statistics for fiscal year 2012. In that year, DOJ recovered 4.9 billion dollars in cases trying to recoup the money stolen from the Government by fraud. By far the largest amount of the money was recovered from health care companies who were cheating the Government, usually via Medicare or Medicaid. I wrote about this health care fraud in a recent blog entry. Today I want to focus on the area of financial fraud, and in particular the areas of mortgage and housing fraud.

The DOJ pointed to successes the Financial Fraud Enforcement Task Force has had over the past year. President Obama established the Task Force as a mechanism for allowing the various groups involved in preventing financial fraud to work together. The Task Force pulls together regulatory agencies, law enforcement, investigative, and prosecution.

The Task Force's big news for the year was a mammoth $25 billion settlement with Bank of America Corporation, JP Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC). The settlement involved the federal government, and also the attorneys general from 49 of the fifty states as well as from the District of Columbia. The banks repaid $900 million that had been laid out by federal mortgage insurance programs as a result of the fraud by the banks. The settlement addressed fraud in the area of mortgage loan servicing and foreclosure. The settlement also includes provisions aimed at helping homeowners who were having difficulty making their mortgage payments, and provisions designed to protect homeowners in the future, in order to prevent what Attorney General Eric Holder called the "abusive practices" by Bank of America, JP Morgan, Wells Fargo, Citigroup and Ally Financial.

Over the course of fiscal year 2012, the federal government also made several other large settlements with other banks that had cheated the government. Deutsche Bank AG and subsidiary MortgageIT, Inc., agreed to pay $202.3 million as a result of false claims they made in connection with federally insured mortgages. As part of the settlement, MORTGAGEIT admitted that it had not complied with all of HUD-FHA regulations, and that it had submitted paperwork saying that loans were eligible for FHA mortgage insurance, even though the loans actually were not eligible under the terms of the insurance program. The case against Deutsche Bank and MortgageIT had been filed in the Southern District of New York, where Preet Bharara is the United States Attorney.

Citibank subsidiary CitiMortgage Inc., was required to pay the federal government $158.3 million. Like MortgageIT, Citibank admitted that it had told HUD that certain loans were eligible for FHA mortgage insurance, despite the fact that the loans actually were not eligible for the insurance. The Citibank case also was filed by U.S. Attorney Bharara's office in New York.

The government recovered another $132.8 million from Flagstar Bank for its federally insured mortgage fraud. The case against Flagstar also had been filed out of the office of the United States Attorney for the Southern District of New York.

While, the Task Force had enormous success in the area of recovering for mortgage insurance fraud, the recoveries barely scratched the surface of the mortgage and banking fraud against the federal government.

On Thursday CNN published my iReport, which asks: Who violated a court order to leak the Lance Armstrong story?

It's a head scratcher for me. As I said in my first blog entry on the Armstrong whistleblower case, the case was under seal when someone talked to the Wall Street Journal and dished some details about what the lawsuit said and about the settlement negotiations between Armstrong and the Government. The False Claims Act requires the whistleblower to get a court order sealing the case - meaning that a court had ordered that no one could discuss the case. So who leaked the story to the press? And why?

The only people who should have known about the suit were: Landis and his lawyers; Armstrong, the two other defendants and their lawyers; the Government; and the Court.

My guess is that it's not likely Landis would blab. Landis has spent years getting the Government interested in the case. If he leaks the case, the Government may try to argue that he should get a smaller percentage, or even no percentage. Why would he risk that now, when he is so close?

And why would a federal judge violate his own order by going anonymously to the press? After all, the judge could lift the seal at any time. And I cannot picture any law clerk or legal secretary violating an order from the judge for whom he works.

So that leaves the defense side and the Government.

Could an individual Government employee have gone rogue and spilled the beans? I would lean toward thinking that is pretty unlikely. The folks who work for DOJ sign up to enforce the law. They tend to be very disciplined people who follow the rules, not break them. And even if one rogue government employee were willing to risk his job for 15 minutes of fame, the report was made anonymously. Where's the fame in that?

Could the DOJ be intentionally violating the order in order to leverage the current publicity to pry a larger settlement from Armstrong? But how would that work? Could the Government be asking the judge to gag Armstrong before the Oprah show airs? But they have not done that?

The article does say that according to "people familiar with the matter", "Justice Department officials have recommended joining a federal whistleblower lawsuit." But that tidbit does not really implicate the Government, because if the Justice Department has to announce its decision by Thursday, and if DOJ is in the middle of negotiations, then almost certainly the whistleblower and the defendants know that DOJ has approved intervention.

But on the other hand, why would the Armstrong side leak the story about the lawsuit to the press? If they did do it, they sure took a big risk. I've seen a federal judge mad at one of the sides in a lawsuit (thank goodness it wasn't mine), and it wasn't pretty.

I've wracked my brain trying to figure out how revealing the lawsuit to the press would help the defense team. Maybe Lance Armstrong wants to get in the first word about the case on his Oprah interview? Surely he won't respond directly to questions, but perhaps he could obliquely. Maybe he talked about the suit in the interview (which was taped earlier) and realized he should not have, and the press leak is an attempt to confuse the issue of how the information leaked? If so, it's a pretty poor attempt, since everyone can see the timing.

Is the leak an attempt to set up a legal argument? Does Armstrong want to argue that the information has been "publicly disclosed" so that Landis cannot qualify as a relator? But even if Landis could not be a relator, the Government still could continue on with the suit. Plus, the "public disclosure bar" applies before the suit is brought, not afterwards. Does Armstrong want to reduce the damages by saying he brought the fraud to the attention of the Government? It's way too late for that.

But for that matter, I've found the entire Oprah interview a great mystery. With this suit pending, why would Armstrong go on national television to admit what he has done?

We know that Armstrong is in negotiations with the Government. Perhaps Armstrong's side thinks that if he confesses, public opinion will shift his way and he will be able to settle the qui tam lawsuit with the Government on more favorable terms? But then I argue back to myself - where's the incentive for Armstrong to violate the order when he could just postpone the Oprah interview until after the judge lifts the seal on the case?

Have any ideas about who did it? Post them on my CNN iReport, Who Leaked the Lance Armstrong Lawsuit Story? Because I just can't figure it.

CNN just posted my iReport about the Lance Armstrong whistleblower lawsuit. It looks like somebody violated a court order to leak the lawsuit to the press before it was unsealed. Who did it? And why?

If you have read or heard the news in the last week, you can't help but know that Thursday night Lance Armstrong is supposed to confess to doping on the Oprah Winfrey network. Since I'm a whistleblower lawyer, I was very interested when the Wall Street Journal published a story claiming that Floyd Landis, Armstrong's former teammate, had filed a False Claims Act lawsuit against Armstrong and, "according to the person who has seen it, [also against] Thom Weisel, the former chairman of the management company that owned Armstrong's cycling team, and Johan Bruyneel, his longtime team director." Armstrong's cycling team had a sponsorship contract with the United States Postal Service. Apparently the suit accuses the trio of knowing that team members were doping, which violated the USPS contract, and yet accepting $ 30.6 million in sponsorship money. The Landis case was filed in 2010, but has been under seal all this time.

And that was when the whistleblower lawyer in me thought: Whoa! Stop the reel! Say what?

The case is still under seal? Yet some "person who has seen it" is talking to the media? Who? And why? I'm a lawyer who represents whistleblowers, so for me that was the head scratcher in the story.

The way that whistleblower cases work is that the "relator" (whistleblower) files suit on behalf of the Government, saying the Government was defrauded. The whistleblower can get a percentage of what the Government gets back as a result of the lawsuit.

But the False Claims Act is very specific - in order to give the Government a chance to investigate the claims, the whistleblower has to file the case "in camera" and "under seal." Since American courts are public, when the whistleblower files the case he has to get an order from the court sealing the case. By federal court order, no one is allowed to talk about the suit - even to the defendant -- unless the court lifts the order.

If the government reaches a point in its investigation when it wants to talk to the defendant about the allegations, it asks the court for a "partial lifting of the seal." We know that must have happened here, because the article says that Armstrong is in negotiations with the Government. But a partial lift only allows the Government to show the case to the defendant. With that one exception, the complaint is still under seal.

So who is the person who is violating the court order and talking to the press? We know it's not someone who just hacked a computer and got hold of the Complaint. The source has to be an insider, because he knew that Armstrong and the Government are having settlement talks, but are "nowhere near an agreement."

Unless something unusual has happened in the litigation, right now only four groups should know about the lawsuit: the whistleblower Landis; the defendants Armstrong, Weisel and Bruyneel; the Government; and the Court. So which one leaked the lawsuit? And since the case was supposed to come out in two days, why would anyone do that?

More on my speculations on that in my next post. If you have ideas, please post them on my CNN iReport, Who Leaked the Lance Armstrong Lawsuit Story?

The Department of Justice announced that in fiscal year 2012, the government recovered $4.9 billion that had been lost due to fraud against the federal government. Relators -- the folks I represent as a whistleblower's attorney -- brought cases that recovered $3.3 billion of that $4.9 billion. Of the 4.9 billion in recoveries, the vast majority of the fraud - 3 billion in total - was detected in the healthcare arena. DOJ was rightfully proud of the recoveries in the area of health care fraud.

In Fall 2011, I heard Health and Human Services Secretary Kathleen Sebelius talk with pride about her 2009 initiative with Attorney General Eric Holder. Together Sebelius and Holder declared open war on health care fraud, creating an interagency task force to actively pursue health care fraud, both criminally and civilly. At the 2011 Taxpayers Against Fraud conference in Washington, D.C., Secretary Sebelius spoke proudly of the task force the two had created, and of the success it has had.

In fact, the Health Care Fraud Prevention and Enforcement Action Team (HEAT) has been wildly successful in seeking out and stopping fraud against the federal government in the health care arena. Since the agency was created, the Justice Department has recovered $9.5 billion dollars of the health care fraud that is plaguing our nation and draining the federal coffers. Given where the federal government's health dollars go, it is no surprise that the majority of these funds have been recovered from medical facilities that were cheating Medicare or Medicaid.

For the second year in a row, the largest recoveries have come from pharmaceutical companies and companies that manufacture medical devices. In drug and medical device cases alone, the federal government recovered $2 billion dollars of stolen money, and passed out another $745 million to state Medicaid programs that had been defrauded.

Of the three top settlements involving drugs and medical devices, the larges were with GlaxoSmithKline LLC (GSK) and Merck, Sharp & Dohme. The Justice Department pointed out that it was not even counting a recent, enormous settlement with Abbott Laboratories, because the settlement will be reflected in the report the Justice Department issues for Fiscal Year 2013.

The GSK settlement, which was for $1.5 billion, was related to False Claims Act claims about the drugs Advair, Lamictal, Paxil, Wellbutrin and Zofran. The Justice Department accused GlaxoSmithKline of promoting those drugs for off-label use, and of paying physicians kickbacks in order to get the physicians to prescribe the drugs. DOJ also said that GSK had used kickbacks to try to pump the sales of drugs Flovent, Imitrex, Lotronex and Valtrex. The Department also made allegations that GSK had made false and misleading statements about whether Avandia was safe to use. Finally, DOJ said that GSK had claimed false "best prices" (drug companies agree to give the government "best prices") and had underpaid Medicaid drug rebates that the company owed.

In fact, the GSK settlement has taken its place in the annals of history as s the largest health care fraud settlement in U.S. history. The federal government recovered $1.5 billion in civil recoveries, as part of a $3 billion global settlement that included amounts attributed to criminal fines and forfeitures and to state Medicaid recoveries.

For this entry in my whistleblower lawyer blog, I want to discuss a settlement that the Government announced just before Christmas. The Department of Justice announced a whopper of a settlement -- $70,000,000 -- with hardware distributor W.W. Grainger. Grainger is based in Lake Forest, Illinois, about 30 miles north of Chicago.

Grainger's False Claims Act troubles started back in 2006, when a former employee filed a Milwaukee, Wisconsin lawsuit against the company. Brian Holbrook, a former sales manager for Grainger, alleged that the company had violated the False Claims Act by knowingly submitting false or fraudulent claims to the federal government. Holbrook brought his suit under the False Claims Act as a "qui tam" lawsuit, meaning that Holbrook sued on behalf of the United States Government to recover the money he said that Grainger had fraudulently charged the Government. Holbrook said that Grainger had agreed to sell products to the Government at a fixed markup of 26% above the prices that Grainger itself paid for the products, but that instead Grainger was charging markups greater than 26%. He also said that Grainger was violating its government contracts by buying products from countries, like China and Taiwan, that did not have reciprocal trade agreements with the United States.

In 2008, Grainger settled the case that Holbrook had bought, paying
$6 million to the federal government. Holbrook, who was the "relator" in the case because he initiated the suit on behalf of the United States, received a percentage of the money that the United States recovered.

In December 2012, Grainger agreed to pay the U.S. government another $70,000,000. According to the Justice Department, the new Grainger settlement was the result of an audit by the General Services Administration Inspector General (GSA IG) and an investigation by the United States Postal Service Inspector General (USPS IG). The Inspector General for the GSA said that Grainger was not providing sales and pricing information, which it had agreed to do in order to qualify as a favored procurement source for government agencies. The Inspector General for the USPS alleged that Grainger was not treating the postal service as a "most-favored customer", which it had agreed to do. In both cases, the Inspectors General said, the government wound up paying Grainger more than it should have had to.

The False Claims Act seeks to stop fraud against the federal government, and in order to do that it incentivizes private citizens to come forward with information that will enable the Government to stem the increasing tide of taxpayer money being lost to fraud each year. The Government starts an investigation based on the information from the relator, using the information to build a suit to recover the money stolen by fraud. Under the False Claims Act, a relator is entitled to receive a percentage of the recovery by the Government, if a relator brings the suit. Most people refer to a relator - like Mr. Holbrook -- as a "whistleblower." Whistleblowers like Brian Holbrook help the Government recover billions of dollars every year.