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Not The Golden Years This Florida Doctor Envisioned: The Perils of the Fast Lane

Back in the days when we were at the U.S. Attorney’s Office, we used to occasionally hear jokes about the fact that “we don’t catch the smart ones.”  This kind of comment would usually come after we might have come back from court in a case where the accused did something so colossally stupid to almost guarantee his or her getting caught — like writing a bank robbery demand note on the back of his pay stub.  (Yes, that really happened in one of my cases.)

The joke was a kind of tacit acknowledgment among us that with all the crimes out there to investigate, and all the many different priorities of law enforcement, smart criminals know how to cover their tracks a little more intelligently, or at least to avoid steps that will put them on the immediate radar screens of investigators and prosecutors.

Fortunately for prosecutors everywhere, stupid criminals abound.  And by stupid, we don’t mean poorly educated.  We mean, in many instances, so blinded by their own greed and self-delusion that they can’t understand how their behavior will look to the rest of the world.

Last week, a 63 year old physician in sunny Florida was sentenced to 17 years of non-parolable time in prison (the judge seems to like round numbers, like 80), for having bilked Medicare of at least $73 million in a five-year period between 2008 and 2013.  That’s roughly $14 million per year, or more than $1 million per month of fraud.

Dr. Salomon Melgen had been considered a prominent eye doctor.  But something went terribly wrong along the way for the Harvard-trained physician.  In a two month trial last November, the government proved a vast pattern of bilking the taxpayers, primarily Medicare, for unnecessary treatments and tests, for “upcoded” bills and the like, totaling 67 criminal counts of conviction in all.  His pretrial release was revoked upon conviction and he’s been in custody since November.  A week and half ago, in late February, the sentencing judge held a hearing to determine, among other things, the extent of the loss to taxpayers.  The government argued for $136 million; the judge found that $73 million had been proven.  See  It was that same day that the 17-year sentence was handed down.

While every case is different from every other, there are some familiar patterns here.

First, our trillion-dollar-per-year health care economy is run, at least with respect to government insurance programs, on an honor system.  For the most part, claims that are submitted get paid, and problems that are identified get chased later.  (This is the so-called “pay and chase” system.)  What that means, as Dr. Melgen proved, is that defrauding Medicare and Medicaid is pretty darned easy.  An up-coded bill here, an unnecessary test there, pretty soon it’s real money.

Second, as most prosecutors will tell you, greedy people don’t suddenly stop being greedy after they’ve had a taste of their ill-gotten gains.  They usually acquire a taste for more.  Sometimes they just can’t hold back, which seems to have been the case with Dr. Melgen.  Now it’s not just the occasional upcoded bill, but masses of them.  And not the occasional unnecessary test, but a raft of them.  Fancy houses, fancy cars, fancy connections to politicians… a taste of life in the fast lane.

Next thing you know, however, you’re on some law enforcement agent’s radar screen.  Some patient might have complained.  Some whistleblower might have noticed your up-coding.

And now that Florida retirement is looking so, so different.

Happy Fourth of July from Boston

The patriots who signed the Declaration of Independence over 235 years ago, concluded the Declaration with these words:

And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor“.

Had their bold experiment failed, they would have lost everything, including their lives.


As the long 4th of July holiday weekend is unfolding, let us remember the vision, sacrifice, faith, and hard work that have preserved our democracy, and appreciate the many acts, large and small, that contribute to the common good.


Among these are the courageous whistleblowers who at great personal cost come forward to tell “the government”, our government, that it is being cheated, by a defense contractor, a health care company, a bank, or others.   Sometimes they succeed, sometimes they fail, but regardless they are doing their part as citizens in a democracy.

In just the past month, we have already seen the largest settlement involving alleged violations of the Anti-Kickback Statute by skilling nursing facilities in the United States, Trinity Industries was ordered to pay 463.4 for defrauding the Federal Highway Administration, and UPS agreed to pay for False Claims Act violations.  All due to the contributions of whistleblowers.  Their bravery, and the dedication of the public servants who work the cases, inspire us.

We wish everyone a safe and happy Fourth of July from Boston!

Fraud in Small Business Innovation Research Yields Settlement

Recently the U.S. Attorney’s Office for the Western District of Washington announced a False Claims Act settlement stemming from fraud in the Small Business Innovation Research (“SBIR”) program. nLight Photonics, Inc. (nLight), a privately-held, Vancouver, Washington-based manufacturer of high performance diode and fiber lasers, agreed to pay $420,000 to resolve allegations that between 2004 and 2013, it received multiple government grants and contracts for which it did not legitimately qualify under the SBIR because of its ownership structure. For the purposes of the SBIR program, the term “small business” is defined as a for-profit business with fewer than 500 employees, owned by one or more individuals who are citizens of, or permanent resident aliens in, the United States of America.


The SBIR program was established by Congress in 1982, and amended several times since. Currently eleven federal agencies participate in the program, awarding millions of dollars of grants and contracts each year. It is a highly competitive program that encourages domestic small businesses to engage in Federal Research/Research and Development (R/R&D) that has the potential for commercialization. Id. Government funding is available because many early-stage innovation are still too high risk for private investors, including venture capital firms.

The fraud was discovered by an employee of the Department of Energy, one of the government agencies from whom SBIR funding was obtained. Apparently, the employee who was overseeing both an nLight SBIR grant as well as an SBIR grant awarded to a company that nLight had acquired, made an inquiry of nLight which brought its ineligibility to light. Indeed, nLight had successfully sought funding from the Army, Navy, Air Force, NASA and Department of Energy to further develop its laser technology, which has military and related applications of interest. Each of these agencies participated in the investigation, along with the Department of Justice, to reach the settlement. According to one news report, by 2011 the privately-held company nLight had secured $110 million in equity financing from Silicon Valley investors and was on a steady growth trajectory that led to speculation that it would initiate a public stock offering.

It is encouraging to see a False Claims Act case made “the old-fashioned way”—through discovery by agency contracting personnel and investigation by government law enforcement working together with DOJ. It reminds us all that without the benefit of a whistleblower, there are plenty of FCA cases the government can and should make.  To be sure, there are many cases of complicated fraud where a whistleblower is needed, and one wonders how much sooner the fraud here would have been uncovered if a whistleblower had come forward.  In addition, while so much of the attention of the FCA these days is on health care fraud cases, we would all do well to remember how many billions of dollars the federal government spends each year procuring other goods and services, from research as here, to military equipment for our soldiers.

Florida Home Health Care Kickbacks to Doctors

In the past month, the Justice Department has settled two cases involving kickbacks between doctors and home health care companies providing services to Medicare patients.


Offering and/or accepting kickbacks has been banned by Congress and violates the False Claims Act .


As the Justice Department said in a recent release:


“The Anti-Kickback Statute and the Stark Law are intended to ensure that a physician’s medical judgment is not compromised by improper financial incentives.  The Anti-Kickback Statute prohibits offering, paying, soliciting or receiving remuneration to induce referrals of items or services covered by federal health care programs, including Medicare.  The Stark Law forbids a home health care provider from billing Medicare for certain services referred by physicians who have a financial relationship with the entity.”


The first case involved two South Florida medical doctors and their wives who allegedly accepted sham marketer salaries in exchange for their husbands’ referrals to A Plus Home Health Care Inc.  Dr. Alan and Lynn Buhler agreed to pay to the United States $1.047 million and Dr. Craig and Cynthia Prokos agreed to pay $90,000 to settle allegations that accepting such kickbacks violated the False Claims Act.


The second case involved Recovery Home Care Inc. and Recovery Home Care Services Inc.  who allegedly paid dozens of physicians thousands of dollars per month to perform patient chart reviews in return for referring their patients to Recovery Home Care. The government contended that these doctors were over-compensated for any actual work they performed and the payments were an illegal inducement.


Recovery Home Care agreed to pay $1.1 million to resolve allegations that the Recovery Home Care entities violated the False Claims Act.  Whistleblower Gregory Simony, a former employee of Recovery Home Care, will receive $198,000 of the recovered funds.  The government continues to litigate this case against Recovery Home Care’s previous owner, Mark Conklin.


As they say, “it takes two to tango” and in health care that often means the “partners” are the doctors and another health care provider. The cases above involved home health care companies, but in other instances improper relationships could involve, for example, hospitals, hospice care,  to name just a couple. Any health care provider who depends on physician referrals is in a position to improperly influence the doctor’s judgment with illegal kickbacks. Medicare patients deserve conflict free medical care, as do the taxpayers.


For more on home health care fraud, see the announcement last year of the largest home health care fraud settlement against Amedisys – United States ex rel. CAF Partners v. Amedisys, et al., Civ. No.:10-cv-02323 (E.D. PA) – in which the Whistleblower Law Collaborative represented one of the relators.

RELATED: Florida Home Health Care Company Agrees to Pay $1.1 Million to Resolve False Claims Act Allegations RELATED: Two Florida Couples Agree to Pay $1.13 Million to Resolve Allegations that They Accepted Kickbacks in Exchange for Home Health Care Referrals

Shippers Who Ripped Off Military Settle FCA Suit

It appears a settlement has been reached in the False Claims Act case  brought by two whistleblowers and the United States against two shipping companies, Covan World-Wide Moving Inc. and Coleman American Moving Services Inc. (the Covan Carrier Group), in federal district court in South Carolina. In an Order issued yesterday, the federal district court judge put the case on hold pending finalization of a settlement in principle.  See Covan-Order and Law360-article-Covan.


Covan Carrier Group had contracts with the U.S. Department of Defense (DOD) to assist in relocating military personnel by packing and shipping their belongings as they were deployed at home and abroad. The United States and the whistleblowers, two workers at a Coven Carrier Group warehouse in Augusta, Georgia, allege that since at least 2007, Covan padded their bills for relocating personnel by lying about shipment weights. The whistleblowers claim that managers falsified weight tickets, including by forging documents or “whiting” out portions of the documents.  A government audit revealed widespread misconduct, for example, in Pearl Harbor, Hawaii, military officials determined that Covan consistently claimed its shipments weigh about ten percent more than they actually do; the United States’ Complaint has many other examples of fraud and alleges that it happened at all twenty-four Covan locations in the United States. See Covan-Complaint.


The terms of the settlement are not yet announced, but DOD says the companies have billed $723 million to the government for the shipping and relocation services. Under the FCA, the companies could face up to three times the damage or loss to the government plus a civil penalty of between $5,500 to $11,000 per false claim (i.e. invoice).  We expect the size of the settlement will depend on how much weight inflation there was and at what locations (for example, if it was ten percent across the board, then the single damages could be about $72 million; if it was limited in scope as the companies contend, it would be less), how much of a multiplier is applied to the single damages or loss figure (i.e. is it doubled or trebled which will likely depend on how egregious the conduct is), and how many, if any, civil penalties are assessed. In addition to damages and penalties, the companies could face debarment or exclusion by DOD from future federal contracts.


The FCA, also known as “Lincoln’s Law,” was first passed during the Civil War to recover for shoddy military equipment being billed to the Union Army. It is frustrating that companies are still ripping off the military for profit, but it is rewarding that the qui tam provisions of the FCA are working. We commend the two whistleblowers here for coming forward. Without them “blowing the whistle” in 2013,  the fraud may never have been exposed.

“Ambiguous” Government Reg Not Automatic Defense

A common defense in a False Claims Act case is to argue that the defendant cannot be liable because the applicable government regulation was “ambiguous” and the defendant’s interpretation of the regulation is “reasonable” therefore the defendant could not have “knowingly” submitted a “false” claim (two key elements of FCA liability). Indeed, this defense is central to a declined qui tam case pending in U.S. District Court in Missouri against Anesthesia Associates of Kansas City (“AAKC”). Last week the Justice Department supported the whistleblower by filing a Statement of Interest debunking this defense.


The U.S. first addressed the argument that the defendant could not have acted “knowingly” or in other words with the requisite scienter to have violated the FCA. The FCA defines “knowingly” to mean having actual knowledge, reckless disregard, or deliberate ignorance of the falsity of the claim, and no proof of specific intent to defraud is required. 31 U.S.C. § 3729(b)(1). Defendant AAKC argued that CMS’ regulation was ambiguous and that AAKC could now advance a reasonable interpretation of the regulation. The U.S. rebutted this argument stating:


“An FCA defendant’s scienter, or lack thereof, depends on the surrounding facts as they existed at the time, not on whether its lawyers can point to ambiguities in regulatory language and advance plausible post hoc interpretations… To hold otherwise would mistakenly absolve of liability any defendant who can later advance a plausible regulatory basis for the submission of false claims. It would allow a defendant who fully intended to submit false claims to escape liability. It would eliminate liability, across the board and regardless of circumstances, for those who recognized an ambiguity and made the decision not to inquire.”


Brief at 2-3 (emphasis added).


As part of the court’s fact finding exercise, it may look at the defendant’s state of mind at the time the claims were being submitted; the U.S. acknowledged that “evidence of whether or not the defendant reasonably interpreted the governing regulation and submitted claims it, in good faith, believed to be truthful at the time of submission is important to consider.” Brief at 4. However, the U.S. reminded the court that the defendant cannot engage in “ostrich-like conduct” by effectively sticking its head in the sand. Brief at 6.


The U.S. then turned its fire on the argument that the claim could not have been “false” because of defendant’s purported reasonable interpretation. The U.S. rejected this argument out of hand, characterizing it as a “misstatement of the law.” Brief at 8. Explaining that “knowledge” and “falsity” are separate elements of FCA liability, the U.S. went on to note that it is up to the court to determine “falsity” by using “normal tools of statutory construction to determine whether statements or claims are ‘objectively’ false.” Id. (emphasis added).


This case is worth keeping an eye on to see how the district court rules. Anyone litigating a FCA case should consult the U.S. Brief for an excellent summary of the law of “knowledge” and the meaning of “falsity” under the FCA.

Medical Device Manufacturer Settles False Claims Act Lawsuit

A whistleblower False Claims Act lawsuit accusing Medtronic, Inc. of promoting off label unapproved uses of its “SubQ” spinal stimulation device has been settled by the Department of Justice for $2.8 million.


The suit, brought by a former Medtronic sales representative, alleged that “from 2007 through 2011, Medtronic knowingly caused dozens of physicians located throughout more than 20 states to submit claims to Medicare and TRICARE for investigational medical procedures known as SubQ stimulation that were not reimbursable.” While the safety and efficacy of SubQ stimulation had not been proved to the FDA, Medtronic nevertheless persuaded doctors to implant Medtronic’s spinal cord stimulation devices just beneath the patient’s skin near an area of pain, most often in the lower back, where the devices would purportedly provide electrical impulses intended to alleviate chronic pain.


Devices or drugs prescribed for purposes that are not FDA approved and thus are “off label” are unfortunately all too common. Indeed, the successful, but unlawful, promotion of prescription drugs for off label purposes has led to multiple large FCA recoveries in the last several years.  On Sunday night John Oliver did a hilarious, sad but true, piece on these drug company tactics on his show Last Week With John Oliver.


Patients should not be treated like guinea pigs for profit. Ask your doctor…or ask John Oliver..or ask a lawyer who represents FCA whistleblowers.

Blowing the Whistle on Environmental Law Violations

Scientists believe 2014 will likely be the warmest year on record; and now Christopher K. Warren, a third year law student at Boston College Law School and a former summer law intern with the Whistleblower Law Collaborative, has written a timely and excellent law review article: “Blowing the Whistle on Environmental Law_ How Congress Can Help“.




The Note will be published in Volume 42, Issue 1 of the Boston College Environmental Affairs Law Review and is also available online for download as a PDF.


Congress has a history of instituting whistleblower programs to protect and reward individuals who expose wrongdoing to the government, most notably the False Claims Act and more recently the Dodd-Frank Act.


In this article, Mr. Warren persuasively argues that the recent whistleblower programs instituted by the Securities and Exchange Commission and the Commodities Futures Trading Commission pursuant to the Dodd-Frank Act should be used as models for an Environmental Protection Agency whistleblower program to expose environmental statutory violations and crimes.


The major environmental laws such as the Clean Air Act and the Clean Water Act have been on the books for decades now, but the government needs the help of insiders to adequately address violations just as Congress decided in 1986 that the False Claims Act originally enacted during the Civil War needed to be modernized to address the growing problem of fraud against the government. The amended False Claims Act has been hugely successful resulting in the recovery of over $30 billion to the Treasury. The environmental crisis facing the United States and the world is even more daunting and we need all hands on deck. Let’s hope Congress will consider Mr. Warren’s idea.

Home Health Care Fraud Settlement for our Clients

We are happy to report that a False Claims Act case filed by two of our clients against North Atlantic Medical Services Inc. (NAMS), doing business as Regional Home Care Inc., has been successfully resolved by the United States and the Commonwealth of Massachusetts [Press Release].


The settlement involving fraud on the Medicare and Medicaid programs was announced by the United States Department of Justice, fill in their pr, the United States Attorney for the District of Massachusetts, fill in its pr, and the Attorney General’s Office for the Commonwealth of Massachusetts, fiil in its pr, after a nearly two year investigation.


The defendant NAMS is a medical device company based in Massachusetts that provides equipment and services for the treatment of respiratory ailments, such as oxygen deficiency and sleep apnea.  Under the terms of the settlement, NAMS has agreed to pay $852,378 to resolve allegations that it used unlicensed employees to set up sleep apnea masks and oxygen therapy equipment for patients in Massachusetts and then improperly billed Medicare and Medicaid for these services.


The whistleblowers will jointly share a portion of the federal and state recoveries in the case.


We are very proud of our clients, who took the risk in coming forward to alert law enforcement and other authorities to the improper billing of Medicare and Medicaid and the threat to patient safety.  The patients who need these services are among our most vulnerable, and deserve our protection.


The case is captioned United States ex rel. John Does v. Regional Home Care, Inc. d/b/a North Atlantic Medical also d/b/a North Atlantic Medical Tolman Clinical Laboratory and as North Atlantic Medical Services, Docket No. 12-CA-11979 (D. Mass.).


A copy of the complaint can be found here.

Life Care Seeks Sixth Circuit Review of Sampling Decision

We recently wrote about a federal district court decision allowing the government to use statistical sampling to prove liability in a False Claims Act case pending against Life Care Centers of America, Inc.  The government’s case stems from two whistleblower suits accusing Life Care of providing uncovered, unskilled, and medically unnecessary services. Life Care has more than 200 locations in about 30 states and much of its revenue comes from Medicare patients.


Life Care has asked the federal district court judge who issued the decision to certify his decision for an interlocutory appeal to the United States Court of Appeals for the Sixth Circuit before the case is tried in the district court.  In that decision, Judge Mattice ruled that 400 specific admissions involving roughly 1,700 claims could be extrapolated to roughly 55,000 admissions involving almost 155,000 claims. In essence, Life Care is hoping to require the government to separately prove the falsity of each of the 155,000 claims, an almost insurmountable burden.  In its motion, Life Care argues that the issue is novel and thus the Sixth Circuit should consider whether extrapolation can satisfy the government’s burden of proof under the FCA and whether constitutional due process rights would be violated if Life Care could not mount a claim-by-claim defense.


The Department of Justice opposed the motion for an interlocutory appeal, arguing among other things that the district court was following decades of precedent establishing the use of statistical sampling in a variety of types of litigation and thus there is no basis justifying Sixth Circuit review of the district court decision’s decision before trial.  “Although the court stated in its order that the use of sampling and extrapolation may have been one of first impression as applied specifically to the FCA, the court nonetheless emphasized that the use of sampling and extrapolation in litigation is hardly novel, and, in fact, is well established,” the government said.


We do not expect the federal district court judge to certify his well-reasoned and thorough decision for interlocutory appeal. Instead, Life Care will have to proceed through discovery, try to challenge the validity and reliability of the statistical sample and supporting expert testimony in the district court, and hope that it can make inroads to limit or exclude the extrapolation.  If done right, the extrapolation should withstand attack and not only help prove liability but also lay the foundation for a massive damages award if the judge or the jury finds Life Care liable of violating the False Claims Act.