Whistleblower Law Blog : Whistleblower Lawyer & Attorney : LaBovick Law Firm, Florida : Federal False Claims Act, Qui Tam

Qui tam is a very interesting niche practice in the law. It has a long history in the United States and today is widely used by the Government.

The qui tam provisions started in the 1800’s during the United States Civil War. President Abraham Lincoln was getting his army requisitions ripped off and he was buying things that were not coming through once he bought them. For instance, the Union army would pay for rifles and instead of getting a thousand rifles they would get 100 rifles and they wouldn’t work.

So, they wanted to figure out a way of making sure that what they were purchasing was what in fact what they were trying to buy. They created a reward system called qui tam, which is short for a Latin phrase which means “he who sues on behalf of the king sues for himself as well.” In other words, if you as someone who knows that a deal is going through, and also knows that the person doing business with the government is going to rip off the government, and you turn them in, commonly called a whistleblower, that you will be included in part of the savings, reward, or recovery that the government gains in that transaction.

In today’s environment fraud schemes are incredibly complex. But here’s a very simple example.

Corporation A makes a deal with the government to sell them a million paperclips a month and that works for a couple of months, but that corporation realizes that nobody on the governments end is trying to count the paperclips or do anything to make sure that they are getting their million paperclips. Instead they decide “you know what, we are going to send them 900,000 paperclips a month.” Since nobody is counting, they are getting away with 10% of the deal. Then they decide to send 800,000. This goes on for five years. Five years go by of ripping off the government 20% on that contract until someone in the company finds out, and when they do and look back and realize that millions of dollars of purchased paperclips have never been sent to the government, they can tell the government about that. When the government recovers, they can recover a reward with the government.

Unfortunately, it doesn’t happen easily. First off, the schemes are very complex, so one needs the paperwork, documentation, etc. Second, the government is very apt to listen to you, and then in the end if you are not properly secured in your claim, the government may not allow you to keep that claim and not give 15-30% of that money.

That’s why it’s necessary to have an qui tam attorney to represent them in going to the government. The people that they should hire for that job should be attorneys with governmental prosecutorial experience. You would want somebody who understands how the government works and to bring the case to them in a format they understand, in a significant organized fashion. In doing so, the person who gives them the claim, the professional name for that is "relator", the "relator" secures their claim so that they can then recover in the end.

It’s a long and arduous process. It can be risky for the "relator" They have to be willing to go out and do these things. But usually, if they have a really valid claim, it can be extremely lucrative.

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Don't Play with Qui Tam Matches without being familiar with the statute - You will get burned!

This week the United States District Court (USDA) Sixth Circuit (6th Cir.) confirmed that the Plaintiff was liable for filing frivolous Qui Tam Actions. In the case of Stalley v. Mt. States Health Alliance, 2011 U.S. App. LEXIS 13895, No. 10-5211/5212 (6th Cir. Jul. 8, 2011) the District Court for the Eastern District of Tennessee held that the Plaintiff had filed a frivolous Qui Tam action against the Defendant for failure to abide by the Medicare Secondary Payer Act (MSPA).

There is no actual authority to file a Qui Tam action for such a violation. However, on it's face, it would seem that breaching any portion of Medicare could straddle you Qui Tam liability. The court said no. To make matters worse, the court granted the Defendant sanctions against the Plaintiff in the amount of $276,589.00. Feeling confident that the MSPA should apply, the Plaintiff appealed.

UH OH! The USCA 6th said WE AGREE and AFFIRM the Sanctions. They also found that the sanctions should be held against plaintiff AND HIS COUNSEL!

The real lesson here is that an unfamiliar legal niche, such as Qui Tam, is a hard place to practice if you don't know the rules.

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Did use of information obtained by the Freedom of Information Act (FOIA) just become a little less free? The recent Supreme Court Schindler Elevator Corporation vs. US ex rel. Kirk decision in a False Claims Act (FCA) case sheds some light on this topic. The Supreme Court ruled five to three that information obtained via the FOIA cannot be used for pursuing a claim under the FCA.

To understand the meaning of the Supreme Court's ruling and its potential impact on the role of whistleblowers, it may help to better understand the three parts of this case: The Freedom of Information Act, the False Claims Act, and the specific circumstances of the Schindler vs. Kirk case.

Freedom of Information Act
The Freedom of Information Act went into effect in 1967. It allows for disclosure, in full or in part, of information that has previously been unreleased by the federal government. Under the law, most documents produced by the federal government are available for scrutiny. Exclusions include anything that might threaten national security, hinder law enforcement efforts, or reveal commercial or financial trade secrets, amongst other things.

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Healthcare facilities can’t bring False Claims Act lawsuits to enforce ceiling-price contracts between drug manufacturers and the Secretary of Health and Human Services, according to the United States Supreme Court in Astra USA v. Santa Clara County, No. 09-1273.

This was a huge win to the pharmaceutical industry and a major blow to health care facilities, since the ruling overturned an earlier  lower court decision in favor of the healthcare facilities.

The clinics involved in the Astra USA v. Santa Clara County case were from California. According to their case, brought under the California False Claims Act.  In a legal maneuvering, the pharmaceutical manufacturers had the case moved to federal court.

The heart of the legal issue is whether drug makers, were at fault in over charging Medicare and Medicaid more than the pre-determined caps for drugs that serve 340B entities medical facilities serving the poor.

The eight pharmaceutical manufacturers in the case included subsidiaries of Astra Zeneca, Sanofi-Aventis SA, Bayer AG, Takeda Pharmaceutical, Bristol Myers Squibb, Merck, Pfizer and GlaxoSmithKine.

Justice Ruth Bader Ginsburg, stated in her opinion that drug-pricing enforcement was solely the responsibility of the U.S. Department of Health and Human Services. "Recognizing the county's right to proceed in court could spawn a multitude of dispersed and uncoordinated lawsuits," Ginsburg said in a 10-page opinion. She said the risk of conflicting court rulings "would be substantial.

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Pharmaceutical giants: Serono Laboratories Inc., EMD Serono Inc., Merck Serono S.A, and Ares Trading S.A. have agreed to settle False Claims Act allegations in connection with the marketing of the drug Rebif for $44.3 million, according to a recent announcement by the Department of Justice.

Under the Serno agreement, proceeds from the settlement will be split between the federal government and various states, with the United States receiving $34.6 million to resolve the federal claims and the states receiving $9.7 million to settle their respective claims under Medicaid.

As a Florida False Claims Act and Whistleblower Law Firm, we applaud the whistleblower, Tim Amato, who brought the qui tam suit in 2005. The False Claims Act permits private citizens with knowledge of fraud against the government to bring a lawsuit on behalf of the United States and to share in any recovery.  Mr Amato will receive $5.19 million out of the federal share of the Serno civil settlement.

Allegedly, health care providers were paid from the launch of Rebif in January 2002 through December 2009, to promote or prescribe Rebif, a recombinant interferon that is used to treat relapsing forms of multiple sclerosis. The payments were made to providers for hundreds of speaker training meetings and programs, as well as payments for attending consultant, marketing and advisory board meetings, all at upscale resorts and other locations. Serono’s actions allegedly resulted in the submission of false claims to federal health care programs including Medicare and Medicaid for the payment of Rebif, i.e., claims that were tainted by kickbacks.

It is a great day in America when the government can combat corporate greed and health care fraud. The False Claims Act is a powerful tool in that effort and allows the government to recover triple the amount of its actual damages, plus a civil penalty of $5,500 to $11,000 for each false claim.

We encourage whistleblowers to come forward and report fraud against the government. If you are aware of corporate fraud against the federal or state government, contact a whistleblower or qui tam lawyer to discuss your legal rights and steps to take on reporting the fraud.

Click on the following links to read more on the $44.3M Serno FCA Settlement:

Pharmaceutical Giant, Serono, Agrees to Pay $44.3 Million to Settle False Claims Act Case - DOJ

Serono to Pay $44.3 Million to Resolve False Claims Act Allegations in Connection With Promotion of Drug Rebif - PharmaLive

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Recently, Jummal Joy Ibrahim, of Las Vegas, Nevada, pleaded guilty to her role in Medicare fraud of a durable medical equipment company that generated over $3.5 million in false Medicare claims. Between January of 2006 and September of 2009, the woman and her brother worked in conjunction to dupe Medicare into paying false claims submitted for high-end power wheelchairs and other expensive pieces of durable medical equipment.

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Recently, the Health and Human Services Department, Department of Justice, and FBI issued a joint announcement that they were charging 111 defendants with Medicare fraud in nine cities, and expanding their investigative operations, called the Medicare Fraud Strike Force, to two more cities. The 111 charges is the largest federal health care fraud take-down in history.

Who's Defrauding Medicare?

The 111 individuals charged consisted mostly of doctors, nurses, and health care company owners / executives. The fraud consisted of over $225 million in false billing.

Attorney General Eric Holder stated that the arrests prove that the Department of Justice is “waging an aggressive fight against health care fraud” and securing taxpayer dollars. In 2010 alone, Holder went on to say, the Medicare Fraud Strike Force recovered more than $4 billion in fraudulent Medicare claims. The Strike Force focuses primarily on identifying and shutting down large-scale fraud schemes.

Examples of Fraud

The arrests on February 17 included some of the following examples:

Miami 32 defendants, including 10 health care professionals, participated in frauds that led to $55 million in false billings. The false billings were mostly for home health care, medical equipment, and prescription drugs.
 

• Detroit:21 defendants, including 9 health care professionals, defrauded Medicare for $23 million. These cases included home health care, psychotherapy, physical therapy, and podiatry.
• Brooklyn: A mere 10 people, including 4 health care professionals, managed to run schemes that totaled $90 million. These schemes focused on physical therapy, proctology, and nerve conduction testing.
• Los Angeles: 5 individuals defrauded Medicare for $28 million, mostly with false claims for medical equipment and home health care.

The strike force intends to expand its operations into Dallas and Chicago – the next two cities that have been identified as fraud hot spots.

Medical Identity Theft

The Office of the Inspector General (OIG) calls attention to a new sort of identity theft – medical identity theft. This identity theft relies upon a person's name, Social Security number, or Medicare number to make false prescription drug claims and other false Medicare claims. Like other types of identity theft, medical identity theft can threaten the victim's credit and finances, while simultaneously defrauding taxpayers.

As basic precautions against healthcare fraud, OIG suggests the following measures:

• Protect your information by not giving out your Medicare number to people who offer free medical equipment or services, or who offer a free gift in exchange for a Medicare number.
• Check your Medicare Summary Notices to see if you were billed twice for anything or if you were charged for any services or equipment that you didn't receive.
•  If you do suspect someone is using your Medicare or Social Security number to commit fraud, contact the Department of Health and Human Services

Considering the ongoing, heated debates over health care in America, watching out for medical identity theft is one step Medicare recipients can take to ensure all taxpayers are protected from healthcare fraud.
 

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The Corporate Lobbyists are trying to make the whistleblower provisions in the Dodd-Frank less effective for whistleblowers.  We must stand up against them to help fight fraud. The National Whistleblower Center submitted very detailed comments addressing serious concerns with the recent recommendations made by the "Corporate Lobby" to the SEC..

According to the Executive Director of the National Whistleblower Center, Stephen M. Kohn, 

 “The Dodd-Frank Act clearly states that the rules implemented by the SEC must be ‘user-friendly’. We will be paying close attention to tomorrow’s SEC meeting to see if the SEC’s promise to protect whistleblowers is more than simple lip service.”

 A few key points from the letter to the SEC by the National Whistleblower Center include the following:

• Requiring Employees to Utilize Internal Corporate Whistleblower Procedures Would Violate the Law
• The SEC Should Implement a Rule that Prevents the Regulated Industry from eviscerating the ability of Internal Corporate Compliance Programs to Properly Detect and Prevent Fraud
• The Restrictions on Attorney Fees Urged by Baker Donelson Are Radical and Without Support in Law or Policy.
• The Other Proposals Should Be Summarily Rejected.

It is important to note that the law firm of Baker Donelson made a proposal to place a restriction on  attorneys who represent whistleblowers. If implemented, these restrictions would completely undermine the requirement that the Dodd-Frank whistleblower rules be "user-friendly'". 

These proposed restrictions are unprecedented in law, and none of the numerous federal whistleblower laws, including the False Claims Act, contain any type of restriction that is suggested by Baker Donelson law firm. If implemented, these proposals would undermine the efforts of the Dodd-Frank Act and make it nearly impossible for corporate whistleblowers to obtain attorneys to represent them in Dodd-Frank cases.

Important Links:

NWC Letter to SEC opposing corporate lobby position

Baker Donelson letter representing corporate lobby position

Arent Fox letter representing corporate lobby position

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In Fiscal Year 2010, the U.S. Department of Justice recovered over $3.1 billion of America's stolen money largely due to valiant whistleblowers and the federal False Claims Act, According to the Consumer Interest Group,  Taxpayer's Against Fraud.

Over 80 percent of all successful False Claims Act recoveries are brought to the government by whistleblowers and their lawyers, making the law the most important tool the U.S. Government has in the war against fraud

80 percent health:
Approximately 80 percent of all fraud recoveries under the False Claims Act occur in health care, but significant amounts of fraud are also found in defense, education, transportation, and the oil and gas industries.
 
28 State False Claims Acts:
In order to increase the amount of money coming back to them, and to initiate their own recoveries, 28 states and the District of Columbia have now passed their own versions of the federal False Claims Act.

A few significant qui tam cases for Fiscal Year 2010 include the following:
 

• Allergan -  $600 M -($225 million to resolve civil allegations and a $375M criminal fine.)  9/1/2010 - Off-label marketing practices involving Botox
• AstraZeneca - $520 M-  4/27/2010 - Illegal marketing - anti-psychotic drug Seroquel 
• Novartis Pharmaceuticals
   $422.5 million ($237.5 M - Civil allegations and a $185 M criminal fine)  9/30/2010
  Unapproved promotion of Trileptal 
• Forest Laboratories -  $313 M - ($149M -Civil claims, a $150M criminal fine, and $14 M forfeiture.   9/15/2010
  Unlawful marketing - Levothroid and promoting Celexa and Lexapro for pediatric use
• Elan Corporation -  $203.5 M - 7/15/2010 - improper marketing of Zonegran
• Teva Pharmaceuticals - $169 M -  7/26/2010 -  Inflated prices reported to  Medicaid
• WellCare Health Plans -  $137.5 M- 8/9/2010 - Defrauded Medicare and Medicaid programs in several states
• Health Alliance of Greater Cincinnati and Christ Hospital -  $108 M -  5/21/2010
  Kickbacks to doctors in exchange for referring cardiac patients

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Mobil Oil and several affiliate companies have agreed to pay $32.2 million to resolve False Claims Act violation allegations. According to the Department of Justice, Mobil Natural Gas Inc., Mobil Exploration & Producing U.S. Inc. and their affiliates “knowingly underpaid royalties” owed from the production of natural gas on American Indian and Federal lands. The Justice Department alleges that from March 1, 1988 to Nov. 30, 1999, the Mobil companies underpaid multiple Native American tribes and the United States due to the systematic understating of the produced natural gas’ value. The Mobil companies’ settlement stems from a lawsuit brought by whistleblower Harold Wright. 

Tony  West, Assistant Attorney General for the Civil Division of the Department of Justice stated the following:

"The message to those who seek to evade their mineral royalty obligations is this: We will aggressively pursue you. We at the Justice Department are committed to protecting the public trust by ensuring that those who remove valuable minerals, some of which are non-renewable, from American Indian or public lands pay their full, fair, negotiated share for those assets."

Under the qui tam (or whistleblower) provisions of the Federal False Claims Act, private citizens such as Mr. Wright may file lawsuits on behalf of the United States. These provisions also allow the whistleblower to recover a portion of any settlement received by the government. Although Mr. Wright passed away before the Mobil companies settled, his heirs will receive approximately $975,000 for his role.

The U.S. Department of the Interior’s Minerals Management Service requires companies such as Mobil and its affiliates to report the value of natural gas produced on federal lands (including American Indian lands) on a monthly basis. According to the United States, the Mobil Companies “used transactions with affiliated entities to falsely reduce the reported value of gas taken from federal and American Indian leases to claim excessive deductions for the cost of transporting that gas, and to otherwise understate the value they reported each month for their natural gas production.”

Thanks to the qui tam provisions of the False Claims Act, private citizens such as Mr. Wright can bring violations to light. Thanks to Mr. Wright’s actions, the United States will receive $32.2 million, and his heirs will be rewarded $975,000 for his role in supporting justice.

Mobil Oil Companies to Pay U.S. $32.2 Million to Resolve Allegations of Underpayment of Royalties from American Indian and Federal Lands – U.S. Department of Justice

Mobil Companies Settle Unpaid Royalties Case for $32 Million - Law.com

Case Information: U.S. ex rel. Wright v. Chevron USA, Inc. et al., 5:03-CV-264 (E.D. Tex.)

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Maryland is moving in the right direction in the fight against Medicaid fraud. The Maryland Senate approved the Maryland False Claims Act of 2010 (Maryland Senate Bill 279). The new False Claims Act will allow the state to track and punish individuals and health care providers attempting to defraud low-income resident Medicaid programs run by the state. Included in the bill are provisions that permit a whistleblower to alert state investigators about fraudulent actions, and allow the whistleblower to collect a portion of any damages recovered by the state. The Maryland False Claims Act of 2010 passed by a vote of 37-8 in the Senate. Similar legislation is pending in the House.

However, the Maryland False Act presents limitations for whistleblowers in bringing  lawsuits against health care providers without intervention by the state. As a result, Maryland’s False Claims Act does not comply with Deficit Reduction Act of 2005 guidelines. This technicality reduces the state’s (and the whistleblower’s) ability to receive a larger percentage of any recovered damages.

Legal Blogger, Richard Renner, calls the Act  "watered down" in his post Maryland Senate passes watered-down state False Health Claims Act. He outlines key areas that could have strengthened the Act and questions whether the hospital administrators are important to the Maryland Senate or protecting taxpayer dollars.

Passage of the Maryland False Claims Act came after a series of amendments that received the backing of the Maryland Hospital Association, which opposed the bill last year. The Hospital Association did not want  whistleblowers to be able to bring a case on their own if the state decided not to pursue it. Their goal for the bill was to only go after "true fraud" not mistakes.

Last year efforts to pass the false claims act bill failed by one vote, largely because of vocal opponents. Lt. Gov. Anthony Brown's persistence paid off this year, with the Maryland Senate voting for this legislation the same day President Barack Obama signed an overhaul of the nation's health care system.

"This reform targets those who cheat our system and steal Medicaid dollars that belong to those most in need," Brown said in a statement.
 

Click on the following links to read more on the Maryland False Claims Act 2010:

Maryland Senate Bill 279: Maryland False Health Claims Act of 2010

Maryland Senate approves civil penalties for making a false health claim - Washington Examiner

Lt. Governor Brown Statement Applauding Senate Passage of Maryland False Health Claims Act
- Press Release

Maryland Senate approves the false medicaid Claims Bill - Baltimore Business Journal

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Upon returning from holiday recess, the 111^th Congress of the United States introduced bill H.R. 4444, better known as the Defund the Crooks Act, in early January 2010. First introduced by Congressman Alan Grayson (D-FL), the Defund the Crooks Act prohibits the Federal Government from awarding Federal funds, contracts, or grants to covered organizations. The Act also prohibits the Federal Government from promoting certain organizations or from entering into other agreements with these organizations.

Based in part on the Defund ACORN Act of 2009, Congressman Grayson’s bill effectively broadens the scope of regulation while not basing the regulation on the acts of one organization. The purpose of the bill is essentially to ensure that Federal funds – taxpayer dollars – do not end up in the hands of organizations that fail to meet certain requirements.

According to the bill, “covered organizations” refers to several of the following examples:

• Any organization previously convicted of a Federal or State law violation
• Any organization that failed to comply with Federal or State laws leading to its corporate charter being revoked
• Any organization that has filed, transmitted, or submitted a fraudulent claim to any Federal or State agency
• Any organization that knowingly employs, contracts, or relegates authority to any individual who has been convicted of a Federal or State law violation

The Defund the Crooks Act states that no Federal funds, regardless of form, may be provided to organizations that do not meet the aforementioned requirements set out in the bill. It is important to note that the Act does not apply to organizations that received Federal funds prior to the enactment of the bill. However, if organizations that are now deemed unfit to receive Federal funds, grants, endorsements, etc. have a contract extending past the date of the bill’s enactment, they will be terminated.

Click on the following link to view the proposed bill H.R. 4444  introduced to Congress.

Click on the following to learn more on Congressman Grayson and the Defund the Crooks Act (H.R. 4444).

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The United States filed a qui tam or False Claims Act complaint against Johnson & Johnson (J&J) and its subsidiary companies Johnson & Johnson Health Care Systems Inc. and Ortho-McNeil-Janssen Pharmaceuticals Inc. According to the complaint, Omnicare Inc., the U.S.’s largest dispenser of pharmaceuticals to patients in nursing homes, was receiving millions of dollars in kickbacks from the companies. This complaint comes after Omnicare entered into a $98 million settlement with the federal government and multiple states in November of last year, an action that supposedly resolved Omnicare’s liability for taking previous kickbacks from Johnson & Johnson.

Allegedly, Omnicare accepted financial kickbacks in return for the company’s purchase and recommendation of Johnson & Johnson and its subsidiaries’ pharmaceutical products to nursing home patients.  Doctors accepted the recommendations of Omnicare’s pharmacists more than 80 percent of the time, and allegedly Johnson & Johnson viewed Omnicare pharmacists as “an extension of its sales force.”

Kickbacks were delivered in several ways, including:

1)      Offering Omnicare rebates when programs to increase the sale of Johnson & Johnson’s prescription drugs to nursing home patients were implemented.

2)      Paying Omnicare millions of dollars for “data”; the complaint alleges that these payments were false and used only to coerce the recommendation of Johnson & Johnson drugs from Omnicare pharmacists.

3)      Johnson & Johnson also made multiple “educational funding” and “grant” payments to Omnicare, with intent only to receive a recommendation from its pharmacists.

Assistant Attorney General for the Civil Division of the Department of Justice had this to say about the situation,

"We will pursue those who break the law to take advantage of the elderly and the poor. He went on to say that, “Kickbacks such as those alleged here distort the judgments of health care professionals and put profits ahead of sound medical treatment." 

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FORBA Holdings LLC, a dental management company, settled a qui tam claim for allegedly performing medically unnecessary dental services on children. FORBA  Holdings LLC provides administrative services to  "Small Smiles Center, a nationwide operation of 69 dental centers. The settlement calls for FORBA to pay $24 million, plus interest to the United States and participating states, for suspected medically unnecessary dental services for children on Medicaid insurance. In addition, FORBA will implement several new remedial measures, designed to prevent this type of conduct in the future.

Three whistleblowers are credited for the government’s investigation into these allegations. The whistleblowers filed lawsuits under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens to sue on behalf of the United States and share in any recovery. The whistleblowers will receive payments over $2.4 million from the federal share of the settlement.

According to the Department of Justice, FORBA allegedly falsely submitted claims for dental services performed on low-income children. Many of these services performed did not meet professionally recognized standards of care or were not medically necessary.  Tony West, “Assistant Attorney General for the Civil Division of the Department of Justice stated the following:

 "We have zero tolerance for those who break the law to exploit needy children. Illegal conduct like this endangers a child’s well-being, distorts the judgments of health care professionals, and puts corporate profits ahead of patient safety."

To resolve the allegations against it, FORBA will pay $24 million, plus interest. The federal share of the civil settlement is $14,285,645, and the Medicaid share for 21 states is $9,714,355.25.  This settlement sends a clear message that the government will not tolerate fraud. U.S. Attorney for the Western District of Virgini,  Timothy J. Heaphy, is correct in the following statement:

"FORBA put greed and profits before the well-being of children. It endangered the health and safety of innocent children and defrauded the taxpayer of millions of dollars.  Today’s settlement addresses these egregious acts and sends a clear message that Medicaid fraud will be expeditiously addressed by this Department."

The False Claims Act is a powerful tool that has helped the government recover approximately $2.2 billion since January 2009 in cases involving fraud against federal health care programs and over $3 billion in False Claims Act total cases overall.

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Happy New Year 2010!! Today is the first day of the New Year.  Last year marked a milestone in record breaking settlements relating to qui tam and false claims act violations.

The year ended with a qui tam settlement from Genesys Health System in the amount of  $669,413. The lawsuit brought by the Justice Department alleged that  the health care provider violated the False Claims Act by submitting false claims to Medicare.

Genesys, a Grand Blanc, Mich.-based Company, provides health care services through a network of medical facilities located in Michigan. The government alleged that between 2001 and 2007, Genesys violated the False Claims Act by billing Medicare for higher levels of service than were actually rendered to patients. Specifically, the government alleged that Genesys overbilled for evaluation and management services provided to cardiology patients.

Assistant Attorney General of the Justice Department’s Civil Division, Tony West stated:

"We are committed to vigorously pursuing those who defraud Medicare. Taxpayer dollars should be spent on health care services for patients, not wasted on fraud and abuse."

This case was a success due to the coordinated efforts of the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Eastern District of Michigan, and the Office of Investigations for the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General.
 

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The Atlanta based home builder, Beazer Homes USA Inc. settled a qui tam suit involving mortgage fraud with Federally insured mortgages. Beazer Homes USA has agreed to pay $50,000,0000 to the United States to be shared with victimized private homeowners, to resolve the False Claims Act allegations.

According to published reports by the DOJ, the Builder's mortgage company made Federal Housing Administration (FHA) insured mortgage loans for the purchase of homes built by the Builder and both companies fraudulently and improperly:

1) required purchasers to pay "interest discount points" at closing, but then kept the cash and failed to reduce interest rates;
2) provided cash "gifts" to home purchasers through certain charities, so purchasers could come up with minimum required down payments, with assurances the "gifts" would not have to be repaid, and then increased home purchase prices to offset the amount of the gifts;
3) obscured which of its branches made defaulting mortgage loans to avoid FHA detection of excessive default rates, and;
4) ignored "stated income" requirements in making loans to unqualified purchasers.

The Attorney General's Office is serious about fighting mortgage fraud. The US Attorneys Office along with the Department of HUD are working together to crack down on fraudulent mortgage practices by firms. Assistant Attorney General Tony West, who heads the Civil Division stated recently:

"We will aggressively pursue fraud claims against federal mortgage insurance programs, which are so vitally important to this economy."

This is further echoed in a DOJ press statement by HUD Secretary Shaun Donovan, that the lenders will be held accountable for their actions if they are involved with mortgage fraud:

"This action shows that the Administration is serious about making the housing market safe from mortgage fraud and will crackdown on those who violate the trust of American homebuyers."

Beazer has agreed to provide appropriate restitution to buyers and have established a national restitution fund. The Chief Executive Officer and Chief Operating Officer are voluntarily contributing funds from their 2008 year end bonuses to the restitution fund. This was a smart move on their part. However, they should have thought about the repercussions of the company's actions beforehand.

It is interesting that we covered Beazer Homes on our Law Planet Blog recently regarding the SEC charging Chief Accounting Office, Michael Rand of misleading investors by inflating earnings. This was the first time that a firm made The Whistleblower Law Blog and The Law Planet Blog both in the same week.

Note to all firms committing mortgage fraud: "if you are actively engaging in fraudulent behavior that can be construed as mortgage fraud, you will be caught and prosecuted by your actions. Whistleblowers are bring educated on "what is qui tam" and the False Claims Act and are stepping forward with information on mortgage fraud. Based on the nature of their information, they may get a Whistleblower reward, which can be 15% - 30% of what the US recovers based on their information. Be advised... Your secrets will come out and you will be caught and brought to justice. Thanks to a Whistleblower stepping forward and bringing this information to light with a qui tam attorney.

To learn more on qui tam and the rights of Whistleblowers, click on the following for more information on qui tam and the False Claims Act.
 

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The Atlanta based home builder, Beazer Homes USA Inc. settled a qui tam suit involving mortgage fraud with Federally insured mortgages. Beazer Homes USA has agreed to pay $50,000,0000  to the United States to be shared with victimized private homeowners, to resolve allegation. 

According to published reports by the DOJ, the Builder's mortgage company made Federal Housing Administration (FHA) insured mortgage loans for the purchase of homes built by the Builder and both companies fraudulently and improperly:

1) required purchasers to pay "interest discount points" at closing, but then kept the cash and failed to reduce interest rates;
2) provided cash "gifts" to home purchasers through certain charities, so purchasers could come up with minimum required down payments, with assurances the "gifts" would not have to be repaid, and then increased home purchase prices to offset the amount of the gifts;
3) obscured which of its branches made defaulting mortgage loans to avoid FHA detection of excessive default rates, and;
4) ignored "stated income" requirements in making loans to unqualified purchasers.

The Attorney General's Office is serious about fighting mortgage fraud. The US Attorneys Office along with the Department of HUD are working together to crack down on fraudulent mortgage practices by firms.  Assistant Attorney General Tony West, who heads the Civil Division stated recently:

"We will aggressively pursue fraud claims against federal mortgage insurance programs, which are so vitally important to this economy."

This is further echoed in a statement by HUD Secretary Shaun Donovan, that the lenders will be held accountable for their actions if they are involved with mortgage fraud:

"This action shows that the Administration is serious about making the housing market safe from mortgage fraud and will crackdown on those who violate the trust of American homebuyers."

Beazer has agreed to provide appropriate restitution to buyers and have established a national restitution fund. The Chief Executive Officer and Chief Operating Officer are voluntarily contributing funds from their 2008 year end bonuses to the restitution fund. This was a smart move on their part. However, they should have thought about the repercussions of the company's actions beforehand.

It is interesting that we covered Beazer Homes on our Law Planet Blog recently regarding the SEC charging Chief Accounting Office, Michael Rand of misleading investors by inflating earnings.  This was the first time that a firm made The Whistleblower Law Blog and The Law Planet Blog both in the same week.

Note to all firms committing mortgage fraud: "if you are actively engaging in fraudulent behavior that can be construed as mortgage fraud, you will be caught and prosecuted by your actions.  Whistleblowers are bring educated on "what is qui tam" and the False Claims Act and are stepping forward with information on mortgage fraud. Based on the nature of their information, they may get a Whistleblower reward, which can be 15% - 30% of what the US recovers based on their information. Be advised... Your secrets will come out and you will be caught and brought to justice. Thanks to a Whistleblower stepping forward and bringing this information to light with a qui tam attorney.

To learn more on qui tam and the rights of Whistleblowers, click on the following links on qui tam and the False Claims Act.

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The whistleblower case, Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 08-304 was granted certiorari by the Supreme Court.

This case has special implications for the business community, especially  whistleblower lawsuits against drugmakers, and biotechnology companies. Several organizations such as National League of Cities, Pharmaceutical Research and Manufacturers of America, Chamber of Commerce of the United States of America, and the  Washington Legal Foundation, filed amici curiae Briefs

The central players in this case include the Graham County water district from North Carolina and a former secretary at Graham County water district. The main argument in the case is whether the whistleblower can bring a qui tam case against the water district for allegedly fraudulently seeking federal money for storm cleanup, since the allegations are based on information made known in publicly available in state documents. 

According to the Supreme Court Docket Report from Appellate.Net of the Mayer Brown Law Firm:

"The decision in Graham County will be especially significant to businesses that are subject to inspections and audits by state and local government agencies, because the results of those inspections and audits are frequently made available to the public, and thus to potential relators and their lawyers."

The Solicitor General, Elena Kagan and the United States asserts the following in the discussion of this case in the May 2009 Amicus Curiae Brief for Graham County Soil & Water Conservation District v. United States ex rel. Wilson, 08-304.

"The court of appeals correctly construed the second clause of the “public disclosure” bar contained in 31 U.S.C. 3730(e)(4)(A). The court’s decision, however,
deepens a pre-existing circuit conflict regarding whether state and local administrative audits and reports fall within the scope of the FCA’s “public disclosure” provision. This Court should grant the petition for a writ of certiorari to resolve the split among the circuits on an important legal issue affecting the federal courts’ jurisdiction over FCA qui tam actions."

To learn more on this case read Bloomberg News, Scotus Blog, The Supreme Court, The US DOJ

Time will tell, which way the court will decide on this opinion.  Will Big Business prevail or will the Courts render an opinion that is in favor or whistleblowers and bringing FCA fraudulent activity  to light?

All eyes are on the Supreme Court. Stay Tuned....

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Capmark Finance Inc., a California-based mortgage lender, is the target of a qui tam suit filed by the Department of Justice. In this suit, the Justice Department alleges that the company has committed mortgage fraud and is seeking reparations under the False Claims Act.

The suit against Capmark Finance stems from what the Department of Justice claims as fraudulent statements by the company on applications for federal mortgage insurance for two residential nursing home facilities. The facilities, Canoga Care Center, located in Canoga Park, California, and Hudson Valley Care Center, based in Ghent, New York, were both covered by the U.S. Department of Housing and Urban Development (HUD) under a federal program that guarantees mortgages that are used to purchase healthcare facilities. Both of these residential care institutions have both defaulted on these guaranteed loans and HUD has since had to pay approximately $26 million under the terms of the mortgage insurance agreement.

The False Claims Act, sometimes referred to as the Lincoln Law, provides for liability against entities that make false claims in order to gain government funding. An entity can be charged as much as three times the amount fraudulently taken from the government along with other civil penalties, under what is commonly known as a qui tam suit.

If a qui tam suit, is brought by a whistleblower also known as a "relator", the whistleblower may be entitled to 15-30% of the government's total recovery. This includes damages for the false bills, tripled, plus civil penalties of from $5,000 to $10,000 per false claim. However, it is important to note, that the whistleblower must have complied with statutory requirements if they are to receive a portion of the whistleblower reward.

Since the Department of Justice alleges that Capmark Finance falsified information on paperwork in order to receive protection from the Department of Housing and Urban Development, the False Claims Act covers this case of suspected mortgage fraud. The United States is also seeking the highest possible dollar amount from Capmark in its suit.

According to Tony West, Assistant Attorney General for the Justice Department's civil division:

"Mortgage fraud is a top priority for this administration, especially when public dollars are at stake.  This complaint sends a clear message that we will aggressively pursue allegations of fraud on federal mortgage insurance programs, which are so vitally important to this economy."

Capmark Finace had its early beginnings in 1994, when the company operated under General Motors ownership as GMAC Commercial Mortgage Corporation. In 2006, GM sold its majority interest in GMAC Commercial to a consortium including Five Mile Capital Partners, Kohlberg, Kravis Roberts & Co., and Goldman Sachs. The company was then renamed as Capmark Financial Group. Capmark now bills itself as a diversified company that offers a variety of financial services in the commercial real estate industry. Capmark’s three areas of focus include investments and funds management, mortgage banking and lending, and servicing
 

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