The Qui Tam Blog

In a qui tam complaint unsealed last week, whistleblowers Curtis Lockey and Craig MacKenzie alleged that the City of Dallas, Texas failed to affirmatively further fair housing as it was obligated to do when it accepted funding from the U.S. Department of Housing and Urban Development (“HUD”).

Lockey and MacKenzie claimed that the City of Dallas requested and received millions of dollars from HUD in community development block grants and public housing assistance grants that the city was not qualified for because it was out of compliance with its obligations to affirmatively further fair housing. The complaint alleged specifically that the City of Dallas was obligated to analyze impediments to fair housing choice, take action to overcome the effects of any such impediments, and maintain records of such analyses and actions.

Pfizer Inc. agreed to pay $14.5 million to settle False Claims Act allegations related to marketing of its drug Detrol.  The qui tam suit alleged that Pfizer illegally marketed Detrol–a drug approved for the treatment of overactive bladder–for use in men with enlarged prostates and related conditions, including bladder obstruction. Pfizer denied all allegations of wrongdoing in a statement.

Of the $14.5 million settlement, $11,878,846 will go to the federal government, and $2,621,154 will go to state Medicaid programs.  The whistleblowers will receive  a relator’s share of $3,282,019 under the False Claims Act.  The settlement was part of the governments’ Health Care Fraud Prevention and Enforcement Action Team (HEAT), announced in May 2009 by the Department of Justice and the Department of Health and Human Services.

Two whistleblowers, Victor Bibby and Brian Donnelly, brought suit against thirteen lenders on behalf of the United States in connection with fraudulent Department of Veterans Affairs (VA) home mortgage loans.  The suit alleges that the lenders charged borrowers unallowable fees that technically invalidated the VA guarantee.

Certain fees–otherwise typical of a real estate transaction–such as attorney’s fees or settlement closing fees are not allowed in closing a VA loan for purposes of refinancing. The lenders allegedly charged these fees but hid them from borrowers and the VA by disguising them as allowable fees, sometimes bundling them with permitted fees.

The suit is pending in the Northern District of Georgia.

A Louisville, Kentucky physician, Dr. Steven H. Stern, and his practice, Kentuckiana Center For Better Bone and Joint Health (“KCB”), have settled allegations of overbilling Medicare.  The complaint, brought by a former employee, claims that Stern and KCB falsely billed Medicare for rheumatoid arthritis infusions over a three-year period.  Specifically, the complaint alleges that Stern and KCB split vials of Infliximab across multiple patients, then billed Medicare as if an entire vial were used for each patient.

In addition to the $349,860 paid to settle the overbilling allegations, Stern and KCB will pay the attorney’s fees, costs, and expenses of the former KCB employee whistleblower.  The whistleblower will receive a payment of $70,000 as a realtor’s share.

Maryland-based Maxim Healthcare Services, Inc. (“Maxim”) agreed to pay $150 million to settle criminal and civil charges relating to a nationwide scheme to defraud state Medicaid programs and the Veterans Affairs program. Maxim will pay $130 million in civil settlements and a $20 million fine as part of a Deferred Prosecution Agreement (“DPA”). If Maxim complies with the DPA’s reform and compliance requirements, it will avoid a conviction on the health care fraud charges.

According to the complaint, Maxim submitted more than $61 million in fraudulent billings to government healthcare programs for services not rendered or not reimbursable. From 2003 through 2009, Maxim received over $2 billion in reimbursements from programs in 43 states.

Eight former Maxim employees and the parent of a former Maxim patient pleaded guilty to federal charges arising out the submission of false billings and false statements.

The owner of Memorial Medical Supply, Sunny Robinson, was sentenced on August 30, 2011 to over 8 years in federal prison after a 5-day jury trial for alleged health care fraud and anti-kickback violations.  Robinson used names and Medicare numbers of doctors and beneficiaries to falsify  medical records on false and fraudulent claims in excess of $4.3 million to both Medicare and Medicaid. He illegally obtained protected health information including names, birth dates, medical histories, and Medicare and Social Security numbers from individuals and home health agencies.  The information was used to submit false and fraudulent claims for “Arthritis Kits,” power wheelchairs, diabetic supplies, and incontinence supplies.  In many instances, the beneficiaries did not need or order the medical equipment nor did a doctor prescribe the equipment. Claims also were submitted for medical equipment that was not provided. Memorial Medical Supply even submitted claims for reimbursement to Medicare for equipment supposedly delivered to deceased beneficiaries.

Three co-defendants, Manuel DeLuna, Lisa Jones, and Shirley Chavis, also were sentenced for their roles in the fraudulent scheme.

The United States District Court for the Eastern District of New York held that the Government did not violate the “no-contact” rule in connection with an investigation of Amgen, Inc., a biotechnology company.  Since 2006, the United States District Attorney for the Eastern District of New York has been investigating allegations that the company violated the False Claims Act and other federal statutes.  Amgen alleged that the Government violated New York professional responsibility rules when it contacted Amgen employees directly instead of through counsel.

New York Rule of Professional Conduct 4.2(a) generally prohibits an attorney from communicating with a party to a particular matter when the attorney knows the party to be represented by another attorney in the same matter. The court held that, because the Government had not intervened in the qui tam lawsuits against Amgen, it was not a “party” to the matter, and thus Rule 4.2(a) did not apply.  The court further held that Amgen was not a “party” to the grand jury investigation; therefore, Rule 4.2(a) did not prohibit Government attorneys or investigators from communicating directly with Amgen employees in connection with the investigation.

The Department of Justice is investigating claims that Home Depot provided Chinese-made products to the U.S. Government in violation of the Buy American Act. Two employees of another government contractor, Actus Lend Lease, filed suit alleging that their company supplied products used in several military housing projects that were made in China and other “non-designated” countries. Before Actus Lend Lease settled its claims, attorneys discovered that its corporate partner Home Depot also was in violation of the Buy American Act.

In April, a federal judge denied Home Depot’s motion to dismiss the qui tam suit. Although the suit has been unsealed, the Department of Justice has not yet decided whether to intervene in the case. Trial is scheduled for early next year.

On July 1, the federal government will begin using computerized predictive modeling software to collect and analyze information to spot potential fraud. The software will sort information gathered from Medicare and Medicaid claim forms to generate a risk score for claims. If a risk score reaches a particular level, the system will flag that claim for further investigation by Centers for Medicare and Medicaid Services and the Office of the Inspector General. Prompt payment provisions will be waived for claims that are flagged as suspicious.

$77 million in funding for the system is provided as part of the Patient Protection and Affordable Care Act signed into law last year. Northrop Grumman, National Government Services, and Federal Network Systems, a subsidiary of Verizon, are working on the system.

Novo Nordisk will pay $25 million to the U.S. Government to settle allegations of improper marketing of the anti-clotting drug NovoSeven. The complaint alleged that the company improperly promoted NovoSeven for indications not approved by the Food and Drug Administration.

Novo Nordisk also agreed to pay $1.725 million to the U.S. Government and four states to resolve allegations that its sales representatives paid Rite Aid pharmacists to recommend the diabetes drugs Novolin and Novolog.

Novo Nordisk made no admission of wrongdoing in either settlement.