NYC Fights Tax Evasion With Federal Database

“New York Citys Department of Finance has reached an agreement with the U.S. Treasury that will give local officials access to the Financial Crimes Enforcement Network (FinCEN). This federal database will give the city a new financial and analytical tool to use in the investigation of tax evasion. Because income from individuals and businesses is self-reported, it is estimated that the city is owed billions of dollars in unpaid and under-reported taxes.

The Financial Crimes Enforcement Network tracks suspicious financial activity including large cash transactions and money transfers into foreign bank accounts. According to Michael Flowers, the director of the citys Financial Crime Task Force , access to this information gives enforcement agencies a significant advantage in tracking the financial activities of businesses or individuals who arent paying city taxes.

Gaining access FinCEN is just the latest move by the NYC Finance Department to combat tax evasion. Last year the department hired more than two dozen additional auditors. The department may hire additional auditors and is also considering developing a whistleblower program modeled on the IRS program. The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

The IRS whistleblower statute provides an important tool in law enforcement, says Joel Androphy, attorney and partner at the prestigious Nationwide law firm of Berg & Androphy.”” Any efforts that provide more opportunity for citizens to discover tax fraud benefit the countrys financial health.”””

Posted in Tax FraudNo Comments

Former Owner of Emmanuel Medical Supply Pleads Guilty to $2.6 Million Medicare Fraud Scheme

Akinola Afolabi, former owner and president of Emmanuel Medical Supply located in Long Beach, California, plead guilty to engaging in a Medicare fraud scheme from June 2006 through September 2009 wherein he submitted over $2 million in fraudulent claims to Medicare for providing medically unnecessary power wheelchairs and other durable medical equipment to Medicare beneficiaries.  He obtained the Medicare beneficiaries’ information through various schemes including paying marketers for referrals of beneficiary information.  Afolabi used the information to submit or cause the submission of false and fraudulent claims for wheelchairs and other durable medical equipment.  Afolabi knew that the prescriptions and medical documents for the wheelchairs and durable medical equipment were fraudulent. He also admitted that some of the beneficiaries did not receive the equipment even though he certified to Medicare with each submitted claim that the equipment was received and medically necessary.

Afolabi submitted over $2 million in fraudulent claims to Medicare and was reimbursed approximately $1,490,532 on the claims.  Afolabi faces a maximum penalty of ten years in prison and a $250, 000 fine at his sentencing scheduled for November 25, 2013.

Posted in Healthcare Fraud, Medicaid Fraud, Medicare FraudNo Comments

Shands Healthcare of Florida Settles $26 Million False Claims Act Allegations

Shands Teaching Hospital & Clinics Inc., Shands Jacksonville Medical Center Inc., and Shands Jacksonville Healthcare Inc. (Shands Healthcare), which operate a network of health care providers in Florida has entered an agreement with the government to settle allegations that six of the Shands Healthcare’s hospitals submitted false claims to Medicare, Medicaid and other federal health care programs for inpatient procedures that should have been billed as outpatient services.

The government alleged that the six hospitals – Shands at Jacksonville; Shands at Gainesville, Shands Alachua General Hosptial; Shands at Lakeshore; Shands Starke and Shands Live Oak – knowingly submitted inpatient claims, from 2003 through 2006, to Medicare, Medicaid and TRICARE for services and procedures the hospitals knew were supposed to be billed as outpatient services or procedures.

Terry Myers, the president of the helathcare consulting firm YPRO Corp. filed the underlying qui tam lawsuit in the federal district court in Jacksonville, Florida.  The government and Shands Healthcare settled the allegations raised in the qui tam lawsuit for $26 million of which $25,170,400 will be reimbursed to Medicare and the other federal health care programs.  The State of Florida will recieve $829,600.  Mr. Myers’ share of the settlement as a whistleblower under the Federal False Claims Act has yet to be decided.

Posted in False Claims, Federal False Claims Act, Healthcare Fraud, Qui Tam, Settlements, Whistleblower LawsuitNo Comments

Home Health Care and Medciare Fraud

Louis T. Age owner of South Louisiana Home Health Care who operated the company with Verna Age were sentenced to 180 months and 60 months in prison, respectively, and ordered to forfiet $9.2 million and pay $17.1 million in restitution for their roles in a $17.1 million Medicare fraud scheme involving the payment of kickbacks and falsification of documents.  Louis Age and Verna Age were convicted on one count of conspiracy to commit health care fraud and Mr. Age was convicted of one count of conspiracy to defraud the United States and to pay or receive illegal health care kickbacks.

The Ages paid kickbacks to patient recruiters in exchange for Medicare beneficiary information.  Nurses, including Verna Age, would then falsify qualification documents so it appeared that the beneficiaries qualified for the home health services.  Evidence at trial showed that Louis Age hired and paid doctors kickbacks in exchange for signing fraudulent referrals and certifications for home health services that were not medically necessary.  The Ages also used fraudulently acquired Medicare beneficiary information and false documents to submit claims to Medicare for the medically unnecessary home health services.  From 2005 to 2011, Medicare reimbursed South Louisiana Home Health Care approximately $17.1 million based on these fraudulently submitted claims.

In yet another case of home health care fraud, Hemal Bhagat a greater Detroit area physical therapist employed at Prestige Home Health Services Inc., and co-owner of Royal Home Health Care Inc., plead guilty to one count of conspiracy to commit home health care fraud for his role in a $22 million home health care fraud scheme.

Bhagat and his co-conspirators, from approximately May 2009 through October 2011, paid kickbacks to patient recruiters in exchange for Medicare beneficiary information.  The co-conspirators created fictitious therapy files appearing to document physical therapy services to these beneficiaries, when  such services were not provided and/or were not medically necessary. Bhagat signed the documents in these fictitious therapy files, including physical therapy evaluations, supervisory patient visits, and patient discharge forms, which indicated that he and others had provided physical therapy to the Medicare beneficiaries when in fact they had not.  Bhagat admitted he knew these falsified documents were used to support the false claims that his co-conspirators at Prestige Home Health Services, Inc. and Royal Home Health Care Inc. submitted to Medicare.  During this time frame, Medicare reimbursed these two home health care agencies approximately $4, 767,359.03.

Bhagat awaits his sentencing scheduled for November 12, 2013.

Posted in Healthcare FraudNo Comments

Acclaim Professional Services Settle $400,000 E-Rate Program False Claims Allegations

Acclaim Professional Services’ CEO and managing partner Larry Lehmann agreed to pay $400,000 to settle False Claims Act allegations related to the Federal Communications Commission’s E-rate program.  The E-rate program subsidizes eligible equipment and services to make Internet access and internal networking more affordable to public school and libraries.

Under Lehmann’s guidance Acclaim Professional Services partnered with other companies to provide E-rated funded equipment and services from 2004 t0 2006 to the Houston Independent School District (HISD).  The United States government alleged that Lehmann provided gifts and loans to to HISD employees, including two loans totalling $66,750 to an HISD employee involved in the procurement and administration of HISD’s E-rate projects.  The provisions of the gifts and loans violated the E-rate competitive bidding requirements and HISD procurement rules.

Additionally, the United States alleged that Lehmann devised a scheme that outsourced some of HISD employees to Acclaim Professional Services, which allowed the employees to continue to work while passing on the costs to the E-rate program.  Acclaim Professional Services hid the cost of these employees in its invoices to the E-rate program by including such costs into eligible goods and services categories.

This settlement is part of a larger United States government investigation of E-rate funding requests by the HISD and the Dallas Independent School District.  The United States previously settled similar allegations with Hewlett-Packard for $16.25 million, $850,000 with HISD and $750,000 with the Dallas Independent School District.

These allegations were first brought to the government’s attention with the filing of a qui tam lawsuit by whistleblowers Dave Richardson and Dave Gillis, who investigated the E-rate program based on Richardson’s experience with bidding for contracts with the two Texas school districts.  The United States intervened in the qui tam lawsuit and added Lehmann as a defendant.

Posted in Financial Fraud, Qui Tam CaseNo Comments

Michigan Oncologist Charged in $35 Million Medicare Fraud Scheme

Dr. Farid Fata, owner and operator of Michigan Hematology Oncology Centers has been charged in a criminal complaint for submitting fraudulent claims to Medicare for medically unnecessary services that include chemotherapy treatments, Positron Emission Tomograph scans and other cancer and hematology treatments for patients who did not need them.

The criminal complaint alleges that the defendant endangered patient safety through misdiagnosis, over or misprescription of chemotherapy and other treatments, as well as, delaying hospital care for patients with serious injuries. The complaint further alleges  Dr Fata directed the administration of unnecessary chemotherapy to patients in remission; deliberate misdiagnoses of patients as having cancer to justify unnecessary cancer treatment and expensive testing; administration of chemotherapy to end-of-of life patients who did not benefit from such therapy; fabrication of diagnoses such as anemia and fatigue to justify unnecessary hematology treatments, and distribution of controlled substances to patients without medical necessity or administering drugs at dangerous levels. Dr. Fata also falsified and directed others to falsify documents to justify the cancer treatments for billing purposes.

Through is his Michigan Hematology Oncology Centers located in Clarkston, Bloomfield Hills, Lapeer, Sterling Heights, Troy and Oak Park Michigan, Fata billed Medicare approximately $35 million dollars over a two year period, and approximately $25 million was directly attributatble to Dr. Fata.

Dr. Fata is now awaiting trial on these allegations and remains innocent until proven guilty.

Posted in Medicare FraudNo Comments

Florida Home Health Care Owners Plead Guilty for Roles in $8 Million Medicare Health Care Fraud Scheme

Miguel Jimenez and Marina Sanchez Pajon, owners and operators of Flores Home Health, a Miami, Florida home health care agency, plead guilty to one count each of conspiracy to commit health care fraud.  This husband and wife team ran the now defunct Flores Home Health agency for the purpose of billing Medicare for expensive physical therapy and home health services that were neither medically necessary nor provided.  Both were responsible for negotiating and paying kickbacks and bribes, interacting with the patient recruiters and coordinating and overseeing the submission of fraudulent claims submitted to Medicare.

The kickback and bribes paid by Jimenez, Pajon and their co-conspirators were in exchange for patients recruiters’ referrals of patients to the Flores Home Health for home health and therapy services that were not medially necessary and/or provided.  Kickbacks and bribes were also provided to doctors’ officers and clinics in exchange for home health and therapy prescriptions, medical certifications and other documentation.  Jimenez, Pajon and their co-conspirators used these medical documents to fraudently bill Medicare for home health services that Jimenez and Pajon knew were in violation of federal criminal laws. From approximately October 2009 through June 2102, Medicare reimbursed $8 million to Flores Home Health for services that were not medically necessary and/or provided.

Posted in Medicare FraudNo Comments

ArthroCare Corp.’s Former CEO and CFO Charged in $400 Million Securities Fraud Scheme

ArthroCare Corp.’s former CEO and director Michael Baker and Michael Gluck, former ArthroCare Corp. CFO were charged on July 17, 2013 in the U.S. District Court for the Western District of Texas for their alleged leading roles in a $400 million dollar scheme to defraud the company’s shareholders and public investors by falsely inflating ArthoCare Corp.’s earnings by tens of millions of dollars.

The criminal indictment returned on July 16, 2013 charged the former CEO and CFO with one count of conspiracy to commit wire and securities fraud, eleven counts of wire fraud and two counts of securities fraud.  Former CEO Baker also was charged with three counts of false statements.

ArthroCare Corp. (ArthroCare) is a publicly traded medical device company based in Austin, Texas.  From at least December 2005 through December 2008, CEO Baker, CFO Gluck, and other senior executives and employees were alleged to have falsely inflated ArthroCare’s sales and revenues through a series of end-of-quarter transactions involving several distributors.

One scheme involved Baker, Gluck and other employees determining the type and amount of product to be shipped to distributors based on meeting ArthroCare’s Wall Street analyst forecasts rather than the distributors’ actual orders.  Another scheme involved ArthroCare “parking” millions of dollars of product with distributors at the end of each fiscal quarter.  ArthroCare would report these shipments as sales in its quarterly and annual filings which would enbable the company to meet or exceed internal and external earnings forecasts.  ArthoCare provided substantial, upfront cash commissions, extended payment terms, the ability to return the products, as well as, other special conditions in exchange for the distributors’ cooperation and participation in the schemes.  The distributors’ participation allowed ArthroCare to falsely inflate its revenue.

Another scheme involved DiscoCare, a privately owned Delaware corporation that Baker and Gluck caused ArthroCare to acquire in order to conceal from its public investors the true nature of the two companies’ financial relationship.  That relationship involved using DiscoCare, ArthroCare’s large distributor, to cover short falls in ArthroCare’s revenue.  One way that was acheived was by shipping DiscoCare far more product that it needed.  The criminal indictament alleged that Gluck, Baker and others lied to investors and analysts about its relationship with DiscoCare and other distributors.  It also alleged that Baker lied on multiple occasions regarding the relationship with DiscoCare during his deposition to the U.S. Securities and Exchange Commission in November 2009.

During the time period between 2005 and 2008 more than 25 million shares of ArthroCare stock was held by its shareholders.  On July 21, 2008 the price of the stock fell from $40.03 to $23.21 a share following the company’s announcement it was restating its previously reported financial results from the third quarter of 2006 to the first quarter 2008 to reflect the results of an internal investigation.  That prescipitous drop caused shareholders to lose more than $400 million in value.

An indictment is meraly a charge, and the defendants are presumed innocent until proven guilty.

Posted in Financial FraudNo Comments

Liechtenstein Bank to Pay $23.8 Million to Resolve Criminal Tax Investigation

The DOJ entered into a non-prosecution agreement with Liechtensteinische Landesbank AG, a bank based in Vaduz, Liechtenstein (LLB-Vaduz).  Under this agreement, LLB-Vaduz will pay more than $23.8 million to the United States and will not be criminally prosecuted for opening and maintaining undeclared bank accounts for U.S. citizens from 2001 through 2011. LLB-Vaduz admitted to assisting a U.S. taxpayers in evading tax obligations, filing false federal tax returns with the IRS and otherwise hiding accounts held at LLB-Vaduz from the IRS.

The NPA requires LLB-Vaduz to forfeit $16,316,000, representing the total gross revenues that it earned in maintaining these undeclared accounts, and to pay $7,525,542 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by LLB-Vaduzs clients. For more information, see the DOJ Press Release.

Posted in Whistle BlowersNo Comments

Wyeth Pharmaceuticals Settles Off-label Marketing Allegations for $490.9 Million

Wyeth Pharmaceuticals Inc., (Wyeth) acquired by Pfizer Inc. in 2009, entered a $490.9 million settlement with the United States government that resolved criminal and civil liability arising from the off-label marketing of it immunosuppressive drug Rapamune.

Under the Federal Food, Drug and Cosmetic Act (FDCA), when a pharmaceutical company developes a product it must indicate the specific use of the product in its new drug approval application submitted to the U.S. Food and Drug Administration (FDA).  Once the FDA approves the product for the specific use, a company may not market the drug for any other uses, unless if recieves FDA approval for such new use. The FDA, in 1999, approved Wyeth’s Rapamune for the limited use in renal (kidney) transplant patients and required the drug’s label to include a warning against certain uses.

Under the government’s criminal information, it alleged that Wyeth trained its national Rapamune sales force to promote the drug for use with non-renal transplant patients. Or in other words to promote the use of Rapamune for uses other than its specific FDA approved use.  According to the information Wyeth also supplied its sales force with training materials regarding the off-label use of Rapamune and how to use such materials in presentations to transplant physicians.  Wyeth provided its sales force with financial incentives to target all transplant patients with the goal of increasing Rapamune sales. Sanford Coats, U.S. Attorney for the Western District of Oklahoma characterized Wyeth’s training of its sales forceon the off-label promotions of Rapamune as “a systemic, corporate effort to seek profit over safety.”

Wyeth pleaded guilty to the criminal information that charged it with a misbranding violation under the FDCA.  Wyeth was charged with a criminal fine and forfeiture of $233.5 million.  Wyeth concurrently settled civil allegations with the federal and state governments totalling $257.4 million.  The government under the civil settlement alleged that from 1998 through 2009, Wyeth promoted Rapamune for unapproved uses, some which were not medically accepted indications and, therefore, were not covered by Medicare, Medicaid and other federal health care programs.  The unapproved uses included promoting Rapamune for non-renal transplants, converting patients from other immunosuppressant drugs to Rapamune, and using Rapamune in combination with other immunosuppressive agents not included on Rapamune’s FDA approved label.  This conduct resulted in false claims being submitted to the federal and state health care programs.  Wyeth in settling these allegations will pay the federal government $230, 112, 596 and the state governments will recieve $27,287,404.

This civil settlement resovles two qui tam cases filed which included these allegations.  The first action was filed by former Rapamune sales representative Marlene Sandler, and pharmacist Scott Paris.  The second qui tam was filed by former Rapamune sales reprsentative Mark Campbell.  At the time of the Department of Justice’s announcement on July 30, 2013, the whistleblowers had not resovled the amount of their share of the total settlement.


Posted in False Claims, Federal False Claims Act, Healthcare Fraud, Off-Label Marketing, Qui Tam, Settlements, State False Claims ActsNo Comments

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