CyTerra Enters $1.9 Million Settlement to Resovle False Claims Act Allegations

CyTerra, headquartered in Waltham Massachusetts, manufactures, among other equipment, portable mine detectors used by the U.S. Military.  The false claims allegations alleged that CyTerra failed to provide the U.S. Department of the Army with accurate, complete and current cost or pricing data for the sales of its portable mine detectors.

CyTerra was awarded a Department of the Army contract in 2003 for the production and delivery of AN/PSS-14 hand-held mine detection units. The contract was modified several times and the government contended that during these contract modification negotiations, CyTerra knowingly failed to provide the Army with the most recent cost or pricing data related to the number of labor hours required to produce a portable mine detector.  CyTerra was required under the Truth in Negotiations Act to provide cost or pricing data that was accurate, complete and current. The allegations stated that if the govenrment had been aware of the correct pricing and costs, it would have negotiated for a lower price.

The allegations were included in the qui tam case filed by Kevin Bartczak and Keith Aldrich, two former CyTerra executives.  These two whistleblowers will share $361,000 from the total civil recovery of $1.9 million.

Posted in Defense Contracts, Fraud, Government Contracts, Military Contracts, Price Falsification, Qui TamNo Comments

General Electric Aviation Systems Resolves False Claims Act Allegations For $6.58 Million

General Electric Aviation Systems (GEAS), headquartered in Ohio, entered a settlement for $6.58 million regarding allegations that it submitted false claims under multiple Department of Defense contracts.

GEAS contracted with the Navy to manufacture and deliver external fuel tanks for use on the F/A 18 Hornet strike fighter jets. The fuel tanks were manufactured in Santa Ana, California.   In March 2008 a GEAS manufactured external fuel tank failed government testing, which resulted in an investigation by the local California offices of the Defense Contract Management Agency, the Defense Contract Audit Agency, the Defense Criminal Investigative Service, and the Navy Criminal Investigative Service.  Following several years of investigation, the United States alleged that between June 2005 and February 2008 GEAS knowingly failed to comply with contract specifications and did not undertake proper quality control procedures in the manufacturing of 641 external fuel tanks it delivered to the Navy.

Additionally the United States alleged that between June 2010 and June 2011, GEAS knew it falsely represented to another government contractor that it has performed a complete inspection of 228 drag beams used on Army UH-60 Blackhawk helicopters and that the 228 drag beams conformed to contract specificiations.

These allegations were brought to the United States government’s attention with the filing of the qui tam case by former GEAS Santa Ana employee Jeffrey Adler.  Mr. Adler’s share of the settlement had not been determined by the time the Department of Justice announced the settlement on June 26, 2013.

Posted in Defense Contracts, Fraud, Government Contracts, Military Contracts, Qui TamNo Comments

Fifty-five Nationwide Hospitals Settle False Claims Allegations for $34 Million

Fifty-five hospitals located in over twenty-one states entered into a settlement agreement with the United States to pay $34 million to settle allegations under the the False Claims Act for the submission of false claims to Medicare.  The DOJ announced the settlement on July 2, 2013 stating that the claims related to Medicare reimbursement for kyphoplasty procedures.

Kyphoplasty procedure is a minimally invasive procedure to treat certain spinal fractures often caused by osteoporosis.  In many cases the procedure is performed as an outpatient procedure.  Outpatient procedures are reimbursed by Medicare at a far lower rate than inpatient procedures.  These allegations, raised through a qui tam suit brought by Craig Patrick and Charles Bates, stated that the named hospital defendants often admitted patients needing the kyphoplasty procedures on an inpatient status which resulted in more costly remibursements from Medicare.  These hospitals knowingly submitted the claims for inpatient basis when the procedure should have been billed on an outpatient basis.

The July 2, 2013 settlement also resolved allegations against Medtronic Spine LLC, the corporate successor to Kyphon, Inc. that developed the medical devices to be used during the procedure and is the former employer of the two whistleblowers.  The Department of Justice alleged that the company defrauded Medicare by counseling hospital providers to preform the procedures as an inpatient rather than an outpatient status.  The company will pay the government $75 million to resolve these allegations.

The two whistleblowers will share approximately $5.5 million from the two July 2, 2013 settlements.  As of July 2, 2013 the government has reached settlements with one hundred hospitals on these allegations totally $75 million.

Posted in False Claims, Federal False Claims Act, Healthcare Fraud, Qui Tam, SettlementsNo Comments

Dubuis Health System and Southern Crescent Hospital For Specialty Care Settle False Claims Allegations for $8 Milliion

The Department of Justice on July 26, 2013 announced it had resolved, under the False Claims Act, allegations of the submission of false claims to Medicare with Dubuis Health Systems and Southern Crescent Hospital for Specialty Care, Inc. (Southern Crescent).   Dubuis Health Systems manages long-term acute care hospitals in several states.  It manages hospitals for Southern Crescent.  Southern Crescent is located in Riverdale, Georgia and is part of the CHRISTUS Health System.

Long-term acute care hospitals are certified to focus on patients with complex medical needs, whose average length of stay is more than twenty-five days.  The long-term care acute hospitals recieve higher reimbursement for the care provided than typical acute care hospitals.  The allegations against Dubuis Health Systems and Southern Crescent states that between 2003 and 2009, Dubuis Health Systems and Southern Crescent knowingly kept patients hospitalized for more days than was considered medically necessary in order to recieve higher reimbursment from Medicare and to keep Southern Crescent classified as a long-term acute care facility.

Darlene Tucker, a former administrator at Southern Crescent,  filed the whistleblower complaint under the False Claims Act that lead to this settlement.  She will recieve $2,160,000 of the United States recovery.

Posted in False Claims, Federal False Claims Act, Healthcare Fraud, Qui Tam, Settlements, Worthless ServiceNo Comments

Rewards for Tax Fraud Whistleblowers

Tough economic times may lead to more tax fraud schemes. That is good news for tax fraud whistleblowers seeking to reap substantial rewards from a law enacted by Congress in 2006. This law requires the IRS Whistleblower Office to pay rewards to individuals who blow the whistle on persons who fail to pay the taxes that they owe the Government. The rewards range from 15% to 30% of the taxes, penalties, and interests collected by the IRS in the case. However, certain conditions must be met first. For example, the whistleblower only receives this monetary reward if more than $2 million is at issue in the case and the IRS actually uses the information provided by the whistleblower.

The process begins with the whistleblower filling out a Form 211, Application for Award for Original Information, describing the tax fraud that he or she knows about and attaching documents to support the allegations. All whistleblower claims must be submitted under penalty of perjury; therefore, individuals often seek the assistance of an attorney.

Concerns about retaliation for snitching are alleviated by the provisions of this law because the whistleblowers identity, and even his or her existence, remains a secret and kept out of the public forever. This is quite different than in a qui tam case where the whistleblowers identity is eventually revealed.

Once the form is submitted, the IRS evaluates the case and decides whether it is worth pursuing. The IRS keeps a tax fraud whistleblower in the dark about the progress of the case until it is closed, which could take years. Even after waiting for the IRS to successfully prosecute the individual who committed the tax fraud, whistleblowers should not expect to see their reward immediately because the IRS does not pay out the reward until the accused has exhausted his appeals and paid the owed taxes.

Posted in Tax FraudNo Comments

IRS Fraud Office Pays First Major Whistleblower Reward

Three years ago, the Internal Revenue Service established an office that would allow whistleblowers to report information on big tax fraud scams and receive rewards. For the first time, it appears as if the IRS is paying out a substantial reward.

The Wall Street Journal reports that the IRS Office paid $5.5 Million in reward money to a whistleblower who reported tax fraud among several companies. More money is still possible as the IRS continues to investigate and resolve claims involving the accused companies.

The case began nearly eight years ago and involved international stock and tax fraud scenarios, completed in part by an international corporate conglomerate. It is reported that the case recovered over $60 million in unpaid taxes so far.

This award is the first major IRS payout to a whistle blower, but gives future whistleblowers and their attorneys confidence that the relatively new program is working, according to Dean A. Zerb, a former fraud investigator and key player in creating the new IRS office.

Posted in IRS Whistleblower, Tax Fraud, Whistle BlowersNo Comments

Former CEO of Havenwood Pleads Guilty

Former Havenwood CEO Karen Mason-Mueller pleaded guilty to tax evasion charges. Mueller admits to having used over $1 million of Havenwood’s resources to pay for personal expenses. Mueller used her access to finances at Havenwood, a skilled nursing facility in Milwaukee, to buy over $60,000 worth of jewelry, $150,000 worth of home improvements, $108,000 on vehicles for her family, and over $300,000 on personal expenses such as vacations and yacht club fees.

The financial mismanagement at Havenwood brought the facility under federal investigation. Reports of employee paychecks bouncing, patient neglect and Medicaid fraud brought the center to the attention of several Federal agencies. The Wisconsin Department of Health and Family Services moved to shut the facility down in Mid-2005, three months after Mueller and her co-owner stepped down from CEO positions.

For her tax fraud, Mueller will face up to 5 years in prison and fines of up to $250,000.

Posted in IRS WhistleblowerNo Comments

U.S. District Court for the Eastern District of Texas Bars Twelve Sub-promoters of Alleged $30 Million Tax Credit Scam

On February 24, 2010, the Justice Department announced that the Honorable Marcia Crone of the U.S. District Court for the Eastern District of Texas has permanently barred twelve (12) people from promoting an alleged tax fraud scheme involving false income tax credits. The twelve (12) are among thirty-two (32) defendants named in a civil injunction lawsuit who allegedly helped customers claim more than $30 million in false federal income tax credits designed for producers of fuel from non-conventional sources. A total of 23 of the 32 defendants have now been barred. The thirty-two (32) defendants include four (4) Certified Public Accounts, twenty-seven (27) tax preparers and one other individual.

According to the government’s original complaint, the tax fraud scheme involved claiming tax credits based on the purported recovery and sale of methane from landfills in Puerto Rico, Illinois, New York, Ohio, and Connecticut. The complaint averred that no methane was ever produced or sold and that the defendants allegedly created fictitious business records to falsely document the purported production and sales. The tax preparers allegedly sold interests in the fictitious methane production facilities to thousands of customers in at least fourteen (14) states across the country and prepared income tax returns for customers claiming tax credits based on the fictitious methane sales.

Posted in Tax Credits, Whistle BlowersNo Comments

Former IRS Officer Charged in Tax Evasion Scheme

Former Internal Revenue Service (IRS) Officer Mark E. Hunt, along with three other Maryland men, has been charged in a Tax Evasion scheme. The scheme was orchestrated by Potomac attorney Irvin Catlett and totaled $1.2 million. Hunt worked as Catlett’s inside man and provided taxpayer information while using his position with the IRS to convince clients that the scheme was safe from prosecution.

Catlett has been charged with fraud, obstruction of IRS law, and 10 counts of aiding and assisting in the preparation of false tax returns. The scheme worked by absorbing the investments (supposedly in three car dealerships) of clients and then posting the dealerships as losses on the client’s returns, allowing the taxpayers to negate their taxable income because of the supposed losses.

Catlett faces up to 38 years in prison. Hunt faces up to 13 years for lying to an investigator and participation in fraud and the other three conspirators face up to 5 years each.

Posted in IRS Whistleblower Office, Tax FraudNo Comments

Father and Two Sons Accused of $15 Million Tax Fraud

Operators of the family business, Adams Beach Income Tax, are being charged with tax fraud of up to $15 million in damages after allegedly filing false claims on behalf of themselves and clients.

Father Alexander Adams and his two sons, Garrett Adams and Brandon Adams, promoted their tax fraud schemes through live seminars, CD’s and web advertising.

The fraud was built around claims of inflated tax refunds and fabricated income tax with-holdings. If the men are found guilty, they will face civil penalties and be barred from the tax industry in the future.

Posted in Tax FraudNo Comments

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