October 5, 2016

Accountability Through Individual Prosecution: Former Tuomey CEO Pays $1 Million in False Claims Act Settlement

By Ronny Valdes

On September 27, the Department of Justice (DOJ) announced former Tuomey Healthcare Systems CEO Ralph “Jay” Cox would pay $1 million to settle allegations related to his personal involvement in a fraudulent physician compensation scheme that violated the Stark Law and the False Claims Act (FCA). Tuomey, for its part, settled claims arising from the same scheme last year. In the original case against Tuomey, a jury determined that over 21,000 false claims had been submitted to Medicare and entered a judgment for $237 million. Tuomey subsequently settled the case for $72.4 million.

However, the government claimed Mr. Cox “ignored and suppressed warnings from a hospital attorney that the physician contracts were risky and raised red flags.”  Mr. Cox’s personal involvement in the scheme spurred authorities to pursue the CEO personally. The government alleged that Mr. Cox not only facilitated but encouraged the execution of physician contracts that violated the Stark law, out of fear of Tuomey losing patients to a new surgical center.

This settlement is a positive step in the ongoing fight against fraud.  Personal liability for high level executives who profit from fraud against the government is the key to real accountability in fraud cases. Without it, the perpetrators of fraud suffer no consequences for their deeds, while organizations and shareholders pay. Increased calls for holding high level executives personally accountable for fraud are echoed in the recent scrutiny of Wells Fargo CEO John Stumpf. Recoveries against high level executives not only serve up a much needed dose of justice, they may also increase the likelihood that power players will think twice before directly or indirectly perpetuating fraud.

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