Whistleblower Insider

Whistleblower Insider is written by the Constantine Cannon law firm team of experienced qui tam and whistleblower lawyers. It is updated daily to provide the latest whistleblower and fraud news and developments.
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April 18, 2017

NYAG Schneiderman Announces Largest Tax Whistleblower Recovery In Office’s History

By the C|C Whistleblower Lawyer Team

NY Attorney General Eric T. Schneiderman announced a $40 million settlement with Alabama-based Harbert Management Corporation, fund sponsor for Harbinger Capital Partners, a $26 billion hedge fund in NYC, for violations of the tax provisions of the New York False Claims Act. The settlement resolves whistleblower allegations that members of Harbinger’s investment manager failed to pay millions in New York State tax on performance income for several years.

When businesses operate both inside and out of New York City and State, they must apportion for tax purposes that part of their income derived from or connected with New York. Harbinger Capital Partners Offshore Manager LLC served as the investment manager for the Harbinger Fund from 2002 through 2009. As investment manager, Offshore Manager earned performance fee income in an amount equal to 20 percent of the Harbinger Fund’s net profits. Offshore Manager’s members, which included several senior executives at Harbert Management Corporation, were required to pay New York State income tax on this performance fee income earned by trading activity in New York.

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April 18, 2017

Whistleblower News From The Inside — April 18, 2017

By the C|C Whistleblower Lawyer Team

Nigeria offers financial incentives to whistleblowers — Anyone who reports wrongdoing will be rewarded with up to 5 per cent of the recovered funds — a potentially very large carrot to be dangled in front of associates of those who have stolen tens of billions of dollars from the “fantastically corrupt” west African nation. Last week a tip-off resulted in a raid that uncovered more than $43 million in cash from an unoccupied apartment in Lagos, meaning the anonymous whistleblower could be in line for a $2 million payday. The Times UK

U.S. Audit Overseer Mulls Safeguards on KPMG Leak Scandal — The Public Company Accounting Oversight Board is working to prevent future breaches of conduct that tipped off KPMG LLP about audit inspections and led to the firing of six employees of the firm, including its chief U.S. auditor. A PCAOB staff member—no longer at the board—leaked the sensitive information to a former PCAOB employee who worked at KPMG, according to the accounting firm. BNA

The Fraud Claims Tainting Turkey’s Referendum Win — The narrow victory of a historic referendum to centralize power in the hands of Turkish President Recep Tayyip Erdogan has been tarnished with allegations of fraud. Opposition parties are challenging the vote, which saw 51.4 percent of Turks approve the measures, and international monitors have disputed its fairness. Erdogan insists he won’t tolerate criticism of the outcome while his opponents are demanding a recount or outright annulment. Bloomberg

April 17, 2017

In Their Own Words — Grassley

— “Whistleblowers are critical to uncovering wrongdoing in government. However, the old process for reporting waste, fraud or abuse at the FBI was vague, confusing and left whistleblowers with conflicting instructions for how to properly make disclosures without fear of reprisals . . .The FBI has had months to update its policies. Its failure to do so suggests a serious gap between rhetoric and reality on whistleblower protection at the FBI.”

Senator Charles Grassley in a letter to FBI Director James Comey on the need to update the FBI whistleblower protection guidance.

April 17, 2017

EB-5 Visa Scandal Underscores the Critical Role Whistleblowers Play in Exposing EB-5 Fraud

By the C|C Whistleblower Lawyer Team

Approximately two weeks ago on April 5, authorities raided a business run by a California attorney and her father under suspicion of orchestrating a $50 million EB-5 visa scheme. The father and daughter owned a company called California Investment Immigration Fund LLC (“CIIF”). CIIF raised money from over one hundred Chinese investors for business projects. Under the EB-5 program, the Chinese investors would qualify for U.S. residency if the business projects created at least ten jobs. Instead the owners of CIIF hired high school students to pose as employees for fake projects and used the investor funds to buy luxury products for themselves.

According to court filings, the scheme began in 2008 and was not detected for many years. Some of the Chinese investors were able to fraudulently obtain U.S. residency despite neither investing in a legitimate business nor creating jobs. Three of the Chinese investors who were granted U.S. residency were fugitives wanted by the Chinese government. This situation demonstrates the issues with the EB-5 program and the high potential for fraud. This potential was further demonstrated with last week’s settlement for $150 million for misusing EB-5 investments by a Vermont ski resort owner. Additionally in March, the company of President Trump’s son-in-law and senior adviser Jared Kushner faced scrutiny for the use of $850 million in investment from Chinese investors through the EB-5 program. click here for more »

April 17, 2017

Whistleblower News From The Inside — April 17, 2017

By the C|C Whistleblower Lawyer Team

Acting Manhattan U.S. Attorney Settles Civil Lawsuit Against HSBC Bank USA, N.A., Regarding Failure To Disclose Fraud Or Potential Fraud In Guaranteed Loans — Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Eric S. Benderson, the Acting General Counsel of the U.S. Small Business Administration (“SBA”), announced today that the United States has settled a civil fraud lawsuit against HSBC BANK USA, N.A. (“HSBC”). The Government’s complaint, filed on April 10, 2017 (the “Complaint”), sought damages and civil penalties under the False Claims Act for misconduct in connection with HSBC’s participation in the SBAExpress loan program, which was designed to help start-ups and existing small businesses. DOJ

Chuck Grassley Demands FBI Update ‘Incorrect’ Whistleblower Protection Guidance — Senate Judiciary Committee Chairman Chuck Grassley is demanding that the FBI update its “incorrect” and outdated guidance on its whistleblower policies to abide by legislation that became law four months ago. In a letter sent to FBI Director James Comey on Friday, Grassley asks for an explanation as to why the agency hasn’t updated its employee training and internal communications to comply with the Federal Bureau of Investigation Whistleblower Protection Enhancement Act, which the senator and his panel’s ranking member Patrick Leahy introduced last Congress. Washington Examiner 

Lahey Fights Back Against Bermuda Bribery Allegations — Lahey Hospital and Medical Center on Friday fired back against a civil lawsuit accusing it of running a racketeering conspiracy and paying bribes to gain business in Bermuda, saying the island’s government has offered no evidence of wrongdoing. In a federal lawsuit filed in February, the government of Bermuda alleged that Lahey and Dr. Ewart Brown, a physician and former premier of the island, ran a sweeping, two-decade long scheme involving money laundering, mail fraud, and corruption. Boston Globe

April 14, 2017

Fraudster of the Week — Ex Alabama Governor Robert Bentley

By the C|C Whistleblower Lawyer Team

Facing impeachment, Alabama governor Robert Bentley resigned on Monday after an ethics report revealed that he used state resources to conceal an extramarital affair with his adviser, Rebekah Caldwell Mason.  Bentley was charged with, and has since pled guilty to, two misdemeanors—one for failing to file a major contribution report, and another for knowingly converting campaign contributions to personal use.

Governor Bentley’s troubles began in 2013, when his then-wife, Dianne Bentley, became suspicious of the budding relationship between the governor and Mason.  According to the ethics report presented to the Alabama House Judiciary Committee, Dianne placed a recorder inside her purse in March 2014.  The recording captured Bentley calling and professing his love for Mason mere minutes after Dianne, but not her purse, left the room.  click here for more »

April 14, 2017

$150 Million Settlement Announced in Vermont Ski Resort Fraud Case

By the C|C Whistleblower Lawyer Team

A year after the owner and president of a Vermont ski resort were accused by the state and the SEC of massive fraud, a $150 million settlement has been reached with Raymond James Financial Inc., which is the financial institution allegedly at the heart of the fraud. The federal receiver overseeing Jay Peak ski resort said the settlement agreement will be filed in court next week. A federal judge still must approve the settlement.  “While this does not wipe the slate clean for the individuals, businesses and communities harmed by this alleged fraud, it’s very, very encouraging news,” Vermont Gov. Phil Scott said.

The money will be used to pay all 42 contractors, 513 trade creditors — which are the other unpaid businesses, nonprofits and municipalities — and 169 investors, he said. click here for more »

April 14, 2017

In Their Own Words — Goldberg

— “They stepped up to the plate, they faced their responsibility and they basically set an example of how firms caught in this situation should react and that can’t go unnoticed.”

Federal receiver Michael Goldberg, commenting on the $150m settlement with Raymond James Financial Inc. over fraud allegations relating to Vermont’s Jay Peak ski resort.  Click here for more.

April 14, 2017

Whistleblower News From The Inside — April 14, 2017

By the C|C Whistleblower Lawyer Team

Oklahoma Hospital, Administrator, and Physicians Agree to Pay $1.6m to settle FCA case — The United States alleges that from January 1, 2008, through September 30, 2016, Oklahoma hospital Norman Regional submitted, or caused to be submitted, false claims for payment to Medicare for radiological services performed by assistants without the proper supervision by a physician.  Specifically, the assistants performed radiological services that required “personal” supervision, but a physician was not in the room supervising the work when the service was performed. DOJ

Giants defend Eli Manning amid claim of false memorabilia Eli Manning turned over a potentially incriminating email earlier this month in connection with a lawsuit that claims the quarterback, the New York Giants and a team equipment manager knowingly provided false game-worn memorabilia to collectors.  On April 27, 2010, Manning sent an email to Giants head equipment manager Joe Skiba asking for “two helmets that can pass as game used.”  In response, the Giant’s lawyers said “the email predates any litigation, and there was no legal obligation to store it on the Giants server. Eli Manning is well known for his integrity and this is just the latest misguided attempt to defame his character.” ESPN 

Detroit Podiatrist Charged for Role in $13.9 Million Medicare Fraud Scheme — A Detroit podiatrist was charged in an indictment unsealed today for his alleged participation in a $13.9 million health care fraud scheme involving fraudulent claims for unnecessary foot surgeries and other podiatric services that were never rendered.  According to the indictment, Dearborn Podiatric Services and Georgetown Podiatric Services falsely conveyed to podiatry patients that they needed weekly or bi-weekly shots and minor surgeries to prevent hammertoe, which were allegedly medically unnecessary.  As a result, these patients returned to his practice on a regular basis every month for shots and minor surgeries. DOJ

April 13, 2017

Two State Social Services Departments Settle FCA Suits over SNAP Funds

By the C|C Whistleblower Lawyer Team

This week, the Virginia Department of Social Services (VDSS) and the Wisconsin Department of Health Services (WDHS) each agreed to pay the United States roughly $7M to settle allegations that they violated the FCA in their administrations of the SNAP program (formerly known as the Food Stamp program). Both VDSS and WDHS used the same consultant, Julie Osnes Consulting, to advise them on quality control (QC) measures while administering the SNAP program.

The SNAP program is federally funded, but states are tasked in determining applicant eligibility, administering benefits, and performing QC. The Federal Government reimburses states for a portion of expenses involved in administering SNAP, including QC expenses. Additionally, the Federal Government pays states bonuses based for low QC error rates.

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