October 30, 2014

False Claims Act Scores Continue to Pile Up

By the C|C Whistleblower Lawyer Team

It was only two weeks ago when we reported on three major False Claims Act wins with the government taking home more than $90 million in fines and penalties and the whistleblowers getting a $10 million piece of the pie.  See Big Week for Whistleblowers.  Then there was last week’s $175 million pre-trebled jury verdict against guardrail maker Trinity Industries for lacing our highways with defective and dangerous guardrails.  See Whistleblower Wins Big In Guardrail Case.  Here we are again just a week later with four more False Claims Act hits, with total recoveries crossing the $400 million mark.  This most recent parade of perpetrators includes leading provider of dialysis services DaVita Healthcare Partners, Inc., US military contractor First RF Corporation, medical device maker Biomet Inc., and North Florida Shipyards.

The DaVita case, which settled last Wednesday, received the most attention because of the government’s eye-popping $400 million recovery, the highest to date for a healthcare kickbacks case.  According to the government, for the past decade, DaVita used a sophisticated three-part joint venture business model to induce patient referrals to its dialysis clinics.  First, DaVita would identify physicians with significant patient populations suffering renal disease.  Then DaVita would offer them extremely lucrative joint venture opportunities.  And finally, DaVita would enter into side agreements with these physician partners through which they would be funneled kickbacks disguised as joint venture profits.  This joint venture scheme was first revealed in a whistleblower lawsuit brought by former DaVita Senior Financial Analyst David Barbetta.  His share of the government’s recovery has yet to be determined.  See DOJ Catch of the Week – DaVita.

The First RF case, which settled last Friday, involved allegations the antenna and radio system company submitted inflated claims for electronic warfare antennas sold to the US Army to combat Improvised Explosive Devices.  Specifically, the government charged First RF with knowingly submitting to the Army false data that misrepresented First RF’s cost to manufacture the antennas, and thereby inflating the price for the antennas and the payments First RF received for them.  With this settlement, the government made it clear it will not tolerate this kind of government contracting fraud, especially when it involves “our men and women in uniform who are putting their lives on the line daily around the world.”  The company agreed to pay $10 million to settle the charges.  See DOJ Press Release.

The Biomet case, which settled yesterday, involved allegations the company provided kickbacks to doctor’s office staff to induce the doctors to use Biomet bone growth stimulators, which are used to repair fractures that are slow to heal.  According to the government, the payments were made pursuant to personal service agreements with the staff members and resulted in false billings to various federal health care programs, including Medicare.  Biomet agreed to pay $6 million to resolve the charges, which originated in a whistleblower lawsuit filed by Yu Yue, a former Biomet product manager.  Her whistleblower award has yet to be determined.  See DOJ Press Release.

Finally, the North Florida Shipyards case, which also settled yesterday, involved allegations the shipyard and its president, Matt Self, created a front company, Ind-Mar Services Inc., to improperly secure Coast Guard contracts designated for Service Disabled Veteran Owned Small Businesses (SDVOSBs).  To qualify as a SDVOSB on Coast Guard ship repair contracts, a company must be operated and managed by service disabled veterans and must perform at least half the labor.  According to the government, North Florida created Ind-Mar merely as a contracting vehicle and that North Florida performed all the work and received all the profits, and had the government known of the scheme the Coast Guard would not have awarded the company contracts to repair five ships.  North Florida agreed to pay $1 million to settle the charges, which originated in a whistleblower lawsuit filed by Robert Hallstein and Earle Yerger.  They will receive a combined whistleblower award of $180,000.  See DOJ Press Release.

Thus the government continues on its False Claims Act campaign, picking up significant victories on a weekly, if not daily basis these days.  And mostly because of the whistleblowers on the front lines providing a much needed hand.

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