Monthly Roundup -- August 2014
Here is our look-back at the key whistleblower and fraud developments we have written about over the past month:
Featured Posts and Commentary
The First Circuit issued a decision recently on a matter of first impression for the circuit: whether courts may consider factors outside of settlement agreements in False Claims Act cases in order to determine whether portions of a settlement can be deducted from a defendant’s tax liability. In ruling that courts can indeed look beyond the agreements, the First Circuit in Fresenius Medical Care Holdings, Inc. v. United States arguably has broken ranks and issued a holding at odds with a prior decision by the Ninth Circuit. Click here for more.
The VA Office of the Inspector General (“OIG”) released its final report this week on the alleged patient deaths, wait times and scheduling issues at the Phoenix VA. Despite the allegations of several whistleblowers, the investigators found that there was no conclusive evidence that delays in care were linked to veterans’ deaths. But the report cautioned that, even so, the Phoenix VA has significant and serious problems with wait times and poor quality of care. Click here for more.
This week’s “Whistleblower Spotlight” shines on Shelly Doss, a former environmental compliance specialist with Washington River Protection Solutions (WRPS), an environmental cleanup contractor for the Hanford Nuclear Reservation. Located in central Washington, Hanford made plutonium for nuclear weapons for decades and now is the country’s largest environmental cleanup site with more than 150 underground tanks containing highly radioactive sludge. In October 2011, WRPS fired Ms. Doss after she raised numerous environmental, safety and radiation-related issues with management at the site. She had worked at Hanford for more than twenty years. Apparently, she was just one of several employees fired after raising health and safety concerns at the facility. Click here for more.
This week’s Department of Justice “catch of the week” goes to Bank of America. Yesterday, the North Carolina based banking giant agreed to pay $16.65 billion to resolve federal and state mortgage fraud claims against the bank and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch. It is the largest civil settlement with a single entity in American history. And it includes a $5 billion penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), the largest FIRREA penalty ever. Click here for more.
A former prosecutor was arrested in New York City in 2012 for spray-painting “NYPD Get Your Hands Off Me” on the entrance to city hall. That fact alone makes for a rather odd story. But in the case of Bobby Constantino, the “vandal” in question, there is much more to the story. And unfortunately, it is as relevant today — with the ongoing strife in Ferguson, MO over allegations of police brutality and abuse of power — as it was when his story first ran in The Atlantic. Click here for more.
In late 2011, Kristi Beeson was working as a laboratory technician at Rose Cancer Clinic in Mississippi, but had a bad feeling that something was not quite right. In a short time, she had witnessed numerous fraudulent practices at the clinic, including unqualified technicians performing bone marrow biopsies, using one dose of chemotherapy drugs for multiple patients, and doctoring patient records to conceal the clinic’s Medicare billings for services not performed. Click here for more.
It may not be the biggest scam contributing to the estimated $50 billion annual price tag for Medicare fraud and abuse. But according to a recent Washington Post report, it could be one of the simplest and most lucrative ones. It is the power wheelchair scam. According to the Post, “criminals disguised themselves as medical-supply companies. They ginned up bogus bills, saying they’d provided expensive wheelchairs to Medicare patients who, in reality, didn’t need wheelchairs at all. Then the scammers asked Medicare to pay them back, so they could pocket the huge markup that the government paid on each chair.” Click here for more.
The Second Circuit Court of Appeals issued a decision today holding that the Dodd-Frank whistleblower retaliation protections do not apply abroad. The Court based its holding on the lack of any connection between the U.S. and the improper conduct alleged in the case as well as the absence of any Congressional intent that the whistleblower protections would apply outside of the country. Click here for more.
Senators Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.) sent a letter to President Obama on Tuesday urging him to release a report from the Attorney General on the state of the country’s FBI whistleblower protections. Obama commissioned the report in his October 10, 2012 Presidential Policy Directive (“PPD”) 19 entitled “Protecting Whistleblowers with Access to Classified Information.” He requested that the Attorney General provide a report in 180 days that assessed the effectiveness of the FBI whistleblower regulations, the enforcement of those regulations, and a description of any needed improvements. Click here for more.
What it takes to make out a whistleblower retaliation claim under the Sarbanes-Oxley Act just got a little clearer thanks to the Second Circuit decision last Friday in Nielsen v. AECOM Technology Corp. There, the Court wrestled with exactly what kind of complaint a whistleblower needs to make to be protected under the statute enacted in the wake of the mighty Enron debacle. In doing so, the Court provided some useful guidance on the type of whistleblower this law was really designed to target. Click here for more.
This week’s Department of Justice “catch of the week” goes to Community Health Systems, Inc. On Monday, the Tennessee-based operator of acute care hospitals — the largest in the country with 206 affiliated hospitals in 29 states — agreed to pay $98 million to resolve charges of billing the government for inpatient services that should have been billed as significantly less expensive outpatient or observation services. Click here for more.
The Internal Revenue Service issued final rules for the IRS whistleblower program yesterday. Under the new rules, some government employees may now qualify as whistleblowers, and whistleblower bounties may be larger in some cases. But the rules will not permit whistleblowers to receive awards when the government uses their information to secure recoveries through criminal tax proceedings. Click here for more.
The whistleblower responsible for the record-setting Halifax Health Medical Center settlement spoke out about blowing the whistle on massive health care fraud. Elin Kunz was working in the hospital’s compliance department — a job she had held for 16 years — when she says she discovered some disturbing information that eventually led her to blow the whistle. Click here for more.
Apparently, Bank of America is close to inking a deal with the government under which it would pay about $17 billion to settle charges of its mortgage machinations in the run-up to the financial crisis. If finalized, BofA would be just the latest big bank to cement its membership in the Billion Dollar Mortgage Fraud Club. Some of the other major banks that make up this elite assemblage, and the prices they paid for admission, include…. Click here for more.
The Government Accountability Project (GAP) unveiled a new website yesterday designed to support whistleblowers reporting on food safety issues. The website is part of GAP’s Food Integrity Campaign, an effort to protect and empower whistleblowers in sounding the alarm on fraud and abuse in our food supply chain. Click here for more.
This week’s Department of Justice “catch of the week” goes to Vascular Solutions Inc (VSI). On Monday, the Minneapolis-based medical device maker agreed to pay $520,000 to resolve allegations that it violated the False Claims Act by marketing a product for sealing veins without FDA approval. Specifically, the government charged that VSI marketed and sold its “Vari-Lase Short Kit” for treating perforator veins (which run deep in the leg muscle) even though the FDA approved the device only for treating surface (or superficial) veins. Click here for more.
Whistleblower News from the Inside
Included among this month’s top stories: Border Patrol corrupt and covering up shootings? (here).
DOJ Fraud Settlements
The DOJ settled False Claims Act and other fraud allegations with DuPont, ExxonMobil, Bank of America, NGK Sparkplug, Samsung, McKesson, Community Health Systems and Hewlett-Packard, among others, for a combined recovery this month of roughly $17 billion. Many of these matters were initiated by whistleblowers under the qui tam provisions of the False Claims Act.