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Government Enforcement Actions

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June 19, 2019

The former CEO of Quintillion, a telecommunications company in Alaska, has been sentenced to 5 years in prison and ordered to forfeit $896,698 for defrauding investors of more than $270 million.  In order to secure funding to build a high-speed fiber optic cable system, Elizabeth Pierce had presented two New York investment companies with contracts that made it appear as if Quintillion was guaranteed revenue of nearly $1 billion.  Unbeknownst to investors and her own staff, however, the contracts were allegedly forged and the actual contracts she’d negotiated would generate only a fraction of that amount.  Quintillion eventually reported her to the DOJ.  USAO SDNY

June 19, 2019

Memphis Goodwill Industries has agreed to pay $150,000 for allegedly making false certifications to the federal government in order to qualify for contracts administered by the AbilityOne Commission, which helps create job opportunities for disabled individuals.  Federal regulations required AbilityOne contractors like Goodwill to employ disabled individuals for 75% of its direct labor hours and submit annual certifications attesting to that fact.  Despite submitting certifications attesting to the 75%, Goodwill was found to allegedly employ disabled individuals for far fewer hours.  USAO WDTN

June 18, 2019

A New Hampshire man named Imtiaz Shaikh has been sentenced to 1.5 years in prison and ordered to pay $2.8 million to the State of New Hampshire for evading taxes on the sale of certain tobacco products.  According to state law, wholesale distributors of other tobacco products (OTP) must be licensed, file reports on the number of OTP sold, and pay taxes at 65% of the wholesale price.  To avoid paying taxes on his products, Shaikh conducted business through a number of shell corporations, robbing the state of $2.8 million in unpaid taxes.  USAO NH

June 18, 2019

A consultant in South Dakota who allegedly caused multiple states to submit up to five years of false quality control data to the USDA’s Supplemental Nutrition Assistance Program (SNAP) has agreed to pay $751,571 to resolve her liability under the False Claims Act.  Though funded by the federal government, SNAP relies on states to ensure that food stamp benefits are awarded correctly and error rates are accurately reported.  To incentivize lower error rates, the USDA reimburses states for certain quality control expenses and pays bonuses to states with the lowest and most improved error rates.  Julie Osnes was retained by multiple states to lower error rates but gave improper advice, causing the states to report false information and receive bonuses they were not entitled to.  Through settlements with three of the states—Alaska, Virginia, and Wisconsin—the federal government has recovered $17 million.  USAO EDWA

June 18, 2019

Nevada Heart & Vascular Center has agreed to pay $2.5 million to settle allegations that it accepted kickbacks from genetic testing companies, Natural Molecular Testing Corp. and Iverson Genetic Diagnostics, Inc., in exchange for referrals of Medicare patients.  The alleged violations of the Anti-Kickback Statute and False Claims Act occurred for nearly a year in 2012.  USAO NV

June 14, 2019

IBM and its subsidiary, Cúram Software, will pay $14.8 million for allegedly making material misrepresentations to the State of Maryland during a contract award process for the state’s health insurance exchange website.  Cúram, which was acquired by IBM at the end of 2011, had applied for the award in 2012 and subsequently became a subcontractor on the project, which was partially funded by federal grants.  However, during the application process, and with IBM’s knowledge, Cúram allegedly misrepresented the development status and existing functionality of its software, as well as its software’s ability to integrate with other software.  The resulting issues caused the State of Maryland to terminate the contract and replace Cúram’s software.  DOJ; USAO MD

June 14, 2019

In the SEC’s largest recovery from a broker for improper ADR practices, Industrial and Commercial Bank of China Financial Services LLC (ICBCFS) has agreed to pay more than $42 million for improperly handling pre-released American Depository Receipts (ADRs).  Because ADRs represent foreign shares of a foreign company, they usually require a deposit of a corresponding number of foreign shares, but can be pre-released if certain conditions are met.  ICBCFS allegedly facilitated the early issuance of ADRs in order to allow certain tax-advantaged borrowers to collect dividends without taxes.  This left the door open for abusive practices such as the inflation of securities held by foreign issuers, short selling, and dividend arbitrage.  SEC

June 12, 2019

In connection with the development of the Lakeway Regional Medical Center in Texas, a number of individuals and entities have agreed to pay $1.1 million to resolve claims that they made false claims in obtaining a loan insured by the Federal Housing Administration under a HUD program that insures loans to build hospitals in underserved areas.  Pacific Medical Buildings LLC, PMB Lakeway LLC, RD Development Partners LLC, Lakeway Management LLC, J&L Rush Family Partnership LP, Jeff Rush, and Brad Daniel, were alleged to have delayed refunds to investors who had cancelled their investments in order to make it appear as if the project satisfied mortgage covenants regarding the cash on hand required to close the loan. The settlement also resolves allegations that the settling parties received impermissible distributions of project funds. DOJ

June 12, 2019

Lake Country Pharmacy and Compounding Center in Georgia, along with two of its principals, Chris and Carey Vaughan, have settled allegations filed by a whistleblower under the federal False Claims Act and Georgia False Medicaid Claims Act.  According to former pharmacist Chris Coleman, Lake Country submitted bills to Medicare, Medicaid, and TRICARE for compounded medications that were made from non-reimbursable bulk powders but billed as if they were made from reimbursable tablets.  Without admitting or denying these charges, Lake Country agreed to pay $365,000 and enter into an Integrity Agreement with the Department of Health and Human Services.  USAO MDGA

June 11, 2019

Two additional co-defendants in a recently reported home health fraud case have been sentenced to 6-10 years in prison and ordered to pay over $4.3 million each for their involvement.  Angela Avetisyan and Ashot Minasyan, the co-owners and operators of Fifth Avenue Home Health, paid kickbacks to Marina Merino and other patient recruiters to bring Medicare patients to a clinic owned by Robert Glazer.  In exchange, they received referrals from Glazer’s clinic for home health services that were allegedly medically unnecessary.  DOJ; USAO CDCA
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