DOJ Enforcement

October 3, 2018

Blessings, Inc., of Tucson, Arizona, and two associated individuals, were sentenced following guilty pleas to pay over $1.2 million in fines, forfeiture and restitution for the illegal trafficking in sea cucumber from 2010-2012. Defendants admitted that they obtained the sea cucumber in Mexico in violation of Mexican law, imported the sea cucumber into the United States with false documentation, and illegally exported the sea cucumber to Asia.  Portions of the fines will be deposited in the Lacey Act Rewards Fund and the Magnuson Stevens Fishery Conservation and Management Act Fund. USAO S.D. Cal.

October 3, 2018

Nippon Chemi-Con, a manufacturer of  electrolytic capacitors, was sentenced to pay a $60 million criminal fine for its role in a price-fixing conspiracy. The company pleaded guilty to conspiring with others to suppress and eliminate competition for electrolytic capacitors from at least 2001 to 2014.  DOJ

October 1, 2018

Pharmaceutical distributor AmerisourceBergen Corporation will pay $625 million to the federal government and 43 states to settle claims that between 2001 and 2014 a pre-filled syringe program at one of its subsidiaries, Medical Initiatives, Inc., violated federal law.  Despite lacking the proper licensing and registration, MII opened FDA-approved sterile vials of oncology drugs, and in a non-sterile environment, pooled the medicine and transfered it into non-FDA approved pre-filled syringes which were then sold to oncology practices and physicians.  This practice allowed Amerisource to capture the "overfill" in the original FDA-approved sterile vials and produce a larger number of pre-filled syringes.  AmerisourceBergen also resolved claims that it provided unlawful kickbacks to physicians to induce them to purchase pre-filled syringes rather than vials.  The settlement resolved three qui tam actions initiated by whistleblowers Michael Mullen, Daniel Sypula, Kelly Hodge, and Omni Healthcare, Inc.; a payment of over $93 million will be made to relators. Previously, in September, 2017, AmerisourceBergen Specialty Group pleaded guilty to illegally distributing misbranded drugs and agreed to pay $260 million in criminal fines and forfeitures. USAO E.D.N.Y.;  NY

October 1, 2018

HealthCare Partners Holdings LLC, a DaVita entity, will pay $270 million to settle allegations arising from DaVita's collection and submission of diagnosis data for Medicare Advantage beneficiaries to whom DaVita provided healthcare services.  HealthCare Partners, an independent physician association, allegedly instituted practices that caused the submission of incorrect diagnosis codes - diagnosis codes that increased payments from CMS to the MAOs, and then from the MAOs to DaVita/HealthCare Partners.  DaVita had voluntarily disclosed some practices, including improper medical coding guidance provided to physicians.  In addition, a whistleblower, James Swoben, alleged in a False Claims Act qui tam case that HealthCare Partners had engaged in improper "one-way chart reviews," which added diagnosis codes identified from the review of patient charts, but did not delete previously-submitted diagnosis codes that were not supported by the patient charts. Swoben will receive a whistleblower reward of $10,199,100. DOJ

September 28, 2018

Kalispell Regional Healthcare System and six of its related entities agreed to pay $24 million to settle a False Claims Act case based on its compensation arrangements with physicians, which were alleged to violate the Stark Law, and other arrangements alleged to violate the Anti-Kickback Statute.  Between 2010 and 2018, KRH entities reportedly paid excessive and above-market full-time compensation to more than 60 physicians, even if those physicians worked far less than full-time.  In addition, some of the KRH entities were alleged to unlawfully seek referrals from physicians through excessive compensation arrangements and the provision of administrative services at below market rates.  Jon Mohatt, the former CFO of a related entity, initiated the action with a qui tam filing; Mohatt will receive $5.4 million dollars as a relator's share of the government's recovery.  DOJ

September 28, 2018

Sentient Science Corporation has agreed to pay $2,675,000 to settle allegations that it made false claims for funding under the Small Business Innovation Research (SBIR) program administered by the National Science Foundation and Department of Energy. SBIR grants are intended to stimulate technological and research innovations by small businesses. However, the company took advantage of the program by claiming expenses that had not yet been incurred, claiming to use third-parties in order to receive additional funding, and using less qualified employees to perform work.  USAO WDNY

September 28, 2018

RS Compounding, Inc, and its owner, Renier Gobea, have agreed to pay $1.2 million to settle a False Claims Act-based lawsuit by whistleblower McKenzie Stepe that the now defunct compounding pharmacy had overcharged TRICARE, at times by as much as 10,000% more than it charged members of the general public. The alleged fraud occurred between 2012 and 2014. According to the DOJ, TRICARE's costs for compounded drugs have ballooned from $5 million to over $500 million in the span of ten years, then increased by over 150% between 2014 and 2015 alone. Tragically, the whistleblower passed away before the settlement was finalized, so her estate will receive her relator's share of $264,000. DOJ

September 27, 2018

Millicent Traylor, M.D., of Detroit, Michigan was sentenced to over 11 years in prison today for her part in a health care scheme against Medicare from 2011 to 2016. Traylor and her co-conspirators defrauded Medicare of an estimated $8.9 million during that period. They submitted fraudulent claims for home health care services and other services which were not provided or not medically necessary. At times, the physician services which were provided were provided by Dr. Traylor, though she was unlicensed during that period. Furthermore, evidence presented during the four-day trial showed that Traylor forged the signature of licensed physicians on prescriptions for opioid medications, oxycodone for instance, as a way to encourage patient participation in the scheme. Traylor’s three co-conspirators will also serve time in prison.  DOJ  

September 27, 2018

NGL Crude Logistics LLC, formerly known as Gavilon, Inc., has agreed to pay a $25 million civil penalty to the Environmental Protection Agency (EPA) to resolve allegations of RIN fraud through violations of the EPA's Renewable Fuel Standard (RFS) program. In 2011, NGL bought millions of gallons of biodiesel, which came with about 36 million RINS—or Renewable Identification Numbers, which are generated when certain renewable fuels are produced, and which are used for tracking purposes. According to the complaint, NGL sold off most of the original RINs, then sold the biodiesel as unprocessed feedstock to another company, Western Dubuque. After Western Dubuque reprocessed the biodiesel, it sold the fuel back to NGL with another set of RINs, which NGL then sold off again. The fraud was eventually revealed through a tip from other program participants. DOJ

September 27, 2018

A ceramic materials company, LoTEC Inc. (dba Vesta Sciences), has agreed to pay $175,000 to settle claims that it committed multiple violations of the False Claims Act. The alleged fraud involved transferring and loaning out money awarded to them under the Small Business Innovation Research Program by the National Science Foundation and U.S. Army. Additionally, LoTEC was accused of making false certifications, and improperly recording hours worked. USAO NJ