Government Enforcement Actions

July 31, 2023

Martin’s Point Health Care Inc. in Maine has agreed to pay almost $22.5 million to resolve a lawsuit by a former manager in its Risk Adjustment Operations group, which alleged the health plan administrator defrauded Medicare over a three year period.  The former manager, Alicia Wilbur, alleged that Martin’s Point reviewed charts for their Medicare Advantage beneficiaries to identify additional diagnosis codes, then submitted those codes in claims to Medicare in order to increase reimbursements even though they were not properly supported by patient medical records.  For blowing the whistle on this misconduct, Wilbur will receive a $3.8 million award.  DOJ

July 28, 2023

Thomas D. Renison and Timothy J. Allcott, co-founders of ARO Equity, LLC, were sentenced to 48 months and 30 months in prison, respectively, for lying to current and prospective investors about ARO's performance and for using new investors' funds to pay interest to older investors. For at least 3 years, and despite Renison being barred in 2014 by the SEC from associating with any investment adviser or broker-dealer, Renison and Allcott deceptively convinced investors to cash out their retirement accounts and invest instead with ARO, touting double-digit returns and zero downside, ultimately raising nearly $6 million from investors. ARO's investments began failing almost immediately, but Renison and Allcott continued to tell investors their investments were as safe with ARO as they were with a bank. In addition to their prison sentences, Renison was ordered to pay restitution of $6,098,198.30 and Allcott will pay restitution of $6,249,983.30. SEC

July 28, 2023

Summitcrest Capital, Inc., and its principals, Johnny Tseng and Kevin Zhang, raised approximately $19.8 million from Chinese-speaking investors in the United States and China, misleading them to believe the funds would be used to make real estate-related loans "to the general public" and the income from these loans would be used to make interest payments and return of capital to investors. Tseng and Zhang, through their entity SC Development Fund, instead used investor funds for loans to Zhang's many real estate development and contracting businesses. Summitcrest, Tseng, and Zhang are on the hook jointly and severally for $16.6 million in disgorgement and over $4.3 million in prejudgment interest. Summitcrest and Zhang are permanently enjoined from violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act. Additionally, Tseng is barred from acting as an officer or director and will pay disgorgement of $60,000, plus $15,721 in prejudgment interest and a $414,366 penalty. SEC

July 25, 2023

Global Metallurgical, Inc. has agreed to pay a $2.6 million civil penalty for emitting air pollutants such as sulfur dioxide and particulate matter at its ferroalloy production facility in Ohio.  According to the government, the company has a history of releasing excessive emissions, but also failed to proactively implement pollution control technology when expanding one of its furnaces.  DOJ

July 21, 2023

In one of the largest procurement fraud settlements in history, defense contractor Booz Allen Hamilton has agreed to pay almost $377.5 million to resolve claims of violating the False Claims Act.  According to former employee Sarah Feinberg—who filed a qui tam suit in 2016, and who will receive a nearly $70 million share of the settlement—Booz Allen improperly billed the government for indirect charges that should instead have been billed to commercial and international contracts.  USAO DC

July 19, 2023

Amazon.com Inc. and its wholly-owned subsidiary Amazon.com Services LLC have agreed to pay a $25 million civil penalty to resolve allegations that its voice assistant service Alexa violated the Federal Trade Commission Act, Children’s Online Privacy Protection Act, and Children’s Online Privacy Protection Rule.  Since at least May 2018, Amazon has retained indefinitely and by default voice recordings of children interacting with Alexa. The company also falsely represented that such recordings, including transcriptions and geolocation information, could be deleted by Alexa users, when in fact user deletion requests were not always honored.  As part of the settlement, Amazon will have to identify and delete inactive child profiles and notify users about its retention and deletion practices.  DOJ

July 14, 2023

Electronic health record technology vendor NextGen Healthcare Inc. has agreed to pay $31 million to resolve a whistleblower’s allegations that it misrepresented the capabilities of certain software and improperly induced users to recommend the software.  According to two users of the NextGen’s software, Toby Markowitz and Elizabeth Ringgold, the company allegedly violated the False Claims Act by concealing from a certifying entity that its technology lacked critical but required functions. Additionally, the company allegedly violated the Anti-Kickback Statute by giving credits worth up to $10,000 to customers whose recommendation of NextGen’s EHR software led to a new sale.  For launching a successful qui tam case, the whistleblowers will receive and share a $5.6 million share of the recovery.  DOJ

July 14, 2023

Online counseling service BetterHelp has been ordered to pay $7.8 million, refrain from disclosing private client health data for advertising purposes, and obtain affirmative consent from clients disclosing such information again, following a settlement with the FTC.  The company was previously found to disclose its clients’ email addresses, IP addresses, and health questionnaire information to various advertisers, in direct contradiction to its promises to clients that such information would be disclosed for select purposes only.  FTC

July 14, 2023

The former CEO of SPAC African Gold Acquisition Corp., Cooper J. Morgenthau, has been ordered to pay over $5 million in disgorgement with prejudgment interest to the SEC for stealing more than $5 million from the company and investors via unauthorized withdrawals, which he disguised through falsified documents to auditors and accountants.  In a related criminal action, Morganthau was sentenced to 3 years in prison, ordered to forfeit over $5 million, and pay over $5 million in restitution.  SEC

July 13, 2023

Cryptocurrency platform Celsius Network has been banned from handling consumer assets and ordered to pay a $4.7 billion judgment, suspended pending the return of remaining assets to consumers in ongoing bankruptcy proceedings.  Before filing for bankruptcy in July 2022, Celsius marketed the platform as a safe place to deposit cryptocurrency and made various representations to build consumer confidence, including promises that consumers could withdraw deposits at any time, that deposits were insured by a $750 million policy, that sufficient reserves were on hand, and that deposits could earn as high as 18% APY.  However, all of those claims were all false, and in fact, Celsius misappropriated $4 billion in deposits, using them to fund operations, reward other consumers, and make high-risk investments that often lost money.  FTC; SEC