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State Enforcement Actions

Each state enforces its laws and defends its interests, and states often work with the federal government in investigating and prosecuting corporate frauds.  Whistleblowers with knowledge of fraud or wrongful conduct that involves state or local funds or programs may be able to bring a claim under a state or local False Claims Act, and may be eligible to receive a monetary reward and protection against retaliation.

Below are summaries of recent settlements, successful prosecutions, and enforcement actions by states. If you believe you have information about fraud which could give rise to a claim under a State or Local False Claims Act or other whistleblower reward provision, please contact us to speak with one of our experienced whistleblower attorneys.

October 16, 2018

A Medicaid transportation provider, its president, and a driver have been sentenced to pay a $10,000 fine and serve 2-4 years in prison for stealing a total of $1.2 million from New York's Medicaid program. The driver who was sentenced, Haimid Thompson, was accused of paying a Medicaid recipient to enroll in services from his employer and submitting falsified logs showing daily trips on behalf of the recipient. He was ordered to pay $23,598. The company, 716 Transportation, Inc., was sentenced to a fine of $10,000, and the president, Wossen Ambaye was ordered to pay restitution of $900,497, for knowing the services billed were not actually provided. NY AG

October 12, 2018

Michael Martin, the owner of a New York-based general contractor called Eastern Building & Restoration, Inc. has plead guilty to a multitude of charges, including fraudulently obtaining public works contracts, withholding over $400,00 in wages from over 50 employees, and stealing over $150,000 each from a minority-owned business and an insurance company. According to the Attorney General, Martin and co-defendant Dr. Scott Henzel, also of Eastern Building and Restoration, took control of two minority-owned businesses in order to fraudulently obtain millions of dollars worth of contracts intended for minority-owned businesses. Furthermore, they underpaid laborers working on public works projects and created false documentation and certifications stating otherwise. Separately, Martin also embezzled over $150,000 from one of the businesses and caused a false insurance claim to be filed on its behalf. He will be sentenced in both Albany and Schenectady counties in early December.  NY AG

October 11, 2018

Tesla Energy Solutions (fka Solar City) and its accounting firm, Novogradac & Company LLP, have agreed to pay a combined $13 million to settle claims that it defrauded the Oregon Department of Energy (ODOE) in seeking to receive a higher tax credit for commercial solar projects built in the state. According to Oregon DOJ's press release, SolarCity submitted fraudulent applications to ODOE certifying that its solar projects had cost it $36.7 million. Novogradac then submitted fraudulent reports certifying the same, which allowed SolarCity to receive more than $10 million in tax credits, and which it then used to fund 14 other solar projects, including 6 with the Oregon University System. However, subsequent investigation revealed that the actual cost had been inflated by more than 100%. OR AG

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

September 28, 2018

Credit Suisse Securities LLC has agreed to pay $5 million to the SEC and $5 million to New York to settle charges of violating the Securities Act by making material misrepresentations about retail customer orders. Between 2011 to 2015, the company allegedly failed to disclose to retail customers that their electronic system gave preferential treatment to orders that had a public reporting component over orders that did not. Additionally, the routing tactic used by the system gave customers of these non-reported orders less favorable execution prices. NY AG; SEC

September 27, 2018

A New York-based hedge fund manager, Harbinger Capital Partners Offshore Manager LLC, has agreed to pay $30 million to settle charges that it used fraudulent means to avoid paying both New York State and City taxes. A related investment management company based in Alabama, Harbinger Management Corporation, had earlier settled for $40 million, bringing a total of $70 million recovered in a case first brought to light by a whistleblower filing under the New York False Claims Act. According to the New York Attorney General's office, the alleged fraud had involved listing an office in Alabama as the source of hundreds of millions of dollars earned through fees from successful trades, even though the trades had in fact been made through the New York office and were thus subject to New York taxes. For their role in exposing the fraud, the unnamed whistleblower is to receive a relator's share of $15.4 million. NY AG

September 27, 2018

Uber has reached a $148 million settlement in a multi-state investigation arising from a 2016 data breach, which exposed the drivers’ license data of 600,000 drivers and other personal data from as many as 57 million customers.  Uber learned of the breach when anonymous hackers demanded $100,000 to keep the breach confidential.  Uber paid the hackers, but failed to disclose the breach or notify affected parties until November 2017.  The $148 million settlement, the largest multi-state data breach settlement to date, will be divided among all 50 states and the District of Columbia. Uber also agreed to implement additional security and compliance procedures.  Among the AG announcements: CA, CT, FL, GA, IL, NJ, NY, NC, PA, VA.

September 26, 2018

Two brokerage firms, UK-based TFS-ICAP LIMITED and New York-based TFS-ICAP LLC, pled guilty to securities fraud under New York's Martin Act for their roles in posting fake trades, bids, and offers by inter-dealer brokers for emerging market foreign exchange currency options.  The fake trades were intended to create a false appearance of liquidity in the emerging markets FX options market and encourage traders to buy and sell FX options via TFS-ICAP rather than other brokers.  In addition to the criminal pleas by the companies, a civil settlement requires them to implement remedial procedures, retain an independent monitor, pay $1.5 million, and cooperate in ongoing investigations.  NY AG.

September 12, 2018

A New York based long-term care facility, Centers Plan for Healthy Living, has agreed to pay $1,650,000 to settle allegations that it violated the state and federal False Claims Acts in billing Medicaid for services not provided to Medicaid beneficiaries. The alleged fraud involved enrolling unqualified patients and failing to disenroll recently unqualified patients from a Medicaid-funded care program over the span of two and a half years. It was eventually exposed by an unnamed whistleblower. AG NY; USAO EDNY

September 11, 2018

Through a tip by Connecticut State Comptroller, Kevin Lembo, a Florida-based compounding pharmacy, Assured, Rx, along with multiple individuals—many of them former and current Connecticut state government employees—have been sued by the State of Connecticut for alleged violations of the Connecticut False Claims Act. The pharmacy is accused of paying kickbacks to co-defendants Nicholas and Lisette Maulucci, who then paid other individuals to file reimbursement claims from a state employee health plan for expensive compound drugs manufactured by Assured, Rx. Through their actions, the Mauluccis allegedly received kickbacks totaling upward of $2.6 million, and cost the Connecticut Pharmacy Benefit Plan approximately $10.9 million. CT AG
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