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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.

				

			

			
						
					
			

	
		
		

			

				
				
June 17, 2016

				 New Jersey concluded its investigation of Walker Cancer Research Institute, Inc., a Maryland-based charity, through entry of a Consent Order, which includes a $375,000 voluntary payment to the Rutgers Cancer Institute of New Jersey to support cancer research in the state. As part of the settlement, Walker Cancer Research has also agreed to pay the Division $95,000 in reimbursement of its attorney’s fees and investigative costs, and agreed to certain practices, among other things, in its direct mail solicitation of contributions. Walker Cancer Research entered into the settlement without any admission of liability. NJ				 			
	
		
		
	


 			




	
		
		

			

				
				
June 17, 2016

				 New York announced the unsealing of an indictment charging Renee Kanas, 63, a resident of Tamarac, Florida, with Grand Larceny in the Second Degree, a Class C felony.  Kanas is charged in Albany County Court with stealing over $148,000 in pension payments from the New York State and Local Employees Retirement System paid to her father, Jacob Yudenfreund, a New York State pensioner who died in March 2010. According to the indictment and statements made by the prosecutor at arraignment, Kanas’ father was a New York State pensioner who elected to receive reduced monthly benefits so his wife, Doris Yudenfreund, would continue to receive benefits after his death.  Mrs. Yudenfreund, however, predeceased Mr. Yudenfreund.  As such, upon Mr. Yudenfreund’s passing in March 2010, his pension benefits ceased. NY				 			
	
		
		
	


 			




	
		
		

			

				
				
June 14, 2016

				 Florida and the Federal Trade Commission obtained a federal district court order to temporarily shut down a Central Florida-based operation allegedly causing more than $15 million in consumer harm. The operation blasted consumers with robocalls designed to deceive consumers into paying up-front fees for phony credit card interest-rate-reduction and debt-elimination services. The defendants, claiming to be Bank Card Services and the Credit Assistance Program, allegedly called consumers promising to substantially and permanently lower credit card interest rates, pay off consumers’ debts faster and save consumers thousands of dollars. According to the complaint filed in court, the defendants charged between $500 to $5,000 in illegal up-front fees and rarely, if ever, delivered the promised services. For an additional fee paid in advance, the defendants also allegedly claimed they would pay off credit card balances using money obtained from bogus government funds, leaving some victims in even greater debt. FL				 			
	
		
		
	


 			




	
		
		

			

				
				
June 9, 2016

				 Raleigh, North Carolina-based specialty pharmacy Salix Pharmaceuticals, Inc., which sells products used to treat various gastroenterology conditions, agreed to pay $54 million to settle charges it violated the federal Anti-Kickback Statute and False Claims Act by using its “speaker programs” as a mechanism to pay kickbacks to doctors to induce them to prescribe Salix drugs and medical devices.  Specifically, the government alleged Salix held sham speaker programs, frequently at high-end restaurants, where doctors were paid substantial honoraria purportedly to educate other doctors about a Salix product, but in reality spent little or no time discussing the product.  $16,578,000 of the settlement amount will go to the Medicaid programs of different states including Ohio.  The allegations originated in two whistleblower lawsuits filed under the qui tam provisions of the False Claims Act.  The whistleblowers will receive a yet-to-be-determined award from the proceeds of the government's recovery.  DOJ (SDNY), OH				 					 

						
Tagged in:
													  Anti-Kickback and Stark, 
													  FCA Federal, 
													  FCA State, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 6, 2016

				 Genentech Inc. and OSI Pharmaceuticals LLC agreed to pay $67 million to resolve charges they violated federal and state False Claims Act by making misleading statements about the effectiveness of the cancer drug Tarceva.  According to the government, Genentech and OSI made misleading representations to physicians and other health care providers about the effectiveness of Tarceva when there was little evidence to show that Tarceva was effective to treat those patients unless they also (i) had never smoked or (ii) had a mutation in their epidermal growth factor receptor, which is a protein involved in the growth and spread of cancer cells.  The allegations originated in a whistleblower lawsuit filed by former Genentech employee Brian Shields under the qui tam provisions of the False Claims Act.  He will receive a whistleblower award of approximately $10 million out of the proceeds of the government’s recovery.  Whistleblower Insider GA, MA, OH				 					 

						
Tagged in:
													  Defective Products, 
													  FCA Federal, 
													  FCA State, 
													  Off-Label and Unapproved Use, 
													  Whistleblower Case, 
													  Whistleblower Rewards, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 8, 2016

				 New Jersey announced that a Burlington County medical device distributor was charged with stealing more than $100,000 in insurance payments intended for two companies that made and marketed a device to clear patients’ airways. Loetta Karen Edwards, 46, owner of Edwards Medical DME, LLC, (Edwards Medical) in Cinnaminson, was indicted on one count of second-degree theft by failure to make required disposition of property received. Edwards was a local distributor of the “Frequencer,” a Canadian-made medical device that helps clear airways in patients with cystic fibrosis and chronic obstructive pulmonary disease. According to prosecutors, Edwards would order the devices on behalf of individuals who paid for them through their insurance companies. Prosecutors say Edwards would then process the insurance claims for the devices and receive the payments. She would then remit a portion of the money to the device manufacturer, Dymedso, Inc., and a portion to Dymedso’s Ohio-based sales representative, Clinical Technology. NJ				 					 

						
Tagged in:
													  Medical Devices and DME, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 6, 2016

				 Michigan filed 33 felony charges against Scott Rookus, 45 of Jenison, for his role in running an alleged Ponzi scheme between 2010 and 2015. Between 2010 and 2013 Rookus allegedly solicited and obtained investments of approximately $1.5 million for his holdings company, New Haven Holdings. His customers many of whom were senior citizens, were allegedly told that earnings from their investments would come from the profits of Rookus’ enterprises, when in fact the money he took resulted in an alleged Ponzi-scheme from which he was the primary beneficiary. To cover his tracks, Rookus allegedly issued fraudulent returns to some investors using money from newer investors. He allegedly used the investor funds to pay personal expenses such as his children’s private school education and to pay of tax liens against him. The alleged scheme was uncovered after Rookus filed for personal bankruptcy in March 2015 and his investors found out that they had lost everything they invested. MI				 					 

						
Tagged in:
													  Ponzi Schemes, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
June 6, 2016

				 New York announced a settlement with 165 West 91st Street Holdings, LLC, a Manhattan developer, for the loss of two rent-controlled apartments in an Upper West Side building while it was being converted into a condominium, as a result of prohibited agreements to buy-out tenancy rights. The settlement requires the developer to pay a $540,000 penalty, $490,000 of which will go to the New York City Affordable Housing Fund created by the Attorney General’s office in order to compensate for lost affordable housing. The Martin Act, New York’s blue sky law, protects apartment purchasers and tenants in buildings that are converted to coops or condominiums. Tenants get an exclusive right to buy their units and, in most cases, cannot be evicted purely because the building is being converted. NY				 					 

						
Tagged in:
													  Housing and Mortgage Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 27, 2016

				 New Jersey assessed a $2 million civil monetary penalty against a Hudson County couple and their bogus private investment fund management company for selling sham securities and using more than $500,000 of investors’ funds to buy luxury cars, expensive clothing and jewelry, and other personal items. West New York residents Alcibiades Cifuentes, his wife, Jennifer Wee Cifuentes, and Cifuentes Fund Management, LLC (“CFM”) violated the State’s Uniform Securities Law by offering investors unregistered securities in the form of investment contracts and/or purported limited partnership interests in the couple’s “investment,” according to the Bureau’s Summary Order. The Cifuenteses held themselves out as the principals of CFM, which they claimed was a private investment fund management company that invested in foreign currencies. Neither the Cifuenteses nor CFM are registered with the Bureau in any capacity. Since May 2013, the pair through CFM, raised at least $553,969 from at least 24 unsuspecting domestic and foreign investors, at least 11 of whom were offered and sold the unregistered securities to or from New Jersey. NJ				 					 

						
Tagged in:
													  Financial and Investment Fraud, 
												
						

					
	
							
	
		
		
	


 			




	
		
		

			

				
				
May 26, 2016

				 New York announced that it has entered into a settlement agreement with Vascuscript, Inc., d/b/a Mobile Pharmacy Solutions, to resolve allegations that it billed Medicaid for prescriptions which were written by an excluded Medicaid Provider. The Attorney General’s investigation determined that from April 21, 2010, through January 25, 2013, Vascuscript, Inc. submitted and received payment on approximately 4,600 claims to Medicaid for prescriptions that were written by Dr. Mikhail Strutsovskiy. The Department of Health had previously excluded Dr. Strutsovskiy from the Medicaid program, rendering prescriptions written by him ineligible for Medicaid reimbursement.  Before filling a prescription, pharmacies are required under Medicaid billing rules to first ascertain whether the prescriber’s services are eligible for reimbursement.  Because Vascuscript did not do so, it filled and delivered the prescriptions written by Dr. Strutsovskiy that were not eligible for Medicaid reimbursement. NY				 					 

						
Tagged in:
													  FCA State, 
													  Improper Medical Personnel, 
													  Medicaid, 
												
						

					
	
							
	
		
		
	


 			


											

						

								

									
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