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Big Week for Whistleblowers -- Three Major False Claims Act Victories

Posted  October 16, 2014

By the C|C Whistleblower Lawyer Team

In what has shaped up to be one of the more prolific weeks for whistleblowers, the government has settled three major False Claims Act cases originated by whistleblowers under the qui tam provisions of the statute. They involved nursing home operator Extendicare Health Services Inc., aerospace and defense industry giant Boeing Company, and drug maker Organon. All together, the government collected more than $90 million from these companies in fines and penalties and the whistleblowers walked away with a collective bounty approaching $10 million.

The Extendicare case which settled last Friday was perhaps the most highly publicized of the lot, probably because of the gross misconduct with which the company was charged. According to the government, Extendicare and its subsidiary Progressive Step Corporation (ProStep) billed Medicare and Medicaid for nursing services that were so deficient they were effectively worthless. They also allegedly billed Medicare for medically unreasonable and unnecessary rehabilitation therapy services. The company agreed to pay $38 million to the United States and eight states to resolve the charges, making it the largest failure of care settlement with a chain-wide skilled nursing facility in the Department of Justice’s history. The government’s action was prompted by whistleblower lawsuits filed by Extendicare employees Tracy Lovvron and Donald Gallick who will receive whistleblower awards of more than $1.8 million and $250,000, respectively. See DOJ Press Release.

The Boeing case, which also settled last Friday, involved allegations the aircraft maker improperly charged for labor costs under contracts with the US Air Force for the maintenance and repair of C-17 Globemaster aircraft. This is one of the military’s major systems for transporting troops and cargo throughout the world.  Specifically, the government charged Boeing with intentionally billing the Air Force for a variety of labor costs in violation of applicable contract requirements, including for time its mechanics spent at meetings not directly related to the contracts. Boeing agreed to pay $23 million to resolve the matter. The settlement resolves allegations originally brought in a whistleblower lawsuit brought by present and former Boeing employees Clinton Craddock, Fred Van Shoubrouek, Anthony Rico and Fernando de la Garza. They will receive a combined whistleblower award of $3.9 million. See DOJ Press Release.

Finally, the Organon case, which just settled yesterday, involved allegations the pharmaceutical company engaged in a host of healthcare transgressions involving defrauding the Medicaid programs of virtually every state. Specifically, the government charged the company with underpaying Medicaid rebates (by failing to include rebates and discounts in its best price reporting to the government); illegal kickbacks (by offered nursing home pharmacy companies market share discounts and rebates to encourage the use of its Remeron and Remeron SolTab over competing antidepressants); off-label promotion (by promoting the sale and use of Remeron and Remeron SolTab for conditions that were not approved as safe and effective by the FDA); and pricing misrepresentations (by reporting false and inflated prices to the government and then offering the drugs at a lower cost to nursing home pharmacy companies). The former Netherlands company, the assets of which are now owned by Merck, agreed to pay $31 million to settle the matter. The action was prompted by two whistleblower lawsuits filed by Organon employees. The amount of their whistleblower recovery has not been released but will likely be several million dollars. See New York Attorney General Press Release.

A big week for whistleblowers indeed and more proof of the critical role they play in protecting us against fraud and misconduct in all industries.