Whistleblower News From The Inside -- July 11, 2016

By the C|C Whistleblower Lawyer Team

California reaches settlement valued at $168.5 million with for-profit online charter school company K12 Inc. — The action, filed in 2012 by a whistleblower who had been a teacher at a K12-affiliated school, alleged that K12 and 14 affiliated non-profit schools known as the California Virtual Academies (“CAVA Schools”) that it managed misled parents to induce them to enroll their children in K12 schools by publishing misleading advertisements about students’ academic progress, parent satisfaction, graduate eligibility for University of California and California State University admission, and other topics.  In addition, the Attorney General’s office alleged that K12 and the CAVA schools submitted inflated student attendance numbers thereby collected more dollars in state funding from the California Department of Education than they were entitled to.  $160 million of the settlement value consists of debt relief K12 will extend to the CAVA schools, debt which those schools accrued as a result of unfavorable contracts K12 allegedly imposed on the nonprofit CAVA schools.  CA AG

Executives for construction management firm Louis Berger sentenced over bribery – The men plead guilty to charges under the Foreign Corrupt Practices Act for paying $3.9 million in bribes from 1998 through 2010 to various foreign government officials to help win the company contracts.  WSJ

Owner of multiple Subway franchises and gas station sentenced for conspiracy to defraud IRS — Obayedul Hoque, was sentenced to 30 months in prison and ordered to pay over $ 2 million in restitution to the IRS, based on an indictment charging that he did not deposit all of the gross receipts of the gas station or the Subway franchises into the corporate or partnership bank accounts, instead keeping them for his personal benefit, for the purpose of obstructing the IRS in the ascertainment and collection of individual and corporate income taxes.  DOJ

Tax return preparer convicted in $53 million tax fraud scheme – Rodrigo Pablo “Paul” Lozano submitted more than 12,000 false tax returns over an 18-month period, conspiring with individuals to submit multiple years of returns under Individual Tax Identification Numbers (“ITINs”) he obtained for the individuals (and their imaginary dependents) using false documents.  The returns themselves were then based on phony W-2s, and included substantial claims for refunds, which Lozano then split with his co-conspirators.  USAO CD Cal

CMS sanctions Theranos laboratories and its founder – CMS revoked the certification of Theranos’s flagship laboratory in Newark, Calif., effective Sept. 5, and said the laboratory would be prohibited from taking Medicare and Medicaid payments.  In addition, Theranos founder Elizabeth Holmes was barred from owning or operating a medical laboratory for at least two years. NY Times

China Securities Regulatory Commission starts process to delist electrical equipment manufacturer Dandong Xintai from Shenzen Stock Exchange — The company was found guilty of fabricating financial information in its IPO application, including inflating receivables.  The securities regulator also announced that the company was fined 8.32 million yuan and its senior executives were barred from the securities market and serving in senior executive positions at any listed companies for life.  China Daily

Celebrity Manager charged with fraud — Kevin R. Foster, who served as a business manager for the artist Shaffer Smith, a.k.a. Ne-Yo, induced Smith to invest $2 million into a company that would supposedly promote a sports beverage called OXYwater, then diverted additional funds from Smith’s accounts, and took an undisclosed “finder’s fee” for Smith’s investment.  In 2015, two other individuals who had raised $9 million from investors for OXYwater were convicted of fraud with respect to their marketing of those investments.  USAO SD Oh

Iowa man sentenced for unauthorized sale of property mortgaged to Farm Services Agency — Jeffrey Lewis DeWitt plead guilty based on a bank loan scheme to fund fraudulent cattle deals, and to selling livestock and hay he had mortgaged to the Farm Service Agency of the United States Department of Agriculture without authorization.  USAO SD Ia

Aetna meets with DOJ to offer reassurances on proposed Humana merger — Aetna reportedly sought to convince DOJ officials that asset sales it proposed would address potential competitive problems arising from it deal to buy rival Humana.  Aetna’s plan to buy Humana would combine two of the largest providers of Medicare Advantage plans.  Reuters

Justice system relies on flawed field tests for controlled substances – At least nine different companies sell tests to identify cocaine, heroin, marijuana, methamphetamine, LSD, MDMA and more than two dozen other drugs.  ProPublica reports that tens of thousands of people every year are sent to jail based on the results of the roadside drug tests, despite widespread evidence shows that these tests routinely produce false positives. ProPublica

Report shows federal lawmakers opposing proposed Medicare Part B overhaul received disproportionate share of donations from pharmaceutical companies – According to an analysis by Public Citizen, 310 lawmakers who either signed two letters opposing the overhaul proposed by the Obama administration or were publicly critical of it had received an average of $23,300 each from pharmaceutical companies.  By contrast, 124 lawmakers who did not speak against it had averaged $12,700 in donations from the companies.  StatNews