Friday Enforcement Wrap: International Airlines Agree to Pay $5.8 Million to Settle False Claims Act Allegations Based on Misreporting of Mail Delivery Times

DOJ News

International Airlines Agree to Pay $5.8 Million to Settle False Claims Act Allegations Based on Misreporting of Mail Delivery Times

On November 13, British Airways Plc and Iberian Airlines, which are both subsidiaries of the International Airlines Group, announced an agreement to resolve their liability based on allegations that the airlines falsely reported the times they transferred possession of mail. The United States Postal Service (USPS) contracts with airliners to take possession of US mail and deliver the mail to domestic and international destinations. To receive federal funds, the carriers submit electronic scans of mail receptacles to report the time the mail was delivered. The USPS and DOJ alleged that the airlines falsely reported the time that the possession of the mail was transferred to foreign postal administrators or other recipients. The settlement is the result of a joint investigation by the DOJ’s Civil Division and USPS Office of the Inspector General.

The DOJ press release is here.

South Korean Companies Plead Guilty and Pay $236 Million in Criminal and Civil Fines for Rigging Fuel Prices

On November 14, the DOJ announced that it obtained guilty pleas in a criminal case and filed a proposed settlement to resolve a civil False Claims Act action against South Korean companies that contracted with the United States military to supply fuel to US military bases throughout South Korea. The three companies, SK Energy Co. Ltd., GS Caltex Corp. and Hanjin Transportation Co. Ltd., will pay $82 million in criminal fines and $154 million in civil damages. The government alleges that the companies conspired to rig fuel prices and overcharged US military bases for more than ten years. The civil complaint was initially brought under the False Claim Act by a whistleblower, and alleges that the South Korean companies made false statements in connection with fuel prices.

The DOJ press release is here.

Liberal Arts University Resolves Claims that it Fabricated Competitive Bids

Shaw University, a private liberal arts and historically black university in Raleigh, North Carolina, and its contractor Freddy Novelo, agreed to settle claims that they fabricated bids for a construction contract to evade the Department of Education’s competitive bidding requirements. The defendants resolved their liability under the False Claims Act by agreeing to pay $316,900. Although the investigation initially began with a whistleblower complaint, the United States intervened to take over the case through settlement. The DOJ noted that Shaw University fully cooperated with the government in its investigation.

The DOJ press release is here.

Substance Abuse Provider Settles Whistleblower Lawsuit Alleging Medicaid Fraud

Maryland Treatment Centers, including its affiliate Mountain Manor Treatment Centers, agreed to a three year Corporate Integrity Agreement (CIA) and also agreed to pay $500,000 to settle a whistleblower False Claims Act lawsuit. The civil settlement resolves allegations that Maryland Treatment Centers submitted claims to Medicaid for mental health and substance abuse services that were undocumented or not provided between January 1, 2009 and October 31, 2013. The CIA with the HHS Office of Inspector General requires Maryland Treatment Centers to implement audits to promptly detect and avoid conduct that gave rise to the settlement.

The underlying case was filed under the whistleblower provisions of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and to obtain a portion of the government’s recovery. The whistleblower in this case was awarded $75,000 for her role in bringing this action on behalf of the government.

The DOJ press release is here.

Dental Practice Pays $5.1 Million and Faces Debarment As a Result of Medicaid Fraud Allegations

ImmediaDent of Indiana, LLC (ImmediaDent), which operates nine dental practices, and its administrative service provider, Samson Dental Partners, LLC (SDP), agreed to pay $5.139 million in connection with allegations that they submitted false claims to Indiana’s Medicaid program. The companies allegedly systematically billed simple tooth extractions as surgical extractions, and billed for deep cleanings that were not performed or not medically necessary. SDP was also accused of violating Indiana’s bar on the corporate practice of medicine. Because the two companies refused to agree to additional oversight through a Corporate Integrity Agreement, both organizations were excluded from participating in Indiana Medicaid.

The DOJ press release is here.

Montana Hospital Settles Fraud Claims Over Illegal Kickbacks for Radiology Services

Bozeman Deaconess Health Services, Bozeman Health Deaconess Hospital and Advanced Medical Imaging agreed to settle a False Claims Act case related to alleged kickbacks for radiology services. The underlying suit alleged that the hospital convinced a radiology group to abandon its plan to open up an imaging practice and instead entered into a “sham” joint venture that rewarded referrals between the co-defendants. The initial suit was brought by terminated employees of the joint venture entity. The relators also alleged that, through this scheme, the hospital sought to maintain its monopoly on radiology services within Gallatin County. The terms of the settlement have not been made public. The case is US ex. rel. Rembert and Paradise v. Bozeman Health Deaconess Hospital et. al., No. CV-15-80-BU-SHE (D. Mont. 2016).

Litigation Developments

New Jersey Sues Janssen over Opioids Marketing

The State of New Jersey filed a civil action against Janssen Pharmaceuticals, a subsidiary of Johnson & Johnson, alleging that the company used deceptive practices in the sale of two opioids, Nucynta and Nucynta ER. The 97-page, five-count complaint was brought under the New Jersey Consumer Fraud Act, the New Jersey False Claims Act and the common law ban on creating public nuisances. According to the lawsuit, Janssen deceived customers with bogus statements about the dangers of the company’s powerful opioid products and used “doublespeak” to conceal the truth. This is the third case brought by the New Jersey Attorney General’s Office against an opioid manufacturer.

The NJ Attorney General’s press release is available here.

DOJ Entitled to Testimony from Anthem in Response to Civil Investigative Demand

A New York federal magistrate judge granted the DOJ’s petition to enforce a civil investigative demand seeking testimony from Anthem. The DOJ’s petition sought testimony about the insurer’s processes for verifying the accuracy of diagnosis codes that may have been inflated and resulted in an overpayment from Medicare. The federal court rejected Anthem’s claims that the DOJ’s request was overbroad, vague or unduly burdensome. The case is among several currently being pursued by the DOJ against Medicare Advantage insurers relating to risk adjustment submissions. The case is US v. Anthem, No.1:18-mc-00379 (S.D.N.Y.).

Los Angeles Federal Court Declares Mistrial in a Damages Trial for Substandard PVC Pipes

A California jury deadlocked in a bellwether False Claims Act damages trial against J-M Manufacturing (J-M). J-M was found to be liable during a 2014 jury trial and, as part of the second-phase of the trial, the jury was asked to determine how much J-M should refund the plaintiff municipalities. The case was initially brought by a former J-M engineer who claimed that J-M pipes did not comply with government standards because they were made with substandard materials and a shoddy manufacturing process. The case is US et al. v. J-M Manufacturing Co. Inc., No. 5:06-cv-00055 (C.D. Cal. 2006).

Texas Man Sentenced to 42-Months In Prison for $158 Million Kickback Scheme

A Texas federal court sentenced a mental health clinic operator to 3.5 years in prison for his role in a 15-person kickback scheme totaling over $158 million. Specifically, prosecutors alleged that the defendant received kickbacks from a hospital in exchange for sending Medicare beneficiaries for partial hospitalization services. The defendant was also required to pay $2 million in restitution. The case is US v. Gibson et al., No. 4:12-cr-00600 (S.D. Tex. 2012).

Michigan Clinic Owner Sentenced to 160 Months and Ordered to Pay $6.3 Million for Medicare Fraud

On Wednesday, an owner of two clinics in Detroit was sentenced to 13 years in prison and ordered to pay $6.35 million in restitution for her role in a Medicare fraud scheme. The defendant allegedly submitted false claims totaling approximately $8.9 Million to Medicare for home health and other physician services that were procured through kickbacks, were not medically necessary, were not provided, or were provided by an unlicensed physician. This case was jointly investigated by the FBI and the HHS Office of the Inspector General, and was brought as part of the DOJ Criminal Division’s Medicare Fraud Strike Force.

The DOJ press release is here.

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Federal Court Throws Out False Claims Act Retaliation Claim Filed Against CEO in Individual Capacity

Last week, in United States ex rel. Brumfield v. Narco Freedom, Inc., No. 12 Civ. 3674 (JGK), 2018 WL 5817379 (S.D.N.Y. Nov. 6, 2018), a federal district court in the Southern District of New York dismissed claims filed against a CEO in his individual capacity under the False Claims Act’s anti-retaliation provision, and also rejected an alter-ego theory of liability.

The decision arguably supports dismissal when a relator brings a retaliation claim against an individual—such as a supervisor or executive—under the FCA’s anti-retaliation provision. The decision also serves as yet another reminder that defendants need to consider all potential defenses when sued under the FCA’s anti-retaliation provision.

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