No wonder FRAUD is "OUT OF CONTROL"!!!
Many Hospital Claims Denials by Recovery Audit Contractors Are Overturned, as Process Itself Is Questioned
Hospitals may be able to fend off recovery audit contractor (RAC) claims denials for medically unnecessary admissions or services because some of them have been overturned, experts tell RMC.
Washington, DC (PRWEB) July 17, 2008 -- AIS's Report on Medicare Compliance (RMC) - Hospitals may be able to fend off recovery audit contractor (RAC) claims denials for medically unnecessary admissions or services because some of them have been overturned, experts tell RMC. If RACs are too quick to reject admissions because they don't meet screening criteria (e.g., InterQual) without looking at the entire medical record, hospitals may be able to reverse them. The best approach, however, is to have an effective up-front process that provides ample documentation of the decision making behind an inpatient admission as described in the Medicare Benefit Policy Manual. To read the full story, go to http://www.aishealth.com/Bnow/hbd070308.html.
Meanwhile, there's evidence that RACs may rush to judgment about some inpatient admissions, physician, Robert Corrato, M.D., CEO of Executive Health Resources tells RMC. For example, CMS appeals contractors and administrative law judges overturned more than 1,000 RAC claims denials appealed by hospitals in four states toward the end of the RAC pilot, which wrapped up in March, says Corrato, whose organization helped the hospitals mount appeals. The hospitals were able to prove that the admissions and/or services were medically necessary, he says.
However, CMS says that only 5% of RAC determinations were overturned on appeal from the beginning of the pilot through Oct. 31, 2007. "CMS does not expect this number to change significantly once the evaluation report of the three-year demonstration is released," a CMS official tells RMC. About 40% of the overpayments identified by RACs were based on their assertions that the services lacked medical necessity. But Corrato notes that "when the 5% figure was computed, very few cases had advanced to the third level of appeal (the ALJ)" and "CMS's own statistics...indicate that 44.2% of appealed cases were decided in favor of the provider."
This article has been excerpted from AIS's Report on Medicare Compliance (RMC). To access the story in its entirety, visit http://www.aishealth.com/Bnow/hbd070308.html.
About Report on Medicare Compliance
Published by Atlantic Information Services, Report on Medicare Compliance is written by veteran compliance editor and reporter, Nina Youngstrom. Since 1992, this award-winning weekly newsletter has been the industry's #1 source of compliance news and strategies ... on medical necessity, physician payments, DRG coding, quality of care, observation billing, Stark and more.
Monday, July 28, 2008
Saturday, July 26, 2008
America’s Health Insurance Plans , Patient Privacy Rights said the revised bill is being reviewed and declined comment ....
House Energy and Commerce Committee Chair John Dingell (D-Mich.) and ranking member Joe Barton (R-Texas) on Tuesday released a revised version of a bill (HR 6357) that aims to promote nationwide adoption of an electronic health record system, CongressDaily reports. According to CongressDaily, the lawmakers “substantially changed the information-sharing and privacy provisions of their proposal” following “concerns from stakeholders in the health care, high-tech and consumer advocacy arenas.” The bill is scheduled for a full committee mark up on Wednesday (Noyes, CongressDaily, 7/22).
Under the revised bill, patients would give their consent only once to health care companies that want to access health care records without identifying information for HHS-approved purposes, such as hospital audits or fraud and abuse allegations. The bill previously would have required patient consent each time the records were accessed (Young, The Hill, 7/22). According to the revised bill, the patient consent provision would be implemented two years after the bill is enacted, and HHS would be required to develop “reasonable and workable” rules to implement the provision.
The original version of the bill also would have required health care providers to notify patients of any unauthorized acquisition, access or disclosure of their health care information. The revised version states that a “good faith” disclosure, such as a mislabeled letter with a wrong address, would not be considered a breach.
Other revised provisions in the bill would:
Prohibit the sale of patients’ records without consent unless it is necessary for treatment or to receive payment for treatment;
Change existing federal privacy laws to allow for the provision of a no-cost digital copy of an individual’s medical record;
Strengthen language to ban direct and indirect payments to providers who advertise health care products to patients without permission; and
Require the HHS Office of Civil Rights to launch a formal investigation of complaints and allow the office to impose fines for violations deemed “willful neglect” (Noyes, CongressDaily, 7/22).
Comments
House Energy and Commerce Subcommittee on Health ranking member Nathan Deal (R-Ga.) said the bill could advance on Wednesday. Deal said, “I think we worked out most of the big issues, barring amendments that come in and change that balance,” adding, “Assuming the mark up goes fairly smoothly this week … we probably would see it maybe even in the form of a suspension on the floor” (Armstrong, CQ Today, 7/22).
Mary Grealy, president of the Healthcare Leadership Council — who on Monday sent a letter to Dingell and Barton stating her concerns about the proposed bill’s effect on the Confidentiality Coalition — said, “They did make improvements in those provisions we had some concerns about, so I do feel like we’re making progress.” However, she added, “Do I think they have completely addressed all the issues? No” (The Hill, 7/22).
A spokesperson for America’s Health Insurance Plans said the provision that would allow patients to access their medical records and require them to provide consent for third-party access could restrict health care providers from developing wellness, disease management, quality assurance and other essential programs (CongressDaily, 7/22). A spokesperson for Patient Privacy Rights said the revised bill is being reviewed and declined comment (The Hill, 7/22).
Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.
Under the revised bill, patients would give their consent only once to health care companies that want to access health care records without identifying information for HHS-approved purposes, such as hospital audits or fraud and abuse allegations. The bill previously would have required patient consent each time the records were accessed (Young, The Hill, 7/22). According to the revised bill, the patient consent provision would be implemented two years after the bill is enacted, and HHS would be required to develop “reasonable and workable” rules to implement the provision.
The original version of the bill also would have required health care providers to notify patients of any unauthorized acquisition, access or disclosure of their health care information. The revised version states that a “good faith” disclosure, such as a mislabeled letter with a wrong address, would not be considered a breach.
Other revised provisions in the bill would:
Prohibit the sale of patients’ records without consent unless it is necessary for treatment or to receive payment for treatment;
Change existing federal privacy laws to allow for the provision of a no-cost digital copy of an individual’s medical record;
Strengthen language to ban direct and indirect payments to providers who advertise health care products to patients without permission; and
Require the HHS Office of Civil Rights to launch a formal investigation of complaints and allow the office to impose fines for violations deemed “willful neglect” (Noyes, CongressDaily, 7/22).
Comments
House Energy and Commerce Subcommittee on Health ranking member Nathan Deal (R-Ga.) said the bill could advance on Wednesday. Deal said, “I think we worked out most of the big issues, barring amendments that come in and change that balance,” adding, “Assuming the mark up goes fairly smoothly this week … we probably would see it maybe even in the form of a suspension on the floor” (Armstrong, CQ Today, 7/22).
Mary Grealy, president of the Healthcare Leadership Council — who on Monday sent a letter to Dingell and Barton stating her concerns about the proposed bill’s effect on the Confidentiality Coalition — said, “They did make improvements in those provisions we had some concerns about, so I do feel like we’re making progress.” However, she added, “Do I think they have completely addressed all the issues? No” (The Hill, 7/22).
A spokesperson for America’s Health Insurance Plans said the provision that would allow patients to access their medical records and require them to provide consent for third-party access could restrict health care providers from developing wellness, disease management, quality assurance and other essential programs (CongressDaily, 7/22). A spokesperson for Patient Privacy Rights said the revised bill is being reviewed and declined comment (The Hill, 7/22).
Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.
.....problem that costs the healthcare system an estimated $60 billion a year at the lowest estimate, and perhaps as much as $200 billion a year,.....
Healthcare fraud doesn’t even get a mention in the recently released government plan for creating a nationwide health information network.
REALLY? My same sentiments regarding the CAMPAIGN and FIXING the HEALTHCARE SYSTEM in this country.
Tackle fraud issue now, IT leaders advise
Jul 25th, 2008 | By Vantage Technology | Category: Healthcare IT
Healthcare fraud doesn’t even get a mention in the recently released government plan for creating a nationwide health information network.
Donald W. Simborg, MD, headed a team that worked on the problem of fraud for the Office of the National Coordinator. It’s a problem that costs the healthcare system an estimated $60 billion a year at the lowest estimate, and perhaps as much as $200 billion a year, Simborg told an audience at the 3rd Annual Leadership Summit on The Road to Interoperability, held in Boston earlier this week
Simborg chaired a follow-up panel that came up with a list of 14 specific recommendations that could be built into the review process used by the Certification Commission for Healthcare Information Technology.
“So what happened to our recommendations?” Simborg asked. “Well, it got a lot of push-back.”
On some level, Simborg expected resistance. Requiring fraud protections would perhaps slow the already snail-like pace of EMR adoption - at 4 percent, compared with 90 percent in every other industrialized country, according to David Bates, MD, medical director at the Harvard University-affiliated Partners HealthCare in Boston.
“What I didn’t expect was that (the Office of the National Coordinator) would totally drop fraud management from its plan,” Simborg said. “What I can’t understand is why we don’t try to solve this problem.”
“What I find astounding,” said Reed Gelzer, MD, a member of CCHIT’s privacy and compliance panel and co-founder of Advocates for Documentation Integrity and Compliance, “we are essentially suggesting our healthcare organizations adopt systems for which there are virtually no standards and minimal certifications. Where’s the discussion of the fact that we are killing 50,000 to 100,000 people a year?”
Simborg, who has been a vocal supporter of EHR adoption for more than 30 years, is a co-founder and member of Health Level 7, a founding member of the American College of Medical Informatics and a board member of the Foundation on Research and Education at the American Health Information Management Association (AHIMA).
In his view, the focus on promoting adoption, which goes back to President George W. Bush’s mention of electronic medical records in his State of the Union Address in 2004, might prove fruitless.
“Unless the focus changes,” he said, “adoption of electronic health records will lead to higher healthcare costs without much benefit. Without proactive fraud management, whatever the problem is will be much greater in an electronic environment.”
Beyond that, there are other issues.
The physician savings derived from electronic health records most often come from coding increases - what Simborg called “E&M code creep.” The E&M stands for evaluation and management.
“We need to have fundamental changes in how we pay physicians,” Simborg said.
While electronic health records provide a legitimate way for physicians to speed up their documentation, they also increase costs, he said.
He noted that when he developed a commercial EHR for oncologists, “our customers had an increase in billing that provided ROI in two years. More than half came from coding increases.”
Simborg suggests that adoption per se is not the goal.
“If driving value means slower adoption, that’s OK,” he said.
He recommends continuing “what we do right:”
Work on interoperability and certification;
Eliminate E&M payments based on volume of documentation;
Promote P4P models;
Build in decision-support and add incentives based on documented behavior change (over time, though, even that can be gamed, he said);
And tackle the issue of fraud management.
“Clearly we have to put fraud management in there somewhere,” he said. “The elephant has to be slain.”
“The issue is patient literacy,” said Charles Jaffe, MD, chief executive officer of HL7. “When we put down our list of to-dos, let’s make sure there are others in the equation besides providers.”
REALLY? My same sentiments regarding the CAMPAIGN and FIXING the HEALTHCARE SYSTEM in this country.
Tackle fraud issue now, IT leaders advise
Jul 25th, 2008 | By Vantage Technology | Category: Healthcare IT
Healthcare fraud doesn’t even get a mention in the recently released government plan for creating a nationwide health information network.
Donald W. Simborg, MD, headed a team that worked on the problem of fraud for the Office of the National Coordinator. It’s a problem that costs the healthcare system an estimated $60 billion a year at the lowest estimate, and perhaps as much as $200 billion a year, Simborg told an audience at the 3rd Annual Leadership Summit on The Road to Interoperability, held in Boston earlier this week
Simborg chaired a follow-up panel that came up with a list of 14 specific recommendations that could be built into the review process used by the Certification Commission for Healthcare Information Technology.
“So what happened to our recommendations?” Simborg asked. “Well, it got a lot of push-back.”
On some level, Simborg expected resistance. Requiring fraud protections would perhaps slow the already snail-like pace of EMR adoption - at 4 percent, compared with 90 percent in every other industrialized country, according to David Bates, MD, medical director at the Harvard University-affiliated Partners HealthCare in Boston.
“What I didn’t expect was that (the Office of the National Coordinator) would totally drop fraud management from its plan,” Simborg said. “What I can’t understand is why we don’t try to solve this problem.”
“What I find astounding,” said Reed Gelzer, MD, a member of CCHIT’s privacy and compliance panel and co-founder of Advocates for Documentation Integrity and Compliance, “we are essentially suggesting our healthcare organizations adopt systems for which there are virtually no standards and minimal certifications. Where’s the discussion of the fact that we are killing 50,000 to 100,000 people a year?”
Simborg, who has been a vocal supporter of EHR adoption for more than 30 years, is a co-founder and member of Health Level 7, a founding member of the American College of Medical Informatics and a board member of the Foundation on Research and Education at the American Health Information Management Association (AHIMA).
In his view, the focus on promoting adoption, which goes back to President George W. Bush’s mention of electronic medical records in his State of the Union Address in 2004, might prove fruitless.
“Unless the focus changes,” he said, “adoption of electronic health records will lead to higher healthcare costs without much benefit. Without proactive fraud management, whatever the problem is will be much greater in an electronic environment.”
Beyond that, there are other issues.
The physician savings derived from electronic health records most often come from coding increases - what Simborg called “E&M code creep.” The E&M stands for evaluation and management.
“We need to have fundamental changes in how we pay physicians,” Simborg said.
While electronic health records provide a legitimate way for physicians to speed up their documentation, they also increase costs, he said.
He noted that when he developed a commercial EHR for oncologists, “our customers had an increase in billing that provided ROI in two years. More than half came from coding increases.”
Simborg suggests that adoption per se is not the goal.
“If driving value means slower adoption, that’s OK,” he said.
He recommends continuing “what we do right:”
Work on interoperability and certification;
Eliminate E&M payments based on volume of documentation;
Promote P4P models;
Build in decision-support and add incentives based on documented behavior change (over time, though, even that can be gamed, he said);
And tackle the issue of fraud management.
“Clearly we have to put fraud management in there somewhere,” he said. “The elephant has to be slain.”
“The issue is patient literacy,” said Charles Jaffe, MD, chief executive officer of HL7. “When we put down our list of to-dos, let’s make sure there are others in the equation besides providers.”
$156,000 in restitution , and PROBATION!!
Health care fraud gets Washington County man three-year probationBy The Tribune-Review
Saturday, July 26, 2008
A Washington County man was sentenced in federal court Friday to three years' probation for health care fraud.
U.S. District Judge Gary L. Lancaster placed John Slimick, 49, of New Eagle on house arrest for six months. Slimick was ordered to pay $156,000 in restitution to Highmark Blue Cross Blue Shield and to perform 120 hours of community service.
Slimick is one of more than a dozen people convicted of taking kickbacks from former Lower Burrell chiropractor Douglas Henderson, who billed the insurance company for treatment never performed. Henderson, who submitted more than $7 million in false claims, is awaiting sentencing.
Saturday, July 26, 2008
A Washington County man was sentenced in federal court Friday to three years' probation for health care fraud.
U.S. District Judge Gary L. Lancaster placed John Slimick, 49, of New Eagle on house arrest for six months. Slimick was ordered to pay $156,000 in restitution to Highmark Blue Cross Blue Shield and to perform 120 hours of community service.
Slimick is one of more than a dozen people convicted of taking kickbacks from former Lower Burrell chiropractor Douglas Henderson, who billed the insurance company for treatment never performed. Henderson, who submitted more than $7 million in false claims, is awaiting sentencing.
Thursday, July 24, 2008
$60 Million to Settle False Claims Act and they still are BILLING!!!
What is wrong with this picture?
And they are allowed to still OPERATE and BILL MEDICARE/MEDICAID!!!
As part of the $60 million settlement, Cox has entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services (HHS) Office of Inspector General. The Corporate Integrity Agreement contains measures to ensure compliance with Medicare regulations and policies in the future.
Missouri Health Care System to Pay U.S. $60 Million to Settle False Claims Act Allegations
July 23, 2008
Lester E. Cox Medical Centers, a health care system headquartered in Springfield, Mo., has agreed to pay the United States to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1996 and 2005, by entering into certain financial relationships with referring doctors at a local physician group and engaging in improper billing practices with respect to Medicare. Cox, a not-for-profit healthcare organization, will pay the United States $60 million to resolve these claims.
Under the Stark Statute, Medicare providers like Cox are prohibited from billing the federal health care program for referrals from doctors with whom the providers have a financial relationship, unless that relationship falls within certain exceptions. The United States contended that certain relationships between Cox and physicians ran afoul of the Anti-Kickback Statute, which prohibits offering inducements to providers in return for patient referrals, and the Stark statute. Additional claims being resolved concern Cox’s inclusion of non-reimbursable costs on its Medicare cost reports and improper billings for services provided to dialysis patients.
“The Justice Department is committed to ensuring that the best interests of federal health care program patients are not compromised by unlawful payments to physicians,” said Gregory G. Katsas, Assistant Attorney General for the Justice Department’s Civil Division. “The resolution of this matter resulted in a significant recovery for taxpayers, and it exemplifies our dedication to vigorous enforcement of the Stark and Anti-Kickback Statutes.”
As part of the $60 million settlement, Cox has entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services (HHS) Office of Inspector General. The Corporate Integrity Agreement contains measures to ensure compliance with Medicare regulations and policies in the future.
“Today’s settlement furthers both our commitment to protecting patients from improper billing practices and the continued ability of Cox to provide quality medical care in Springfield and the Ozarks,” said John F. Wood, U.S. Attorney in Kansas City, Mo. “I am pleased that we were able to resolve this matter without litigation.”
The settlement with Cox was the result of a coordinated effort by the Commercial Litigation Branch of the Justice Department’s Civil Division; the U.S. Attorney’s Office for the Western District of Missouri; HHS’ Office of Inspector General, Office of Counsel to the Inspector General, and Office of Audit Services; and the FBI.
Source: DoJ
And they are allowed to still OPERATE and BILL MEDICARE/MEDICAID!!!
As part of the $60 million settlement, Cox has entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services (HHS) Office of Inspector General. The Corporate Integrity Agreement contains measures to ensure compliance with Medicare regulations and policies in the future.
Missouri Health Care System to Pay U.S. $60 Million to Settle False Claims Act Allegations
July 23, 2008
Lester E. Cox Medical Centers, a health care system headquartered in Springfield, Mo., has agreed to pay the United States to settle claims that it violated the False Claims Act, the Anti-Kickback Statute and the Stark Statute between 1996 and 2005, by entering into certain financial relationships with referring doctors at a local physician group and engaging in improper billing practices with respect to Medicare. Cox, a not-for-profit healthcare organization, will pay the United States $60 million to resolve these claims.
Under the Stark Statute, Medicare providers like Cox are prohibited from billing the federal health care program for referrals from doctors with whom the providers have a financial relationship, unless that relationship falls within certain exceptions. The United States contended that certain relationships between Cox and physicians ran afoul of the Anti-Kickback Statute, which prohibits offering inducements to providers in return for patient referrals, and the Stark statute. Additional claims being resolved concern Cox’s inclusion of non-reimbursable costs on its Medicare cost reports and improper billings for services provided to dialysis patients.
“The Justice Department is committed to ensuring that the best interests of federal health care program patients are not compromised by unlawful payments to physicians,” said Gregory G. Katsas, Assistant Attorney General for the Justice Department’s Civil Division. “The resolution of this matter resulted in a significant recovery for taxpayers, and it exemplifies our dedication to vigorous enforcement of the Stark and Anti-Kickback Statutes.”
As part of the $60 million settlement, Cox has entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services (HHS) Office of Inspector General. The Corporate Integrity Agreement contains measures to ensure compliance with Medicare regulations and policies in the future.
“Today’s settlement furthers both our commitment to protecting patients from improper billing practices and the continued ability of Cox to provide quality medical care in Springfield and the Ozarks,” said John F. Wood, U.S. Attorney in Kansas City, Mo. “I am pleased that we were able to resolve this matter without litigation.”
The settlement with Cox was the result of a coordinated effort by the Commercial Litigation Branch of the Justice Department’s Civil Division; the U.S. Attorney’s Office for the Western District of Missouri; HHS’ Office of Inspector General, Office of Counsel to the Inspector General, and Office of Audit Services; and the FBI.
Source: DoJ
Monday, July 21, 2008
James K. Happ
JULY 16, 2008 11:43AM
Healthcare co. exec sells in Palm Beach Gardens
by C.J. Marks, BlockShopper Staff
42 Bermuda Lake Dr.James K. Happ and his wife, Julie, sold a home at 42 Bermuda Lake Drive in Palm Beach Gardens to Charles and Andrea Hirsch for $789,000 on June 23.
The Happs paid $590,000 for the property in Sept. 2003.
Mr. Happ, a certified public accountant, has served as president of Med Diversified, Inc., a provider of home healthcare services based in Andover, Mass. He was named to the position in 2002.
Before he joined Med Diversified, he served as executive vice president of National Century Financial Enterprises, a healthcare financing company and major lender of Med Diversified. He has also served as chief financial officer of Dallas-based Columbia Homecare Group, Inc.
He earned a B.S. in business administration from Miami University in Oxford, Ohio. He holds an M.B.A. from Nova University in Ft. Lauderdale.
The Haps bought a home at 112 Via Escobar Place in Palm Beach Gardens for $540,000 on June 24.
Home sales in Palm beach Gardens dropped nearly 14 percent in 2008 versus sales in 2007. The median sales price also fell from $320,000 to $290,000.
Address: 42 Bermuda Lake Drive
Buyer(s): Charles J Hirsch and Andrea F Hirsch
Seller(s): James K Happ and Julie K Happ
Sale date: 2008-06-23
Healthcare co. exec sells in Palm Beach Gardens
by C.J. Marks, BlockShopper Staff
42 Bermuda Lake Dr.James K. Happ and his wife, Julie, sold a home at 42 Bermuda Lake Drive in Palm Beach Gardens to Charles and Andrea Hirsch for $789,000 on June 23.
The Happs paid $590,000 for the property in Sept. 2003.
Mr. Happ, a certified public accountant, has served as president of Med Diversified, Inc., a provider of home healthcare services based in Andover, Mass. He was named to the position in 2002.
Before he joined Med Diversified, he served as executive vice president of National Century Financial Enterprises, a healthcare financing company and major lender of Med Diversified. He has also served as chief financial officer of Dallas-based Columbia Homecare Group, Inc.
He earned a B.S. in business administration from Miami University in Oxford, Ohio. He holds an M.B.A. from Nova University in Ft. Lauderdale.
The Haps bought a home at 112 Via Escobar Place in Palm Beach Gardens for $540,000 on June 24.
Home sales in Palm beach Gardens dropped nearly 14 percent in 2008 versus sales in 2007. The median sales price also fell from $320,000 to $290,000.
Address: 42 Bermuda Lake Drive
Buyer(s): Charles J Hirsch and Andrea F Hirsch
Seller(s): James K Happ and Julie K Happ
Sale date: 2008-06-23
The largest prosecution of a home-health-care agency in Virginia
OK!!
GET THIS!!
Nurse pleads guilty to Medicaid fraud
Zavelsky admitted she defrauded Medicaid by submitting false claims for payment.
Total billings for Renaissance to Virginia Medicaid totaled more than $14 million
Zavelsky is facing a maximum of 10 years in prison and a $250,000 fine. Renaissance faces a fine of up to $500,000.
($500,000.+$250,000 = $750,000) Where is the MONEY? $14 MILLION in Billing (remember, we are reading about THIEVES and very Cunning People.)
Hmm.....$14MILLION minus $750,000 = GOOD WORK FOR HOW MNAY YEARS IN PRISON?
TEN? I doubt it. Will be very interesting to see how many years for this PROFIT!
As part of the plea agreement, Zavelsky's husband, Ilya Zavelsky, 46, a physician, was dismissed from the case. The couple live in Glen Allen, and their company provided respite care and other services to Russian-speaking communities in Virginia
Nurse pleads guilty to Medicaid fraud
Billings exceeded $14 million; husband dismissed from case
Saturday, Jul 19, 2008 - 12:08 AM
TIMES-DISPATCH STAFF WRITER
The largest prosecution of a home-health-care agency in Virginia ended in guilty pleas yesterday in federal court.
Rina Zavelsky, 40, a nurse, and her company, Renaissance Inc., pleaded guilty to one count of conspiracy to commit health-care fraud before U.S. District Judge Richard L. Williams.
They will be sentenced Oct. 24. Zavelsky is facing a maximum of 10 years in prison and a $250,000 fine. Renaissance faces a fine of up to $500,000.
As part of the plea agreement, Zavelsky's husband, Ilya Zavelsky, 46, a physician, was dismissed from the case. The couple live in Glen Allen, and their company provided respite care and other services to Russian-speaking communities in Virginia.
They were indicted this year for conspiracy to commit health-care fraud and money laundering. In pleading guilty yesterday, Zavelsky admitted she defrauded Medicaid by submitting false claims for payment.
She acknowledged providing services through unqualified and untrained personal care aides and making false training certificates to cover up the lack of training. The Virginia Department of Medical Assistance discovered the violations in 2003 and 2007.
From 2002 to its closing in 2008, Renaissance employed more than 350 aides acting as independent contractors and made billings for more than 250 Medicaid recipients in the Richmond, Tidewater, Harrisonburg and Northern Virginia areas.
Total billings for Renaissance to Virginia Medicaid totaled more than $14 million.
The case was investigated by the FBI, the U.S. Internal Revenue Service and the Virginia Attorney General's Office.
Virginia Attorney General Bob McDonnell said, "This is an important step forward in ensuring the future of the Medicaid system in the commonwealth."
Chuck Rosenberg, the U.S. attorney for the Eastern District of Virginia, lauded the close work of state and federal agencies in investigating the case. It was prosecuted by Brian Whisler, an assistant U.S. attorney, and Assistant Virginia Attorneys General Dale Mullen and Eric Atkinson.
Contact Frank Green at (804) 649-6340 or fgreen@timesdispatch.com.
GET THIS!!
Nurse pleads guilty to Medicaid fraud
Zavelsky admitted she defrauded Medicaid by submitting false claims for payment.
Total billings for Renaissance to Virginia Medicaid totaled more than $14 million
Zavelsky is facing a maximum of 10 years in prison and a $250,000 fine. Renaissance faces a fine of up to $500,000.
($500,000.+$250,000 = $750,000) Where is the MONEY? $14 MILLION in Billing (remember, we are reading about THIEVES and very Cunning People.)
Hmm.....$14MILLION minus $750,000 = GOOD WORK FOR HOW MNAY YEARS IN PRISON?
TEN? I doubt it. Will be very interesting to see how many years for this PROFIT!
As part of the plea agreement, Zavelsky's husband, Ilya Zavelsky, 46, a physician, was dismissed from the case. The couple live in Glen Allen, and their company provided respite care and other services to Russian-speaking communities in Virginia
Nurse pleads guilty to Medicaid fraud
Billings exceeded $14 million; husband dismissed from case
Saturday, Jul 19, 2008 - 12:08 AM
TIMES-DISPATCH STAFF WRITER
The largest prosecution of a home-health-care agency in Virginia ended in guilty pleas yesterday in federal court.
Rina Zavelsky, 40, a nurse, and her company, Renaissance Inc., pleaded guilty to one count of conspiracy to commit health-care fraud before U.S. District Judge Richard L. Williams.
They will be sentenced Oct. 24. Zavelsky is facing a maximum of 10 years in prison and a $250,000 fine. Renaissance faces a fine of up to $500,000.
As part of the plea agreement, Zavelsky's husband, Ilya Zavelsky, 46, a physician, was dismissed from the case. The couple live in Glen Allen, and their company provided respite care and other services to Russian-speaking communities in Virginia.
They were indicted this year for conspiracy to commit health-care fraud and money laundering. In pleading guilty yesterday, Zavelsky admitted she defrauded Medicaid by submitting false claims for payment.
She acknowledged providing services through unqualified and untrained personal care aides and making false training certificates to cover up the lack of training. The Virginia Department of Medical Assistance discovered the violations in 2003 and 2007.
From 2002 to its closing in 2008, Renaissance employed more than 350 aides acting as independent contractors and made billings for more than 250 Medicaid recipients in the Richmond, Tidewater, Harrisonburg and Northern Virginia areas.
Total billings for Renaissance to Virginia Medicaid totaled more than $14 million.
The case was investigated by the FBI, the U.S. Internal Revenue Service and the Virginia Attorney General's Office.
Virginia Attorney General Bob McDonnell said, "This is an important step forward in ensuring the future of the Medicaid system in the commonwealth."
Chuck Rosenberg, the U.S. attorney for the Eastern District of Virginia, lauded the close work of state and federal agencies in investigating the case. It was prosecuted by Brian Whisler, an assistant U.S. attorney, and Assistant Virginia Attorneys General Dale Mullen and Eric Atkinson.
Contact Frank Green at (804) 649-6340 or fgreen@timesdispatch.com.
Medicaid False Claims Act Amendment Stalls ....
Posted On: July 19, 2008 by David L. Haron
Michigan Medicaid False Claims Act Amendment Stalls Because of Petty Legislative Political Bickering
As I reported earlier, the Michigan Medicaid False Claims Act was amended effective January 1, 2006 through the efforts of Attorney General Mike Cox and Representative David Law (R., Commerce). I worked actively for passage of the amendment and testified before the Michigan House of Representative Judiciary committee, then chaired by Rep. Law..
The State of Michigan can recoup extra funds from combined state/federal recoveries because of the provisions of the federal Deficit Reduction Act of 2005 ('DRA"). To explain, shortly after the the Michigan Medicaid False Claims Act amendment passed the Michigan Legislature and Governor Granholm signed the Act, the U.S. Congress passed the DRA providing for a 10% incentive to States which enacted a "compliant" Qui Tam statute addressing Medicaid fraud. Specifically, the Medicaid program is a joint federal/state program. Thus, in Michigan, the federal government pays about 56% and the state 44% of the costs of the Medicaid program and fraud recoveries are divided on the same percentage.
If the state has a "compliant" Qui Tam statute, the state receives an extra 10% of the recovery--that is, 54% in Michigan--of the recovery--instead of 44%--a significant amount of money since most recoveries are in the tens of millions of dollars or more!!
However, on December 21, 2006, the U.S, Department of Health and Human Services/Office of Inspector General ("HHS/OIG") advised the state, by letter, that its Medicaid False Claims Act was NOT "DRA compliant" (that is, a mirror image of the federal False Claims Act).
In order to comply, all that was needed was a simple bill adding civil monetary penalties of at least $5000 for each violation and making one other technical amendment. Since the revisions would not have had any negative fiscal impact on the state and would have had a potentially tremendous positive impact in the event of any recovery, one would have expected Representative Law to quickly introduce a clarification/modification bill and obtain quick passage--after all, the State would most certainly not turn down the opportunity to reverse the flow of funds from Michigan to Washington??
Unfortunately, in 2006 and 2007, petty partisan bickering was rampant in the Michigan Legislature--we were paralyzed by the absurd budget fight and leadership was non-existent.
Rep. Law, finally, on September 17, 2007, introduced a one-page bill. The date of introduction is significant. In addition to being a Saturday, the day of the Notre Dame-UM football game (a game, I suspect, Rep. Law, a Notre Dame grad, was attending), it was three days before Ray Sayeh, then a WXYZ-TV investigative reporter, had scheduled (at my request) an interview with the representative to discuss the failure to take action on the revisions.
Unfortunately, again because of partisanship and Democratic control of the House of Representatives, the bill went nowhere while the Attorney General continued to obtain recoveries from fraud-feasors and the unclaimed 10% incentive was lost to Washington.
Finally, on February 19, 2008, Representative Marc Courveau (D., Northville) introduced HB 5757. The amended FCA, as presented in HB 5757, would allow the Michigan FCA to become DRA compliant. Once again, the small changes made by HB 5757, as required by the federal HHS/OIG., would cost the state nothing in administrative or other costs and would bring millions of dollars in the future back from Washington.
HB 5757 quickly passed the House with NO opposition and was sent to the Senate.
Tragically, because of continued political maneuvering, the Bill sits in the Judiciary Committee.
It seems that Rep. Courveau was elected at the expense of a Republican and the leadership of the Judiciary Committee and Senate Majority Leader, Mike Bishop will not allow this largely unopposed, fiscally responsible bill, to be brought up at the committee or floor level because it would give "points" to Rep. Courveau!!!!
The State of Michigan is in a deep recession/depression, unemployment sits at 8.5%, the highest in the nation, GM is in deep trouble, the City of Detroit is selling assets and landmarks--such at the Detroit-Windsor tunnel--and the Legislature cannot pass a one-page bill that will bring money to the state and its Medicaid recipients.
This Bill is under the radar, unfortunately--Ray (now Rez) Sayeh has joined CNN International and is posted in Pakistan, columnists such as Brian Dickerson and others have been unresponsive despite my entreaties, my solicitations to the Legislature and the use of my contacts have been unavailing.
I am frustrated. Medicaid fraud is rampant, the Attorney General is acting diligently in pursuing the cheaters, and we have been filing qui tam cases under the new Act, but even if all of these activities are successful--and they will be--the State will not receive the full benefit of its recoveries!!!
Michigan Medicaid False Claims Act Amendment Stalls Because of Petty Legislative Political Bickering
As I reported earlier, the Michigan Medicaid False Claims Act was amended effective January 1, 2006 through the efforts of Attorney General Mike Cox and Representative David Law (R., Commerce). I worked actively for passage of the amendment and testified before the Michigan House of Representative Judiciary committee, then chaired by Rep. Law..
The State of Michigan can recoup extra funds from combined state/federal recoveries because of the provisions of the federal Deficit Reduction Act of 2005 ('DRA"). To explain, shortly after the the Michigan Medicaid False Claims Act amendment passed the Michigan Legislature and Governor Granholm signed the Act, the U.S. Congress passed the DRA providing for a 10% incentive to States which enacted a "compliant" Qui Tam statute addressing Medicaid fraud. Specifically, the Medicaid program is a joint federal/state program. Thus, in Michigan, the federal government pays about 56% and the state 44% of the costs of the Medicaid program and fraud recoveries are divided on the same percentage.
If the state has a "compliant" Qui Tam statute, the state receives an extra 10% of the recovery--that is, 54% in Michigan--of the recovery--instead of 44%--a significant amount of money since most recoveries are in the tens of millions of dollars or more!!
However, on December 21, 2006, the U.S, Department of Health and Human Services/Office of Inspector General ("HHS/OIG") advised the state, by letter, that its Medicaid False Claims Act was NOT "DRA compliant" (that is, a mirror image of the federal False Claims Act).
In order to comply, all that was needed was a simple bill adding civil monetary penalties of at least $5000 for each violation and making one other technical amendment. Since the revisions would not have had any negative fiscal impact on the state and would have had a potentially tremendous positive impact in the event of any recovery, one would have expected Representative Law to quickly introduce a clarification/modification bill and obtain quick passage--after all, the State would most certainly not turn down the opportunity to reverse the flow of funds from Michigan to Washington??
Unfortunately, in 2006 and 2007, petty partisan bickering was rampant in the Michigan Legislature--we were paralyzed by the absurd budget fight and leadership was non-existent.
Rep. Law, finally, on September 17, 2007, introduced a one-page bill. The date of introduction is significant. In addition to being a Saturday, the day of the Notre Dame-UM football game (a game, I suspect, Rep. Law, a Notre Dame grad, was attending), it was three days before Ray Sayeh, then a WXYZ-TV investigative reporter, had scheduled (at my request) an interview with the representative to discuss the failure to take action on the revisions.
Unfortunately, again because of partisanship and Democratic control of the House of Representatives, the bill went nowhere while the Attorney General continued to obtain recoveries from fraud-feasors and the unclaimed 10% incentive was lost to Washington.
Finally, on February 19, 2008, Representative Marc Courveau (D., Northville) introduced HB 5757. The amended FCA, as presented in HB 5757, would allow the Michigan FCA to become DRA compliant. Once again, the small changes made by HB 5757, as required by the federal HHS/OIG., would cost the state nothing in administrative or other costs and would bring millions of dollars in the future back from Washington.
HB 5757 quickly passed the House with NO opposition and was sent to the Senate.
Tragically, because of continued political maneuvering, the Bill sits in the Judiciary Committee.
It seems that Rep. Courveau was elected at the expense of a Republican and the leadership of the Judiciary Committee and Senate Majority Leader, Mike Bishop will not allow this largely unopposed, fiscally responsible bill, to be brought up at the committee or floor level because it would give "points" to Rep. Courveau!!!!
The State of Michigan is in a deep recession/depression, unemployment sits at 8.5%, the highest in the nation, GM is in deep trouble, the City of Detroit is selling assets and landmarks--such at the Detroit-Windsor tunnel--and the Legislature cannot pass a one-page bill that will bring money to the state and its Medicaid recipients.
This Bill is under the radar, unfortunately--Ray (now Rez) Sayeh has joined CNN International and is posted in Pakistan, columnists such as Brian Dickerson and others have been unresponsive despite my entreaties, my solicitations to the Legislature and the use of my contacts have been unavailing.
I am frustrated. Medicaid fraud is rampant, the Attorney General is acting diligently in pursuing the cheaters, and we have been filing qui tam cases under the new Act, but even if all of these activities are successful--and they will be--the State will not receive the full benefit of its recoveries!!!
RAC Contractors to be Identified, Recovery Asset Contractor
RAC Contractors to be Identified
Posted on July 19, 2008 by Executive-Post
CMS Aims to Reduce Fraud
Staff Writers
This month, the Centers for Medicare and Medicaid Services [CMS] will name the auditing firms that will review hospitals’ books for payment mistakes, while hospital officials say results in other states suggest the auditors will give priority to recovering overpayments.
The RAC Program
Under the so-called Recovery Asset Contractor [RAC] program, CMS pays auditors a fee based on the amount of improper payments discovered.
Hospital officials worry this “bounty hunter” approach - the second for CMS after medical practice audits - will create a bias in auditors to focus only on collecting government overpayments, reported the Pittsburgh Business Times on June 16, 2008.
Pilot Program Results
Some hospitals point to a pilot audit program in New York, Florida and California, which found $357.2 million in overpayments and just $14.3 million in underpayments. Medicare estimates its error rate at 3.9 percent in 2007, down from 9.8 percent in 2003, but still totaling $10.8 billion in improper payments
Conclusion
Your thoughts and comments are appreciated. Is this another instance of brute intimidation or just honest review
Posted on July 19, 2008 by Executive-Post
CMS Aims to Reduce Fraud
Staff Writers
This month, the Centers for Medicare and Medicaid Services [CMS] will name the auditing firms that will review hospitals’ books for payment mistakes, while hospital officials say results in other states suggest the auditors will give priority to recovering overpayments.
The RAC Program
Under the so-called Recovery Asset Contractor [RAC] program, CMS pays auditors a fee based on the amount of improper payments discovered.
Hospital officials worry this “bounty hunter” approach - the second for CMS after medical practice audits - will create a bias in auditors to focus only on collecting government overpayments, reported the Pittsburgh Business Times on June 16, 2008.
Pilot Program Results
Some hospitals point to a pilot audit program in New York, Florida and California, which found $357.2 million in overpayments and just $14.3 million in underpayments. Medicare estimates its error rate at 3.9 percent in 2007, down from 9.8 percent in 2003, but still totaling $10.8 billion in improper payments
Conclusion
Your thoughts and comments are appreciated. Is this another instance of brute intimidation or just honest review
Saturday, July 19, 2008
$1.75 million as a result of fraudulent billings
July 17, 2008 in Health Fraud by Dave Westheimer
In Washington on Friday, US District Court Judge Colleen Kotar-Kotelly sentenced Martin McLaren of Bethesda, Maryland to 37 months in prison for making false statements in relation to health care matters. McLaren, an anesthesiologist who owned the Pain Management Center based in Hyattsville, admitted to receiving at least $1.75 million as a result of fraudulent billings submitted to Medicare, Medicaid and private carriers between 2000 and 2006 (Washington Times, DOJ).
Blog Published By
Wisenberg & Wisenberg PLLC: White Collar Criminal Defense Attorneys
In Washington on Friday, US District Court Judge Colleen Kotar-Kotelly sentenced Martin McLaren of Bethesda, Maryland to 37 months in prison for making false statements in relation to health care matters. McLaren, an anesthesiologist who owned the Pain Management Center based in Hyattsville, admitted to receiving at least $1.75 million as a result of fraudulent billings submitted to Medicare, Medicaid and private carriers between 2000 and 2006 (Washington Times, DOJ).
Blog Published By
Wisenberg & Wisenberg PLLC: White Collar Criminal Defense Attorneys
Ten individuals associated with a Brooklyn-based medical clinic ...charges of conspiracy to commit health care and mail fraud.
NEW YORK—Ten individuals associated with a Brooklyn-based medical clinic — including the clinic’s owners and several of its medical practitioners – have been arrested on Three other individuals remain at large, although one was expected to surrender later Thursday.
Samuel Vilshanetski, aka “Dima,” Sviatoslav Jadan, aka “Slava,” and a third individual owned and operated a medical clinic located at 3003 Avenue K in Brooklyn, New York. The Avenue K Clinic was primarily engaged in the treatment of individuals who filed no-fault automobile insurance claims with insurance companies. Under New York State Law, no-fault insurance enables the driver and passengers of a vehicle registered and insured in New York to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault.
Prosecutors say the Avenue K Clinic was a medical fraud mill which routinely billed automobile insurance companies under the no-fault program for medical “treatments” which were either never provided or unnecessary, because the person being “treated” did not medically need the treatments.
According to the complaints, the operators of the Avenue K Clinic paid thousands of dollars to “runners” who would recruit patients who were in car accidents — sometimes staged solely to commit insurance fraud — but who often suffered little or no injury from the accidents. These patients would undergo weeks or months of unnecessary “treatments” — such as physical therapy, chiropractory and acupuncture — at the Avenue K Clinic. The Avenue K Clinic then billed automobile insurance companies under the no-fault program for these unnecessary medical treatments, prosecutors said.
In the first two years of its operation, the Avenue K Medical Clinic billed insurance companies a total of approximately $3.6 million for no-fault medical services on behalf of more than 500 patients and, as of June 2008, had received approximately $1.2million from these insurance companies.
Vilshanetski, Jadan and the third individual owned and operated the Avenue K Clinic – making the initial financial investments and supervising the Clinic’s medial staff and operations. The owners of the Avenue K Clinic engaged so-called “runners,” including defendants Roman Satler, aka “Roma”, Shamil Tagiev, aka “Sammy”, Emmanuel Kelly, aka “Kevin”, Vladimir Deupont, aka “Vlad” and Feliks Khatsela, to recruit patients for the clinic for treatment.
According to the complaints, the owners paid the runners an average of approximately $2,000 per patient but paid them only after the referred patients had received enough treatments for the patient to be profitable. The recruited patients were required to attend the clinic for treatment regularly, sometime daily, and to agree to receive multiple MRIs. Even greater payments were offered to the runners when a patient was accepted as a client at one of several law offices associated with the clinic because the law offices paid fees to the clinic for each patient signed up as a client.
The owners relied on various means to obtain cash to pay the clinic runners. For example, the owners of the Avenue K Clinic laundered money through defendant Mark Pogoriler, aka “Lobster” by writing checks drawn on the accounts of clinic medical practitioners to Pogoriler’s medical transportation companies. In fact, Pogoriler provided no transportation services to the clinic and instead simply returned 90 percent of the value of the checks as cash.
The owners also obtained cash from kickbacks provided by outside medical suppliers and practitioners in exchange for the referral of business. Medical supply companies associated with Radion Aminov, the defendant, billed insurance companies for overpriced and often unnecessary medical supplies provided to Avenue K Clinic patients, and in return provided kickbacks to the Avenue K Clinic.
Gennady Broytman, aka “Genna,” the defendant, operated an MRI clinic that billed insurance companies for MRIs provided to Avenue K Clinic patients and paid kickbacks to the clinic owners. The Avenue K Clinic also hired doctors and medical
professionals to “treat” the patients recruited for the clinic by the runners, even though the majority of such patients did not need the medical treatments provided.
These medical professionals included defendants Romilla Anwar (a physician), Anatoliy Sunik (an acupuncturist) and Asnodin Dianalan, aka “Dino” (a physica ltherapist)(collectively the “medical staff.”) The medical staff provided unnecessary medical treatments and supplies to clinic patients, and also submitted bills to the insurance companies for more medical services than were in fact provided. 7-17-08
Samuel Vilshanetski, aka “Dima,” Sviatoslav Jadan, aka “Slava,” and a third individual owned and operated a medical clinic located at 3003 Avenue K in Brooklyn, New York. The Avenue K Clinic was primarily engaged in the treatment of individuals who filed no-fault automobile insurance claims with insurance companies. Under New York State Law, no-fault insurance enables the driver and passengers of a vehicle registered and insured in New York to obtain benefits of up to $50,000 per person for injuries sustained in an automobile accident, regardless of fault.
Prosecutors say the Avenue K Clinic was a medical fraud mill which routinely billed automobile insurance companies under the no-fault program for medical “treatments” which were either never provided or unnecessary, because the person being “treated” did not medically need the treatments.
According to the complaints, the operators of the Avenue K Clinic paid thousands of dollars to “runners” who would recruit patients who were in car accidents — sometimes staged solely to commit insurance fraud — but who often suffered little or no injury from the accidents. These patients would undergo weeks or months of unnecessary “treatments” — such as physical therapy, chiropractory and acupuncture — at the Avenue K Clinic. The Avenue K Clinic then billed automobile insurance companies under the no-fault program for these unnecessary medical treatments, prosecutors said.
In the first two years of its operation, the Avenue K Medical Clinic billed insurance companies a total of approximately $3.6 million for no-fault medical services on behalf of more than 500 patients and, as of June 2008, had received approximately $1.2million from these insurance companies.
Vilshanetski, Jadan and the third individual owned and operated the Avenue K Clinic – making the initial financial investments and supervising the Clinic’s medial staff and operations. The owners of the Avenue K Clinic engaged so-called “runners,” including defendants Roman Satler, aka “Roma”, Shamil Tagiev, aka “Sammy”, Emmanuel Kelly, aka “Kevin”, Vladimir Deupont, aka “Vlad” and Feliks Khatsela, to recruit patients for the clinic for treatment.
According to the complaints, the owners paid the runners an average of approximately $2,000 per patient but paid them only after the referred patients had received enough treatments for the patient to be profitable. The recruited patients were required to attend the clinic for treatment regularly, sometime daily, and to agree to receive multiple MRIs. Even greater payments were offered to the runners when a patient was accepted as a client at one of several law offices associated with the clinic because the law offices paid fees to the clinic for each patient signed up as a client.
The owners relied on various means to obtain cash to pay the clinic runners. For example, the owners of the Avenue K Clinic laundered money through defendant Mark Pogoriler, aka “Lobster” by writing checks drawn on the accounts of clinic medical practitioners to Pogoriler’s medical transportation companies. In fact, Pogoriler provided no transportation services to the clinic and instead simply returned 90 percent of the value of the checks as cash.
The owners also obtained cash from kickbacks provided by outside medical suppliers and practitioners in exchange for the referral of business. Medical supply companies associated with Radion Aminov, the defendant, billed insurance companies for overpriced and often unnecessary medical supplies provided to Avenue K Clinic patients, and in return provided kickbacks to the Avenue K Clinic.
Gennady Broytman, aka “Genna,” the defendant, operated an MRI clinic that billed insurance companies for MRIs provided to Avenue K Clinic patients and paid kickbacks to the clinic owners. The Avenue K Clinic also hired doctors and medical
professionals to “treat” the patients recruited for the clinic by the runners, even though the majority of such patients did not need the medical treatments provided.
These medical professionals included defendants Romilla Anwar (a physician), Anatoliy Sunik (an acupuncturist) and Asnodin Dianalan, aka “Dino” (a physica ltherapist)(collectively the “medical staff.”) The medical staff provided unnecessary medical treatments and supplies to clinic patients, and also submitted bills to the insurance companies for more medical services than were in fact provided. 7-17-08
Tuesday, July 15, 2008
Since Poulsen's trial is now set to begin Oct. 1, it pushes the trial of James K. Happ, another former National Century executive....
Now why is this delay for Happ occurring? After the NOVEMBER election of course. Does any reporter really know where Happ is form or what his job at NCFE really was? If so, no one has yet to connect the dot!
Who does Happ really know? (Hint: Bush Connection)
The former CEO of National Century Financial Enterprises Inc. has successfully put off his trial on fraud-related charges by two months.
A federal judge ruled Friday that Lance Poulsen, the leader of the Dublin-based health-care financing company before it collapsed in 2002, will begin facing charges of securities fraud and conspiracy on Oct. 1 instead of Aug. 4. U.S. District Court Judge Algenon Marbley granted Poulsen's July 7 continuance request after Poulsen's attorneys argued they needed more time to review 40 boxes of documents the government is scheduled to make available between now and August.
"A two-month continuance will ensure that Poulsen has the time to obtain and review the documents that he plausibly claims are central to his theories of defense," Marbley wrote in his July 11 order.
Since Poulsen's trial is now set to begin Oct. 1, it pushes the trial of James K. Happ, another former National Century executive, to Dec. 1. Poulsen and Happ have both pleaded not guilty.
Poulsen, 65, co-founded National Century in 1991, building it into a major health-care financing company. It specialized in buying receivables from medical providers at a discount, which gave the health-care businesses the quick cash they needed. The receivables were then packaged as asset-backed bonds and sold to investors.
But National Century fell into Chapter 11 bankruptcy six years ago. The Justice Department alleged Poulsen and other executives ran a sophisticated Ponzi scheme that bilked investors out of nearly $2 billion. Poulsen pleaded not guilty to charges of conspiracy, securities fraud, wire fraud, money laundering conspiracy and concealment of money laundering.
Five other former National Century executives were found guilty in March of running a multiyear securities fraud at National Century. Poulsen was scheduled to go on trial with them, but his day in court on those charges was delayed because the government also accused him of trying to tamper with a witness.
Shortly after the March convictions of the five executives, Poulsen stood trial on the witness tampering charges. A jury found him and an associate, Karl Demmler, guilty of trying to bribe a government witness who is planning to testify against Poulsen in his securities fraud trial.
Who does Happ really know? (Hint: Bush Connection)
The former CEO of National Century Financial Enterprises Inc. has successfully put off his trial on fraud-related charges by two months.
A federal judge ruled Friday that Lance Poulsen, the leader of the Dublin-based health-care financing company before it collapsed in 2002, will begin facing charges of securities fraud and conspiracy on Oct. 1 instead of Aug. 4. U.S. District Court Judge Algenon Marbley granted Poulsen's July 7 continuance request after Poulsen's attorneys argued they needed more time to review 40 boxes of documents the government is scheduled to make available between now and August.
"A two-month continuance will ensure that Poulsen has the time to obtain and review the documents that he plausibly claims are central to his theories of defense," Marbley wrote in his July 11 order.
Since Poulsen's trial is now set to begin Oct. 1, it pushes the trial of James K. Happ, another former National Century executive, to Dec. 1. Poulsen and Happ have both pleaded not guilty.
Poulsen, 65, co-founded National Century in 1991, building it into a major health-care financing company. It specialized in buying receivables from medical providers at a discount, which gave the health-care businesses the quick cash they needed. The receivables were then packaged as asset-backed bonds and sold to investors.
But National Century fell into Chapter 11 bankruptcy six years ago. The Justice Department alleged Poulsen and other executives ran a sophisticated Ponzi scheme that bilked investors out of nearly $2 billion. Poulsen pleaded not guilty to charges of conspiracy, securities fraud, wire fraud, money laundering conspiracy and concealment of money laundering.
Five other former National Century executives were found guilty in March of running a multiyear securities fraud at National Century. Poulsen was scheduled to go on trial with them, but his day in court on those charges was delayed because the government also accused him of trying to tamper with a witness.
Shortly after the March convictions of the five executives, Poulsen stood trial on the witness tampering charges. A jury found him and an associate, Karl Demmler, guilty of trying to bribe a government witness who is planning to testify against Poulsen in his securities fraud trial.
Saturday, July 12, 2008
When will it ever end? Is this just human nature?
The Dark Side of Whistleblowing
Neil Weinberg, 03.14.05
The government makes whistleblowers filthy rich for ferreting out fraud on the job.
Douglas Durand is the paragon of a corporate whistleblower. Shortly after stepping in as vice president of sales at TAP Pharmaceutical Products in early 1995, he began to suspect the company was conspiring with doctors to overcharge the federal government's Medicare program by tens of millions of dollars. But instead of trying to fix the problem, he spent seven months gathering evidence of supposed fraud. Then he quit in 1996 and filed a secret lawsuit against TAP. One motive: If he could prove the company was dirty, he would share a nice chunk of any money TAP paid back to the feds.
He spent eight years helping the government build its own case against the company, visiting prosecutors in four states and testifying before a grand jury in Boston. He compiled a list of alleged TAP conspirators and then called these former colleagues while the FBI listened in. Moreover, Durand later filed suit making similar allegations against a TAP rival, the former Zeneca Inc. The feds ultimately joined him, filing civil and criminal charges against TAP and prodding it into paying the government $885 million to settle the case--six times as much as the claimed overcharges. Douglas Durand cashed in: He received $126 million from the U.S. government. Now age 53, he retired and lives with his wife and daughter in the tony enclave of Tarpon Springs, Fla.
Yet TAP itself was never accused of submitting bogus Medicare bills; it was charged under a little-known provision that holds medical suppliers accountable if others falsely bill the government for the suppliers' products. On Oct. 3, 2001, the day prosecutors announced the settlement, they filed criminal fraud charges accusing TAP executives of perpetrating the overbilling scheme. This "sends a very strong signal to the pharmaceutical industry," the prosecutor in the case, Michael Sullivan, publicly declared at the time.
Then Durand's story began to fall apart. As the trial of a dozen TAP employees played out last year, defense attorneys poked holes in Durand's claims. Kickbacks he said TAP paid to doctors never happened. Price hikes he had accused the firm of imposing to overcharge Medicare hadn't actually taken place. A fancy conference Durand had described as a way to bribe doctors into selling TAP's drugs was in fact paid for by the attendees themselves.
By the Numbers
Tattle Totals
The feds have recouped billions from pharma fraud cases. The whistleblowers have done well, too.
AstraZeneca
Government's estimated loss $39 million
Settlement paid by company $355 million
Whistleblower reward $47 million
Schering-Plough
Government's estimated loss $293 million
Settlement paid by company $345 million
Whistleblower reward $32 million
Warner-Lambert
Government's estimated loss $150 million
Settlement paid by company $430 million
Whistleblower reward $25 million
TAP Pharmaceutical Products
Government's estimated loss $145 million
Settlement paid by company $885 million
Whistleblower reward $95 million
Source: Department of Justice.
In July a federal jury in Boston declared all the defendants not guilty. The judge then tossed out a guilty plea entered before trial by Kimberlee Chase, a TAP sales manager charged with bribing a health maintenance organization. The judge ruled that federal antikickback statutes don't apply to HMOs, so Chase hadn't committed a crime. Never mind that those same HMO-related allegations had been key to the government's case against the company. It was the third time in eight years that all the employees indicted in such cases were exonerated after their employers paid big fines--Caremark coughed up $161 million and Blue Cross Blue Shield of Illinois $144 million.
So it goes in the Byzantine world of whistleblowers. In the post-Enron era, these self-appointed do-gooders are granted breathless audiences by Congress, extolled on national television and lauded by Time magazine as Persons of the Year. But some whistleblowers are motivated by greed, willing to stretch the truth for profit. That owes to the whistleblower law, adopted in 1986, that hands informants as much as a 30% cut of any money recouped by the government. It was pushed by a public-interest lawyer who then launched a practice for whistleblower cases, pocketing millions (see box, p. 92).
Since then whistleblower cases have boomed, recovering $7.9 billion from offending companies--and paying out $1.3 billion to the insiders who ratted on the wrongdoers. A whistleblower bar now spans some 200 lawyers. As word of giant awards has spread--$100 million to the two guys who blew the whistle on HCA and $32 million for a suit against Schering-Plough--the number of suits has soared. Fiscal 2003 saw 326 whistleblower suits, ten times as many as cropped up in 1986; the government gets involved in only about one-sixth of the cases, but these yield 96% of recoveries. And while the law first took aim at defense contractors and sought to protect low-level tattlers, it is now used to target fraud in health care and an array of other businesses. And at times it insulates--and enriches--higher-ups like TAP's Durand.
In this hell-bent pursuit of jackpot justice, the prospect of a big payoff draws would-be whistleblowers "like moths to the flame," the 4th Circuit Court of Appeals warned in 1999, when it tossed out a suit against Roche Biomedical by two employees of a merger partner who had already collected $833,000. The Bank of China has been hit with a suit for financing mislabeled mushrooms. Money manager Mario Gabelli faces a suit for allegedly putting in sham bids at auctions of wireless spectrum. An employee ratted on Odebrecht Contractors for underbidding on a federal contract, arguing it intended to raise prices later (his suit was dismissed as "fatally flawed").
Government is often a willing accomplice, keen to look tough and cash in. It tars targets with bad press and threatens to levy fines many times the size of its own purported losses. If a company refuses to settle, the feds can move to ban it from federal business even before getting so much as an indictment. Most times companies settle, whether they are guilty or not. "It's absolutely a form of extortion," says attorney David Stetler, who successfully defended TAP exec Alan MacKenzie. MacKenzie last year became president of the $4 billion (sales) company.
Like whistleblowers themselves, the feds have a profit motive: They bring in $13 for each dollar spent prosecuting a case, and whistleblowers provide 52% of all U.S. government fraud recoveries, says Taxpayers Against Fraud, the whistleblower lawyers' lobby. "It's a tremendous return on investment," says U.S. Attorney Sullivan, who has 13 people working on health care fraud cases. Health care now accounts for more than half of all whistleblower suits. Drugmakers have paid $2.5 billion in fines in recent years. In most instances the penalty paid was several times the losses.
Some of these winnings are funneled back into the pursuit of new cases, a nifty little move the feds began using in 1996. For several consecutive years the larger enforcement budgets have led to larger settlements, which in turn have funded still larger enforcement budgets. "It's all done with a wink and a nod, with the bureaucrats going back to Congress and saying bigger budgets are justified by past results," says Robert Salcido, a former federal prosecutor who defends whistleblower suits at Akin Gump Strauss Hauer & Feld.
Supporters of the whistleblower law say it is the only way to clamp down on the intractable problem of fraud in government contracts. The U.S. government spends half a trillion dollars annually on medical care, one-quarter of its budget, and fraudulent claims could total $50 billion of that sum, says the Government Accountability Office. "There can never be enough bureaucrats to discourage fraudulent use of taxpayers' money, but knowing colleagues might squeal can be a deterrent," says Senator Charles Grassley (R-Iowa), who pushed passage of the law.
In this for-profit justice, "financial incentives are what bring people forward," concedes Michael Hertz, director of the Justice Department's civil fraud section. But thereafter, he says, "a traditional fraud investigation takes place and the facts are the facts."
Handing informants a share of the booty dates back centuries. Suits brought by citizens on a government's behalf are known as qui tam cases, derived from the first two words of the Latin phrase meaning "whoever brings an action for the king brings it for himself." President Lincoln introduced qui tam suits to the U.S. in 1863, signing the False Claims Act to target vendors of dud gunpowder in the Civil War.
The law languished for a century until it was revived in 1986 by Senator Grassley and John Phillips of the Center for Law in the Public Interest, the lawyer who later went into private practice to pursue whistleblower cases. They hiked a whistleblower's cut from 10% to as much as 30% and lowered the threshold for guilt from knowingly ripping off the government to the fuzzier notion of "deliberate ignorance" or "reckless disregard" of regulations.
The whistleblower law was in full swing by the time Doug Durand landed at TAP Pharmaceutical in 1995. He grew up in Pawtucket, R.I., one of eight children, got a degree in pharmacology at the University of Rhode Island and spent 20 years selling drugs for Merck & Co.
His career there ended in a nasty dispute in 1994 in which Durand filed an Equal Employment Opportunity Commission suit against the drugmaker. He accused Merck of retaliating against him for supporting a female colleague's claim that a Merck president had sexually harassed her. Merck paid him $255,000 to settle. Durand claimed in a related affidavit that Merck had ruined his career. Stripped of his office and duties, and exiled on paid leave, Durand applied to TAP, saying he was still a senior regional director looking to switch jobs. When he testified later before a grand jury, Durand left out all details of his Merck ouster, saying only that a headhunter had approached him.
TAP, meanwhile, was in the fight of its life. Abbott Labs and Takeda had formed the Lake Forest, Ill. company in 1977. After it developed a new monthly injection of Lupron, the first alternative to castration for advanced prostate cancer, sales jumped from $135 million in 1990 to $744 million five years later. The drug went for $400 a dose, and Medicare covered 80% of the cost.
Durand joined the company in January 1995 just as Lupron was facing fierce competition, from Zeneca's Zoladex, a lower-cost rival. As head of sales his primary mission was to launch Prevacid, a new drug for acid reflux. But early on, he says, he grew uncomfortable with the way TAP was pushing Lupron. TAP sold it fervently, putting together a slide show on Lupron's "return to practice" for doctors. It held seminars at fancy resorts and gave physicians TVs so they could show its promotional videos. Wags joked internally that TAP lawyers were in the "sales prevention department."
One of Durand's concerns involved sales reps' failure to properly account for the free samples they gave to doctors. A precise accounting is required by federal law to prevent doctors from falsely billing Medicare for samples they received free of charge. Doctors must sign for each free dose they receive, and if they falsely bill Medicare, drugmakers can be convicted of criminal fraud.
Durand became convinced the faulty record-keeping was intentional, designed to let doctors collect extra money from Medicare. At one point he proposed linking sales reps' bonuses to how well they accounted for free samples but was overruled, he claimed at the trial of his former colleagues. He had learned of a sales rep who had doctors sign for doses they hadn't received--a "big problem," he said, but didn't recall doing anything about it. Despite Durand's qualms, he didn't turn to TAP's outside counsel for advice; asked why, he testified that only two employees below the rank of vice president were allowed to do so and he was not on that short list.
In August 1995 Durand got edgier still, after people at a staff meeting discussed paying a 2% fee to Lupron doctors to cover administrative costs; federal rules allow such payments only to HMOs and other buying groups, not to individual doctors. It was tricky legal turf. "How would Doug look in [prison] stripes?" Alan MacKenzie, whom Duran outranked, joked at the meeting. Everyone else laughed, but Durand says he viewed the remark as "serious and sinister."
Durand began looking at how to protect himself. He says he feared getting swept up in a prosecution if the feds ever stumbled upon TAP's misdeeds. "I wanted to do the right thing," he says. He told a former Merck colleague about the prison-stripes comment, and a month later the colleague referred him to a lawyer--Elizabeth Ainslie, a white-collar lawyer who had run the criminal fraud section in the Philadelphia U.S. Attorney's office.
Ainslie suggested Durand begin keeping notes and collecting TAP documents for a possible whistleblower suit. Shortly afterward Durand faxed her a story headlined: "Rugby Laboratories Pays $7.5 Million to Settle Government VA Fraud Allegations; Former Employee Who Brought Qui Tam Suit Receives $1.1 Million." He asked if this is what she had in mind; it was.
Durand began supplying the lawyer with TAP documents, letters with the company's attorneys and memos it exchanged with its archrival, Zeneca. She showed the stuff to James Sheehan, a prosecutor in the Philadelphia office where she had worked, hoping to pique his interest in joining the case. For whistleblowers the key is to enlist the government--with its power to subpoena defendants and deprive a company of contracts before a case has been decided--as co-plaintiff.
As Ainslie wooed the feds, Durand put on a show of remaining a team player at TAP. In truth, he was the opposite. When word reached him of a California rep whose tactics were "out of line," he left the matter to a subordinate to handle. Then he forwarded internal TAP correspondence on the matter to Ainslie.
In February 1996 Durand brought his sales managers to a golf resort in Florida and shared his vision of TAP's future. Later that month he got his bonus for 1995 ($35,000) and quit, leaving TAP for AstraMerck. A month later he formally hired Ainslie to pursue a whistleblower case. She would cover his expenses and share in any recovery while billing defendants for her time if Durand prevailed. Three months later they filed suits against TAP and Zeneca. Like all such suits, Durand's were filed under seal. The government was required to investigate them, and it did so, unbeknownst to the defendants.
For the ensuing five years Durand made repeated visits to U.S. attorney's offices in Philadelphia, Boston, Chicago and Wilmington to prevail on prosecutors to join his suits. From his office at Astra he faxed a prosecutor in the Philadelphia office, Virginia Gibson Mason, calling her "Ginny" and boasting of "a productive morning!"--he had gotten the phone numbers of former subordinates to call and incriminate as the FBI listened in. The FBI made secret tape recordings of TAP employees discussing potential legal problems. In one Durand calls a former TAP colleague at his home, tells the child who answered the phone that a "friend" is calling and then lies to the TAP exec, pretending, in a bid to get the man to incriminate himself, that Durand himself had been subpoenaed; this employee wasn't ever indicted.
Durand's case drew the interest of prosecutors in the Boston office of the U.S. Attorney after they came across a second whistleblower, Dr. Joseph Gerstein. Gerstein oversaw drug buying at a Tufts University HMO and recently had decided to replace TAP's Lupron with rival Zoladex. It was then, he told the feds, that TAP's Kim Chase and a colleague offered him an "unrestricted" educational grant if he reversed his decision. Gerstein viewed it as a possible bribe. He approached TV and newspaper reporters but was ignored. Then he contacted Boston prosecutors.
"They were looking for potential cases to investigate since they have a big health care unit," Gerstein says. He hired a lawyer and met with prosecutors in late 1996 and filed his whistleblower suit against TAP in March 1998. At the behest of federal agents, Gerstein let the FBI hide a camera in his office and wore a wire as he twice lured the TAP reps back by pretending he might reinstate Lupron. The FBI asked Gerstein to meet again to solicit a personal bribe. Queasy about the ethics, he staged the meeting but refused to come right out and ask for a kickback.
In April 2001, five years after Durand filed his suit, the Boston U.S. Attorney's office joined it ("intervened"). Durand's lawyer, Ainslie, drafted a motion to dismiss Gerstein's suit, and his claim to part of the recovery, on the grounds that her client had filed first. The whistleblowers settled their spat, with Gerstein accepting a 3% cut of whatever the government recovered and Durand skimming a 14% share.
TAP denied the charges and argued that its sample program, educational grants and other efforts were entirely legal tactics common to many drugmakers. It was a losing hand. The feds had two highly motivated whistleblowers and had collected 500 boxes of documents. TAP pleaded guilty in October 2001 to what the government said was a nationwide conspiracy that included encouraging doctors to illegally bill for free samples, bribing them to get them to prescribe Lupron and reporting bogus wholesale prices to dupe Medicare into overpaying. It agreed to pay $885 million in restitution, fines and interest.
TAP has agreed to pay $150 million to settle a private suit brought by consumers, insurers and health benefit planners related to the charges, boosting its penalties past $1 billion. The government wrangled $355 million from AstraZeneca (formerly Zeneca) in 2003. Durand had never worked at Zeneca but says he sued the firm at the recommendation of Philadelphia Assistant U.S. Attorney James Sheehan, a former colleague of his attorney.
The carefully crafted deal let TAP remain a Medicare provider. The firm pleaded guilty to criminal charges of violating the Prescription Drug Marketing Act and was allowed to stay in business. Four doctors pleaded guilty to illegal billing. The day the settlement was finalized, H. Thomas Watkins, TAP's president at the time, conceded it had provided Lupron samples to a number of doctors who illegally billed Medicare. But he added that "We fundamentally disagree with the government's claims regarding TAP's pricing and reimbursement policies." TAP had agreed to pay the big fine, he added, only because the government had threatened to end federal reimbursements for Lupron, worth half a billion dollars a year.
That enraged William Young, the chief U.S. District Court judge in Boston who had approved the settlement. Young forbade TAP to make further claims of innocence. "I don't want some p.r. flack saying this is all just a big misunderstanding," he said.
When the separate trial of TAP employees unfolded last summer, the judge in that case, Douglas Woodlock, rejected the claims of whistleblower Gerstein wholesale. Durand testified and "had the crap beaten out of me" during a week of cross-examination, he says. His original suit claimed TAP had paid doctors 2% kickbacks, but only one customer got the fees and they were legit: Tri-State Urology, a buying group, had a legal safe harbor to receive the fees. Durand says TAP intended to kick money back to others.
He also wrongly told Chicago prosecutors that TAP fully accounted for only half of the free samples it handed out; in fact, it accounted for a far higher portion. He inaccurately testified that a meeting in Nevis, West Indies was a free junket for doctors dubbed "TAP into the Future." In fact, it was titled "A Commitment to Urology: Therapeutic Innovations in BPH and Prostate Cancer." Doctors paid their own way and earned educational credits.
"If you fixed the problems, do you think it would have helped your lawsuit?" Durand was asked at trial. His reply: "If I was allowed to fix the problems I was trying to fix, yes, the lawsuit would not have probably ever happened."
By the time the legal holes, logical leaps and inaccuracies in the case were revealed in the criminal trial last year, TAP had been shaken down. Durand picked up $79 million for his TAP case and $47 million for suing AstraZeneca, and his lawyer, Ainslie, landed $13.5 million. Gerstein shared $16 million with Tufts, and his lawyer got an undisclosed sum, plus fees and expenses.
Durand appeared with a raft of other whistleblowers on Oprah Winfrey's TV talk show in August 2002, regaling viewers with tales of his heroics. "Financially, I lost a lot," he solemnly told his popular TV host. The show made only fleeting reference to the most interesting part--that ten months earlier he had received almost $80 million of his whistleblower windfall.
TAP may have deserved to get smacked down by prosecutors, and Durand may have deserved a reward for helping deliver it. But in other areas the government caps whistleblowers' rewards at sane levels--$250,000 in customs cases and $1.6 million in those involving bank fraud. It's an odd law that makes whistleblowers centimillionaires for reporting on bad behavior after silently watching it take place under their noses.
Neil Weinberg, 03.14.05
The government makes whistleblowers filthy rich for ferreting out fraud on the job.
Douglas Durand is the paragon of a corporate whistleblower. Shortly after stepping in as vice president of sales at TAP Pharmaceutical Products in early 1995, he began to suspect the company was conspiring with doctors to overcharge the federal government's Medicare program by tens of millions of dollars. But instead of trying to fix the problem, he spent seven months gathering evidence of supposed fraud. Then he quit in 1996 and filed a secret lawsuit against TAP. One motive: If he could prove the company was dirty, he would share a nice chunk of any money TAP paid back to the feds.
He spent eight years helping the government build its own case against the company, visiting prosecutors in four states and testifying before a grand jury in Boston. He compiled a list of alleged TAP conspirators and then called these former colleagues while the FBI listened in. Moreover, Durand later filed suit making similar allegations against a TAP rival, the former Zeneca Inc. The feds ultimately joined him, filing civil and criminal charges against TAP and prodding it into paying the government $885 million to settle the case--six times as much as the claimed overcharges. Douglas Durand cashed in: He received $126 million from the U.S. government. Now age 53, he retired and lives with his wife and daughter in the tony enclave of Tarpon Springs, Fla.
Yet TAP itself was never accused of submitting bogus Medicare bills; it was charged under a little-known provision that holds medical suppliers accountable if others falsely bill the government for the suppliers' products. On Oct. 3, 2001, the day prosecutors announced the settlement, they filed criminal fraud charges accusing TAP executives of perpetrating the overbilling scheme. This "sends a very strong signal to the pharmaceutical industry," the prosecutor in the case, Michael Sullivan, publicly declared at the time.
Then Durand's story began to fall apart. As the trial of a dozen TAP employees played out last year, defense attorneys poked holes in Durand's claims. Kickbacks he said TAP paid to doctors never happened. Price hikes he had accused the firm of imposing to overcharge Medicare hadn't actually taken place. A fancy conference Durand had described as a way to bribe doctors into selling TAP's drugs was in fact paid for by the attendees themselves.
By the Numbers
Tattle Totals
The feds have recouped billions from pharma fraud cases. The whistleblowers have done well, too.
AstraZeneca
Government's estimated loss $39 million
Settlement paid by company $355 million
Whistleblower reward $47 million
Schering-Plough
Government's estimated loss $293 million
Settlement paid by company $345 million
Whistleblower reward $32 million
Warner-Lambert
Government's estimated loss $150 million
Settlement paid by company $430 million
Whistleblower reward $25 million
TAP Pharmaceutical Products
Government's estimated loss $145 million
Settlement paid by company $885 million
Whistleblower reward $95 million
Source: Department of Justice.
In July a federal jury in Boston declared all the defendants not guilty. The judge then tossed out a guilty plea entered before trial by Kimberlee Chase, a TAP sales manager charged with bribing a health maintenance organization. The judge ruled that federal antikickback statutes don't apply to HMOs, so Chase hadn't committed a crime. Never mind that those same HMO-related allegations had been key to the government's case against the company. It was the third time in eight years that all the employees indicted in such cases were exonerated after their employers paid big fines--Caremark coughed up $161 million and Blue Cross Blue Shield of Illinois $144 million.
So it goes in the Byzantine world of whistleblowers. In the post-Enron era, these self-appointed do-gooders are granted breathless audiences by Congress, extolled on national television and lauded by Time magazine as Persons of the Year. But some whistleblowers are motivated by greed, willing to stretch the truth for profit. That owes to the whistleblower law, adopted in 1986, that hands informants as much as a 30% cut of any money recouped by the government. It was pushed by a public-interest lawyer who then launched a practice for whistleblower cases, pocketing millions (see box, p. 92).
Since then whistleblower cases have boomed, recovering $7.9 billion from offending companies--and paying out $1.3 billion to the insiders who ratted on the wrongdoers. A whistleblower bar now spans some 200 lawyers. As word of giant awards has spread--$100 million to the two guys who blew the whistle on HCA and $32 million for a suit against Schering-Plough--the number of suits has soared. Fiscal 2003 saw 326 whistleblower suits, ten times as many as cropped up in 1986; the government gets involved in only about one-sixth of the cases, but these yield 96% of recoveries. And while the law first took aim at defense contractors and sought to protect low-level tattlers, it is now used to target fraud in health care and an array of other businesses. And at times it insulates--and enriches--higher-ups like TAP's Durand.
In this hell-bent pursuit of jackpot justice, the prospect of a big payoff draws would-be whistleblowers "like moths to the flame," the 4th Circuit Court of Appeals warned in 1999, when it tossed out a suit against Roche Biomedical by two employees of a merger partner who had already collected $833,000. The Bank of China has been hit with a suit for financing mislabeled mushrooms. Money manager Mario Gabelli faces a suit for allegedly putting in sham bids at auctions of wireless spectrum. An employee ratted on Odebrecht Contractors for underbidding on a federal contract, arguing it intended to raise prices later (his suit was dismissed as "fatally flawed").
Government is often a willing accomplice, keen to look tough and cash in. It tars targets with bad press and threatens to levy fines many times the size of its own purported losses. If a company refuses to settle, the feds can move to ban it from federal business even before getting so much as an indictment. Most times companies settle, whether they are guilty or not. "It's absolutely a form of extortion," says attorney David Stetler, who successfully defended TAP exec Alan MacKenzie. MacKenzie last year became president of the $4 billion (sales) company.
Like whistleblowers themselves, the feds have a profit motive: They bring in $13 for each dollar spent prosecuting a case, and whistleblowers provide 52% of all U.S. government fraud recoveries, says Taxpayers Against Fraud, the whistleblower lawyers' lobby. "It's a tremendous return on investment," says U.S. Attorney Sullivan, who has 13 people working on health care fraud cases. Health care now accounts for more than half of all whistleblower suits. Drugmakers have paid $2.5 billion in fines in recent years. In most instances the penalty paid was several times the losses.
Some of these winnings are funneled back into the pursuit of new cases, a nifty little move the feds began using in 1996. For several consecutive years the larger enforcement budgets have led to larger settlements, which in turn have funded still larger enforcement budgets. "It's all done with a wink and a nod, with the bureaucrats going back to Congress and saying bigger budgets are justified by past results," says Robert Salcido, a former federal prosecutor who defends whistleblower suits at Akin Gump Strauss Hauer & Feld.
Supporters of the whistleblower law say it is the only way to clamp down on the intractable problem of fraud in government contracts. The U.S. government spends half a trillion dollars annually on medical care, one-quarter of its budget, and fraudulent claims could total $50 billion of that sum, says the Government Accountability Office. "There can never be enough bureaucrats to discourage fraudulent use of taxpayers' money, but knowing colleagues might squeal can be a deterrent," says Senator Charles Grassley (R-Iowa), who pushed passage of the law.
In this for-profit justice, "financial incentives are what bring people forward," concedes Michael Hertz, director of the Justice Department's civil fraud section. But thereafter, he says, "a traditional fraud investigation takes place and the facts are the facts."
Handing informants a share of the booty dates back centuries. Suits brought by citizens on a government's behalf are known as qui tam cases, derived from the first two words of the Latin phrase meaning "whoever brings an action for the king brings it for himself." President Lincoln introduced qui tam suits to the U.S. in 1863, signing the False Claims Act to target vendors of dud gunpowder in the Civil War.
The law languished for a century until it was revived in 1986 by Senator Grassley and John Phillips of the Center for Law in the Public Interest, the lawyer who later went into private practice to pursue whistleblower cases. They hiked a whistleblower's cut from 10% to as much as 30% and lowered the threshold for guilt from knowingly ripping off the government to the fuzzier notion of "deliberate ignorance" or "reckless disregard" of regulations.
The whistleblower law was in full swing by the time Doug Durand landed at TAP Pharmaceutical in 1995. He grew up in Pawtucket, R.I., one of eight children, got a degree in pharmacology at the University of Rhode Island and spent 20 years selling drugs for Merck & Co.
His career there ended in a nasty dispute in 1994 in which Durand filed an Equal Employment Opportunity Commission suit against the drugmaker. He accused Merck of retaliating against him for supporting a female colleague's claim that a Merck president had sexually harassed her. Merck paid him $255,000 to settle. Durand claimed in a related affidavit that Merck had ruined his career. Stripped of his office and duties, and exiled on paid leave, Durand applied to TAP, saying he was still a senior regional director looking to switch jobs. When he testified later before a grand jury, Durand left out all details of his Merck ouster, saying only that a headhunter had approached him.
TAP, meanwhile, was in the fight of its life. Abbott Labs and Takeda had formed the Lake Forest, Ill. company in 1977. After it developed a new monthly injection of Lupron, the first alternative to castration for advanced prostate cancer, sales jumped from $135 million in 1990 to $744 million five years later. The drug went for $400 a dose, and Medicare covered 80% of the cost.
Durand joined the company in January 1995 just as Lupron was facing fierce competition, from Zeneca's Zoladex, a lower-cost rival. As head of sales his primary mission was to launch Prevacid, a new drug for acid reflux. But early on, he says, he grew uncomfortable with the way TAP was pushing Lupron. TAP sold it fervently, putting together a slide show on Lupron's "return to practice" for doctors. It held seminars at fancy resorts and gave physicians TVs so they could show its promotional videos. Wags joked internally that TAP lawyers were in the "sales prevention department."
One of Durand's concerns involved sales reps' failure to properly account for the free samples they gave to doctors. A precise accounting is required by federal law to prevent doctors from falsely billing Medicare for samples they received free of charge. Doctors must sign for each free dose they receive, and if they falsely bill Medicare, drugmakers can be convicted of criminal fraud.
Durand became convinced the faulty record-keeping was intentional, designed to let doctors collect extra money from Medicare. At one point he proposed linking sales reps' bonuses to how well they accounted for free samples but was overruled, he claimed at the trial of his former colleagues. He had learned of a sales rep who had doctors sign for doses they hadn't received--a "big problem," he said, but didn't recall doing anything about it. Despite Durand's qualms, he didn't turn to TAP's outside counsel for advice; asked why, he testified that only two employees below the rank of vice president were allowed to do so and he was not on that short list.
In August 1995 Durand got edgier still, after people at a staff meeting discussed paying a 2% fee to Lupron doctors to cover administrative costs; federal rules allow such payments only to HMOs and other buying groups, not to individual doctors. It was tricky legal turf. "How would Doug look in [prison] stripes?" Alan MacKenzie, whom Duran outranked, joked at the meeting. Everyone else laughed, but Durand says he viewed the remark as "serious and sinister."
Durand began looking at how to protect himself. He says he feared getting swept up in a prosecution if the feds ever stumbled upon TAP's misdeeds. "I wanted to do the right thing," he says. He told a former Merck colleague about the prison-stripes comment, and a month later the colleague referred him to a lawyer--Elizabeth Ainslie, a white-collar lawyer who had run the criminal fraud section in the Philadelphia U.S. Attorney's office.
Ainslie suggested Durand begin keeping notes and collecting TAP documents for a possible whistleblower suit. Shortly afterward Durand faxed her a story headlined: "Rugby Laboratories Pays $7.5 Million to Settle Government VA Fraud Allegations; Former Employee Who Brought Qui Tam Suit Receives $1.1 Million." He asked if this is what she had in mind; it was.
Durand began supplying the lawyer with TAP documents, letters with the company's attorneys and memos it exchanged with its archrival, Zeneca. She showed the stuff to James Sheehan, a prosecutor in the Philadelphia office where she had worked, hoping to pique his interest in joining the case. For whistleblowers the key is to enlist the government--with its power to subpoena defendants and deprive a company of contracts before a case has been decided--as co-plaintiff.
As Ainslie wooed the feds, Durand put on a show of remaining a team player at TAP. In truth, he was the opposite. When word reached him of a California rep whose tactics were "out of line," he left the matter to a subordinate to handle. Then he forwarded internal TAP correspondence on the matter to Ainslie.
In February 1996 Durand brought his sales managers to a golf resort in Florida and shared his vision of TAP's future. Later that month he got his bonus for 1995 ($35,000) and quit, leaving TAP for AstraMerck. A month later he formally hired Ainslie to pursue a whistleblower case. She would cover his expenses and share in any recovery while billing defendants for her time if Durand prevailed. Three months later they filed suits against TAP and Zeneca. Like all such suits, Durand's were filed under seal. The government was required to investigate them, and it did so, unbeknownst to the defendants.
For the ensuing five years Durand made repeated visits to U.S. attorney's offices in Philadelphia, Boston, Chicago and Wilmington to prevail on prosecutors to join his suits. From his office at Astra he faxed a prosecutor in the Philadelphia office, Virginia Gibson Mason, calling her "Ginny" and boasting of "a productive morning!"--he had gotten the phone numbers of former subordinates to call and incriminate as the FBI listened in. The FBI made secret tape recordings of TAP employees discussing potential legal problems. In one Durand calls a former TAP colleague at his home, tells the child who answered the phone that a "friend" is calling and then lies to the TAP exec, pretending, in a bid to get the man to incriminate himself, that Durand himself had been subpoenaed; this employee wasn't ever indicted.
Durand's case drew the interest of prosecutors in the Boston office of the U.S. Attorney after they came across a second whistleblower, Dr. Joseph Gerstein. Gerstein oversaw drug buying at a Tufts University HMO and recently had decided to replace TAP's Lupron with rival Zoladex. It was then, he told the feds, that TAP's Kim Chase and a colleague offered him an "unrestricted" educational grant if he reversed his decision. Gerstein viewed it as a possible bribe. He approached TV and newspaper reporters but was ignored. Then he contacted Boston prosecutors.
"They were looking for potential cases to investigate since they have a big health care unit," Gerstein says. He hired a lawyer and met with prosecutors in late 1996 and filed his whistleblower suit against TAP in March 1998. At the behest of federal agents, Gerstein let the FBI hide a camera in his office and wore a wire as he twice lured the TAP reps back by pretending he might reinstate Lupron. The FBI asked Gerstein to meet again to solicit a personal bribe. Queasy about the ethics, he staged the meeting but refused to come right out and ask for a kickback.
In April 2001, five years after Durand filed his suit, the Boston U.S. Attorney's office joined it ("intervened"). Durand's lawyer, Ainslie, drafted a motion to dismiss Gerstein's suit, and his claim to part of the recovery, on the grounds that her client had filed first. The whistleblowers settled their spat, with Gerstein accepting a 3% cut of whatever the government recovered and Durand skimming a 14% share.
TAP denied the charges and argued that its sample program, educational grants and other efforts were entirely legal tactics common to many drugmakers. It was a losing hand. The feds had two highly motivated whistleblowers and had collected 500 boxes of documents. TAP pleaded guilty in October 2001 to what the government said was a nationwide conspiracy that included encouraging doctors to illegally bill for free samples, bribing them to get them to prescribe Lupron and reporting bogus wholesale prices to dupe Medicare into overpaying. It agreed to pay $885 million in restitution, fines and interest.
TAP has agreed to pay $150 million to settle a private suit brought by consumers, insurers and health benefit planners related to the charges, boosting its penalties past $1 billion. The government wrangled $355 million from AstraZeneca (formerly Zeneca) in 2003. Durand had never worked at Zeneca but says he sued the firm at the recommendation of Philadelphia Assistant U.S. Attorney James Sheehan, a former colleague of his attorney.
The carefully crafted deal let TAP remain a Medicare provider. The firm pleaded guilty to criminal charges of violating the Prescription Drug Marketing Act and was allowed to stay in business. Four doctors pleaded guilty to illegal billing. The day the settlement was finalized, H. Thomas Watkins, TAP's president at the time, conceded it had provided Lupron samples to a number of doctors who illegally billed Medicare. But he added that "We fundamentally disagree with the government's claims regarding TAP's pricing and reimbursement policies." TAP had agreed to pay the big fine, he added, only because the government had threatened to end federal reimbursements for Lupron, worth half a billion dollars a year.
That enraged William Young, the chief U.S. District Court judge in Boston who had approved the settlement. Young forbade TAP to make further claims of innocence. "I don't want some p.r. flack saying this is all just a big misunderstanding," he said.
When the separate trial of TAP employees unfolded last summer, the judge in that case, Douglas Woodlock, rejected the claims of whistleblower Gerstein wholesale. Durand testified and "had the crap beaten out of me" during a week of cross-examination, he says. His original suit claimed TAP had paid doctors 2% kickbacks, but only one customer got the fees and they were legit: Tri-State Urology, a buying group, had a legal safe harbor to receive the fees. Durand says TAP intended to kick money back to others.
He also wrongly told Chicago prosecutors that TAP fully accounted for only half of the free samples it handed out; in fact, it accounted for a far higher portion. He inaccurately testified that a meeting in Nevis, West Indies was a free junket for doctors dubbed "TAP into the Future." In fact, it was titled "A Commitment to Urology: Therapeutic Innovations in BPH and Prostate Cancer." Doctors paid their own way and earned educational credits.
"If you fixed the problems, do you think it would have helped your lawsuit?" Durand was asked at trial. His reply: "If I was allowed to fix the problems I was trying to fix, yes, the lawsuit would not have probably ever happened."
By the time the legal holes, logical leaps and inaccuracies in the case were revealed in the criminal trial last year, TAP had been shaken down. Durand picked up $79 million for his TAP case and $47 million for suing AstraZeneca, and his lawyer, Ainslie, landed $13.5 million. Gerstein shared $16 million with Tufts, and his lawyer got an undisclosed sum, plus fees and expenses.
Durand appeared with a raft of other whistleblowers on Oprah Winfrey's TV talk show in August 2002, regaling viewers with tales of his heroics. "Financially, I lost a lot," he solemnly told his popular TV host. The show made only fleeting reference to the most interesting part--that ten months earlier he had received almost $80 million of his whistleblower windfall.
TAP may have deserved to get smacked down by prosecutors, and Durand may have deserved a reward for helping deliver it. But in other areas the government caps whistleblowers' rewards at sane levels--$250,000 in customs cases and $1.6 million in those involving bank fraud. It's an odd law that makes whistleblowers centimillionaires for reporting on bad behavior after silently watching it take place under their noses.
Saturday, July 5, 2008
How would you expose the FRAUD ?
Before you read this , answer the question: How would one EXPOSE the FRAUD that is so EVIDENT in our HEALTH CARE SYSTEM?
The Dark Side of Whistleblowing
Neil Weinberg, 03.14.05
The government makes whistleblowers filthy rich for ferreting out fraud on the job.
Douglas Durand is the paragon of a corporate whistleblower. Shortly after stepping in as vice president of sales at TAP Pharmaceutical Products in early 1995, he began to suspect the company was conspiring with doctors to overcharge the federal government’s Medicare program by tens of millions of dollars. But instead of trying to fix the problem, he spent seven months gathering evidence of supposed fraud. Then he quit in 1996 and filed a secret lawsuit against TAP. One motive: If he could prove the company was dirty, he would share a nice chunk of any money TAP paid back to the feds.
He spent eight years helping the government build its own case against the company, visiting prosecutors in four states and testifying before a grand jury in Boston. He compiled a list of alleged TAP conspirators and then called these former colleagues while the FBI listened in. Moreover, Durand later filed suit making similar allegations against a TAP rival, the former Zeneca Inc. The feds ultimately joined him, filing civil and criminal charges against TAP and prodding it into paying the government $885 million to settle the case–six times as much as the claimed overcharges. Douglas Durand cashed in: He received $126 million from the U.S. government. Now age 53, he retired and lives with his wife and daughter in the tony enclave of Tarpon Springs, Fla.
Yet TAP itself was never accused of submitting bogus Medicare bills; it was charged under a little-known provision that holds medical suppliers accountable if others falsely bill the government for the suppliers’ products. On Oct. 3, 2001, the day prosecutors announced the settlement, they filed criminal fraud charges accusing TAP executives of perpetrating the overbilling scheme. This “sends a very strong signal to the pharmaceutical industry,” the prosecutor in the case, Michael Sullivan, publicly declared at the time.
Then Durand’s story began to fall apart. As the trial of a dozen TAP employees played out last year, defense attorneys poked holes in Durand’s claims. Kickbacks he said TAP paid to doctors never happened. Price hikes he had accused the firm of imposing to overcharge Medicare hadn’t actually taken place. A fancy conference Durand had described as a way to bribe doctors into selling TAP’s drugs was in fact paid for by the attendees themselves.
In July a federal jury in Boston declared all the defendants not guilty. The judge then tossed out a guilty plea entered before trial by Kimberlee Chase, a TAP sales manager charged with bribing a health maintenance organization. The judge ruled that federal antikickback statutes don’t apply to HMOs, so Chase hadn’t committed a crime. Never mind that those same HMO-related allegations had been key to the government’s case against the company. It was the third time in eight years that all the employees indicted in such cases were exonerated after their employers paid big fines–Caremark coughed up $161 million and Blue Cross Blue Shield of Illinois $144 million.
So it goes in the Byzantine world of whistleblowers. In the post-Enron era, these self-appointed do-gooders are granted breathless audiences by Congress, extolled on national television and lauded by Time magazine as Persons of the Year. But some whistleblowers are motivated by greed, willing to stretch the truth for profit. That owes to the whistleblower law, adopted in 1986, that hands informants as much as a 30% cut of any money recouped by the government. It was pushed by a public-interest lawyer who then launched a practice for whistleblower cases, pocketing millions (see box, p. 92).
Since then whistleblower cases have boomed, recovering $7.9 billion from offending companies–and paying out $1.3 billion to the insiders who ratted on the wrongdoers. A whistleblower bar now spans some 200 lawyers. As word of giant awards has spread–$100 million to the two guys who blew the whistle on HCA and $32 million for a suit against Schering-Plough–the number of suits has soared. Fiscal 2003 saw 326 whistleblower suits, ten times as many as cropped up in 1986; the government gets involved in only about one-sixth of the cases, but these yield 96% of recoveries. And while the law first took aim at defense contractors and sought to protect low-level tattlers, it is now used to target fraud in health care and an array of other businesses. And at times it insulates–and enriches–higher-ups like TAP’s Durand.
In this hell-bent pursuit of jackpot justice, the prospect of a big payoff draws would-be whistleblowers “like moths to the flame,” the 4th Circuit Court of Appeals warned in 1999, when it tossed out a suit against Roche Biomedical by two employees of a merger partner who had already collected $833,000. The Bank of China has been hit with a suit for financing mislabeled mushrooms. Money manager Mario Gabelli faces a suit for allegedly putting in sham bids at auctions of wireless spectrum. An employee ratted on Odebrecht Contractors for underbidding on a federal contract, arguing it intended to raise prices later (his suit was dismissed as “fatally flawed”).
Government is often a willing accomplice, keen to look tough and cash in. It tars targets with bad press and threatens to levy fines many times the size of its own purported losses. If a company refuses to settle, the feds can move to ban it from federal business even before getting so much as an indictment. Most times companies settle, whether they are guilty or not. “It’s absolutely a form of extortion,” says attorney David Stetler, who successfully defended TAP exec Alan MacKenzie. MacKenzie last year became president of the $4 billion (sales) company.
Like whistleblowers themselves, the feds have a profit motive: They bring in $13 for each dollar spent prosecuting a case, and whistleblowers provide 52% of all U.S. government fraud recoveries, says Taxpayers Against Fraud, the whistleblower lawyers’ lobby. “It’s a tremendous return on investment,” says U.S. Attorney Sullivan, who has 13 people working on health care fraud cases. Health care now accounts for more than half of all whistleblower suits. Drugmakers have paid $2.5 billion in fines in recent years. In most instances the penalty paid was several times the losses.
Some of these winnings are funneled back into the pursuit of new cases, a nifty little move the feds began using in 1996. For several consecutive years the larger enforcement budgets have led to larger settlements, which in turn have funded still larger enforcement budgets. “It’s all done with a wink and a nod, with the bureaucrats going back to Congress and saying bigger budgets are justified by past results,” says Robert Salcido, a former federal prosecutor who defends whistleblower suits at Akin Gump Strauss Hauer & Feld.
Supporters of the whistleblower law say it is the only way to clamp down on the intractable problem of fraud in government contracts. The U.S. government spends half a trillion dollars annually on medical care, one-quarter of its budget, and fraudulent claims could total $50 billion of that sum, says the Government Accountability Office. “There can never be enough bureaucrats to discourage fraudulent use of taxpayers’ money, but knowing colleagues might squeal can be a deterrent,” says Senator Charles Grassley (R-Iowa), who pushed passage of the law.
In this for-profit justice, “financial incentives are what bring people forward,” concedes Michael Hertz, director of the Justice Department’s civil fraud section. But thereafter, he says, “a traditional fraud investigation takes place and the facts are the facts.”
Handing informants a share of the booty dates back centuries. Suits brought by citizens on a government’s behalf are known as qui tam cases, derived from the first two words of the Latin phrase meaning “whoever brings an action for the king brings it for himself.” President Lincoln introduced qui tam suits to the U.S. in 1863, signing the False Claims Act to target vendors of dud gunpowder in the Civil War.
The law languished for a century until it was revived in 1986 by Senator Grassley and John Phillips of the Center for Law in the Public Interest, the lawyer who later went into private practice to pursue whistleblower cases. They hiked a whistleblower’s cut from 10% to as much as 30% and lowered the threshold for guilt from knowingly ripping off the government to the fuzzier notion of “deliberate ignorance” or “reckless disregard” of regulations.
The whistleblower law was in full swing by the time Doug Durand landed at TAP Pharmaceutical in 1995. He grew up in Pawtucket, R.I., one of eight children, got a degree in pharmacology at the University of Rhode Island and spent 20 years selling drugs for Merck & Co.
His career there ended in a nasty dispute in 1994 in which Durand filed an Equal Employment Opportunity Commission suit against the drugmaker. He accused Merck of retaliating against him for supporting a female colleague’s claim that a Merck president had sexually harassed her. Merck paid him $255,000 to settle. Durand claimed in a related affidavit that Merck had ruined his career. Stripped of his office and duties, and exiled on paid leave, Durand applied to TAP, saying he was still a senior regional director looking to switch jobs. When he testified later before a grand jury, Durand left out all details of his Merck ouster, saying only that a headhunter had approached him.
TAP, meanwhile, was in the fight of its life. Abbott Labs and Takeda had formed the Lake Forest, Ill. company in 1977. After it developed a new monthly injection of Lupron, the first alternative to castration for advanced prostate cancer, sales jumped from $135 million in 1990 to $744 million five years later. The drug went for $400 a dose, and Medicare covered 80% of the cost.
Durand joined the company in January 1995 just as Lupron was facing fierce competition, from Zeneca’s Zoladex, a lower-cost rival. As head of sales his primary mission was to launch Prevacid, a new drug for acid reflux. But early on, he says, he grew uncomfortable with the way TAP was pushing Lupron. TAP sold it fervently, putting together a slide show on Lupron’s “return to practice” for doctors. It held seminars at fancy resorts and gave physicians TVs so they could show its promotional videos. Wags joked internally that TAP lawyers were in the “sales prevention department.”
One of Durand’s concerns involved sales reps’ failure to properly account for the free samples they gave to doctors. A precise accounting is required by federal law to prevent doctors from falsely billing Medicare for samples they received free of charge. Doctors must sign for each free dose they receive, and if they falsely bill Medicare, drugmakers can be convicted of criminal fraud.
Durand became convinced the faulty record-keeping was intentional, designed to let doctors collect extra money from Medicare. At one point he proposed linking sales reps’ bonuses to how well they accounted for free samples but was overruled, he claimed at the trial of his former colleagues. He had learned of a sales rep who had doctors sign for doses they hadn’t received–a “big problem,” he said, but didn’t recall doing anything about it. Despite Durand’s qualms, he didn’t turn to TAP’s outside counsel for advice; asked why, he testified that only two employees below the rank of vice president were allowed to do so and he was not on that short list.
In August 1995 Durand got edgier still, after people at a staff meeting discussed paying a 2% fee to Lupron doctors to cover administrative costs; federal rules allow such payments only to HMOs and other buying groups, not to individual doctors. It was tricky legal turf. “How would Doug look in [prison] stripes?” Alan MacKenzie, whom Duran outranked, joked at the meeting. Everyone else laughed, but Durand says he viewed the remark as “serious and sinister.”
Durand began looking at how to protect himself. He says he feared getting swept up in a prosecution if the feds ever stumbled upon TAP’s misdeeds. “I wanted to do the right thing,” he says. He told a former Merck colleague about the prison-stripes comment, and a month later the colleague referred him to a lawyer–Elizabeth Ainslie, a white-collar lawyer who had run the criminal fraud section in the Philadelphia U.S. Attorney’s office.
Ainslie suggested Durand begin keeping notes and collecting TAP documents for a possible whistleblower suit. Shortly afterward Durand faxed her a story headlined: “Rugby Laboratories Pays $7.5 Million to Settle Government VA Fraud Allegations; Former Employee Who Brought Qui Tam Suit Receives $1.1 Million.” He asked if this is what she had in mind; it was.
Durand began supplying the lawyer with TAP documents, letters with the company’s attorneys and memos it exchanged with its archrival, Zeneca. She showed the stuff to James Sheehan, a prosecutor in the Philadelphia office where she had worked, hoping to pique his interest in joining the case. For whistleblowers the key is to enlist the government–with its power to subpoena defendants and deprive a company of contracts before a case has been decided–as co-plaintiff.
As Ainslie wooed the feds, Durand put on a show of remaining a team player at TAP. In truth, he was the opposite. When word reached him of a California rep whose tactics were “out of line,” he left the matter to a subordinate to handle. Then he forwarded internal TAP correspondence on the matter to Ainslie.
In February 1996 Durand brought his sales managers to a golf resort in Florida and shared his vision of TAP’s future. Later that month he got his bonus for 1995 ($35,000) and quit, leaving TAP for AstraMerck. A month later he formally hired Ainslie to pursue a whistleblower case. She would cover his expenses and share in any recovery while billing defendants for her time if Durand prevailed. Three months later they filed suits against TAP and Zeneca. Like all such suits, Durand’s were filed under seal. The government was required to investigate them, and it did so, unbeknownst to the defendants.
For the ensuing five years Durand made repeated visits to U.S. attorney’s offices in Philadelphia, Boston, Chicago and Wilmington to prevail on prosecutors to join his suits. From his office at Astra he faxed a prosecutor in the Philadelphia office, Virginia Gibson Mason, calling her “Ginny” and boasting of “a productive morning!”–he had gotten the phone numbers of former subordinates to call and incriminate as the FBI listened in. The FBI made secret tape recordings of TAP employees discussing potential legal problems. In one Durand calls a former TAP colleague at his home, tells the child who answered the phone that a “friend” is calling and then lies to the TAP exec, pretending, in a bid to get the man to incriminate himself, that Durand himself had been subpoenaed; this employee wasn’t ever indicted.
Durand’s case drew the interest of prosecutors in the Boston office of the U.S. Attorney after they came across a second whistleblower, Dr. Joseph Gerstein. Gerstein oversaw drug buying at a Tufts University HMO and recently had decided to replace TAP’s Lupron with rival Zoladex. It was then, he told the feds, that TAP’s Kim Chase and a colleague offered him an “unrestricted” educational grant if he reversed his decision. Gerstein viewed it as a possible bribe. He approached TV and newspaper reporters but was ignored. Then he contacted Boston prosecutors.
“They were looking for potential cases to investigate since they have a big health care unit,” Gerstein says. He hired a lawyer and met with prosecutors in late 1996 and filed his whistleblower suit against TAP in March 1998. At the behest of federal agents, Gerstein let the FBI hide a camera in his office and wore a wire as he twice lured the TAP reps back by pretending he might reinstate Lupron. The FBI asked Gerstein to meet again to solicit a personal bribe. Queasy about the ethics, he staged the meeting but refused to come right out and ask for a kickback.
In April 2001, five years after Durand filed his suit, the Boston U.S. Attorney’s office joined it (”intervened”). Durand’s lawyer, Ainslie, drafted a motion to dismiss Gerstein’s suit, and his claim to part of the recovery, on the grounds that her client had filed first. The whistleblowers settled their spat, with Gerstein accepting a 3% cut of whatever the government recovered and Durand skimming a 14% share.
TAP denied the charges and argued that its sample program, educational grants and other efforts were entirely legal tactics common to many drugmakers. It was a losing hand. The feds had two highly motivated whistleblowers and had collected 500 boxes of documents. TAP pleaded guilty in October 2001 to what the government said was a nationwide conspiracy that included encouraging doctors to illegally bill for free samples, bribing them to get them to prescribe Lupron and reporting bogus wholesale prices to dupe Medicare into overpaying. It agreed to pay $885 million in restitution, fines and interest.
TAP has agreed to pay $150 million to settle a private suit brought by consumers, insurers and health benefit planners related to the charges, boosting its penalties past $1 billion. The government wrangled $355 million from AstraZeneca (formerly Zeneca) in 2003. Durand had never worked at Zeneca but says he sued the firm at the recommendation of Philadelphia Assistant U.S. Attorney James Sheehan, a former colleague of his attorney.
The carefully crafted deal let TAP remain a Medicare provider. The firm pleaded guilty to criminal charges of violating the Prescription Drug Marketing Act and was allowed to stay in business. Four doctors pleaded guilty to illegal billing. The day the settlement was finalized, H. Thomas Watkins, TAP’s president at the time, conceded it had provided Lupron samples to a number of doctors who illegally billed Medicare. But he added that “We fundamentally disagree with the government’s claims regarding TAP’s pricing and reimbursement policies.” TAP had agreed to pay the big fine, he added, only because the government had threatened to end federal reimbursements for Lupron, worth half a billion dollars a year.
That enraged William Young, the chief U.S. District Court judge in Boston who had approved the settlement. Young forbade TAP to make further claims of innocence. “I don’t want some p.r. flack saying this is all just a big misunderstanding,” he said.
When the separate trial of TAP employees unfolded last summer, the judge in that case, Douglas Woodlock, rejected the claims of whistleblower Gerstein wholesale. Durand testified and “had the crap beaten out of me” during a week of cross-examination, he says. His original suit claimed TAP had paid doctors 2% kickbacks, but only one customer got the fees and they were legit: Tri-State Urology, a buying group, had a legal safe harbor to receive the fees. Durand says TAP intended to kick money back to others.
He also wrongly told Chicago prosecutors that TAP fully accounted for only half of the free samples it handed out; in fact, it accounted for a far higher portion. He inaccurately testified that a meeting in Nevis, West Indies was a free junket for doctors dubbed “TAP into the Future.” In fact, it was titled “A Commitment to Urology: Therapeutic Innovations in BPH and Prostate Cancer.” Doctors paid their own way and earned educational credits.
“If you fixed the problems, do you think it would have helped your lawsuit?” Durand was asked at trial. His reply: “If I was allowed to fix the problems I was trying to fix, yes, the lawsuit would not have probably ever happened.”
By the time the legal holes, logical leaps and inaccuracies in the case were revealed in the criminal trial last year, TAP had been shaken down. Durand picked up $79 million for his TAP case and $47 million for suing AstraZeneca, and his lawyer, Ainslie, landed $13.5 million. Gerstein shared $16 million with Tufts, and his lawyer got an undisclosed sum, plus fees and expenses.
Durand appeared with a raft of other whistleblowers on Oprah Winfrey’s TV talk show in August 2002, regaling viewers with tales of his heroics. “Financially, I lost a lot,” he solemnly told his popular TV host. The show made only fleeting reference to the most interesting part–that ten months earlier he had received almost $80 million of his whistleblower windfall.
TAP may have deserved to get smacked down by prosecutors, and Durand may have deserved a reward for helping deliver it. But in other areas the government caps whistleblowers’ rewards at sane levels–$250,000 in customs cases and $1.6 million in those involving bank fraud. It’s an odd law that makes whistleblowers centimillionaires for reporting on bad behavior after silently watching it take place under their noses.
Sidebars
The Enforcer
Envy Engines
The Dark Side of Whistleblowing
Neil Weinberg, 03.14.05
The government makes whistleblowers filthy rich for ferreting out fraud on the job.
Douglas Durand is the paragon of a corporate whistleblower. Shortly after stepping in as vice president of sales at TAP Pharmaceutical Products in early 1995, he began to suspect the company was conspiring with doctors to overcharge the federal government’s Medicare program by tens of millions of dollars. But instead of trying to fix the problem, he spent seven months gathering evidence of supposed fraud. Then he quit in 1996 and filed a secret lawsuit against TAP. One motive: If he could prove the company was dirty, he would share a nice chunk of any money TAP paid back to the feds.
He spent eight years helping the government build its own case against the company, visiting prosecutors in four states and testifying before a grand jury in Boston. He compiled a list of alleged TAP conspirators and then called these former colleagues while the FBI listened in. Moreover, Durand later filed suit making similar allegations against a TAP rival, the former Zeneca Inc. The feds ultimately joined him, filing civil and criminal charges against TAP and prodding it into paying the government $885 million to settle the case–six times as much as the claimed overcharges. Douglas Durand cashed in: He received $126 million from the U.S. government. Now age 53, he retired and lives with his wife and daughter in the tony enclave of Tarpon Springs, Fla.
Yet TAP itself was never accused of submitting bogus Medicare bills; it was charged under a little-known provision that holds medical suppliers accountable if others falsely bill the government for the suppliers’ products. On Oct. 3, 2001, the day prosecutors announced the settlement, they filed criminal fraud charges accusing TAP executives of perpetrating the overbilling scheme. This “sends a very strong signal to the pharmaceutical industry,” the prosecutor in the case, Michael Sullivan, publicly declared at the time.
Then Durand’s story began to fall apart. As the trial of a dozen TAP employees played out last year, defense attorneys poked holes in Durand’s claims. Kickbacks he said TAP paid to doctors never happened. Price hikes he had accused the firm of imposing to overcharge Medicare hadn’t actually taken place. A fancy conference Durand had described as a way to bribe doctors into selling TAP’s drugs was in fact paid for by the attendees themselves.
In July a federal jury in Boston declared all the defendants not guilty. The judge then tossed out a guilty plea entered before trial by Kimberlee Chase, a TAP sales manager charged with bribing a health maintenance organization. The judge ruled that federal antikickback statutes don’t apply to HMOs, so Chase hadn’t committed a crime. Never mind that those same HMO-related allegations had been key to the government’s case against the company. It was the third time in eight years that all the employees indicted in such cases were exonerated after their employers paid big fines–Caremark coughed up $161 million and Blue Cross Blue Shield of Illinois $144 million.
So it goes in the Byzantine world of whistleblowers. In the post-Enron era, these self-appointed do-gooders are granted breathless audiences by Congress, extolled on national television and lauded by Time magazine as Persons of the Year. But some whistleblowers are motivated by greed, willing to stretch the truth for profit. That owes to the whistleblower law, adopted in 1986, that hands informants as much as a 30% cut of any money recouped by the government. It was pushed by a public-interest lawyer who then launched a practice for whistleblower cases, pocketing millions (see box, p. 92).
Since then whistleblower cases have boomed, recovering $7.9 billion from offending companies–and paying out $1.3 billion to the insiders who ratted on the wrongdoers. A whistleblower bar now spans some 200 lawyers. As word of giant awards has spread–$100 million to the two guys who blew the whistle on HCA and $32 million for a suit against Schering-Plough–the number of suits has soared. Fiscal 2003 saw 326 whistleblower suits, ten times as many as cropped up in 1986; the government gets involved in only about one-sixth of the cases, but these yield 96% of recoveries. And while the law first took aim at defense contractors and sought to protect low-level tattlers, it is now used to target fraud in health care and an array of other businesses. And at times it insulates–and enriches–higher-ups like TAP’s Durand.
In this hell-bent pursuit of jackpot justice, the prospect of a big payoff draws would-be whistleblowers “like moths to the flame,” the 4th Circuit Court of Appeals warned in 1999, when it tossed out a suit against Roche Biomedical by two employees of a merger partner who had already collected $833,000. The Bank of China has been hit with a suit for financing mislabeled mushrooms. Money manager Mario Gabelli faces a suit for allegedly putting in sham bids at auctions of wireless spectrum. An employee ratted on Odebrecht Contractors for underbidding on a federal contract, arguing it intended to raise prices later (his suit was dismissed as “fatally flawed”).
Government is often a willing accomplice, keen to look tough and cash in. It tars targets with bad press and threatens to levy fines many times the size of its own purported losses. If a company refuses to settle, the feds can move to ban it from federal business even before getting so much as an indictment. Most times companies settle, whether they are guilty or not. “It’s absolutely a form of extortion,” says attorney David Stetler, who successfully defended TAP exec Alan MacKenzie. MacKenzie last year became president of the $4 billion (sales) company.
Like whistleblowers themselves, the feds have a profit motive: They bring in $13 for each dollar spent prosecuting a case, and whistleblowers provide 52% of all U.S. government fraud recoveries, says Taxpayers Against Fraud, the whistleblower lawyers’ lobby. “It’s a tremendous return on investment,” says U.S. Attorney Sullivan, who has 13 people working on health care fraud cases. Health care now accounts for more than half of all whistleblower suits. Drugmakers have paid $2.5 billion in fines in recent years. In most instances the penalty paid was several times the losses.
Some of these winnings are funneled back into the pursuit of new cases, a nifty little move the feds began using in 1996. For several consecutive years the larger enforcement budgets have led to larger settlements, which in turn have funded still larger enforcement budgets. “It’s all done with a wink and a nod, with the bureaucrats going back to Congress and saying bigger budgets are justified by past results,” says Robert Salcido, a former federal prosecutor who defends whistleblower suits at Akin Gump Strauss Hauer & Feld.
Supporters of the whistleblower law say it is the only way to clamp down on the intractable problem of fraud in government contracts. The U.S. government spends half a trillion dollars annually on medical care, one-quarter of its budget, and fraudulent claims could total $50 billion of that sum, says the Government Accountability Office. “There can never be enough bureaucrats to discourage fraudulent use of taxpayers’ money, but knowing colleagues might squeal can be a deterrent,” says Senator Charles Grassley (R-Iowa), who pushed passage of the law.
In this for-profit justice, “financial incentives are what bring people forward,” concedes Michael Hertz, director of the Justice Department’s civil fraud section. But thereafter, he says, “a traditional fraud investigation takes place and the facts are the facts.”
Handing informants a share of the booty dates back centuries. Suits brought by citizens on a government’s behalf are known as qui tam cases, derived from the first two words of the Latin phrase meaning “whoever brings an action for the king brings it for himself.” President Lincoln introduced qui tam suits to the U.S. in 1863, signing the False Claims Act to target vendors of dud gunpowder in the Civil War.
The law languished for a century until it was revived in 1986 by Senator Grassley and John Phillips of the Center for Law in the Public Interest, the lawyer who later went into private practice to pursue whistleblower cases. They hiked a whistleblower’s cut from 10% to as much as 30% and lowered the threshold for guilt from knowingly ripping off the government to the fuzzier notion of “deliberate ignorance” or “reckless disregard” of regulations.
The whistleblower law was in full swing by the time Doug Durand landed at TAP Pharmaceutical in 1995. He grew up in Pawtucket, R.I., one of eight children, got a degree in pharmacology at the University of Rhode Island and spent 20 years selling drugs for Merck & Co.
His career there ended in a nasty dispute in 1994 in which Durand filed an Equal Employment Opportunity Commission suit against the drugmaker. He accused Merck of retaliating against him for supporting a female colleague’s claim that a Merck president had sexually harassed her. Merck paid him $255,000 to settle. Durand claimed in a related affidavit that Merck had ruined his career. Stripped of his office and duties, and exiled on paid leave, Durand applied to TAP, saying he was still a senior regional director looking to switch jobs. When he testified later before a grand jury, Durand left out all details of his Merck ouster, saying only that a headhunter had approached him.
TAP, meanwhile, was in the fight of its life. Abbott Labs and Takeda had formed the Lake Forest, Ill. company in 1977. After it developed a new monthly injection of Lupron, the first alternative to castration for advanced prostate cancer, sales jumped from $135 million in 1990 to $744 million five years later. The drug went for $400 a dose, and Medicare covered 80% of the cost.
Durand joined the company in January 1995 just as Lupron was facing fierce competition, from Zeneca’s Zoladex, a lower-cost rival. As head of sales his primary mission was to launch Prevacid, a new drug for acid reflux. But early on, he says, he grew uncomfortable with the way TAP was pushing Lupron. TAP sold it fervently, putting together a slide show on Lupron’s “return to practice” for doctors. It held seminars at fancy resorts and gave physicians TVs so they could show its promotional videos. Wags joked internally that TAP lawyers were in the “sales prevention department.”
One of Durand’s concerns involved sales reps’ failure to properly account for the free samples they gave to doctors. A precise accounting is required by federal law to prevent doctors from falsely billing Medicare for samples they received free of charge. Doctors must sign for each free dose they receive, and if they falsely bill Medicare, drugmakers can be convicted of criminal fraud.
Durand became convinced the faulty record-keeping was intentional, designed to let doctors collect extra money from Medicare. At one point he proposed linking sales reps’ bonuses to how well they accounted for free samples but was overruled, he claimed at the trial of his former colleagues. He had learned of a sales rep who had doctors sign for doses they hadn’t received–a “big problem,” he said, but didn’t recall doing anything about it. Despite Durand’s qualms, he didn’t turn to TAP’s outside counsel for advice; asked why, he testified that only two employees below the rank of vice president were allowed to do so and he was not on that short list.
In August 1995 Durand got edgier still, after people at a staff meeting discussed paying a 2% fee to Lupron doctors to cover administrative costs; federal rules allow such payments only to HMOs and other buying groups, not to individual doctors. It was tricky legal turf. “How would Doug look in [prison] stripes?” Alan MacKenzie, whom Duran outranked, joked at the meeting. Everyone else laughed, but Durand says he viewed the remark as “serious and sinister.”
Durand began looking at how to protect himself. He says he feared getting swept up in a prosecution if the feds ever stumbled upon TAP’s misdeeds. “I wanted to do the right thing,” he says. He told a former Merck colleague about the prison-stripes comment, and a month later the colleague referred him to a lawyer–Elizabeth Ainslie, a white-collar lawyer who had run the criminal fraud section in the Philadelphia U.S. Attorney’s office.
Ainslie suggested Durand begin keeping notes and collecting TAP documents for a possible whistleblower suit. Shortly afterward Durand faxed her a story headlined: “Rugby Laboratories Pays $7.5 Million to Settle Government VA Fraud Allegations; Former Employee Who Brought Qui Tam Suit Receives $1.1 Million.” He asked if this is what she had in mind; it was.
Durand began supplying the lawyer with TAP documents, letters with the company’s attorneys and memos it exchanged with its archrival, Zeneca. She showed the stuff to James Sheehan, a prosecutor in the Philadelphia office where she had worked, hoping to pique his interest in joining the case. For whistleblowers the key is to enlist the government–with its power to subpoena defendants and deprive a company of contracts before a case has been decided–as co-plaintiff.
As Ainslie wooed the feds, Durand put on a show of remaining a team player at TAP. In truth, he was the opposite. When word reached him of a California rep whose tactics were “out of line,” he left the matter to a subordinate to handle. Then he forwarded internal TAP correspondence on the matter to Ainslie.
In February 1996 Durand brought his sales managers to a golf resort in Florida and shared his vision of TAP’s future. Later that month he got his bonus for 1995 ($35,000) and quit, leaving TAP for AstraMerck. A month later he formally hired Ainslie to pursue a whistleblower case. She would cover his expenses and share in any recovery while billing defendants for her time if Durand prevailed. Three months later they filed suits against TAP and Zeneca. Like all such suits, Durand’s were filed under seal. The government was required to investigate them, and it did so, unbeknownst to the defendants.
For the ensuing five years Durand made repeated visits to U.S. attorney’s offices in Philadelphia, Boston, Chicago and Wilmington to prevail on prosecutors to join his suits. From his office at Astra he faxed a prosecutor in the Philadelphia office, Virginia Gibson Mason, calling her “Ginny” and boasting of “a productive morning!”–he had gotten the phone numbers of former subordinates to call and incriminate as the FBI listened in. The FBI made secret tape recordings of TAP employees discussing potential legal problems. In one Durand calls a former TAP colleague at his home, tells the child who answered the phone that a “friend” is calling and then lies to the TAP exec, pretending, in a bid to get the man to incriminate himself, that Durand himself had been subpoenaed; this employee wasn’t ever indicted.
Durand’s case drew the interest of prosecutors in the Boston office of the U.S. Attorney after they came across a second whistleblower, Dr. Joseph Gerstein. Gerstein oversaw drug buying at a Tufts University HMO and recently had decided to replace TAP’s Lupron with rival Zoladex. It was then, he told the feds, that TAP’s Kim Chase and a colleague offered him an “unrestricted” educational grant if he reversed his decision. Gerstein viewed it as a possible bribe. He approached TV and newspaper reporters but was ignored. Then he contacted Boston prosecutors.
“They were looking for potential cases to investigate since they have a big health care unit,” Gerstein says. He hired a lawyer and met with prosecutors in late 1996 and filed his whistleblower suit against TAP in March 1998. At the behest of federal agents, Gerstein let the FBI hide a camera in his office and wore a wire as he twice lured the TAP reps back by pretending he might reinstate Lupron. The FBI asked Gerstein to meet again to solicit a personal bribe. Queasy about the ethics, he staged the meeting but refused to come right out and ask for a kickback.
In April 2001, five years after Durand filed his suit, the Boston U.S. Attorney’s office joined it (”intervened”). Durand’s lawyer, Ainslie, drafted a motion to dismiss Gerstein’s suit, and his claim to part of the recovery, on the grounds that her client had filed first. The whistleblowers settled their spat, with Gerstein accepting a 3% cut of whatever the government recovered and Durand skimming a 14% share.
TAP denied the charges and argued that its sample program, educational grants and other efforts were entirely legal tactics common to many drugmakers. It was a losing hand. The feds had two highly motivated whistleblowers and had collected 500 boxes of documents. TAP pleaded guilty in October 2001 to what the government said was a nationwide conspiracy that included encouraging doctors to illegally bill for free samples, bribing them to get them to prescribe Lupron and reporting bogus wholesale prices to dupe Medicare into overpaying. It agreed to pay $885 million in restitution, fines and interest.
TAP has agreed to pay $150 million to settle a private suit brought by consumers, insurers and health benefit planners related to the charges, boosting its penalties past $1 billion. The government wrangled $355 million from AstraZeneca (formerly Zeneca) in 2003. Durand had never worked at Zeneca but says he sued the firm at the recommendation of Philadelphia Assistant U.S. Attorney James Sheehan, a former colleague of his attorney.
The carefully crafted deal let TAP remain a Medicare provider. The firm pleaded guilty to criminal charges of violating the Prescription Drug Marketing Act and was allowed to stay in business. Four doctors pleaded guilty to illegal billing. The day the settlement was finalized, H. Thomas Watkins, TAP’s president at the time, conceded it had provided Lupron samples to a number of doctors who illegally billed Medicare. But he added that “We fundamentally disagree with the government’s claims regarding TAP’s pricing and reimbursement policies.” TAP had agreed to pay the big fine, he added, only because the government had threatened to end federal reimbursements for Lupron, worth half a billion dollars a year.
That enraged William Young, the chief U.S. District Court judge in Boston who had approved the settlement. Young forbade TAP to make further claims of innocence. “I don’t want some p.r. flack saying this is all just a big misunderstanding,” he said.
When the separate trial of TAP employees unfolded last summer, the judge in that case, Douglas Woodlock, rejected the claims of whistleblower Gerstein wholesale. Durand testified and “had the crap beaten out of me” during a week of cross-examination, he says. His original suit claimed TAP had paid doctors 2% kickbacks, but only one customer got the fees and they were legit: Tri-State Urology, a buying group, had a legal safe harbor to receive the fees. Durand says TAP intended to kick money back to others.
He also wrongly told Chicago prosecutors that TAP fully accounted for only half of the free samples it handed out; in fact, it accounted for a far higher portion. He inaccurately testified that a meeting in Nevis, West Indies was a free junket for doctors dubbed “TAP into the Future.” In fact, it was titled “A Commitment to Urology: Therapeutic Innovations in BPH and Prostate Cancer.” Doctors paid their own way and earned educational credits.
“If you fixed the problems, do you think it would have helped your lawsuit?” Durand was asked at trial. His reply: “If I was allowed to fix the problems I was trying to fix, yes, the lawsuit would not have probably ever happened.”
By the time the legal holes, logical leaps and inaccuracies in the case were revealed in the criminal trial last year, TAP had been shaken down. Durand picked up $79 million for his TAP case and $47 million for suing AstraZeneca, and his lawyer, Ainslie, landed $13.5 million. Gerstein shared $16 million with Tufts, and his lawyer got an undisclosed sum, plus fees and expenses.
Durand appeared with a raft of other whistleblowers on Oprah Winfrey’s TV talk show in August 2002, regaling viewers with tales of his heroics. “Financially, I lost a lot,” he solemnly told his popular TV host. The show made only fleeting reference to the most interesting part–that ten months earlier he had received almost $80 million of his whistleblower windfall.
TAP may have deserved to get smacked down by prosecutors, and Durand may have deserved a reward for helping deliver it. But in other areas the government caps whistleblowers’ rewards at sane levels–$250,000 in customs cases and $1.6 million in those involving bank fraud. It’s an odd law that makes whistleblowers centimillionaires for reporting on bad behavior after silently watching it take place under their noses.
Sidebars
The Enforcer
Envy Engines
C. Taylor Pickett, Chief Executive Officer of Omega.,
Where was Mr Pickett prior to this fraud ?
Omega Healthcare Announces Plan for Haven Facilities
Omega Healthcare Announces Plan for Haven FacilitiesTIMONIUM, Md.MD-OMEGA-HEALTHCARE
TIMONIUM, Md.--(BUSINESS WIRE)--
Omega Healthcare Investors, Inc. (NYSE:OHI) today announced that as a result of the termination of a third party's agreement to acquire substantially all the assets of Haven Eldercare, LLC out of bankruptcy, Omega and an experienced nursing home management team have formed a new company to operate the 15 Haven facilities located on real estate owned by Omega. The transition to the new operating management team is subject to approval of the U.S. Bankruptcy Court, which has jurisdiction over Haven's assets. Omega expects the Court to approve the new management team taking control based on Omega's rights as a lessor and a secured creditor under existing agreements.
'Given the termination of a third party purchaser's agreement to acquire the assets of Haven out of bankruptcy, Omega worked swiftly and diligently to retain an excellent and qualified team ready to assume management of the facilities,' according to C. Taylor Pickett, Chief Executive Officer of Omega.
The team will be led by Timothy Coburn. Tim has been in health care facility management for 30 years as a senior member of several national health care companies providing successful oversight to skilled nursing facilities, assisted living facilities, sub-acute care facilities including traumatic brain injury facilities and independent living communities around the country. Over the past six years he has been utilized as a manager of distressed health care properties on behalf of the U.S. Bankruptcy Courts and the State of Connecticut Superior Courts, as well as private investors. He was appointed Patient Care Officer by the U.S. Bankruptcy Court for the Haven bankruptcy in November of 2007 and is a licensed Nursing Home Administrator in Connecticut and Massachusetts.
'Omega plans to provide both working capital and capital expenditure credit facilities to the new provider so that the caregivers in these facilities can continue doing what they do best and that is providing quality care for the residents of these facilities,' continued Mr. Pickett.
'Since the Haven situation has been rapidly evolving, we have not completed our assessment of the financial impact of these actions,' continued Mr. Pickett. 'We expect to be in a position to provide an overview of the financial impact in connection with our second quarter earnings announcement.'
Omega is a real estate investment trust investing in and providing financing to the long-term care industry. At March 31, 2008, Omega owned or held mortgages on 235 healthcare facilities located in 28 states and operated by 26 third-party healthcare operating companies.
This announcement includes forward-looking statements. Actual results may differ materially from those reflected in such forward-looking statements as a result of a variety of factors, including, among other things: (i) uncertainties relating to the business operations of the operators of the Company's properties, including those relating to reimbursement by third-party payors, regulatory matters and occupancy levels; (ii) regulatory and other changes in the healthcare sector, including without limitation, changes in Medicare reimbursement; (iii) changes in the financial position of the Company's operators; (iv) the ability of operators in bankruptcy to reject unexpired lease obligations, modify the terms of the Company's mortgages, and impede the ability of the Company to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor's obligations; (v) the availability and cost of capital; (vi) the Company's ability to maintain its credit ratings; (vii) competition in the financing of healthcare facilities; (viii) the Company's ability to maintain its status as a real estate investment trust; (ix) uncertainties relating to Haven's bankruptcy process, and (x) other factors identified in the Company's filings with the Securities and Exchange Commission. Statements regarding future events and developments and the Company's future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements.
.
Omega Healthcare Announces Plan for Haven Facilities
Omega Healthcare Announces Plan for Haven FacilitiesTIMONIUM, Md.MD-OMEGA-HEALTHCARE
TIMONIUM, Md.--(BUSINESS WIRE)--
Omega Healthcare Investors, Inc. (NYSE:OHI) today announced that as a result of the termination of a third party's agreement to acquire substantially all the assets of Haven Eldercare, LLC out of bankruptcy, Omega and an experienced nursing home management team have formed a new company to operate the 15 Haven facilities located on real estate owned by Omega. The transition to the new operating management team is subject to approval of the U.S. Bankruptcy Court, which has jurisdiction over Haven's assets. Omega expects the Court to approve the new management team taking control based on Omega's rights as a lessor and a secured creditor under existing agreements.
'Given the termination of a third party purchaser's agreement to acquire the assets of Haven out of bankruptcy, Omega worked swiftly and diligently to retain an excellent and qualified team ready to assume management of the facilities,' according to C. Taylor Pickett, Chief Executive Officer of Omega.
The team will be led by Timothy Coburn. Tim has been in health care facility management for 30 years as a senior member of several national health care companies providing successful oversight to skilled nursing facilities, assisted living facilities, sub-acute care facilities including traumatic brain injury facilities and independent living communities around the country. Over the past six years he has been utilized as a manager of distressed health care properties on behalf of the U.S. Bankruptcy Courts and the State of Connecticut Superior Courts, as well as private investors. He was appointed Patient Care Officer by the U.S. Bankruptcy Court for the Haven bankruptcy in November of 2007 and is a licensed Nursing Home Administrator in Connecticut and Massachusetts.
'Omega plans to provide both working capital and capital expenditure credit facilities to the new provider so that the caregivers in these facilities can continue doing what they do best and that is providing quality care for the residents of these facilities,' continued Mr. Pickett.
'Since the Haven situation has been rapidly evolving, we have not completed our assessment of the financial impact of these actions,' continued Mr. Pickett. 'We expect to be in a position to provide an overview of the financial impact in connection with our second quarter earnings announcement.'
Omega is a real estate investment trust investing in and providing financing to the long-term care industry. At March 31, 2008, Omega owned or held mortgages on 235 healthcare facilities located in 28 states and operated by 26 third-party healthcare operating companies.
This announcement includes forward-looking statements. Actual results may differ materially from those reflected in such forward-looking statements as a result of a variety of factors, including, among other things: (i) uncertainties relating to the business operations of the operators of the Company's properties, including those relating to reimbursement by third-party payors, regulatory matters and occupancy levels; (ii) regulatory and other changes in the healthcare sector, including without limitation, changes in Medicare reimbursement; (iii) changes in the financial position of the Company's operators; (iv) the ability of operators in bankruptcy to reject unexpired lease obligations, modify the terms of the Company's mortgages, and impede the ability of the Company to collect unpaid rent or interest during the pendency of a bankruptcy proceeding and retain security deposits for the debtor's obligations; (v) the availability and cost of capital; (vi) the Company's ability to maintain its credit ratings; (vii) competition in the financing of healthcare facilities; (viii) the Company's ability to maintain its status as a real estate investment trust; (ix) uncertainties relating to Haven's bankruptcy process, and (x) other factors identified in the Company's filings with the Securities and Exchange Commission. Statements regarding future events and developments and the Company's future performance, as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements.
.
Hmm.........WHERE IS THE OUTRAGE?
The Washington Post says that experts are concerned about the growing problem of health care fraud, which is estimated to cost taxpayers over $60 billion each year.
The article notes that Medicare automatically pays most provider bills that are submitted with federally issued supplier numbers. The audit systems focus on overbilling and unorthodox treatment rather than fraud.
These circumstances allowed a high school dropout using a laptop computer to bilk the federal government out of $105 million.
Posted by Qui Tam at 12:45 PM
Newer Post Older Post Home Sponsored by
Phillips & Cohen LLP, which also sponsors the Tax Fraud Blog.
quitam.blogspot.com is presented as a service of Phillips & Cohen LLP (http://www.phillipsandcohen.com), the nation's most successful law firm representing whistleblowers nationwide in qui tam (False Claims Act) litigation.
whistleblower lawsuit
California school district joins qui tam suit agai...
L.A. Dept. of Water & Power files FCA suit
Government recovers $2 billion in health fraud in ...
House holds hearings on FCA amendments
Washington Post on health care fraud
► June (5)
Government sues Honeywell for defective bulletproo...
Hospice company will pay to resolve FCA suit
Walgreen's settles Medicaid drug fraud allegations...
Conference on whistleblower rights
Supreme Court rules in FCA case on subcontractor f...
► May (13)
Hartford Hospital settles cancer overbilling suit
Bid rigging in military personnel moving expenses
Florida dermatologist will pay $11 million for Med...
Medtronic unit settles False Claims Act suit
Baptist Health South Florida will pay $7.8 million...
Computer Sciences Corp. settles FCA suit
FCA case alleging customs fraud settles
Connecticut attorney general calls for False Claim...
U.S. joins qui tam suit against government contrac...
Federal government sues NJ cardiologists
New Orleans hospital settles FCA allegations
Government joins qui tam suit against California r...
Heartland Dental settles whistleblower suit
► April (8)
Manufacturer settles defective bulletproof vest la...
Florida Radiologist to Pay $7 Million to Resolve F...
Medicaid Dental Center resolves FCA suit
Geriatric care provider will settle FCA suit for $...
Wackenhut accused of overbilling Miami-Dade County...
Judiciary Committtee approves False Claims Act ame...
U.S. joins whistleblower suit against Ohio hospita...
Whistleblowers charge insurers overburden Social S...
► March (14)
Japanese drug company will pay $4 million to settl...
Whistleblowers seek to have flood insurance suit r...
Government focuses on managed-care fraud
Companies settle FCA suit alleging faulty jet part...
Psychiatrist to pay $1.1 million to settle FCA sui...
CVS Caremark will settle Medicaid drug fraud alleg...
Whistleblower suit alleges overbilling by Planned ...
Healthcare consulting firm settles Medicare fraud ...
Cathedral Healthcare System settles qui tam suit
Yale-New Haven Hospital to settle FCA suit
Northrop Grumman accused of defrauding Joint STARS...
Dallas school district settles FCA suit
Government joins whistleblower suit against South ...
Senate committee considers amendments to False Cla...
► February (6)
Supreme Court to hear arguments in whistleblower l...
Louisiana qui tam bill introduced
Whistleblower lawsuit alleges overcharging by Grai...
► January (8)
► 2007 (133)
► December (11)
► November (19)
► October (6)
► September (10)
► August (12)
► July (8)
► June (6)
► May (8)
► April (19)
► March (12)
► February (14)
► January (8)
► 2006 (113)
► December (14)
► November (15)
► October (8)
► September (8)
► August (13)
► July (9)
► June (10)
► May (10)
► April (6)
► March (8)
► February (8)
► January (4)
► 2005 (96)
► December (3)
► October (10)
► September (6)
► August (10)
► July (9)
► June (10)
► May (12)
► April (12)
► March (6)
► February (12)
► January (6)
► 2004 (72)
► December (16)
► November (10)
► October (7)
► September (12)
► August (18)
► July (9)
The article notes that Medicare automatically pays most provider bills that are submitted with federally issued supplier numbers. The audit systems focus on overbilling and unorthodox treatment rather than fraud.
These circumstances allowed a high school dropout using a laptop computer to bilk the federal government out of $105 million.
Posted by Qui Tam at 12:45 PM
Newer Post Older Post Home Sponsored by
Phillips & Cohen LLP, which also sponsors the Tax Fraud Blog.
quitam.blogspot.com is presented as a service of Phillips & Cohen LLP (http://www.phillipsandcohen.com), the nation's most successful law firm representing whistleblowers nationwide in qui tam (False Claims Act) litigation.
whistleblower lawsuit
California school district joins qui tam suit agai...
L.A. Dept. of Water & Power files FCA suit
Government recovers $2 billion in health fraud in ...
House holds hearings on FCA amendments
Washington Post on health care fraud
► June (5)
Government sues Honeywell for defective bulletproo...
Hospice company will pay to resolve FCA suit
Walgreen's settles Medicaid drug fraud allegations...
Conference on whistleblower rights
Supreme Court rules in FCA case on subcontractor f...
► May (13)
Hartford Hospital settles cancer overbilling suit
Bid rigging in military personnel moving expenses
Florida dermatologist will pay $11 million for Med...
Medtronic unit settles False Claims Act suit
Baptist Health South Florida will pay $7.8 million...
Computer Sciences Corp. settles FCA suit
FCA case alleging customs fraud settles
Connecticut attorney general calls for False Claim...
U.S. joins qui tam suit against government contrac...
Federal government sues NJ cardiologists
New Orleans hospital settles FCA allegations
Government joins qui tam suit against California r...
Heartland Dental settles whistleblower suit
► April (8)
Manufacturer settles defective bulletproof vest la...
Florida Radiologist to Pay $7 Million to Resolve F...
Medicaid Dental Center resolves FCA suit
Geriatric care provider will settle FCA suit for $...
Wackenhut accused of overbilling Miami-Dade County...
Judiciary Committtee approves False Claims Act ame...
U.S. joins whistleblower suit against Ohio hospita...
Whistleblowers charge insurers overburden Social S...
► March (14)
Japanese drug company will pay $4 million to settl...
Whistleblowers seek to have flood insurance suit r...
Government focuses on managed-care fraud
Companies settle FCA suit alleging faulty jet part...
Psychiatrist to pay $1.1 million to settle FCA sui...
CVS Caremark will settle Medicaid drug fraud alleg...
Whistleblower suit alleges overbilling by Planned ...
Healthcare consulting firm settles Medicare fraud ...
Cathedral Healthcare System settles qui tam suit
Yale-New Haven Hospital to settle FCA suit
Northrop Grumman accused of defrauding Joint STARS...
Dallas school district settles FCA suit
Government joins whistleblower suit against South ...
Senate committee considers amendments to False Cla...
► February (6)
Supreme Court to hear arguments in whistleblower l...
Louisiana qui tam bill introduced
Whistleblower lawsuit alleges overcharging by Grai...
► January (8)
► 2007 (133)
► December (11)
► November (19)
► October (6)
► September (10)
► August (12)
► July (8)
► June (6)
► May (8)
► April (19)
► March (12)
► February (14)
► January (8)
► 2006 (113)
► December (14)
► November (15)
► October (8)
► September (8)
► August (13)
► July (9)
► June (10)
► May (10)
► April (6)
► March (8)
► February (8)
► January (4)
► 2005 (96)
► December (3)
► October (10)
► September (6)
► August (10)
► July (9)
► June (10)
► May (12)
► April (12)
► March (6)
► February (12)
► January (6)
► 2004 (72)
► December (16)
► November (10)
► October (7)
► September (12)
► August (18)
► July (9)
James K. Happ , CFO at Columbia Homecare Group Inc. in Dallas
Getting ready to avoid confiscation?
Before his BIG TRIAL in October regarding the FRAUD at NCFE, PAY ATTENTION!!!
JULY 2, 2008 1:00PM
Healthcare veteran spends $540K for Palm Beach Gardens home
by Dan Fey, BlockShopper Staff
James K. Happ and his wife, Julie, bought a home at 112 Via Escobar Place in Palm Beach Gardens for $540,000 from Kenco Communities At Mirasol Inc. on June 24.
Mr. Happ has served as the president of Med Diversified Inc., a national provider of home and alternate site health care services. He was appointed to the position in Oct 2002, and has also served as the CEO of the company's subsidiary, Tender Loving Care Health Care Services, Inc.
He's previously served as the chief financial officer at the Columbia Homecare Group Inc. in Dallas and in various executive positions with Interim Services, Inc., a Florida-based staffing and home care company.
He earned his M.B.A. from Nova Southeastern University and his bachelor's in business administration from Miami University in Oxford, Ohio.
Home sales in Palm Beach Gardens have dropped 14.4 percent thus far in 2008. The median sale price has also dropped from $320,000 in 2007 to $290,000 so far this year.
Address: 112 Via Escobar Place
Buyer(s): James K Happ and Julie K Happ
Seller(s): Kenco Communities At Mirasol Inc
Sale date: 2008-06-24
Before his BIG TRIAL in October regarding the FRAUD at NCFE, PAY ATTENTION!!!
JULY 2, 2008 1:00PM
Healthcare veteran spends $540K for Palm Beach Gardens home
by Dan Fey, BlockShopper Staff
James K. Happ and his wife, Julie, bought a home at 112 Via Escobar Place in Palm Beach Gardens for $540,000 from Kenco Communities At Mirasol Inc. on June 24.
Mr. Happ has served as the president of Med Diversified Inc., a national provider of home and alternate site health care services. He was appointed to the position in Oct 2002, and has also served as the CEO of the company's subsidiary, Tender Loving Care Health Care Services, Inc.
He's previously served as the chief financial officer at the Columbia Homecare Group Inc. in Dallas and in various executive positions with Interim Services, Inc., a Florida-based staffing and home care company.
He earned his M.B.A. from Nova Southeastern University and his bachelor's in business administration from Miami University in Oxford, Ohio.
Home sales in Palm Beach Gardens have dropped 14.4 percent thus far in 2008. The median sale price has also dropped from $320,000 in 2007 to $290,000 so far this year.
Address: 112 Via Escobar Place
Buyer(s): James K Happ and Julie K Happ
Seller(s): Kenco Communities At Mirasol Inc
Sale date: 2008-06-24
Subscribe to:
Posts (Atom)
