Monthly Archives: October 2013

SEC Rewards Whistleblower With $150,000 Payout

Written October 31, 2013 by Robert Lu

The Securities and Exchange Commission on October 30, 2013, announced an award of more than $150,000 to a whistleblower whose tips helped the agency stop a scheme that was defrauding investors.

The whistleblower, who did not wish to be identified, provided significant information that allowed the SEC to quickly open an investigation and obtain emergency relief before additional investors were harmed. By law under the Dodd-Frank Act, the SEC must protect the confidentiality of whistleblowers and cannot disclose any information that might directly or indirectly reveal an identity.  The SEC said the award amount represented 30 percent of the money collected by the SEC in the successful enforcement action, the maximum permitted under the law.

This is the sixth whistleblower to be awarded through the SEC’s whistleblower program since it began two years ago.

The largest award was announced earlier this month when a whistleblower was awarded more than $14 million.

Omnicare Agrees to Pay $120 Million to Settle Whistleblower’s False Claims Act Allegations

Written October 30, 2013 by Janine Arno

Omnicare, Inc., a Fortune 500 pharmaceutical provider based out of Cincinnati, Ohio, has agreed to pay $120 million to settle a whistleblower-initiated False Claims Act lawsuit.  Whistleblower Donald Gale, a former Omnicare pharmacist, filed the case in 2010 in the U.S. District Court for the Northern District of Ohio.  Gale alleged the company violated the False Claims Act when it submitted claims for payment to the federal government, under Medicare and other federal government health programs, that were induced in contravention to the Federal Anti-Kickback Statute.

Specifically, Gale claimed Omnicare illegally provided discounts to Skilled Nursing Facilities (“SNFs”) in exchange for reimbursable drug referrals.  His allegations focused on Omnicare’s practices in connection with Medicare Part A, which provides prescription drug coverage for patients in SNFs.  According to the complaint, Omnicare offered discounts and below-cost pricing for prescription drugs or supplies to the SNFs for their Part A patients in exchange for referrals of patients the company could bill against other public insurance programs, such as Medicare Part D.

Under the provisions of Medicare Part A, SNFs are provided a flat fee to cover all prescription costs; these provisions incentivize provider facilities to find the best price for prescription drugs.  Gale alleged that Omnicare engaged in a swapping scheme with SNFs, offering them a pricing plan for Medicare Part A drugs well below fair market value in return for referrals, or a “swap,” of the SNFs’ non-Part A patients to Omnicare.  Omnicare then billed these other patients (e.g. self-pay or Medicare Part D) the full price for their prescription drugs or other pharmacy services.

This type of activity is considered a kickback under the Federal Anti-Kickback Statute, which prohibits the receipt or paying of anything of value to induce the referral of federal health care program business.  Claims submitted for payment to the federal government under Medicare or other federal government health programs as a result of Anti-Kickback Statute violations constitute false claims for purposes of the False Claims Act.

The False Claims Act qui tam provisions allow private individuals, such as Gale in this case, to bring suit on behalf of the federal government where the private person has information that individuals and/or businesses have knowingly submitted or caused the submission of false or fraudulent claims to the United States government.  For their role in the False Claims Act litigation, a whistleblower is entitled to 15-30% of the federal government’s recovery and is protected from employer retaliation.

The $120 million settlement came a week before the case was set to go to trial.  Gale will get as much as $36 million of the settlement, with the remainder going to the federal government.  Omnicare has also agreed to pay  Gale’s attorney’s fees.


False Claims Act Under Attack By U.S. Chamber of Commerce

Written October 29, 2013 by Robert Lu

The U.S. Chamber of Commerce, in a report issued last week, says that the federal government is abusing its authority under the False Claims Act.  The Chamber said the government is using the law as a revenue generating tool, as opposed to a way to prevent and deter government fraud.  Lisa Rickard, the president of the Chamber’s Institute for Legal Reform, denounced the government for recovering nearly $5 billion in False Claims Act settlements on behalf of U.S. taxpayers in 2012, even though it is estimated that the government loses $60 billion ever year in Medicare fraud alone.

The Chamber’s report, drafted by two major defense firms, proposes several reforms for the False Claims Act – all of which are intended to minimize the ability of the government, and whistleblowers, to seek recovery for government fraud.  Among the notable proposed reforms is restricting qui tam lawsuits (or whistleblower claims) if the corporate defendant self-reports.  The Chamber also wants to reduce whistleblower rewards under the False Claims Act to as little as 1% in some instances.  Currently, a whistleblower is entitled to at least 15% of any government settlement, and sometimes as much as 30%.

For more information about the government’s ongoing work to stop fraud and to reward whistleblowers’ for their efforts under the False Claims Act, please visit the U.S. Dept. of Justice website.

Another Federal Court Rules in Favor of Internal Securities Whistleblower

Written October 22, 2013 by Janine Arno

Last week the U.S. District Court for the District of Massachusetts ruled in favor of a whistleblower who reported securities violations by his employer internally before reporting the violations to the SEC, holding that he was a protected whistleblower.  Ellington v. Giacoumakis, No. 13-11791-RGS, 2013 U.S. Dist. LEXIS 148939 (D. Mass. Oct. 16, 2013).  The whistleblower was fired from New England Investment & Retirement Group, Inc. (NEINV), an investment advisory firm, after he reported to NEINV’s compliance department that it was distributing misleading investment reports to clients.  Following his termination, the whistleblower reported the violations to the SEC and the SEC assessed civil penalties against the company for willful violations of the federal securities laws.

The whistleblower brought an action against NEINV alleging that it violated the Securities Whistleblower Incentives and Protection provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).  The anti-retaliation provisions of Dodd-Frank provide that no employer may discharge, demote, suspend, threaten, harass, indirectly or indirectly, or in any other manner discriminate against a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower in providing information to the SEC in accordance with the whistleblower rules, in assisting with an investigation or judicial or administration action of the SEC; or in making disclosures that are requires under Sarbanes-Oxley Act of 2002, the Securities Exchange Act of 1934 or other federal securities laws.

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South Carolina Hospital Ordered to Pay $237 Million in Whistleblower-Initiated Medicare Fraud Action

Written October 2, 2013 by Janine Arno

A federal judge has entered a $237 million judgment against South Carolina’s Tuomey Healthcare System (Toumey) in light of the jury’s finding that Tuomey submitted 21,730 claims in violation of the False Claims Act and the Stark Law, defrauding Medicare of more than $39 million.  The judgment includes monetary penalties under the False Claims Act of more than $119 million (calculated by multiplying the minimum False Claims Act penalty amount per violation of $5,500 by the 21,730 violations found by the jury) and treble punitive damages of more than $117 million (three times the jury’s verdict of $39 million).

The Stark Law prohibits a physician who has a “financial relationship” with a hospital from making a referral to that hospital for the furnishing of certain designated health services for which payment is made under Medicare.    A violation of the Stark Law, as in this case, can be the basis for False Claims Act liability.

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SEC Awards Record $14 Million to Whistleblower and Assures More Whistleblower Awards Are Coming

Written October 1, 2013 by Janine Arno

The SEC announced today that generic cialis it awarded an anonymous whistleblower more than $14 million whose information led to an SEC enforcement action that recovered “substantial investor funds” within less than a six month time period.  This is the largest whistleblower to date by the SEC’s Whistleblower Program.  In order to protect the anonymity of the whistleblower, the SEC has not revealed the individuals or companies that the action was against.

The SEC Whistleblower Program, authorized by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, began operating in August 2011. On August 21, 2012, the SEC issued its first award under the new SEC program.  The whistleblower helped the SEC stop a multi-million dollar Ponzi scheme and received an award of 30 percent – the maximum percentage payout allowed by law – of the amount collected in the SEC’s enforcement action against the perpetrators of the scheme.  The assistance by the whistleblower, who remained anonymous, led to a court ordering more than $1 million in sanctions.

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