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Taxpayers Against Fraud Education Fund is a nonprofit, public interest organization dedicated to combating fraud against the Federal Government through the promotion and use of the Federal False Claims Act and its qui tam provisions.

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Common
Types of Fraud:


 


Fast Facts

about the FCA
 


The Government Counts on Whistleblowers: 
More than 80 percent of the False Claims Act cases that are now pursued by the U.S. Department of Justice are initiated by whistleblowers.
 


Cheaters Pay Whistleblower Awards:
Companies cheating the U.S. Government pay whistleblower rewards – not one dime comes from U.S. taxpayers.  The reason for this is that the False Claims Act calls for triple damages so that the Government can be made whole, not only by recouping the cost of whistleblower awards, but also by recovering the cost of investigations, prosecutions, and lost interest.
 


Big Cases Require Big Investments:
Big fraud cases prosecuted under the False Claims Act often require many years of litigation and investigation.  For example, the whistleblower in the first Columbia-HCA fraud case spent 13 years pursuing his False Claims Act lawsuit.  The law firm that spearheaded this case invested more than 85,000 hours in the case.  In the end, the various frauds perpetrated by Columbia-HCA returned over $1.5 billion to the U.S. Treasury.
 


Frivolous Lawsuits are Discouraged:  Because most False Claims Act lawyers work on a contingency basis, they only get paid if they win. This means that they are unlikely to invest time, money and energy building a case that they themselves do not feel will be productive.  In addition, under the False Claims Act, a complainant can be required to pay the defendants attorney’s fees if the court finds that the claim was frivolous or brought primarily for purposes of harassment.
 


The False Claims Act Provides Some Employment Protections: 
If an employee is fired, demoted, harassed, or otherwise discriminated against for filing a False Claims Act suit, the law provides for reinstatement, double back pay, and compensation for special damages, including litigation costs and reasonable attorneys’ fees.
 


Drug Company Frauds are Pervasive and Large: 
Over 500 pharmaceutical fraud cases are now under investigation by the U.S. Department of Justice under the False Claims Act. 

Settlement of just 14 drug manufacturing cases (all those resolved to date) has returned over $3.45 billion to the U.S. Government and the 50 states.

 


Routine Mistakes and  Errors are Not  Prosecuted Under the  False Claims Act:
The False Claims Act is not used to correct minor billing mistakes or errors, as these frauds are not systematic and rarely amount to truly large sums of money.   


 

Major Cases Under Watch:  


Pratt & Whitney
The Government awaits a judge's decision in a False Claims Act case involving hundreds of millions of dollars allegedly stolen from U.S. taxpayers by United Technologies and Pratt & Whitney during the Alternate Fighter Engine (AFE) program of the 1980s. 
 

Medco Health Solutions:  A June trial date has been set in a large case involving Medco Health Solutions.  In this case, the Government has joined a whistleblower lawsuit that alleges that Medco defrauded hundreds of millions of dollars from Medicare, Medicaid and other federal health care programs. 

Mario Gabelli:  A June trial date has been set in a case involving Wall Street financier Mario Gabelli and various companies he owns.  The charge is that Mr. Gabelli and partners created various front companies to act as "small business" investors in a scheme to purchase radio bandwidth at a discount.  The bandwidth was later resold, netting Gabelli and partners more than $250 million profit. 
 

Tenet Healthcare:  A massive fraud case against Tenet Healthcare involving Medicare "outlier" payments remains under investigation.  Tenet is known to have reserved over a billion dollars in expectation of a settlement in this and other federal and state cases.  An unrelated criminal case against Tenet is now before a jury in San Diego.  However that case is decided, some analysts expect Tenet to move to settle the Federal outlier case. 

Pharmaceutical Fraud:  Only 14 pharmaceutical fraud cases that have been settled so far, but they have returned well over $3.44 billion to the U.S. Government.  More than 150 other cases, involving more than 500 drugs, are now under investigation.  In all likelihood, at least one or two large pharmaceutical cases will be settled sometime in the next 9 months, and possibly more.

Dialysis Fraud: Most of the major renal care facilities in the country are now under investigation for fraud.  One large case, against Gambro, has already been settled for $325 million, but investigations against Fresenius, DaVita, Renal Care Group, Quest Diagnostics, and Bone Care International are still underway.




 

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TAF E-News E-News Index Search Site

Latest News & Updates from TAF
l Oil Lease Fraud
l DoJ Sues Dey
l FCA Lawyer of the Year
 
l AWP in Plan English
l Whistleblower of the Year
l U. of Phoenix Case

Supreme Court to Hear Rockwell Case
    In 1999, the U.S. and Jim Stone won a $4.2 million False Claims Act jury verdict against Rockwell International which was defrauding the U.S. Government concerning hazardous waste disposal at the Rocky Flats Nuclear Weapons Plant in Colorado. 
     In 2002, Rockwell appealed the verdict and lost.  Rockwell then asked for a rehearing and lost for the third time in 2004

     Now, almost 20 years after first blowing the whistle, and despite winning his case,
Jim Stone's case is going to the U.S. Supreme Court. 
     The issue?  Was Jim Stone an "original source" as defined under the False Claims Act?
     It's worth noting what is NOT being argued in this case.  There is no question that Rockwell International is guilty of ripping off the American people -- their second offense under the False Claims Act.  Nor is there any question that Jim Stone was the first person to bring to the Government's attention the fact that nuclear waste was being improperly disposed of at Rock Flats due to defects in the "pondcrete" manufacturing process.  Finally, there is no question that the Government amended and joined Jim Stone's original complaint when it finally decided to take Rockwell International to trial.  The only question is whether Rockwell International -- the guilty party -- can determine who is, and who is not, an original source in a case that has been joined by the U.S. Department of Justice.  
     Arguments in the case are expected to be heard December 5th.

"The Good Guys" In Brief:  Two citizens reporting fraud against U.S. taxpayers; the chief lawyer for the United States Government; the U.S. Senator that co-authored the 1986 False Claims Act amendments, and; the leading nonprofit organization representing taxpayer interests in the False Claims Act arena.

"The Bad Guys" In Brief:  A repeat fraud-feasor; an aggressive litigator for corporate interests; a trade association for corporations; a pharmacy trade association whose members have repeatedly engaged in fraud against U.S. taxpayers; a national defense trade association whose members have repeatedly engaged in fraud against U.S. taxpayers, and; a hospital trade association whose members have repeatedly engaged in fraud against U.S. taxpayers.

 

Omnicare Settles for $49.5 Million
Omnicare, Inc., one of the nation's largest long-term care pharmacy companies, has agreed to pay $49.5 million to settle a False Claims Act case filed by two whistleblowers who said Omnicare was substituting tablets for capsules when filling prescriptions for generic Zantac, Buspar and Prozac.  This is the second large False Claims Act case in a month settled by Omnicare. >> To read more

Contractors Must Explain FCA
Beginning January 1, 2007, companies that do $5 million a year or more in Medicaid business must include in their personnel manuals a detailed description of the company's policies and procedures for preventing fraud, and a detailed explanation of the rights of whistleblowers and the provisions of the Federal and state False Claims Acts.  >> To read the law (Section 6032 of S.1932, the Deficit Reduction Act of 2005)

In Plain English: Serious Trouble
U.S. District Judge Patti Saris has ruled that "Average Wholesale Price" (AWP) means what the dictionary says, and that it is not a "term of art." Though this ruling comes in a  private class action lawsuit in Boston, it will also hold true in False Claims Act cases waiting to come to trial in this same court. The bottom line:  Pharmaceutical companies are in serious trouble.  More than 40 companies face Average Wholesale Price False Claims Act cases.   >> To read more

Amerigroup to Pay $144 Million
Amerigroup was found liable, in a trial by jury, in the largest qui tam False Claims Act judgment ever levied -- $144 million with an additional $190 million in statutory fines possible. Amerigroup was accused of discriminating against pregnant women and other potentially high-risk patients who were supposed to be recruited into a state-sponsored Medicaid HMO. >> To read more
InterMune to Pay $40 Million
InterMune Inc. has agreed to pay $36.9 million to settle charges the company illegally promoted Actimmune to treat lung scarring despite the fact that the drug was not FDA-approved for that use.  A criminal prosecution has been deferred for two years, contingent on the company cooperating with the investigation and implementing changes to its compliance policies. >> To read more
Medco to Pay $155 Million
Medco Health Solutions Inc. will pay $155 million plus legal fees to settle three False Claims Act lawsuits previously joined by the Federal Government.  The settlement covers a wide variety of cheats, including:  shorting prescriptions,  canceling  prescriptions to avoid paying non-performance penalties, soliciting and accepting kickbacks from pharmaceutical manufacturers to favor their drugs, and paying kickbacks to health plans to obtain business.  The relators will receive $23 million as their award for helping the Government achieve this recovery.  >> To read more

Hospital Consultant Nailed
for $64.25 Million by Court

The District Court for the Northern District of Illinois has ordered that a health care consultant who effectively controlled a teaching hospital, first as CEO until 1997 and later through a management company, must repay three times the amount of Medicare and Medicaid claims submitted by the hospital from 1995 through 2000, plus a $7,500 penalty for each claim.  >> To read more


Lighting the Fuse on Gunpowder Fraud
For decades, the
St. Marks Powder company, has been producing gunpowder for the military but not testing it as required.  St. Marks, a division of General Dynamics, sells about $100 million worth of gunpowder every year, most of it used in small-caliber weapons. General Dynamics rushed to self-disclose the fraud when they found out a whistleblower might come forward.  Under the FCA, a company is required to pay double damages, rather than triple damages, if they self-disclose.  >> To read more

Omnicare settles for $52 Million
Omnicare has agreed to pay the state of Michigan $52.5 million to settle a civil suit filed against its subsidiary, Specialized Pharmacy Services.  The settlement is the largest Medicaid fraud recovery in Michigan's history. The criminal case against Daniel Lohmeier, former president of Omnicare's Specialized Pharmacy Services unit in Michigan, remains in place and is moving forward.  Rumor has it that Omnicare may be working towards a global settlement on other charges.  >> To read more


Record Year for Fraud Recoveries
Fiscal Year 2006 will be a record year for False Claims Act recoveries, says Taxpayers Against Fraud, which estimates total settlements and judgments will top $3.142 billion. This figure does not include more than $200 million in settlements which have been announced by companies but not yet green-lighted by the U.S. Department of Justice.

Notes Jim Moorman, President of Taxpayers Against Fraud, "We have seen extraordinary fraud settlements this year. The whistleblowers, investigators, and private and Department of Justice attorneys that have worked on these cases deserve a huge thank you from the American people." also said that the numbers should grow as activity increases in states that pass their own False Claims Acts. >> To read more
 

              Top FCA Cases in the first 10 Months of FY 2006   

Company

Amount

Date

Serono  

$567 million

10-17-2005

King Pharmaceutical   

$124 million

11-01-05

Saint Barnabas Hospitals 

$265 million

6-15-06

Tenet Healthcare

$900 million

6-29-06

Mario Gabelli and partners

$130 million

7-9-06

Schering-Plough

$435 million

8-26-06









 


FCA Case Filed Against Oil Companies
Four government auditors who monitored oil and gas leases on federal property say the Interior Department tried to squelch their efforts to recover millions of dollars stolen from U.S. taxpayers. The scam involved the theft of at least $30 million in oil revenue underpayments from companies  pumping oil from publicly owned waters in the Gulf of Mexico.  The four whistleblower, who filed four False Claims Act cases in Oklahoma named a total of more than two dozen companies.  A fifth FCA complaint has been filed by another auditor in Colorado.  That case is against Kerr-McGee, the company was made infamous by their actions against whistleblower Karen Silkwood back in the 1970s. >> To read more | Sept. 26, 2006

A Field Guide to Health Fraud

The Office of the Inspector General of HHS has released its 2007 "work plan."  A close reading of this publication is a bit like reading a field guide to fraud prosecutions in the year ahead. OIG IG Dan Levinson recently told TAF that HHS has one auditor for every billion dollars in HHS spending. >> To read more  (PDF) False Claim Act investigations and prosecutions in the health care arena return $15 back for every $1 invested.
| Sept. 26, 2006

US Joins Suit Against Dey

Dey Pharmaceuticals, a unit of Merck, has been accused by the U.S. Dept. of Justice of overcharging Medicaid by lying about the Average Wholesale Price (AWP) of prescription drugs.  DoJ alleges Medicaid paid over $500 million more than it should have due to Dey's price deceptions. The Dey lawsuit is the second major AWP case joined by DoJ. The first case was against Abbott. >> To read more | Sept. 19, 2006

California False Claims Act: 
Arbitrator Awards $37 Million
An arbitrator has ruled that Navigant Consulting Inc. must pay the city of Vernon, California over $37 million to resolve a case brought under the California False Claims Act.  The case involves a dispute related to electric distribution maintenance services that a Navigant subsidiary provided to the city before Nov. 30, 2005.  To read more | Sept. 19, 2006

TAF's Whistleblower of the Year
Taxpayers Against Fraud has named Ven-a-Care of the Florida Key (Mark Jones, Luis Cobo, Dr. John Lockwood, and Zach Bentley) whistleblowers of the year for their extraordinary work in combating fraud against the Federal Government in the prescription drug arena. In 2005, GlaxoSmithKline settled a case brought by the Ven-a-Care whistleblowers for the sum of $150 million.  The case involved fraudulent misreresentation of the "Average Wholesale Price" of the anti-nausea drugs Zofran and Kytril.  The Ven-a-Care relators have, so far, helped return more than $700 million stolen from the American people.  >> To read more
| Sept. 10, 2006

TAF's FCA Lawyer of the Year
Taxpayers Against Fraud has named  Orlando, Florida lawyer Alan Grayson Lawyer of the Year for 2006 for his work in the Custer Battles case which sought to recover money stolen from the American people through fraudulent billing in Iraq.  In a trial by jury, a jury awarded maximum damages on every single point -- a total of more than $10 million.  The case is currently on appeal.  >> To read more | Sept. 10, 2006

U. of Phoenix Case Moves Forward
The U.S. Court of Appeals for the Ninth Circuit has reinstated a massive False Claims Act lawsuit against the University of Phoenix which, with 180 campuses and over 310,000 students nationwide, is now America's largest accredited university. The overwhelming majority of students at the U. of Phoenix have federally funded tuition loans and grants, and last year U.S. taxpayers paid, and the University of Phoenix obtained, $1.7 billion in federal education funds. Yet many students who enroll at the U. pf Phoenix never complete their education, and many are unable to even finish the classes they signed up for. >> To read more
| Sept. 19, 2006 

Schering to Pay $435 Million
Schering-Plough has agreed to pay a total of $435 million to resolve criminal charges and civil liabilities in connection with illegal sales and marketing programs for brain tumor medication Temodar, and Intron-A which is used in the treatment of bladder cancer and hepatitis C. The Schering settlement also covers best price violations related to Claritin RediTabs (an antihistamine), and K-Dur, which is used in the treatment of ulcers. Past False Claims Act settlements by Schering include $345 million paid for best price violations (Claritin), and $27 million paid for Average Wholesale Price violations (albuterol).  Overall, the pharmaceutical industry has paid $4 billion to settle False Claims Act violations.  >> To read more  | August 29, 2006

HHS Issues FCA Guidelines

The Federal Register has published the "OIG Guidelines for Evaluating State False Claims Acts." The Guidelines (read here) lay out a clear roadmap for states wishing to receive additional funds under the Deficit Reduction Act (DRA).  The word is spreading that millions of Medicaid dollars are now available to states that have a DRA-qualifying False Claims Act.  TAF's Model State False Claims Act appears to meet or exceed all of the OIG Guidelines, and can be read >> here. (PDF) | August 29, 2006

PowerPoint on
State FCA Benefits
Jim Moorman, President of TAF, and Roderick Chen, Office of Counsel to the HHS Inspector General, delivered a PowerPoint presentation to the National Conference of State Legislatures meeting in Nashville. >>
To see the PowerPoint on how states can recover stolen money | August 29, 2006

Fighting Healthcare Fraud:

Whistleblower Statute Returns
$15 for Every $1 Invested

A new TAF report by economist Jack Meyer, concludes that every dollar invested by the U.S. Government in investigation and prosecution of federal health care fraud returns $15 back to the American people -- a phenomenal rate of direct return that does not even factor in the benefits of fraud  deterrence.  >> To read more | August 2, 2006


Supreme Court Takes 17-Year Old Case
In 1999, the U.S. and Jim Stone won a $4.2 million False Claims Act jury verdict against Rockwell International which was defrauding the U.S. Government concerning hazardous waste disposal at the Rocky Flats Nuclear Weapons Plant in Colorado.  Rockwell appealed the verdict, lost again in 2002, asked for a rehearing, and lost for the third time in 2004.  Now, almost 20 years after first blowing the whistle, and despite winning his case, 80-year old Jim Stone's case is going to the Supreme Court.  >> To read Supreme Court briefing on US ex rel. Stone v. Rockwell International


Medtronic to Pay $40 Million

Medtronic will pay $40 million to dismiss a
False Claims Act lawsuit against it filed by Jacqueline Kay Poteet, a senior manager of travel services for Medtronic who accused the company of paying over $50 million in kickbacks to doctors in order for get them to use Medtronic medical devices. >> To read more

Gabelli Settles:  $130 Million
Wall Street money manager Mario Gabelli and partners have agreed to pay $130 million to resolve allegations of fraud in connection with FCC bandwidth auctions.  The government initially declined to intervene in the case which was pursued by the whistleblower and his lawyers for four year before the Department of Justice changed its mind.  FCC Commissioner Jonathan Adelstein has said he wants Gabelli banned from future FCC auctions.  >> To read more
 

Odyssey to Pay $13 Million Odyssey HealthCare, a hospice care provider with 82 Medicare-certified programs in 30 states, has agreed to pay $13 million to settle a False Claims Act case initiated by two whistleblowers.  As part of the settlement agreement, Odyssey will put in place a corporate integrity agreement that will incorporate a first-of-its kind clinical review protocol for end-of-life decisions.  >> To read more

Tenet Settles for $900 Million
Tenet Healthcare, the second largest hospital chain in the U.S., has agreed to pay the Federal Government $900 million for billing violations that include manipulation of outlier payments to Medicare, as well as kickbacks, upcoding, and bill padding.  The DoJ press release noted that the settlement was based on the company's ability to pay.  Several of the issues resolved by this settlement were brought to the attention of the government as a result of lawsuits filed by whistleblowers under the Federal False Claims Act.  >> To read more

Tenet's History of Business Plan Fraud

National Medical Enterprises' (NME), Tenet's predecessor, was formed in 1964 when three lawyers recognized the potential for profit in the new Medicare system. In 1994 NME was nailed for the largest health care fraud scam in history, and paid $379 million under the False Claims Act and another $214 million to settle state claims, with another $100 million going to pay private civil cases.  NME proceeded to sell off many of its hospitals, renamed itself "Tenet" to reflect "its core business philosophy" and went on to conduct even more fraud scams. >> To read more

St Barnabas Hospital Pays $265 Million

St. Barnabas Healthcare, a nonprofit chain of eight hospitals in New Jersey, has agreed to pay $265 million
to settle a False Claims Act lawsuit filed by a pair of whistleblowers. The case dealt with "outlier" Medicare payments which a hospital can claim if a procedure is particularly difficult or complex.  St. Barnabas generated 41% of its total inpatient Medicare revenue from outlier payments as compared to the national average of 4.75%. The government estimated damages in the St. Barnabas case at $630 to $700 million, but the settlement amount was based on St. Barnabas' ability to pay. >> To read more 
>> To read the complaint
| June 20, 2006
The Scope of Outlier Payment Chicanery
The $265 million St. Barnabas settlement (see above story) may be just the edge of the wedge on outlier payments.  Some hospitals and hospital chains found they could easily manipulate Medicare in order to generate millions of dollars in phony claims.  Along with Tenet Healthcare, where a "global" settlement of well in excess of a billion dollars is reportedly in the works, consider these numbers:
  • Robert Wood Johnson University Hospital at Hamilton (N.J.) received $18.2 million in outlier payments, representing 44.2% of its inpatient Medicare revenue;
  • Kimball Medical Center in Lakewood, N.J., received 63% of its inpatient Medicare revenue from outlier payments -- more than any other hospital.
  • Four-hospital Cathedral Healthcare System, in Newark, received $30.4 million, or 26.6% of its Medicare inpatient revenue from outlier payments;
  • Hackensack (N.J.) University Medical Center, received $35.6 million, or 20.4% of its Medicare inpatient revenue from outlier payments;
  • Methodist Hospital in Houston netted $41.4 million, or 23.8% of its Medicare inpatient revenue from outlier payments;
  • Crozer-Keystone Health System in Springfield, Pa., received $38.5 million, or 32.1% of its Medicare inpatient revenue from outlier payments | June 20, 2006

TAF's Moorman at ABA Institute
On June 15th, Jim Moorman, President of Taxpayers Against Fraud, spoke at the 6th ABA National Institute on the False Claims Act.  The title of his lunch-time presentation:  The Whistleblower's Experience:  The High Cost of Integrity.  >> To read the speech | June 20, 2006

Honeywell to Pay $2.6 Million
Honeywell has agreed to pay the United States $2.6 million to resolve allegations the company violated the False Claims Act by not properly testing electrostatic protective packaging used on over 186,000 sensitive parts used by the Department of Defense and NASA.  >> To read more | June 20, 2006

Baxter to Pay $8.5 Million
Baxter International Inc., has agreed to pay $8.5 million to settle a False Claims Act lawsuit charging the company with falsely reporting the prices of drugs to the Texas Medicaid system.  The Texas attorney general joined a suit against Baxter, Abbott Laboratories and B. Braun Medical Inc. in 2004.  The Abbot and Braun cases are still pending.  >> To read more | June 13, 2006

Feds Say NY Fraud Fighting is Weak
The Centers for Medicare and Medicaid Serices has issued a report that says New York's fraud-fighting efforts are inadequate.  Notes the report: "Being in compliance with the minimum regulatory standards is not the same thing as having an effective fraud and abuse program." The federal review found the staff assigned to Medicaid anti-fraud work in New York has dropped more than 60 percent, from 950 in 1998 to 584 in 2004. >> To read more | June 7, 2005

Nevada Court Upholds Best Price
A District Court has denied a motion to dismiss a False Claims Act lawsuit filed against Merck by the Attorney General of Nevada.  The Attorney General's office argues that a discounted price for drugs which is tied to purchases is not “merely nominal” and is therefore not exempt from the Medicaid "best price" statute.  >> To read the opinion | June 6, 2005

Government to Intervene Against Abbott
The United States has intervened in a whistleblower suit filed against Abbott Laboratories Inc., alleging the company engaged in a scheme to report fraudulent and inflated prices for several pharmaceutical products, reporting prices that were more than 1000 percent higher than the actual sales prices.  Medicare and Medicaid reimbursed Abbott's customers in excess of $175 million for the drugs which are the subject of the complaint. >> To read more
| May 23, 2005
 

Past Fraud Charges Against Abbott
Abbott Labs and its affiliates have ripped off Medicare and Medicaid in the past:
w In October 2001, TAP Pharmaceuticals, a joint operation of Abbott Labs and Takeda Pharmaceuticals, agreed to pay $875 million to resolve criminal charges and civil liabilities in connection with fraudulent pricing and marketing of the cancer drug Lupron. 
w In July of 2003, Abbott Labs pled guilty to obstructing a criminal investigation and defrauding the Medicare and Medicaid programs, and agreed to pay $400 million to resolve civil claims as well as pay a criminal fine of $200 million.
w On January 3, 2003 a California False Claims Act case against Abbott came out from under seal charging the company with systematically defrauding California's Medicaid program by inflating prices for various drugs in order to "market the spread" -- a common business plan fraud in which drug companies report an entirely fictitious "Average Wholesale Price" to Medicaid while selling the drugs at deep discounts to WalMart, CVS, Walgreens and other national chains in order to capture market share.
 
Drug Abbott 2001 Red Book AWP DOJ Determined Actual AWP Difference Spread
Acylovir $1047.38 $349.05 698.33 200%
Dextrose $239.97 $3.91 $236.06 6,037%
Diazepam $28.50 $2.03 $26.47 1,304%
Gentamicin Sulfate $64.42 $0.51 $63.91 12,531%
Tobramyn Sulfate $150.52 $2.94 147.58 5.020%
Vancoymycin Hydrochloride $382.14 $4.98 $377.16 7,574%








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