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False Claims Act Update & Alert |
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Taxpayers
Against Fraud Education Fund | Washington, D.C. |
WWW.TAF.ORG
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n TAF Home Page n Previous Newsletters n Email editor
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Taxpayers Against Fraud
Taxpayers Against Fraud is pleased to announce Frederick M. Morgan, Jennifer M. Verkamp, Scott A. Powell, and Don McKenna as our Lawyers of the Year for 2009. Rick, Jennifer, Scott and Don spearheaded successful litigation against Healthways and Diabetes Treatment Centers of America in a declined case that took 15 years of litigation but eventually resulted in a $40 million settlement. Jennifer Verkamp and Rick Morgan have represented Scott Pogue since the beginning, first as lawyers at Helmer, Martins, Rice & Popham, and then in their own firm, Morgan Verkamp. Scott Powell and Don McKenna of Birmingham's Hare, Wynn, Newell & Newton joined Mr. Pogue's litigation team in 2002. This case started in 1994 when Scott Pogue was fired from his job as a marketing representative for Diabetes Treatment Centers of America, owned by parent company Healthways. The Justice Department declined intervention in Mr. Pogue's case in early 1995, and Mr. Pogue and his attorneys carried it forward. Initially filed in Nashville, the case was moved to Washington, D.C. in late 1999 as part of multi-district litigation against Columbia HCA, which was Diabetes Treatment Centers of America’s largest customer. The central allegation of Mr. Pogue's complaint was that Diabetes Treatment Centers of America violated the Anti-Kickback Act by paying kickbacks to more than 200 doctors in exchange for referring their patients to DTCA's hospital customers around the country. Diabetes Treatment Centers of America paid these kickbacks under the guise of "medical director” salaries or payments associated with hospital-based diabetes care centers. Diabetes Treatment Centers of America’s primary source of revenue was, in fact, the "management fees" paid by hospitals based on the company’s promise to increase the number of patients referred to a hospital. DTCA accomplished this increase in patients through their doctor kickback program. Over the course of 15 years, the Pogue Case made a lot of new and important law. In fact, this case resulted in 15 published opinions, several of which have been pivotal in establishing the now widely-accepted principle that violations of the Anti-Kickback Act can form the basis for a suit under the False Claims Act. In addition, the Pogue case was instrumental in clarifying the tolling provisions of the False Claims Act – an increasingly important area as cases drag on past the eight and ten-year mark. How did the Pogue case finally get resolved? The long story made short, is that extensive discovery against Diabetes Treatment Centers of America and its parent company, Healthways, led to a waiver of attorney-client privilege by the founder and CEO of the company during deposition testimony.
The resulting discovery of all
correspondence between Diabetes Treatment Centers of America and its
lawyers showed that lawyers for DTCA were concerned, right at the
beginning, that the company’s business plan of payments to doctors
violated the Anti-Kickback Act. The top management of Diabetes
Treatment Centers of America, however, decided to thumb their nose at
the risks associated with their fraud-based business model, as it was
the only real business plan they had. "In sum, the Court finds that relator has produced a wealth of evidence supporting his claim that defendant compensated physicians for their referrals to DTCA centers, and a reasonable jury could decide the issue in relator's favor.” Needless to say, settlement discussions quickly followed, and in the end the case was settled for $40,000,000, making it the third-highest recovery in an unjoined FCA case in history. To say this was a long-fought and hard-won case does not begin to do it justice. Fifteen years and 15 published opinions! This is the kind of warrior spirit we like to see at TAF, and why we are so very pleased to recognize Rick, Jennifer, Scott and Don as TAF’s Lawyers of the Year for 2009.
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