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New York Whistleblower And Commercial Litigation Blog

False Claims Act case allowed for undisclosed body armor defects

A False Claims Act lawsuit has been revived involving the materials supplier Toyobo and the now-defunct Second Chance Body Armor Inc., which produced bulletproof vests that they knew could be defective. The federal General Services Administration brought a fraudulent inducement claim against the companies in 2015, but a prior federal judge had granted summary judgment (a decision without trial) to the manufacturers and then ruled again in their favor in 2016.

On a motion for reconsideration, a new federal judge ruled that the case can go forward. What the previous judge had failed to appreciate, the new judge ruled, was that the GSA would never have purchased the defective bulletproof vests if the companies had disclosed known defects as required by law. This is the essence of fraudulent inducement to enter into a contract.

Supreme Court to rule on how Dodd-Frank affects whistleblowers

The U.S. Supreme Court recently announced that it will review the application of the Dodd-Frank Act to whistleblowing activity in the financial sector. The vice president of a San Francisco-based company was fired when he told senior management at his firm that his supervisor had apparently done away with some internal controls, which violated securities law.

He sued for unlawful retaliation under Dodd-Frank, which encourages people to blow the whistle on securities law violations. His employer countered that he wasn't eligible for whistleblower protection because he hadn't reported his claim to the Securities and Exchange Commission.

400+ healthcare professionals accused of Medicare/Medicaid fraud

The Justice Department has just announced what it calls the "largest health care fraud takedown operation in American history." 412 doctors, nurses, pharmacists and other licensed medical professionals have been charged with a massive kickback scheme involving the prescription of opioid medications. The scheme allegedly involved $1.3 billion in false billing to Medicare, Medicaid and TRiCARE insurance, and people were charged in 41 federal districts.

Attorney General Jeff Sessions lamented that the healthcare professionals "have chosen to violate their oaths and put greed ahead of their patients."

Whistleblower receives $9.2 million in False Claims Act case

In a case quite similar to a case we settled, the Pacific Alliance Medical Center, a hospital in Los Angeles, has agreed to settle allegations that it paid illegal kickbacks to doctors and submitted false claims to Medicare and Medicaid. The hospital has agreed to pay $31.9 million to the federal government, which includes $9.2 million for a former manager who blew the whistle. The company will also pay $10 million to the state of California.

The hospital disguised the kickbacks it was paying to doctors by subleasing space from them at above-market rates. The hospital and the company that operates it also set up a shared marketing agreement with physicians, paying them thousands of dollars a month in referral fees.

Penalties associated with violations of the False Claims Act

Under the False Claims Act (FCA), the government and private parties alike have an opportunity to sue anyone who fraudulently has made a claim for government-regulated funds. 

Some examples of violations of the FCA include a company or individual filing a Medicare claim for services not rendered or a defense contractor requesting paynment for wages for hours that employees have not worked. In each of these cases, if it can be proven that the offender willfully filed a fraudulent claim for government payment, then the offender can be penalized severely for doing so.  

Besides having to return the fraudulently received monies, offenders may also be held responsible for a monetary penalty for each fraudulent claim submitted.

The University of Rochester is ordered to repay Medicaid $100,000

The University of Rochester's Medical Center (URMC) has agreed to reimburse both the state and federal governments the $113,722.10 that they are alleged to have illegally pocketed. URMC is alleged to have violated both the New York False Claims Act as well as federal law when it improperly used a billing code in filing claims through its Flaum Eye Institute.

In this instance, URMC is alleged to have improperly used the billing modifier 25. Authorities state that the use of this code can result in two independent charges for services, for example, an evaluation and procedure, even though they happened on the same day.

This is exactly the kind of activity that whistleblowers can prevent through the False Claims Act.

New York False Claims Act and tax fraud Qui Tam litigation, P.2

Last time, we mentioned that some states are currently looking at New York's whistleblower statute as a possible model for prosecuting tax fraud. As we noted, there are currently nine states which allow whistleblowers to pursue Qui Tam cases based on tax fraud. Not surprisingly, efforts to expand False Claims Act coverage to tax code violations are not universally supported.

Opponents of modifying state False Claims Act laws to allow for Qui Tam lawsuits based on tax fraud say that this will increase the possibility of nuisance suits--lawsuits filed for their ability to generate negatively publicity or for their settlement potential. 

However, based on the success of New York's tax fraud qui tam law, it is clear that the law benefits the state and the whistleblower.  

Portrait of a whistleblower

What kind of person contemplates blowing the whistle on his (or her) organization?

In the movies, whistleblowers are typically portrayed as heroic figures - risk-takers, with nerves of steel, ethical above all else.

In real life, it's not so black and white. In our experience, whistleblowers are just normal people, who want the usual things from employment - stability, security, food on the table.

Have you noticed time discrepancies in Medicaid billing?

There are many different forms of fraud that involve billing Medicaid. In some cases, a doctor, billing specialist or medical business will intentionally bill for drugs, procedures or services that were never administered or performed. In other cases, doctors or dentists perform unnecessary medical or dental procedures on unwitting patients. One of the less known forms of Medicaid fraud is time theft, where a doctor, therapist or other professional bills for time when no services were provided to the client.

The person or parties responsible are often prosecuted if the government discovers the fraud. Those who knew about the fraud but did nothing could also face charges. While calling attention to illegal practices by your employer may result in retaliation, mistreatment and firing of whistleblowers is also illegal. If you believe that your employer or someone you work with is committing time theft or another form of Medicaid billing fraud, you will want to work with an attorney who understands the False Claims Act.

New York False Claims Act and tax fraud Qui Tam litigation

As we've previously written on this blog, whistleblower or Qui Tam litigation is a means for those who have inside information regarding fraud to file a claim on behalf of the government. Qui Tam litigation allows whistleblowers to assist in holding the offending business liable for fraud and to obtain a reward for doing so.

Qui Tam litigation can occur at both the state and the federal level. At present, 29 states have established False Claims Act measures. Many of these laws are modeled after the federal measure and most are aimed largely at Medicaid fraud. At present, New York is one of nine states that also allow whistleblowers to pursue tax code fraud claims on behalf of the state.

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