Category Archives: False Claims Act

Purchasing a Rolls-Royce Is Not a Permissible Use of PPP Funds

Federal prosecutors continued to quickly respond to PPP loan fraud, bringing two additional cases that allege clear misuse of the funds intended for small businesses.  In one case, prosecutors in Georgia charged reality TV personality Maurice Fayne, aka “Arkansas Mo” of “Love & Hip Hop: Atlanta” fame, with bank fraud for allegedly using $1.5 million of a $2 million PPP loan to maintain his luxury lifestyle. … More

DOJ Brings First Payroll Protection Program-Related Criminal Case

On Tuesday, May 5, the Department of Justice (DOJ) filed charges in the federal District Court of Rhode Island against David A. Staveley and David Butziger for conspiracy to make a false statement and conspiracy to commit bank fraud in connection with loan applications made under the federal government’s Payroll Protection Program (PPP).  The Complaint alleges that Staveley of Andover, Massachusetts, and Butziger of Warwick, Rhode Island,… More

Federal Prosecutors Ask Massachusetts Hospitals to Help Root Out Fraud Related To COVID-19

The United States Attorney for the District of Massachusetts is proactively seeking to find, investigate, and prosecute unlawful attempts to exploit the COVID-19 pandemic and is asking hospitals to assist.  U.S. Attorney Andrew Lelling sent a letter to leaders of Massachusetts hospitals asking them to report any “individuals and companies that may have acquired vital medical supplies in excess of what they would reasonably use, or for the purpose of charging exorbitant prices.”  The Secretary of Health and Human Services has designated 15 categories of supplies as “scarce,” thereby enabling prosecutors to seek certain civil and criminal enforcement remedies against anyone accused of hoarding or gouging prices for those supplies.  … More

White Collar Year in Preview: False Claims Act Trends in 2020

Editors’ Note: This is the fourth in our start-of-year series examining important trends in white collar law and investigations in the coming year. Our previous entry discussed  anti-corruption trends in 2020. Up next: a look at State Attorney General trendsLook for additional posts throughout the month of January.

More than halfway into the Donald Trump administration,… More

White Collar Year in Preview: Healthcare Fraud Trends in 2020

Editors’ Note: This is the second in our start-of-year series examining important trends in white collar law and investigations in the coming year. Our previous entry discussed SEC enforcement in 2020. Up next: a look at trends in anti-corruption and under the Foreign Corrupt Practices Act. Look for additional posts throughout the month of January.

2019 saw ongoing action in the healthcare space.… More

Second Circuit Revives False Claims Act Suit Stemming from ‘08 Crisis, Finding Federal Reserve Banks Were “Agents” of U.S.

In United States ex rel. Kraus v. Wells Fargo & Co., No. 18-1746 (2d Cir. Nov. 21, 2019), two employees of banks later acquired by Wells Fargo alleged a “pervasive pattern” of fraud in connection with the securitization and sale of toxic mortgages.  When the economy imploded, Wells Fargo looked for help from the Federal Reserve Banks (“FRBs”).  In their False Claims Act suit,… More

Challenge to Attorneys’ Fees in False Claims Act Cases

Thanks to inexact language in a settlement agreement, a for-profit hospital chain can challenge whistleblowers’ eligibility for attorneys’ fees under the False Claims Act (“FCA”).  The single sentence that spawned nearly 5 years of litigation was: “All Parties agree that nothing in this Paragraph or this Agreement shall be construed in any way to release, waive or otherwise affect the ability of CHS to challenge or object to [whistleblower’s] claims for attorneys’ fees,… More

Life Sciences Investors Beware: Private Equity Firm Settles Federal False Claims Act Suit Regarding Compounding Pharmacy It Managed

On September 18, 2019, the Department of Justice announced a $21.36 million settlement to resolve a False Claims Act (“FCA”) lawsuit alleging a fraudulent kickback scheme through which a pharmaceutical company (Patient Care America, or “PCA”) induced doctors to write expensive and unnecessary prescriptions to military veterans. A False Claims Act settlement of this magnitude is not unusual, particularly in the healthcare industry (which accounted for $2.5 billion of the DOJ’s $2.8 billion in FCA settlements and judgments in 2018).… More

DOJ Takes Aim at Telehealth and Genetic Testing Markets

The U.S. Department of Justice (DOJ) continues to actively target the healthcare industry for False Claims Act (FCA) and other alleged violations, and it took significant steps to further its reach into the telehealth and genetic testing markets this week.  Prosecutors in the Southern District of Florida (SDFL) indicted the CEO of a genetic testing company in an alleged referral-source kickback scheme in which, according to the indictment,… More

Eleventh Circuit Holds Differences in Clinical Judgment Do Not Create FCA Liability for Hospice Provider

The Eleventh Circuit agreed with the trial court that the government must do more than present expert evidence that a physician’s clinical judgment was inaccurate to establish falsity under the False Claims Act.  Nonetheless, the appellate court remanded for the trial court to consider additional evidence that, the government contends, establish falsity even under the standard now set by the Eleventh Circuit.

At issue was whether AseraCare Inc.… More

No False Claim Where Relator Merely Analyzes or Interprets Publicly Available Data

The Massachusetts Superior Court recently held that a qui tam relator’s analysis of publicly available information was subject to the public disclosure bar and that, no matter how involved or expert that analysis was, the relator was not the original source of the information alleged in the complaint.  Thus, in Commonwealth ex rel. Johan Rosenberg v. JPMorgan Chase & Co., et al., SUCV2014-03323, Judge Kaplan,… More

American Airlines Settles False Claims Act Allegations for Misreporting Mail Delivery Times

Last week the Department of Justice announced that American Airlines will pay over $22 million to settle claims that it falsely reported delivery times for mail it delivered on behalf of the United States Postal Service.

Under a contract between USPS and American, the airline was responsible for picking up U.S. mail from various receptacles in the United States and in U.S. government offices abroad,… More

Latest FCA Settlement Involving Massachusetts Lab Highlights Federal/State Cooperation

Late last month the U.S. Attorney’s Office for the District of Connecticut issued a press release regarding the latest False Claims Act (FCA) settlement involving the healthcare industry in New England.  According to the Department of Justice (DOJ), Clinical Science Laboratory, Inc. (CSL) and its individual owners agreed to pay over $1.5 million to settle claims that they had violated federal and state FCA laws.  The government stated that Massachusetts-based CSL provided urine drug testing services for substance abuse patients in Connecticut,… More

Supreme Court Revives False Claims Act Suit by Applying “Government Knowledge” Statute of Limitations

The Supreme Court, in a unanimous decision authored by Justice Thomas, agreed with the Eleventh Circuit that the False Claims Act’s “government knowledge” statute of limitations applies regardless of whether the government chooses to intervene in a qui tam suit.

Under the False Claims Act, a civil action must be filed by the later of 1) six years after the statutory violation, or  2) three years after the relevant facts are “known or reasonably should have been known by the official of the United States charged with responsibility to act in the circumstances.”  The Act also bars all claims brought more than ten years after the violation. … More

Lessons from a Recent (and Rare) DOJ FCA Lawsuit Against a Private Equity Firm and Its Portfolio Pharmacy Company

Recently, a Florida federal judge dismissed the Department of Justice’s (DOJ) False Claims Act (FCA) allegations against a compounding drug pharmacy and the pharmacy’s private equity (PE) owner.  For two reasons, the case may be illustrative of the DOJ’s increasingly aggressive pursuit of what it perceives as fraud within the healthcare industry.

First, it is noteworthy that DOJ suffered a dismissal of its FCA claims. … More

First Circuit Reaffirms FCA Retaliation Claims Are Not Subject to FRCP 9(b): Where There’s Smoke, There Could Be Fire

The First Circuit recently revisited the pleading standard for retaliation claims under the False Claims Act, and reiterated its prior position that such claims are not subject to the same heightened pleading standard as direct FCA violation claims.

In Guilfoile v. Shields, 913 F.3d 178 (1st Cir. 2019), a former president for a group of healthcare entities that provided specialty pharmacy services to hospitals alleged the entities offered illegal “referral fees” to a consulting group to induce hospitals to award the entities contracts. … More

How Can Healthcare Labs and Testing Companies Avoid Fraud Investigations?

The Department of Justice (DOJ) announced recently that it reached a $63.5 million settlement with pathology lab Inform Diagnostics related to allegations of False Claims Act (FCA) and Stark Law violations.  The government alleged that the company had illegally provided referral-source doctors with subsidies for electronic health records (EHR) systems and free or discounted technology consulting services.  The case, which developed out of a whistleblower complaint, was prosecuted as a civil matter with the coordination multiple DOJ offices,… More