News & Cases

Five Gardena, California tech companies have agreed to pay over $5.8 million to resolve allegations they obtained small business government contracts through misrepresentation and fraud, thereby violating the federal False Claims Act (FCA).

A competitor company and the competitor’s managing member Anthony Colangelo will split a $1.4 million whistleblower award for filing the initial claim that exposed the FCA violations, the U.S. Justice Department announced Wednesday.

Minburn Technology’s Anthony Colangelo Reports En Pointe Gov. Inc. Using Whistleblower Law

Virginia-based Minburn Technology Group and its managing member Anthony Colangelo brought the original whistleblower claim in 2014. The claim alleged that, from 2011 to 2014, En Pointe Gov. Inc., En Pointe Technologies Inc., En Pointe Technologies Sales Inc., Dominguez East Holdings LLC and Din Global Corp. falsely represented a company called En Pointe Gov. Inc. (“En Pointe”) as a small business in order to obtain government-funded contracts specifically set aside to aid small businesses....

Drayer Physical Therapy Institute, LLC has agreed to pay $7 million to settle allegations of health care fraud with the U.S. Attorney's Office for the District of South Carolina, acting U.S. Attorney Beth Drake announced Tuesday. Two whistleblowers in this case will share nearly $1.7 million for reporting the fraud and aiding in the investigation.

Former Employees Blow the Whistle on Drayer’s Fraudulent Billing

Hummelstown, Pennsylvania-based Drayer Physical Therapy Institute (DPTI) delivers physical therapy services across 130 clinics in 16 states. Two former DPTI employees filed a whistleblower claim alleging DPTI submitted false claims to Federal Employee Health Benefit Programs, Medicare and TRICARE....

St. Paul, Minnesota-based Cardiovascular Systems Inc. (CSI) has agreed to pay $8 million to settle a False Claims Act (FCA) lawsuit alleging the company used kickbacks and an off-label marketing scheme to increase medical device sales, the U.S. Attorney’s Office in the Western District of North Carolina announced Wednesday. Whistleblower Travis Thams stands to collect between $800,000 and $2.4 million for filing the initial claim and exposing the alleged FCA violations.

Device Sales Rep Travis Thams Alleges Kickbacks in Whistleblower Lawsuit

Thams began working for Cardiovascular Systems as district sales manager in 2012 and filed the initial civil False Claims Act complaint in July 2013. Thams’ suit claimed CSI provided physicians with all-expense-paid training programs in exchange for explicit agreements to use CSI products. CSI also allegedly paid physicians for sham “Speaker Bureau” services and traded medical devices for 3rd party referral channel marketing....

In the nation’s largest health care fraud sweep to date, the U.S. Departments of Justice (DOJ) and Health and Human Services (HHS) announced Wednesday that federal authorities charged 301 defendants across 36 federal districts for $900 million in false Medicaid and Medicare billings.

Sixty-one licensed medical professionals (28 of whom are physicians) are included among the 301 defendants named in the civil and criminal charges. According to the DOJ, the organized takedown is the largest ever in both the number of charged defendants and the amount lost to healthcare fraud.

The takedown, led by U.S. Medicare Fraud Strike Force teams, highlights the widespread health care fraud issue and affirms the federal government’s stance on corrupt behavior. Medical professionals working in hospitals, physical therapy clinics, occupational health clinics, home health care, psychotherapy facilities, durable medical equipment vendors and pharmaceuticals were among those arrested....

In a game-changing, unanimous decision, the U.S. Supreme Court ruled on Thursday that corporations billing government programs for payment must be in compliance with material regulations, including regulations not stated in express conditions of payment, or they could face False Claims Act (FCA) liability.

Universal Health v. Escobar has become one of the most influential FCA disputes in decades. Thursday’s Supreme Court decision validates the “implied certification” theory of FCA liability. It’s a win for both government programs determined to recover stolen funds and whistleblowers reporting fraud. At the same time, the high court has imposed a rigid materiality standard that will keep FCA plaintiffs on their toes.

Courts Previously Divided On Implied Certification Viability

The federal False Claims Act makes it a crime to knowingly submit false claims for payment or approval to the government. A claim is legally “false” when it contains erroneous information regarding billed-for services or products. However, some courts also hold a claim legally false when it impliedly or expressly certifies compliance with all conditions of payment defined in relevant statutes, regulations or contractual requirements....

The U.S. Department of Justice (DOJ) has opted to intervene in a false claims whistleblower suit against Prime Healthcare Services after investigating allegations of Medicare overbilling. Karin Berntsen, the whistleblower who filed the initial claim accusing Prime Healthcare of Medicare fraud, stands to collect between 15 and 25 percent of the total government recovery.

RN Karin Berntsen alleges $50M in Medicare overbilling

Berntsen, a registered nurse and Director of Quality and Risk Management with Prime Healthcare’s San Diego-based Alvarado Hospital Medical Center, filed her claim in the U.S. District Court of Los Angeles in fall of 2011, alleging Alvarado and 13 additional Prime Healthcare facilities violated the False Claims Act (FCA) by overbilling Medicare to the tune of $50 million....

Tennessee highway building firm, Mountain States Contractors, has agreed to pay $2.25 million to the U.S. government this week to resolve allegations they violated the False Claims Act (FCA) by falsely claiming to have subcontracted work to a minority-owned business. Whistleblower Ron Meadows, filed the initial lawsuit that triggered the investigation of Mountain States. The U.S. Department of Justice reports Meadows will collect a $500,000 cash whistleblower award as allowed under the FCA for his efforts in putting a stop to the contractor fraud scheme.

Whistleblower Ron Meadows Alleges Mountain States DBE

Meadows’ March 2012 whistleblower lawsuit claimed that the Jones Brothers affiliate, Mountain States, violated the FCA when it allegedly lied about subcontracting work out to minority-owned G&M Associates to qualify for federal funding under the United States Department of Transportation’s Disadvantaged Business Enterprise (DBE) program....

The website of the Securities and Exchange Commission's whistleblower program is rather welcoming. Its introductory text explains that, “whistleblowers can help the Commission identify possible fraud and other violations” allowing it to “minimize the harm to investors, better preserve the integrity of the United States' capital markets, and more swiftly hold accountable those responsible for unlawful conduct.”

The SEC has been faithful to its practice of keeping cases and whistleblower identities private ever since the Office of the Whistleblower was first established. Partly because of this, SEC whistleblower awards have always been extremely newsworthy, especially when the whistleblower's name somehow made its way into a journalist's desktop.

But if the SEC’s whistleblower awards have appeared to be a rarity so far, that seems to be about to change.

Securities Exchange Commission Whistleblower Program Gaining Momentum

In terms of scope, rewards, and recoveries, the program has been gaining momentum, and it has just hit an important benchmark. SEC has just awarded over $5 million to one whistleblower and $3.5 million to another, all in the span of one week. The $5 million award is the third largest amount the SEC has ever paid a whistleblower....