Financial Fraud

A settlement has been reached to resolve False Claims Act allegations against Encompass Health Corporation.

The allegations arose from a lawsuit that claimed Encompass Health Corporation provided inaccurate information to Medicare to earn higher reimbursement and admitted patients unnecessarily.

According to the government, Encompass, the country's largest inpatient rehabilitation provider allegedly provided the inaccurate information so that some of its facilities could maintain their status in order to earn its higher reimbursement rate. Medicare and Medicaid use patients' diagnoses to determine whether a facility should be classified as an inpatient rehabilitation facility and to determine the proper reimbursement level.

Furthermore, beginning in 2007, some Encompass inpatient rehabilitation facilities falsely diagnosed patients with what they referred to as "disuse myopathy" when there was no clinical evidence for the diagnosis. This was allegedly done to ensure compliance with Medicare's rules regarding classification as an inpatient rehabilitation facility and to increase Medicare reimbursement. Additionally, Encompass inpatient rehabilitation facilities also allegedly admitted patients who were not eligible for admission because they were too sick or disabled to participate in or benefit from intensive inpatient therapy.

 “This settlement demonstrates our commitment to ensuring that those who participate in federal healthcare programs follow the rules,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “Medicare and Medicaid providers who seek to profit inappropriately at the expense of taxpayers will be held accountable.”

The whistleblowers collective share of the settlement will be $12.4 million.

A settlement has been reached to resolve False Claims Act allegations against ITT Cannon.

The allegations arose from a lawsuit that claimed ITT Cannon supplied electrical connectors to the military that had not been properly tested.

According to the government, ITT Cannon failed to conduct periodic testing on the connectors as promised to the federal government between September 2008 and March 2017. ITT Cannon sold the untested connectors both directly to the government and through distributors and other government contractors that incorporated them into technology and equipment sold to the government.

“Failure to comply with testing requirements undermines the integrity of essential government equipment and technology, and thereby reduces its durability and reliability,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “This settlement demonstrates that we will hold contractors accountable when they fail to deliver what they were paid to deliver.”

The whistleblower Ralph Tatgenhorst, a former company manager, will receive a $2 million as part of the settlement.

A settlement has been reached to resolve False Claims Act allegations against Beaver Medical Group L.P. and one of its physicians, Dr. Sherif Khalil.

The allegations arose from a lawsuit that claimed Beaver Medical Group L.P. and one of its physicians, Dr. Sherif Khalil, have agreed to pay roughly $5 million to resolve allegations that they reported invalid diagnoses to Medicare Advantage plans and thereby caused those plans to receive inflated payments from Medicare.

“The United States relies on healthcare providers to submit accurate diagnosis data to Medicare Advantage plans to ensure those plans receive the appropriate compensation from Medicare,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “We will pursue those who undermine the integrity of the Medicare program and the data it relies upon.”

Medicare Advantage Program, also known as “Medicare Part C,” is a program where those receiving Medicare may opt to get healthcare coverage through private insurance plans that are owned and operated by private insurers. Medicare pays these insurers a fixed, monthly amount to provide care to people with Medicare who enroll in their plans. The monthly amount paid typically depends on the health of the beneficiaries.

According to the government, several insurers in California contracted with Beaver to provide healthcare to people with Medicare. As a contractor, Beaver got a share of the payments the insurers received from Medicare for patients who were under Beaver’s care. Beaver, therefore, had a financial incentive to submit additional diagnosis codes to insurers to hike up the payments received from Medicare.

The whistleblower, Dr. David Nutter, a former Beaver employee will receive about $850,000 from the settlement.

A settlement has been reached to resolve False Claims Act allegations against American Airlines Inc.

The allegations arose from a lawsuit that claimed American Airlines Inc falsely reported the times it transferred possession of United States mail to foreign postal administrations or other intended recipients under contracts with the United States Postal Service (USPS).

USPS contracted American Airlines to gather containers of mail from six locations around the country, as well as at numerous Defense and State department facilities abroad, and then deliver them to numerous international and domestic destinations.

Under the contracts, American Airlines receives payment upon submitting electronic scans of the mail containers to USPS. These electronic scans report to USPS the actual time the mail was delivered to its destination. The contracts specified penalties for mail that was delivered late or to the wrong location.

“We expect companies doing business with the government to comply with their contractual obligations,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division. “The Department of Justice vigorously pursues all manner of fraudulent conduct that undermines the benefits that the government has bargained for.”

A settlement has been reached to resolve False Claims Act allegations against Duke University.

The allegations arose from a lawsuit that claimed Duke University violated the False Claims Act by submitting applications and progress reports that contained falsified research on federal grants to the National Institutes of Health (NIH) and to the Environmental Protection Agency (EPA).

According to the government, between 2006 and 2018, Duke knowingly submitted and caused to be submitted claims to the NIH and to the EPA that contained falsified or fabricated data or statements in thirty grants, causing the NIH and EPA to pay out grants funds they otherwise would not have.  Specifically, that the results of certain research related to mice conducted by a Duke research technician in its Airway Physiology Laboratory, as well as statements based on those research results, were falsified and/or fabricated.

“Taxpayers expect and deserve that federal grant dollars will be used efficiently and honestly.  Individuals and institutions that receive research funding from the federal government must be scrupulous in conducting research for the common good and rigorous in rooting out fraud,” said Matthew G.T. Martin, United States Attorney for the Middle District of North Carolina.  “May this serve as a lesson that the use of false or fabricated data in grant applications or reports is completely unacceptable.”

“Duke knowingly, the government contended, falsified data to claim millions of grant dollars from the National Institutes of Health,” said Maureen R. Dixon, Special Agent in Charge, Office of Inspector General for the U.S. Department of Health and Human Services.  “OIG and our law enforcement partners will continue to hold such grantees fully accountable regardless of the length or complexity of the investigations.” 

Duke is a private university located in Durham, North Carolina.

The Whistleblower, Joseph Thomas, a former Duke employee, will receive $33,750,000 from the settlement.

A settlement has been reached to resolve False Claims Act allegations against Omega Protein Corp and Omega Protein Inc (collectively “Omega”).

The allegations arose from a lawsuit that claimed Omega obtained a loan from the United States by falsely certifying compliance with federal environmental laws.

According to the government, allegedly, Omega violated the False Claims Act in March 2010 when it certified to the Department of Commerce that it was complying with federal environmental laws to obtain a $10 million loan.  At the time Omega submitted the certification, it was knowingly violating the Clean Water Act (CWA).  In 2013, Omega Protein, Inc. pled guilty to violations of the CWA between May 2008 and December 2010, by unlawfully discharging pollutants into U.S. waters and, between April 2009 and September 2010, by unlawfully discharging a harmful quantity of oil into U.S. waters.

“This settlement demonstrates our continuing vigilance in protecting the integrity of federal programs and taxpayer dollars,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.  “Companies will face appropriate consequences if they misrepresent their eligibility to participate in federal programs and divert resources from those who should receive federal support.”

The whistleblower, Keland O. Harrison, a former employee of Omega, will receive $200,000 of the settlement proceeds.

The United States has filed a complaint in the Western District of New York against YRC Freight Inc, Roadway Express Inc, and Yellow Transportation Inc.

The allegations arose from a lawsuit that claimed YRC Freight Inc, Roadway Express Inc, and Yellow Transportation Inc overcharged the government for freight carrier services and made false statements to the government that hid their misconduct.

According to the government, for more than seven years, the defendants defrauded the Department of Defense by millions of dollars for shipments that were actually lighter, and thus cheaper, than the weights for which the defendants charged the government.  Allegedly, the defendants knowingly made or used false statements concealing their overcharging practices to the Department of Defense.

Reportedly, the carriers reweighed thousands of shipments but suppressed the results whenever they showed a shipment was lighter than its original estimated weight. The suit said the carriers “knowingly billed the government (and their other customers) based on weights that they knew to be inflated.”

“When a federal agency, such as the Department of Defense, enters into a service contract with a private corporation or company, the expectation is that the agreement will be administered in good faith,” stated U.S. Attorney James P. Kennedy Jr. for the Western District of New York. “In this case, YRC did not legally fulfill its agreed upon obligations to the Defense Department, choosing instead to line its pockets with tax payer’s dollars. Such actions are fraudulent and illegal. This case should serve as a warning to any organization that enters into a contract with the federal government—if you try to rip us off, be prepared to pay a heavy price.”       

The original lawsuit in this case was filed by James Hannum under the whistleblower provisions of the False Claims Act.

A settlement has been reached to resolve False Claims Act allegations against British Airways and Iberia Airlines.

The allegations arose from a lawsuit that claimed British Airways and Iberia Airlines falsely reported the times they transferred possession of United States mail to foreign postal administrations or other intended recipients under contracts with the United States Postal Service (USPS).

"The U.S. Postal Service contracts with commercial airlines for the safeguarding and timely delivery of U.S. Mail to foreign posts, including the mail sent to our soldiers deployed to foreign operating bases and other locations," said Steven Stuller, Acting Special Agent in Charge, U.S. Postal Service Office of Inspector General.  "The Office of Inspector General supports the Postal Service by aggressively investigating allegations of misconduct within the contract mail delivery process; in this case the falsification of delivery information.  We worked hand-in-hand with the Department of Justice's Civil Division to help ensure a reasonable resolution and to hold those parties accountable for their actions.  We applaud the exceptional work by the investigative and legal team and know it will have a positive impact on Postal Service operations."

Reportedly, under contracts with the United States Postal Service (USPS), the airlines were supposed to take possession of mail at six locations in the United States, or at numerous Department of Defense and State Department locations abroad, and then deliver that mail to numerous international and domestic destinations. The airlines were not eligible for payment under the contracts, however, unless they sent the USPS electronic scans of the mail bins that showed what time the mail was delivered at the specified destinations.

According to the government, allegedly, the scans submitted by British Airways and Iberia falsely reported the time the airlines transferred possession of the mail.

A settlement has been reached to resolve False Claims Act allegations against Northrop Grumman Systems Corporation.

The allegations arose from a lawsuit that claimed Northrop Grumman Systems Corporation violated the False Claims Act, by overstating the number of hours its employees worked on two battlefield communications contracts with the United States Air Force. 

“Contractors that knowingly inflate their bills to the government will face serious consequences,” said Assistant Attorney General Joseph H. Hunt for the Department of Justice’s Civil Division. “This settlement demonstrates, once again, that we will not tolerate those who falsely charge the armed forces or any agency of the United States to illegally profit at the expense of the American taxpayer.”

Reportedly, the Air Force entered into two contracts with Northrop Grumman Systems Corporation for battlefield communications services: the Battlefield Airborne Communications Node contract and the Dynamic Re-tasking Capability contract. 

According to the government, allegedly, Northrop Grumman Systems Corporation billed the Air Force for labor hours purportedly incurred between July 1, 2010, and December 31, 2013, by individuals stationed in the Middle East who had not actually worked the hours claimed. In addition, Northrop Grumman Systems Corporation entered into a separate agreement with the Criminal Division of the U.S. Attorney’s Office for the Southern District of California related to these contracts under which it has agreed to forfeit an additional $4.2 million.

Accordingly, Northrop Grumman Systems Corporation will make a payment of $25.8 million which, combined with earlier payments made, will total $27.45 million.

A settlement has been reached to resolve False Claims Act allegations against 3M Company.

The allegations arose from a lawsuit that claimed 3M Company knowingly sold the dual-ended Combat Arms Earplugs, Version 2 (CAEv2) to the United States military without disclosing defects that hampered the effectiveness of the hearing protection device.  

According to the government, allegedly 3M Company and its predecessor, Aearo Technologies Inc, knew the CAEv2 was too short for proper insertion into users’ ears and that the earplugs could loosen imperceptibly and therefore did not perform well for certain individuals.  In addition, allegedly 3M Company did not disclose this design defect to the military.

“This settlement demonstrates the commitment of the Defense Criminal Investigative Service and our law enforcement partners to hold companies accountable for supplying substandard products, in particular products that could directly impact our service members’ health and welfare.  DCIS protects the integrity of Defense Department programs by rooting out fraud, waste, and abuse that negatively affect the wellbeing of our troops,” said Special Agent in Charge Robert E. Craig, Jr., DCIS Mid-Atlantic Field Office.

Reportedly, the settlement resolves allegations that 3M Company violated the False Claims Act by selling or causing to be sold defective earplugs to the Defense Logistics Agency. 

The whistleblower lawsuit was brought by a 3M competitor, Moldex-Metric Inc in May 2016 under the False Claims Act. As part of the settlement, Moldex-Metric will receive $1.9 million.