Spoofing Whistleblowers Eligible for Millions in SEC and CFTC Cash Rewards

Recently there has been an uptick of traders being accused of spoofing. Today, two former Merrill Lynch traders were convicted of criminal spoofing charges in a Chicago federal court.

Spoofing involves rapidly sending many deceptive orders that can mislead traders into thinking supply and demand have changed. This mirage of phantom trades can move prices in a direction desired by the spoofer, while causing their counterparties to lose money.

While many say the practice is nothing more than bluffing, Congress specifically outlawed the practice with the passage of Dodd – Frank. Prosecutors say that spoofing was always illegal and that Dodd Frank merely clarified existing law.

In the Merrill Lynch case discussed below, prosecutors criminally charged two traders with wire fraud and conspiracy. They say the two men sought to manipulate prices of precious metals.

Securities violations can usually be prosecuted as criminal cases, civil cases or both. When the SEC prosecutes the case, there is usually the opportunity for whistleblowers to receive a large cash reward from the SEC’s whistleblower program. That law provides cash incentives for folks with inside information about fraud to come forward and report the conduct.

Merrill Lynch Traders Convicted of Spoofing

Former traders Edward Bases and John Pacilio were found guilty of conspiracy to commit wire fraud. Prosecutors say the two traders conspired to place large but fake buy and sell orders on the Chicago Mercantile Exchange to mislead other precious metals traders.

At trial, prosecutors showed that the two men placed a genuine, partially hidden order on one side of the market that they “watched like a hawk” so they could execute the order at the price they wanted. They then launched spoof orders on the other side of the market to give the market” a false sense of supply and demand.

In the words of prosecutor Scott Armstrong, “the spoof order was just smoke and mirrors. A trick. A lie. A scam. Spoof orders pretending to be real supply and demand in the market.”

The Wall Street Journal claims that to date, 20 traders have been charged with spoofing. Those numbers only include criminal charges. The SEC and CFTC have also been aggressively prosecuting spoofing cases.

Last year the CFTC ordered JP Morgan Chase  to pay a record $920 million fine in a civil spoofing case. The agency had accused the firm of manipulative and deceptive conduct and spoofing that spanned at least eight years and involved hundreds of thousands of spoof orders in precious metals and U.S. Treasury futures contracts on the Commodity Exchange, Inc., the New York Mercantile Exchange, and the Chicago Board of Trade.

In announcing the JP Morgan settlement, the CFTC said,

“Spoofing is illegal—pure and simple,” said CFTC Chairman Heath P. Tarbert. “This record-setting enforcement action demonstrates the CFTC’s commitment to being tough on those who intentionally break our rules, no matter who they are. Attempts to manipulate our markets won’t be tolerated. The CFTC will take all steps necessary to investigate and prosecute illegal activities that could ultimately undermine the integrity of the American free enterprise system.

“This action sends the important message that if you engage in manipulative and deceptive trade practices you will be caught, punished, and forced to give up your ill-gotten gains,” added Division of Enforcement Director James McDonald. “The CFTC is committed to working with our law enforcement and regulatory partners to eradicate this unlawful activity and to hold those responsible fully accountable.”

CFTC Whistleblower Rewards

For each trader or individual convicted of criminal spoofing, there is usually a corresponding CFTC or SEC enforcement action. Both agencies have robust whistleblower programs. Benefits available under both programs include:

• Monetary awards to eligible whistleblowers who voluntarily provide the CFTC or SEC with original information about violations of the Commodity Exchange Act (CEA)or federal securities laws that lead either agency to bring a successful enforcement action resulting in monetary sanctions exceeding $1,000,000.
• The total amount of an award for an eligible enforcement action is between 10% and 30% of the amount of monetary sanctions collected in the CFTC or SEC’s enforcement action. If multiple whistleblowers are granted awards in an action, the total award amount is still limited to between 10% and 30% of the amount of the monetary sanctions collected.
• Whistleblowers have certain protections regarding confidentiality of their identity.
• Employers may not take any action to impede would-be whistleblowers from communicating directly with regulators about possible violations. This includes a prohibition on confidentiality agreement or predispute arbitration agreement with respect to such communications with the SEC or CFTC. Nor may employers retaliate against whistleblowers for reporting violations. Retaliation includes termination, demotion, suspension, threats, harassment, direct or indirect, or any other discrimination against a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower.
• A whistleblower who has been retaliated against has the right to sue an employer in federal court. In addition, both agencies also have the power to enforce the anti-retaliation provisions by bringing an enforcement action or proceeding against an offending employer.

Whistleblowers have become the eyes and ears of the government. This is especially true in anti-money laundering and spoofing cases. If you have knowledge of these behaviors, you may be entitled to a large cash reward.

To learn more, visit our SEC whistleblower rewards page. (The CFTC and SEC whistleblower reward programs are virtually identical.) Ready to see if you qualify for a reward? Contact us online, by email brian@mahanylaw.com or by phone 202-800-9791.

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FDA, Prosecutors Cracking Down on Pharmaceutical Companies and Labs that Use False Clinical Trial Data

There is probably not a person alive in the United States today that doesn’t know how quickly the pharmaceutical industry moved to develop a COVID-19 vaccine. When President Trump and Dr. Fauci announced that a vaccine could be developed and approved within a year, many were skeptical. It had never been done.

By early 2021, nursing home patients and healthcare workers were rolling up their sleeves for Pfizer-BioNTech’s coronavirus vaccine.

Medical News Today tells us that it typically takes 10 to 15 years to develop a vaccine. So how were several vaccines rolled out and approved in less than one year?

Much of the answer was round-the-clock research and testing by drug companies and independent labs. But no matter how quickly a vaccine may be developed, the FDA still requires extensive clinical trials to make sure the vaccine works and is safe. Those drug trials are conducted by the pharmaceutical companies themselves, often with the help of private labs and testing companies.

In the United States, along with much of the world, we rely on the pharmaceutical industry to police itself. The FDA reviews clinical trial data but doesn’t conduct the actual trials.

The official FDA drug approval process is typically as follows:

First, a pharmaceutical company develops a new drug and seeks to have it approved in the United States.

Second, the drug is often tested on animals to get some initial data on efficacy and safety. Assuming the animal trials go well, the next step is a phase 1 trial on humans, typically 20 to 80 healthy people volunteer. We say healthy because the phase one trial is focused on safety.

Next comes a phase 2 trial that usually involves hundreds of volunteers. While every trial always focuses on safety and any reported side effects, the phase 2 trial is most concerned with efficacy. Does the new drug work?

Assuming the risks are acceptable and the drug appears to work, the final phase of human testing, phase three, involves thousands of volunteers. Here the drug company looks at dosage and interaction with other medications.

At all times, the companies involved with the testing are required to report to the FDA which scrutinizes all aspects of the trials.

Once the clinical trials are complete, the drug company and FDA will work together on a complex new drug application process and review.

The central element to the entire process is accurate clinical trial results. While there have been very few documented cases of fudged results, these incidents do happen. And when they do, patient lives are at stake.

Today it can cost over a billion dollars to roll out a new drug. For a few companies, the temptation to cut corners is simply too great for. Either they lie about  the effectiveness of the drug or worse, hide / minimize adverse reactions. This week a federal judge sent two people implicated in a false clinical trial data scheme to prison.

Justice Department / FDA Prosecutes Two Clinical Trial Workers

Eduardo Navarro, a Miami nurse practitioner, and Nayade Varona, a study coordinator from Port St. Lucie, were sentenced to prison on August 11^th. Both men were convicted of falsifying results in a clinical trial of a drug being developed for irritable bowel syndrome.

The case began in February when a federal Grand Jury indicted four men including a physician. All four were associated with a company called Tellus Clinical Research. According to the Justice Department, the defendants “knowingly enrolled subjects in clinical trials when those subjects failed to meet eligibility criteria, falsified subject laboratory results, falsified subject medical records, and falsely represented that subjects were taking the drugs being studied when in fact they were not.”

In announcing the indictments, the Justice Department said, “The public must be able to rely on the accuracy and honesty of clinical trial data, which is essential to ensuring the safety of drugs approved for patient use. The defendants undermined that process and put patients at risk. The Department of Justice will pursue and prosecute those who put personal profit before public health.”

The indictment does identify the pharmaceutical company associated with the drug or the complicity of that company.

Whistleblower Rewards for False Clinical Trial Data

Although the FDA maintains a tip line for people wishing to report fraud, they have no formal whistleblower reward program. That doesn’t mean whistleblowers can’t receive a reward, however.

If the drug being developed is actually on the market and is approved for reimbursement by Medicare, Medicaid or Tricare, there may be rewards based on the amount of federal spend. Assuming the whistleblower reports the fraud before the FDA approves the drug, there may be a reward from the SEC if any of the companies are public companies or subject to the SEC’s jurisdiction. Obviously, an SEC reward is a bit more tenuous but no shareholder or investor wants to be associated with a company that is putting lives at risk.

While the prosecution of the four Tellus Clinical research employees is important, even more important is the FDA’s statement that they intend to vigorously prosecute anyone who produces or submits false clinical trial data to the FDA.

Do You Have Inside Information About False Clinical Trial Data?

Both the Justice Department and SEC can pay rewards of up to 30% of whatever monies are collected from wrongdoers. To qualify for a reward, one generally must be the first to file (meaning don’t wait) and have inside or “original source” knowledge of the fraud.

To learn more, visit our Pharmaceutical Fraud and SEC Whistleblower Program information pages. Ready to see if you qualify for a reward? Contact is online, by email brian@mahanylaw.com or by phone at 202-800-9791. Pharmaceutical whistleblowing cases accepted worldwide. All inquiries protected by the attorney – client privilege and kept strictly confidential.

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That’s not a misprint. A whistleblower is about to receive $28 million for blowing the whistle on healthcare fraud. Even crazier, the whistleblower was only with the company that broke the law for a few short months.

The U.S. Attorney’s Office in Nashville, Tennessee says a call center employee will receive over $28 million for blowing the whistle on a mail order diabetic testing supply scheme. State and federal prosecutors say Arriva Medical violated the False Claims Act by paying kickbacks to Medicare and Medicaid beneficiaries. Some of the patients who “qualified” for testing supplies were already dead!

The case began in February 2013 when Gregory Goodman started working as a telephone sales rep for Arriva Medical. Arriva was a fast growing mail order medical supply business that sold glucose meters, test strips, lancets and other diabetic testing supplies.

Within weeks Goodman realized that something was wrong. He says Arriva was:

• fraudulently billing Medicare for thousands of glucose meters that were not medically necessary,
• offering kickbacks to their customers―in the form of free, “upgraded” meters and forgiving copayments―to induce beneficiaries to obtain their diabetes testing supplies from Arriva and to further induce beneficiaries to order unnecessary products and services covered and partially paid for by Medicare,
• offering kickbacks, in the form of forgiving copayments, to secondary insurance providers Express Scripts, Inc. (“ESI”) and United Healthcare (“United”) to induce those insurers to refer their Medicare-covered, diabetic patients to defendants to obtain diabetic testing supplies,
• illegally marketing heating pads, back braces, and impotence therapy devices to new patients during calls to place orders for diabetic testing supplies, and then billing government healthcare programs for these illegally marketed items,
• illegally billing Medicare for diabetic supplies without having the necessary prescriptions on file from beneficiaries’ physicians, and
• illegally inducing beneficiaries to switch from one brand of diabetic testing supplies to another.

According to his complaint, Goodman said, Arriva “instructed their sales associates to ‘up-sell’ beneficiaries on every phone call the associates made. Specifically, the sales associates were instructed to market heating pads, back braces and impotence therapy devices to every patient they spoke to, regardless of whether the patient had ever asked about these products.”

By August, Gregory Goodman had seen enough and filed a formal whistleblower complaint in federal court.

On August 2^nd, 2021, Arriva Medical settled the government’s charges. Arriva will a penalty of $160,000,000.00. Goodman is slated to receive a whistleblower reward of $28,548,749 as his share. Two former Arriva executives also agreed to each pay $500,000 for their role in the scheme. All were allowed to settle without admitting guilt.

In announcing the settlement, a Justice Department spokesperson said, “Paying illegal inducements to Medicare beneficiaries in the form of free items and routine copayment waivers can result in overutilization and waste taxpayer funds. We will continue to protect the integrity of the Medicare program by pursuing fraudulent claims arising from violations of the Anti-Kickback Statute or other applicable reimbursement requirements.”

Whistleblower Rewards for Medicare and Medicaid Fraud

The case against Arriva involved mostly Medicare fraud. Both the Medicaid and Medicare program, however, pay cash rewards to whistleblowers with inside information about fraud. Under the federal False Claims Act, whistleblowers can receive between 15% and 30% of whatever the government receives from the wrongdoers. 29 states have similar reward programs that cover state funded Medicaid.

The government says the False Claims Act is one of its most important and powerful tools its arsenal against fraud. Tips and complaints from all sources about potential fraud, waste abuse, and mismanagement can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477). All fifty states also have a Medicaid Fraud Control Unit for reporting state funded Medicaid fraud.

Calling Medicare or the the states does not get you a reward. The only way to collect a reward is to file a complaint with the court.

Our team of Medicare fraud lawyers have years of experience in ferreting out healthcare fraud and obtaining substantial rewards for our clients.  Our team also has the experience to help you put an end to the illegal fraud and to maximize any reward for which you may be eligible. Our lawyers do not charge upfront fees or costs, in fact, you only pay if they are successful and you receive a reward.

To learn more, visit our Medicare fraud whistleblower information page. Ready to see if you qualify for a reward? Contact us online, by email brian@mahanylaw.com or by phone 202-800-9791. All inquiries kept strictly confidential.

The post Whistleblower Gets $28 Million Reward in Diabetic Testing Scam appeared first on Mahany Law.

Treatment of vascular diseases with angiography

Patients Harmed Because of Defective Catheters Made by Cordis Corporation May be Entitled to Substantial Damages.

The FDA has announced a recall of Cordis SUPER TORQUE MB Angiographic Catheter with Radiopaque Marker Bands due to the potential for the marker bands to move or dislodge during procedures. The agency says it has received reports of 167 complaints (mostly from doctors). Eight injuries have been reported but many doctors don’t report adverse events to the FDA out of fear of lawsuits. It is impossible to tell how many people have been injured.

The Cordis SUPER TORQUE MB Angiographic Catheter with Radiopaque Marker Bands is a device used by doctors to visualize and measure parts of the vascular system when used with radiopaque (X-ray detectable) contrast media. Trouble can happen if the catheter gets stuck between the walls of your heart and vascular system.

Typically, a failed catheter could cause a delay in the procedure or require additional surgery to remove the catheter. Extreme cases can result in a stroke, heart attack, or even death.

In late July, Cordis issued an “urgent letter” to healthcare providers telling them to alert patients that may have received this catheter as part of a heart problem.

Although Cordis Corporation began notification efforts earlier this year, the FDA has now issued a class 1 recall, the most serious of all recalls. We believe that 25,000 of these devices were used on patients between January 1, 2019 and May 19, 2021, when the company stopped shipping these catheters. Simply because Cordis issued a recall doesn’t mean that defective catheters in stock at hospitals and surgical centers weren’t used after that date.

Unfortunately, doctors are not required to report suspected product defects. The FDA’s reporting system is voluntary. That is, we believe that hundreds of patients may have been harmed and don’t know that the source of their problems may be a defective catheter.

The device itself is a pig tail shaped device made of polyurethane and comes in a wide variety of sizes. Cordis makes a wide variety of catheters, and not all are subject to the recall. According to the FDA, the following catheters have been recalled:

• Cordis SUPER TORQUE MB 5F PIG, Angiographic Catheter, REF 532-598B
• Cordis SUPER TORQUE MB 5F PIG, Angiographic Catheter, REF 532-598A
• Cordis 5F SUPER TORQUE PIG PIGTAIL SPECIAL, Angiographic Catheter, REF SRD7040MB
• Cordis 5F UNIVERSAL FLUSH F4 SUPER TORQUE MB, SPECIAL, Angiographic Catheter, REF SRD6785MB
• Cordis SUPER TORQUE MB 5F PIG, Angiographic Catheter, REF 532-598C

We understand that few patients will know of the device used in their procedure. If you have concerns, speak to your doctor and learn what your options are if this device was used. If you suffered an injury, make sure to contact an experienced products liability lawyer. Hospital records should reveal the exact devices used on you during diagnostic surgeries.

Many states have a short period to file a lawsuit for medical malpractice or a defective surgical product. In some states, patients only have one year to file a lawsuit for their injuries.

Since the recall is so new, we are currently investigating these claims. If you believe you or a loved one suffered a heart attack or stroke or died because of one of these devices, contact us immediately. We and our national network consider cases anywhere in the United States. For more information, contact us online, by email brian@mahanylaw.com or by phone at 202-800-9791.

Are you a present or former employee of Cordis or a healthcare worker with inside knowledge of these products? As part of our investigation, we would love to speak with you. There may or not be whistleblower rewards available. All inquiries are protected by the attorney – client privilege and kept confidential.

The post Injured by a Defective Angiographic Catheter? appeared first on Mahany Law.

The whistleblower team at Mahany Law has long been at the forefront of fighting greed and corporate corruption. That includes representing whistleblowers with inside knowledge of fraud by defense contractors. The U.S. government spends billions of dollars per year on our defense. Money that comes from taxpayers, you, and me.

Some experts estimate that level of fraud in defense department contracts exceeds 10 percent. When you factor in waste, the problem becomes worse. According to Taxpayers Against Fraud, the Defense Department issued $420 billion in contracts last year. In fact, over half the military’s budget is money spent on private contractors.

The federal government relies on whistleblowers to ferret out fraud and waste. Each year, approximately 75% of the recoveries from bad defense contractors come from information supplied by whistleblowers. These folks are the true American heroes.

As recently as March 2021, the Government Accountability Office (GAO) says that contracting fraud remains rampant within the Department of Defense’s contracting spending. That is where you can help.

There are armored personnel carriers that can’t stop a bullet, defective missile guidance systems, and software systems that don’t work. Congress knew this and passed the False Claims Act during the American Civil War (also called the Lincoln Law after President Abraham Lincoln who signed the law into effect). Back then, the Union Army purchased wagons with defective wheels, lame mules, and gunpowder laced with sawdust. Our weapons are more modern today, but waste continues.

One of the biggest ways to make our country great again is to rid the leeches who put our service women and men in harm’s way while also fleecing taxpayers.

False Claims Act Pays Huge Whistleblower Rewards to Defense Contractor Insiders

Under the False Claims Act, whistleblowers can receive between 15% and 30% of whatever the government collects from wrongdoers. Multiple fines in the defense contractor sector in the hundreds of millions of dollars are the new norm. That means whistleblowers have been collecting tens of millions in reward, often more.

Congress knew that becoming a whistleblower could be a lonely experience. Tough anti-retaliation laws are included in the False Claims Act. Of course, many whistleblowers don’t suffer from retaliation, but we remain ready to help them if they do.

With fraud at an all-time high, the current administration has promised to vigorously prosecute these cases. And other than the Act, private whistleblowers and their lawyers can prosecute these claims on behalf of the government.

With the President and Congress engaged in rare bipartisan support to empower whistleblowers, we thought it time to remind people in the defense space that whistleblowers know how they can fight back and make a difference.

We urge readers to view our Defense Department whistleblower information page. Find out what types of cases qualify and how you can earn a reward and make a difference. By reporting companies that illegally purchase military equipment from China and other foreign nations, you can also help preserve U.S. jobs and protect our national security.

Think you have a claim? Contact us online, by email at brian@mahanylaw.com or by phone at 202.800.9791. All inquiries are protected by the attorney – client privilege and kept strictly confidential. Cases accepted anywhere in the world.

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Five men are behind bars after being convicted of blatant fraud against taxpayers and the United States. According to court records, the men concocted a scheme to relabel Chinese-made goods as made in America and sell them to Uncle Sam. But that wasn’t enough. One of the men falsely claimed that he was a service-disabled veteran in order to obtain special set aside contracts. Their greed is still not satisfied. They also failed to pay taxes and duties.

Prosecutors say that between 2011 to 2018, Iris Kim, Inc., (aka “I-Tek”), owner Beyung S. Kim, employees Seung Kim, Dongjin Park, Chang You, Pyongkon Pak, and Li-Ling Tu, engaged in a conspiracy and scheme related to certain government contracts for which I-Tek acted as a supplier of goods. The goods were sold to the American military and other agencies.

The men obtained government contracts that had been set aside for small businesses owned by service-disabled veterans. The contracts also required the goods to be made in the USA. They also conspired to falsely classify the value of the goods imported into the U.S. to avoid higher customs duties and taxes.

In announcing the sentencing, a spokesperson from the Naval Criminal Investigative Service (NCIS) said,

“The defendants deserve to be held fully accountable for this reprehensible scheme to knowingly and deceptively source illicit Chinese goods to fulfill Department of Defense contracts. This scheme threatened the readiness and safety of our nation’s warfighters, defrauded the American taxpayer, damaged the integrity of the Department of the Navy procurement process, and squandered valuable investigative resources that could have been directed elsewhere. NCIS will continue to work with our law enforcement partners to aggressively root out those who seek to defraud the Navy and Marine Corps.”

Whistleblower Rewards for Information on Fraud

The case against I-Tek and owner Beyung Kim highlights the many ways that companies and individuals can defraud the government. This case involved three different types of fraud, all of which involve possible cash whistleblower rewards.

Rewards for Buy America Violations

Beginning in the great depression, Congress passed a series of laws designed to promote American-made goods and ensure that critical manufacturing jobs stay in America. While some have questioned the logic of these so-called Buy American laws, the recent supply chain disruptions caused by COVID-19 show how dependent we have become on countries like China for certain goods and products.

In addition to the Buy American / Buy America laws passed by Congress, both Presidents Trump and Biden issued presidential executive orders further bolstering the requirements that government agencies give preferences to American-made goods.

The contracts received by Beyung Kim required the goods being supplied to the Navy, Marine Corps, and National Guard to be made in America. Kim lied and hid the fact that some $11 million dollars of goods were mislabeled and were really imported from China.

Under the federal False Claims Act, whistleblowers with inside information about Buy America violations are entitled to between 15% and 30% of whatever the government collects from wrongdoers.

Rewards for Customs Evasion

By mislabeling the Chinese goods as made in America, Kim further defrauded the government and taxpayers of millions of dollars in unpaid customs duties and taxes. Once again, the False Claims Act allows whistleblowers with inside information about customs evasion to also collect rewards.

Often where there is a Buy America fraud violation, there is a second reward available for customs evasion.

Service-Disabled Veterans and Other Disadvantaged Small Business Entity Fraud

We try not to use acronyms on this site but government contractors are already familiar with the term SDVOSB (Service Disabled Veteran Owned Small Business) and DSBE (Disadvantaged Small Business Entity). The latter category, DSBE, covers a wide range of government set aside, including veteran-owned, women-owned, minority-owned, and Native American-owned small businesses. Depending on the program, Congress requires agencies to set aside a certain percentage of government contract opportunities for certain small businesses.

Prosecutors say that Kim took advantage of these laws by creating a phony company called Atlantic Solar Power Inc and then finding a veteran to serve as the “owner” of the business. However, the actual business was conducted by Beyung Kim’s company, I-Tek, which was not veteran-owned. These arrangements are often called “rent-a-vet” schemes.

The Trump administration prosecuted a record number of SDVOSB fraud cases. We expect that the Justice Department will continue to do so under the Biden administration.

Do You Have Information About Fraud Against the Government?

You may be entitled to a cash reward if you know of fraud involving government funds or a government-funded program. Our whistleblower clients have already received over $100 million in rewards. The next reward could be yours.

People like Beyung Kim hurt American businesses, disabled veterans trying to earn a living, and taxpayers. Our team of experienced qui tam lawyers can help you stop fraud, greed, and corruption and earn a whistleblower reward.

As an added benefit, the False Claims Act has strong anti-retaliation provisions. To learn more, visit our Buy American, SDVOSB – DSBE fraud, and customs fraud whistleblower pages. All inquiries are protected by the attorney – client privilege and kept completely confidential.

Ready to see if you qualify for a reward? Contact us online, by email brian@mahanylaw.com or by phone 202-800-9791.

(We accept cases worldwide. All inquiries are protected by the attorney – client privilege and kept confidential. Cases handled on a contingency fee basis, meaning if there is no reward, you owe us nothing.)

The post Triple Crown of Fraud – Customs Evasion, Vet Scam, and Helping the Chinese appeared first on Mahany Law.

The Most Active Firms In Public False Claims Cases

(250K)

Whistleblower law specialist Phillips & Cohen LLP fielded the most false claims cases of any plaintiffs firm over the past five years, while Morgan Lewis & Bockius LLP was defendants’ most frequent choice, according to a new report.

Of 2,429 publicly visible false claims cases filed in federal court between 2016 and 2020, Phillips & Cohen represented whistleblowers in 38 of those cases, according to Lex Machina’s False Claims Litigation Report 2021, its first-ever false claims-focused analytics report. The report covers cases with claims brought under the federal False Claims Act as well as those filed under similar state laws.

Phillips & Cohen partner Erika Kelton told Law360 that whistleblower law is a competitive area and that she believed that Phillips & Cohen’s experience working as a whistleblower specialist “longer than anybody else” was a significant reason why plaintiffs choose the firm.

“What I have experienced over the years is that whistleblowers are smart, they do their homework, and they often will talk to several different whistleblower attorneys before selecting one,” Kelton said. “And they want to go with a lawyer, generally, who has shown a track record of success, which we have, who is respectful of and aware and sensitive to the experiences that they’re going through and the risks that they’re facing.”

Phillips & Cohen came in just ahead of fellow whistleblower specialists Brown LLC, Mahany Law and Bracker & Marcus LLC, each of which represented relators in more than 30 public false claims cases over those five years.

Morgan Lewis, named a Litigation Powerhouse by Law360 in 2016, was tapped to represent defendants in 29 of the 2,429 public false claims cases filed between 2016 and 2020, making it one of eight false claims defense firms entrusted with 20 or more disputes over that period. Morgan Lewis was followed by Reed Smith LLP and Bradley Arant Boult Cummings LLP, which each served defendants in 24 public false claims cases over that period.

Eric Sitarchuk, a Morgan Lewis partner who represents clients in major FCA investigations and litigation, attributed his firm’s position in part to its long experience in FCA litigation, effectively going back to a significant 1980s amendment that incentivized whistleblowers to come forward and raised potential damages available to the government.

The firm represents a wide variety of clients, such as government contractors, technology firms and banks, while continuing to bring in new attorneys with differing industry focuses, according to Sitarchuk.

“We’ve been defending False Claims Act cases really for as long as civil False Claims Act cases have been brought by relators’ counsel,” he said. “We have a very deep bench in the area, significant experience, and that’s not limited to any subset of industries, but crosses the spectrum of industries that face False Claims Act litigation.”

While the report does not break down firms’ work by industry or client, Lex Machina said there was generally very little overlap between cases involving the most frequently used plaintiffs firms and defendants’ firms, “likely due to the tendency for law firms to specialize in certain industries in this practice area.”

The report only captures cases publicly available through the PACER court docket system. Whistleblower false claims suits are initially filed under seal, and can remain under seal for years while the U.S. Department of Justice investigates claims and decides whether it will intervene.

For example, while the report captures 271 newly filed cases from 2020, the DOJ’s most recent figures, which can draw from nonpublic cases, indicate that 922 new FCA matters were filed in fiscal year 2020, up significantly from 786 the year before. The difference in numbers suggests that many more cases will come to light over time on PACER.

A Lag in Resolving False Claims Cases

The median time for a false claims case reaching a resolution through summary judgment was nearly four years, likely because of delays resulting from the sealed filing process as well as what Lex Machina noted was “the complex nature of False Claims litigation.” The slowest-moving case resolved between 2016 and 2020 took roughly a decade to conclude, according to the report.

For the 27 false claims cases that went to trial from 2016 through 2020, the median time period to get to that point was almost 4½ years.

That is longer on both fronts than litigation takes in other practice areas tracked by Lex Machina, it said, with consumer protection cases, for example, reaching summary judgment in a median time of 465 days and heading to trial within 701 days.

The median time to termination for the 3,075 false claims cases Lex Machina reported as being resolved, which includes dismissals and settlements, during that five-year period was 822 days, compared to 155 days for consumer protection cases. More than 75% of false claims cases tracked in the report were settled and an additional 11% were resolved on procedural grounds.

The bulk of procedural resolutions were uncontested dismissals, which the report’s authors said were “likely due in part to the tendency of Qui Tam relators to abandon their prosecution once the United States declines to intervene.”

Of the 375 cases resolved through a court judgment, the relators or government won 134 of them, or nearly 36%, while defendants succeeded in 241 cases, or 64%, most frequently because of the failure by a whistleblower to plead with sufficient particularity under Federal Rule of Civil Procedure 9(b), according to the report.

Rule 9(b) issues were cited in 254 judgments or trial decisions in favor of defendants, and some cases can involve more than one such ruling, Lex Machina said.

The next most common reason for judges ruling in favor of defendants was a lack of actual falsity, followed by a lack of causation for an alleged false claim and failure to show requisite knowledge. A lack of materiality for the government’s decision to pay, the most hot-button issue in false claims litigation since the U.S. Supreme Court’s landmark 2016 Escobar decision, came in fifth on the list, cited in 101 decisions, according to the report.

Frequent False Claims Venues and Defendants

The top 19 defendants for public false claims cases from 2016 through 2020 are all in the pharmaceutical industry, whether as manufacturers or distributors, and many are part of the same cases related to the opioid crisis, Lex Machina said.

This fits in with the trend since the late 1990s for health care and related industries to be the main driver of both false claims cases and recoveries each year, according to DOJ figures.

Johnson & Johnson and McKesson Corp. both faced 36 cases over those five years, and J&J unit Janssen Pharmaceuticals Inc. was also involved in 32 cases. Purdue Pharma LP faced 33 cases, and two other Purdue units were involved in 32 cases.

The Middle District of Florida was the most active court for false claims cases, handling 191 of the publicly visible cases, or close to 7.9% of all cases, while the Southern District of Florida handled a further 63 cases, which Lex Machina said can likely be attributed to a large number of cases involving Medicare fraud.

Florida, particularly southern Florida, has long been viewed as a “hot spot” for Medicare fraud by the Centers for Medicare and Medicaid and the DOJ, with the department launching its first Medicare Fraud Strike Force in Miami-Dade County in 2007.

The Central and Northern Districts of California came in second and third on the list, accounting for 116 and 87 cases, respectively, while other districts with large population centers, like the Northern District of Illinois, which covers Chicago, and the Southern District of New York, which covers Manhattan and the Bronx, were also in the top 10 most frequent venues for false claims cases.

And although the busiest districts for false claims litigation had a tendency to spread the load among their judges relatively evenly, one judge is notable for taking on a particularly outsized false claims caseload: the Northern District of Illinois’ now-retired former Chief Judge Rubén Castillo.

Despite retiring in 2019 without taking senior status, Castillo was the judge in 33 publicly visible false claims cases between 2016 and 2020, 14 more than the next-busiest false claims jurist, Judge Virginia M. Hernandez Covington of the Middle District of Florida, Lex Machina said.

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Two former employees of New York and New Jersey pain management practices owned by Amit Poonia, MD were awarded nearly one million dollars after alerting the government to improper billing practices amounting to serious violations of the False Claims Act (FCA) and other federal laws. Last month, the Department of Justice announced a $7.4 million settlement in a 2018 case brought by Anu Doddapaneni and Christian Reyes on behalf of the United States.

The lawsuit, filed under seal in Federal District Court in Brooklyn, recoups millions of taxpayer dollars fraudulently billed by the doctor and several medical centers based in New York and New Jersey (“the Defendants”).

An Acupuncture Scheme

The whistleblowers, called “Relators” under the law, were former employees who became concerned for patients, many of whom were chronic pain sufferers, who were frequently referred for treatments known as “P-Stim” and “Neurostim.” The procedures utilize electro-acupuncture devices to transmit electronic pulses through needles placed just under the skin on a patient’s ear.

Neither procedure is considered surgical under the Medicare guidelines; however, the Defendants routinely submitted claims for reimbursement by using improper billing codes used for surgical procedures. The Defendants also illegally billed and were reimbursed for anesthesia used in conjunction with the acupuncture procedures. Dr. Amit Poonia, his surgery centers, and medical offices used this scheme to defraud the government out of millions.

Through private attorneys, relators Anu Doddapaneni and Christian Reyes filed their case under the qui tam provisions of the FCA, which allow private citizens to bring suit against individuals or entities who defraud the federal government: in this case, by violating healthcare provisions. Illegal conduct may include improper billing, kick-back schemes providing financial incentives in return for patient referrals, billing for medically unnecessary products or services, and the list goes on. False claims were also submitted under the Federal Employees Health Benefits Program (“FEHBP”).

Doddapaneni and Reyes were not alone; the states of New Jersey and New York, along with federal prosecutors, joined in the lawsuit. The government alleged the Defendants knew or should have known their actions were improper under federal law.

A Million Reasons to Blow the Whistle

Rather than face trial, the parties agreed to a settlement requiring Defendants to pay $7.4 million in restitution and fines. Defendants did not admit to wrongdoing under its terms. For their efforts, the Relators will receive $722,707.57 as their share, plus an additional $200,000 from the Defendants to cover expenses, attorney fees, and other costs. In all, the Relators are set for a payday in excess of $920,000.

Healthy rewards for whistleblowers serve to encourage those with information about fraudulent healthcare practices to come forward under the FCA. Often Relators’ share ranges from 15-30% of the total award, plus repayment of attorney fees and costs incurred.

In this case, by mischaracterizing acupuncture procedures as surgical implantation of a neurostimulator, the Defendants defrauded the federal government to the tune of millions. Without the efforts of Relators Doddapaneni and Reyes, the scheme may have continued for years. In addition to large paydays, successful Relators enjoy FCA protection against job retaliation by accused employers.

New Jersey and New York Pain Management Scheme

According to the Plaintiffs, in the nearly five years the scheme was carried out, Dr. Poonia owned medical offices and surgery centers in several New Jersey locations: East Brunswick, Edison, Springfield, Old Bridge, and Clifton, as well as practices in Brooklyn, New York. According to WebMD, Amit Poonia, MD is a Board-certified Interventional Pain Management Specialist and Anesthesiologist. In addition to the $7.4 million settlement due, the Defendants also entered into an “Integrity Agreement” with the U.S. Department of Health and Human Services, Office of the Inspector General, New York Region.

The agreement requires the Defendants to implement specific measures to prevent future health care fraud and address compliance risks, including training staff on health care fraud laws.

No one will work harder and mroe tirelessly on your behalf. Our qui tam whistleblower lawyers have helped the government and taxpayers get back billions of dollars while our whistleblower clients have received tens of millions in whistleblower rewards.

Large or small, we will work with you to stop the fraud and obtain the maximum whistleblower reward possible.

To learn more, contact us online, or by phone 202.800.9791. All inquiries are protected by the attorney – client privilege and kept confidential. Let us help you become a hero and stop corruption in its tracks.

The False Claims Act can be accessed here.

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Whistleblowers alerting the government to alleged fraudulent conduct by the Ohio-based drug distributor, Cardinal Health, Inc., have been awarded $2.6 million for their role in a lawsuit based on alleged fraudulent dealings by the company.

In January, the Department of Justice announced a $13.125 million settlement with Cardinal Health, a wholesale pharmaceutical distribution company based in Dublin, Ohio. The lawsuit, filed in Boston, Massachusetts, recoups taxpayer dollars illegally diverted to the company in a scheme whereby Cardinal offered cash bonuses to recruit new physician provider customers at the expense of taxpayers.

Upfront Discounts Violated Anti-Kickback Laws

The government alleged Cardinal Health offered discounts in the form of upfront cash bonuses to doctors in outpatient settings in exchange for purchases of certain specialty pharmaceutical products from Cardinal for use by Medicare patients. This was done through the company’s specialty pharmaceutical distribution subsidiary, Cardinal Health 108, LLC. Physician practices routinely seek reimbursement for specialty products through Medicare Part B and state Medicaid programs.

Cardinal paid the bonuses to doctors before the drug purchases were made and were not linked to any particular transaction. These upfront bonuses, often called “upfront discounts,” “upfront rebates,” or “transition rebates,” are not associated with identifiable sales and/or constitute unearned rebates in violation of applicable healthcare laws.

For the Feds, the scheme raised red flags and ultimately resulted in Cardinal paying millions to settle allegations it violated the Anti-Kickback Statute and the False Claims Act (FCA) as well as state Medicaid laws. Under the federal Anti-Kickback Statute, drug distributors are prohibited from offering or paying any compensation to convince doctors to purchase medications for use on patients covered by the Medicare health insurance program.

According to the government, Cardinal’s payment of upfront bonuses amounted to illegal kickbacks. While drug distributors may legally offer commercially available discounts under some circumstances and with appropriate controls in place, Cardinal’s scheme did not follow these rules, according to the Office of Inspector General of the Department of Health and Human Services.

Cardinal the Villain, Taxpayer the Victim, Whistleblower the Hero

American taxpayers are the real victims in a scheme like the Cardinal Health kickback scheme. By illegally inducing physicians to purchase drugs for use by Medicare patients, those like Cardinal influence clinical decision-making of health professionals, subvert the healthcare marketplace, and cause the diversion of funds from federal healthcare programs funded by taxpayers.

The FCA offers a powerful tool to members of the public with information leading to the prosecution of such fraudulent conduct and recovery of taxpayer funds: qui tam actions.  Joined by the government in the suit against Cardinal, whistleblowers Omni Healthcare, Inc., John Crowley, Jeffrey Lovesy, and Michael Mullen were associated with Cardinal Health during the approximately nine years Cardinal is said to have run its illegal scheme, with the named individuals having had ties to the company through management or sales roles. Like the Cardinal whistleblowers (known as “Relators” in qui tam actions) who received approximately $2.6 million-plus attorney fees, costs and expenses, whistleblowers who successfully prosecute or share in the prosecution of those who violate the FCA stand to receive a substantial share of an award: in this case nearly 20% of the multi-million-dollar settlement.

While Cardinal did admit to some underlying facts as outlined in the Settlement Agreement, it claims it no longer offers the types of bonuses forming the basis for this case. Cardinal Health is no stranger to the FCA and allegations of health care fraud. In 2011, Cardinal settled another FCA case by agreeing to pay $8 million in a qui tam action brought by whistleblowers R. Daniel Saleaumua and Kevin Rinne, a former pharmacy owner and a pharmacy consultant, respectively. Mr. Saleaumua alleged that Cardinal paid $440,000 to him in exchange for an agreement that he purchase prescription drugs from Cardinal. For their efforts in bringing Cardinal to justice through the eventual settlement, the 2011 relators received $760,000.

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Everything You Need to Know about Building Collapse Lawsuits and How to Prevent Tragedy from Striking

Less than one day after the collapse of the Champlain Towers South condominiums in Surfside, Florida, the first lawsuit was filed. Two days after the tragic collapse, at least one law firm launched a “Florida Building Collapse” website. While we have our own thoughts about these efforts, our focus has been on early detection and prevention of these tragedies. We have been studying and writing about construction defects involving shoddy steel and concrete for years.

Despite the apparent rush to the courthouse in the Surfside case, none of the experts know yet the cause of the crash. In fact, the experts can’t even begin their work until rescue efforts are complete. It took the National Transportation Safety Board 18 months to complete its investigation of the 2018 collapse of the nearby FIU pedestrian bridge. While we don’t think victims need to wait that long before filing a lawsuit, we believe that there should be some investigation before racing to court.

In this post we discuss the common causes of building and structural collapses, how they can be prevented and what to do if you think there is a problem.

Typical Causes of a Building Collapse

Building and bridge collapses are caused by improper building materials (concrete and steel), poor maintenance and poor design. We will discuss each below.

Defective and Improper Building Materials

Except for residential construction, the typical structural components in a commercial or multifamily dwelling are steel and concrete. Any engineer or architect will tell you that not all steel and concrete is alike.

Without going into a technical recitation of grades and types of building materials, common types of concrete include:

• Plain or Ordinary concrete
• Reinforced concrete (rebar or glass reinforcements)
• Prestressed concrete
• Precast concrete
• Lightweight concrete (used in long bridge spans)
• High-Density concrete
• Air-Entrained Concrete (for use in cold weather where freezes are common)
• Ready-Mix concrete
• Volumetric concrete
• Rapid-Set concrete
• Smart concrete (used for early detection of structural flaws)
• Pervious concrete (contains no sand and has open pores to prevent water absorption)
• Pumped concrete
• Limecrete
• Roll Compacted concrete (what you see on most highways)
• Shotcrete concrete

Each type has different durability, strength and workability characteristics.

Just like concrete, there are different types of steel including carbon steel and alloy steel. When you purchase steel for a commercial building project, it comes with a certificate that says where it was made. The certificate contains important information including chemical composition and how the steel was made. Architects and engineers have very specific requirements for the quality of steel used.

We got into this line of work years ago when a whistleblower alerted us that a company was substituting cheaper steel for use on an airport intermodal facility. The company thought it would be clever and purchased samples of steel from a U.S. mill simply to get the certificates of manufacture. The company then used cheaper foreign steel and kept the U.S. certificates in case someone inspected.

That practice not only violated the Buy American laws (government funded projects must be built with U.S. steel), it was also dangerous. The engineers and architects designing the project believed that one type of steel was being used when something of an unknown quality was instead being substituted.

Since then, we have seen several other cases of improper substitution of unknown quality materials.

Here are some more things to consider. Buildings on the coast are often subject to corrosive salt air. The salt can penetrate many types of concrete and cause support beams and rebar to rust from the inside out. More ominously, that decomposition process isn’t visible. Roads and bridges in many parts of the U.S are also subject to corrosion from salt applied to roadways during winter weather.

We don’t yet know what caused the building collapse at the condo complex in Surfside, no one does.  (This post is written three days after the tragedy.) Could it be caused by poor building materials? Absolutely and a 2018 inspection noted dangerous signs of decay.

That is a segue to poor inspection and maintenance. Buildings don’t last forever. Foundations settle, seismic events occur (earthquakes, heavy traffic or nearby blasting) and water can take its toll. That means buildings need to be inspected often and properly. And when problems occur, they must be quickly addressed.

Poor design is also a frequent culprit. Unlike some lawyers that jumped the gun on the FIU bridge collapse, we waited. Our initial thought was bad concrete (steel wouldn’t deteriorate that fast) but we were wrong. The NTSB said there were major design flaws and the company hired to review the designs wasn’t even certified to do so.

All in all, the NTSB found a series of errors. And that brings up our final point. It is usually not one problem that causes a massive building to collapse without warning. Unless a giant sinkhole appeared under the Surfside condo (and those happen in Florida), we think there will be blame everywhere…

• The condo board for not taking prompt action
• Poor design ( apparently the floor wasn’t sloped allowing water to pool)
• Poor construction
• Improper concrete
• Too much seismic activity from nearby blasting

Who Is Liable When a Bridge or Building Collapses?

If you been carefully following this post, you probably know that the more than one party is frequently liable. Determining who is negligent can be a time consuming process. And the older the building or structure, the harder it becomes to get records.

Typically we look to the following groups of people when determining liability:

• Property owners
• HOAs
• Original developer of the building
• Major contractors and subcontractors
• Architects and engineers
• Persons who reviewed and approved the original building plans
• Building inspectors
• Material suppliers

Things You Can Do to Prevent a Building Collapse Tragedy

We won’t spend too much time on the obvious. Check your suppliers, make sure your architect, engineers and contractors are both qualified and bonded, get an independent inspection of the major components and materials used in the building process, inspect frequently and take care of all problems immediately.

We mention this last point because the condo HOA for Champlain Towers got a report of serious problems following an inspection in 2018. Repairs were finally being started three years later. We would say, three years too late.

Here is something else to ponder. Ironically, few developers and property owners get independent verification on the structural steel and concrete used in the building. We suspect that there is widespread use of substandard materials in building projects. We recently learned of a highway that was being constructed of substandard asphalt. It’s not uncommon for some vendors and contractors to cut corners.

All too often we rely on building inspectors to identify problems but they rarely if ever conduct tests on the concrete, steel and other building materials used in construction. Unless there is a visible indication that something is amiss, municipal building inspectors aren’t going to catch poor materials. And as to design, they usually rely on the project’s architect or engineer to certify the design is proper.

Filing a Construction Defect Claim

Many times a building owner will suspect that a contractor or vendor failed to properly design or build. A leaky roof or windows, doors that don’t shut properly, pooled water in basements, cracks in walls, exposed rebar or rust spots on concrete support beams, and spalling are all signs that major construction defects exist.

We can help you file a claim against the developer or your own insurer. It’s important to take action before matters get worse or a tragedy occurs.

Do you think you have a construction defect claim? Contact us before a tragedy strikes.

For more information, contact us online, at brian@mahanylaw.com or by phone 202-800-9791. Cases handled nationwide. Most matters can be handled on a contingency fee basis.

Whistleblowers and Construction Defects

Under the federal False Claims Act, whistleblowers with information about construction defects in federally funded building and highway projects are eligible for large cash rewards. To qualify, you must have inside information about the fraudulent conduct and be the first to file.

Several states have their own whistleblower reward programs for state funded building and roadway projects.

For federally funded construction projects, the Buy America and Buy American laws require steel used in the construction come from the United States. Simply demonstrating that a vendor substituted foreign made steel can make you eligible for a reward.

The Mahany Law whistleblower lawyers have helped people collect over $100,000,000.00 in rewards. For more information on the Buy American whistleblower rewards, visit our Buy America / U.S. steel whistleblower reward pages. Ready to see if you qualify for a reward, see the contact information above. All inquiries will be kept strictly confidential.

*If you have information on a nongovernment funded project, we still want to hear from you. Even if there is no reward, it is better to help prevent a tragedy from occurring.

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