SUMMARIES OF A FEW OF OUR FALSE CLAIMS ACT CASESPRACTICE AREARESULT
United States ex rel. Beaujon v. Hebrew Homes Health Network, Inc.Health Care$17 million settlement
United States ex rel. Epp v. Supreme Foodservice AGProcurement$434,000,000 settlement; criminal convictions
United States ex rel. Gale v. Omnicare, Inc.Health Care$116 million settlement
United States ex rel. Daugherty v. Bostwick LaboratoriesHealth Care$6 million settlement
United States ex rel. Lankford v. MPRI, Inc.ProcurementProcurement$3.6 million settlement
United States ex rel. Hansson v. CONAXProcurement$2 million settlement
United States ex rel. Hutcheson v. Blackstone Medical, Inc.Medical Devices$30 million settlement
State of Texas ex rel. Galmines v. Novartis PharmaceuticalsPharmaceutical$19.9 million settlement
United States ex rel. Austin v. NovartisPharmaceutical$237 million settlement
United States ex rel. Pogue v. Diabetes Treatment Centers of AmericaHealth Care$28 million settlement
United States ex rel. LeFan, et al. v. The General Electric CompanyProcurement$10 million settlement
United States ex rel. Gonter v. Hunt Valve CompanyProcurement$13 million settlement; criminal convictions
United States ex rel. Brett Roby v. The Boeing CompanyProcurement$61.5 million settlement

United States ex rel. Beaujon v. Hebrew Homes Health Network, Inc.

Practice Area: Healthcare
Result: Settled in 2015 for $17,000,000
Miami, Florida

Relator Stephen Beaujon was the Chief Financial Officer for one of Florida’s largest nursing home networks, Hebrew Homes, when he discovered that his company was offering physicians illegal kickbacks in exchange for patient referrals – a scheme that Mr. Beaujon alleged in his lawsuit was largely orchestrated by the company’s president, William Zubkoff. The United States did not intervene in the case, which ultimately settled for $17 million, which the Justice Department held out as the largest settlement paid by a nursing home for violations of the Anti-Kickback Statute. Hebrew Homes also agreed to enter into a Corporate Integrity Agreement, which required the company to change its policies and allows the Government to more closely monitor the company’s actions. Access the Department of Justice’s press release here to learn more; for the Corporate Integrity Agreement, click here.


United States ex rel. Epp v. Supreme Foodservice AG

Practice Area: Procurement
Result: Settled in 2014 for $101,000,000 as part of $434,000,000 overall recovery
Philadelphia, Pennsylvania

This case involved the inflated billing practices of a company that had contracted with the United States to distribute food and other items to U.S. military locations in Afghanistan. The company, known as Supreme Foodservice AG, allegedly used a variety of mechanisms to fraudulently represent the costs of its services, including (a) the use of a fictional middleman to artificially markup its prices, (b) the inflation and misrepresentation of shipping costs, (c) the practice of knowingly charging the United States more than it paid for items it held in stock, and (d) the failure to notify or give the Government the benefit of “discounts” negotiated between Supreme and its subcontractors. Relator Michael Epp was a Director at Supreme when he voiced his concerns over the company’s questionable practices, after which he was suspended and eventually terminated for acting in a manner inconsistent with the company’s “ethics.” Supreme pled guilty to Major Fraud against the United States and settled Mr. Epp’s allegations for $101,000,000. The Department of Justice’s press release can be found here.


United States ex rel. Gale v. Omnicare, Inc.

Practice Area: Healthcare
Result: Settled in 2014 for $124,000,000
Cleveland, Ohio

The Federal Anti-Kickback Statute forbids anyone from offering financial inducements (or “kickbacks”) to procure services that can be reimbursed by a federal healthcare program, such as Medicare or Medicaid. Relator Donald Gale revealed a kickback scheme carried out by Omnicare, one of the largest healthcare companies in the U.S. According to Mr. Gale, Omnicare had been offering steep discounts to institutional providers who were treating patients covered under Medicare “Part A” (which temporarily provides reimbursements on a per diem basis) in order to capture business for patients covered under all other government healthcare services. Our firm was prepared to present this case to a jury when, on the eve of trial, Omnicare offered to settle the case. The resulting agreement required Omnicare to return $116 million to the government, over $17 million of which was awarded to Mr. Gale for his services in uncovering the alleged scheme. The Department of Justice issued a press release, which can be accessed here, and our press release case be found here.


United States ex rel. Daugherty v. Bostwick Laboratories and Dr. David G. Bostwick

Practice Area: Healthcare
Result: Settled in 2014 and 2015 for $6,000,000 and $4,000,000
Cincinnati, Ohio

An independent medical laboratory can apply for reimbursement through federally funded healthcare programs when a physician sends the laboratory samples from beneficiaries of those government programs. Usually, only tests that are ordered by the referring physician are eligible for reimbursement. In this case our client, Relator Michael Daugherty, revealed how Bostwick Laboratories was performing additional, expensive testing on some samples “reflexively” – or without the knowledge or consent of the physician who ordered the original test – and then accepting reimbursement for these tests from the government. In addition, Bostwick allegedly offered illegal kickbacks to physicians in order to obtain referrals for the unnecessary testing. In the end, Bostwick Labs settled this case for over $6 million (access the press release here). Over a year later, Dr. Bostwick settled the claims asserted against him for up to $3.75 million. Our press release regarding that settlement can be found here, and the Department of Justice’s release can be found here.

United States ex rel. Lankford v. MPRI, Inc.

Practice Area: Military Procurement
Result: Settled in 2014 for $3,600,000
Cincinnati, Ohio

The Department of Defense entered into a contract with MPRI to provide support to U.S. troops serving in Afghanistan. Under the contract, the government agreed to pay MPRI hourly for the actual performance of the services. However, MPRI systematically charged the government for time that its employees were not working on the contract, but rather were on vacation or traveling to and from their vacations. Relator Scott Lankford, an employee at MPRI, spoke to his superiors about the concerns this raised but was ultimately ignored. His qui tam action resulted in a settlement totaling more than $3.6 million. Click here to read the Department of Justice’s press release.


United States ex rel. Hansson v. CONAX

Practice Area: Military Procurement
Result: Settled in 2013 for $2,000,000
Cincinnati, Ohio

This case involved the fraudulent sale of military components to the United States Department of Defense. The components were manufactured by Cobham PLC and its wholly owned subsidiaries CONAX Florida and H. Koch & Sons Company. Relator Mark Hansson, who was employed by CONAX, notified his superiors that the components suffered from potentially fatal deficiencies and had failed to pass the rigorous testing required for sale to the U.S. military. Despite these concerns, the company decided to conceal the components’ deficiencies and continue with their sale, rather than suffer the financial burden of scrapping or fixing them. In some cases, the company conducted fraudulent testing in front of government officials to “prove” that their products could pass muster. As a result of the company’s failure to address these issues and its active participation in what he saw as a scheme to defraud the government, Mr. Hansson resigned from his position and initiated this qui tam action. Almost five years later, the defendants settled the case for over $2 million. Read the Department of Justice’s press release here.


United States ex rel. Hutcheson v. Blackstone Medical, Inc.

Practice Area: Medical Devices
Result: Settled in 2012 for $30,000,000
Boston, Massachusetts

Blackstone Medical manufactured surgical devices that were used in spinal surgeries. While working for Blackstone, Relators Susan Hutcheson and Philip Brown uncovered a scheme through which Blackstone offered illegal inducements (“kickbacks”) in order to persuade surgeons to use Blackstone’s products. These kickbacks came in many forms, the most common of which were sham consulting agreements that paid surgeons up to $8,000 each month. Blackstone also offered expensive grants, travel, entertainment, and other illegal incentives to physicians as a quid pro quo for using their products.

Initially, the district court dismissed the case because it did not believe that the hospitals that were submitting claims for the medical equipment had an obligation to ensure that Blackstone Medical was complying with the Anti-Kickback Statute.   But the 1st Circuit Court of Appeals reversed, holding that the hospitals’ provider agreements did, in fact, precondition payments on the integrity of the underlying transaction, and that their provider agreements made clear that “the federal Medicare program will not pay claims if the underlying transaction that gave rise to the claim violated the AKS.” Click here to read the decision, which was a huge win for relators everywhere. Ultimately, Blackstone settled the case for $30 million. You can access the press release here.

State of Texas ex rel. Galmines v. Novartis Pharmaceuticals

Practice Area: Pharmaceutical
Result: Partially settled in 2012 for $19,900,000
Austin, Texas

Relator Don Galmines was a sales representative for Novartis Pharmaceuticals during the company’s campaign to market Elidel, a topical cream that was used to treat eczema. Because Elidel worked by affecting patients’ immune systems, the FDA approved Elidel for use in patients over the age of two when conventional eczema treatments had either failed or were inadvisable. However, Novartis undertook a massive marketing campaign to promote Elidel’s long-term use in infant populations and to convince prescribing physicians that Elidel was to be used as a first-line treatment. The resulting widespread off-label uses of the drug prompted the FDA to brand Elidel with a “black box” that clarified the drug’s indication. Although the bulk of this case remains in litigation, Novartis was able to reach an agreement with the State of Texas to settle its state-based claims for $19.9 million. You can read the press release here. We continue litigating Mr. Galmines’s remaining claims in Federal court in Philadelphia.


United States ex rel. Austin v. Novartis

Practice Area: Pharmaceutical
Result: Settled in 2010 for $237,000,000
Philadelphia, Pennsylvania

Jim Austin and John Montgomery were employed as pharmaceutical sales representatives at Novartis – one of the world’s largest pharmaceutical companies – when they uncovered the company’s marketing scheme intended to promote the anti-epilepsy drug Trileptal for uses not approved by the FDA. These unapproved uses included treatment of bipolar disorder and various other types of neuropathic pain. Other evidence revealed that Novartis had also paid kickbacks to the physicians in order to induce off-label prescriptions. As a result, it was estimated that over half of Trileptal prescriptions were for the treatment of neurological disorders that Trileptal was not approved to treat. Novartis ultimately settled the case for over $237 million – $24 million of which was paid to the relators for their efforts in uncovering the alleged fraud. Click here to read the press release.


United States ex rel. Pogue v. Diabetes Treatment Centers of America

Practice Area: Healthcare
Result: Settled in 2009 for $28,000,000
Nashville, Tennessee and Washington, D.C.

This case alleged that the Defendant, Diabetes Treatment Centers of America (“DTCA”), violated the False Claims Act by offering illegal kickbacks to physicians in return for patient referrals. DTCA operated diabetes treatment centers in hospitals across the nation and recruited physicians to act as “medical directors.” In reality, this meant that DTCA would pay physicians for referring their patients to DTCA’s treatment centers. The claims to Medicare and Medicaid, however, were ultimately submitted by the hospitals in which DTCA operated. While this case settled for $28,000,000, its effect as legal precedent is perhaps its greatest legacy.

Initially, the District Court dismissed the case for failing to establish that any of the claims were “false.” The decision relied on the fact that the claims were submitted not by DTCA itself, but by the hospitals in which DTCA operated. Upon reconsideration, however, the court vacated its earlier decision and held that a person may violate the FCA based on the theory of “implied certification.” Under this theory, a claim may be considered false if it is based on actions that violate laws or regulations so important to the government that, had the government been aware of the violations, it would not have paid the claim. The court therefore allowed the case to proceed based on the underlying allegations of improper influence, even though the claims made to the Government truthfully represented the services being performed. This case helped set into motion the now well-established theory that an underlying violation of Stark Laws or Anti-Kickback Statutes may form the basis of a qui tam action under the False Claims Act.

Click here to read the District Court’s reconsideration decision, or here to read the oft-cited D.C. Circuit’s discussion and affirmation of that decision after the case was transferred.


United States ex rel. LeFan, et al. v. The General Electric Company

Practice Area: Military Procurement
Result: Settled in 2006 for $10,000,000
Louisville, Kentucky

This product substitution case involved jet engine parts manufactured at GEAE’s Madisonville, Kentucky Turbine Airfoil plant. “Product substitution” is a term which refers to cases where the contractor promised to provide one thing, but is alleged to have provided another. The case was investigated by a large cast of DOJ attorneys and investigators from the Defense Criminal Investigative Service, the Air Force Office of Special Investigations, the Army Criminal Investigations Division, and the Naval Criminal Investigative Service. The United States intervened in the case, and the qui tam allegations were settled in 2006 for over $10,000,000. You can access the press release here. In January 2008, the federal court awarded almost $2.2 million in attorney fees. General Electric appealed that order, but the 6th Circuit Court of Appeals affirmed the decision. Click here to read that decision.


United States ex rel. Gonter v. Hunt Valve Company

Practice Area: Procurement
Result: Settled in 2006 for $13,000,000
Cleveland, Ohio

Tina and Bill Gonter worked for Hunt Valve Company, an Ohio-based manufacturer of valves used in nuclear submarines, Navy ships, and containers for radioactive waste.  Hunt Valve is a subcontractor for the ship-building companies, General Dynamics and Northrop Grumman.  Because they had worked for the Navy for many years, they knew, when they started working for Hunt, that it was doing things horribly wrong.  However, even though Tina was Military Quality Manager, she could not get the company to change, so she contacted Rick Morgan.

We brought a case on their behalf in 2001.  Tina wore a wire for the Defense Department for several months, collecting powerful evidence of fraud against the defendants.  For reasons never fully explained, the Justice Department did not intervene against the contracting companies, General Dynamics and Northrop Grumman.  However, we continued on and settled the case in 2006 for more than $13 million.  This image shows some of the documents, seized by the Defense Department, which Tina and our paralegal Mary Jones went through – page by page.

As a result of the combined efforts of the government and the Gonters’ team, two Hunt Valve executives went to federal prison for fraud, hundreds of valves were inspected and, in some cases, repaired, and the Navy changed the way it supervises manufacturers like Hunt. In early 2008, Tina testified before the United States Senate Judiciary Committee regarding the importance of the False Claims Act and her experiences.  You can read her testimony here.  In 2007, she was honored by the Ohio Academy of Trial Lawyers as its Citizen of the Year; the Academy’s President wrote this article about Tina’s heroism in March 2008. And in 2010, Ms. Gonter was recognized by Senator Charles Grassley, who invited her to Iowa to address the campaign press corps about her lawsuit.


United States ex rel. Brett Roby v. The Boeing Company­

Practice Area: Procurement
Result: Settled in 2000 for $61,500,000
Cincinnati, Ohio

Saudi

Brett Roby worked as a quality assurance specialist for SPECO, a company which made high-performance gears for Chinook CH-47D helicopter transmissions.  He determined that the company was using a steel alloy, Vasco X2M, which was not being properly handled.  The result was that gears in helicopters were dangerous, including some which failed in flight.  This picture is of one such helicopter, after what the Army calls a “hard landing” during Operation Desert Shield.  The United States intervened in our case against Boeing.  We worked very closely with the Justice Department and DCIS team on the case, taking hundreds of depositions and reviewing millions of pages of documents.  This extraordinary team effort resulted in Boeing’s agreement to pay $61,500,000 in settlement and agreeing to replace the defective transmission gears.

Mr. Roby received a relator’s share of $10,000,000.  He was later awarded a “Gold Whistle” Award by United States Senator Charles Grassley in recognition of this service to the United States.  Brett was also recognized as a premier “Fraud Buster” by Taxpayers Against Fraud.  Mr. Roby’s case is one of the leading authorities on the computation of damages under the False Claims Act, because Boeing claimed that the only responsibility it had was the cost of the gears (about $10,000 each) rather than the value of the helicopter pictured above.  The Sixth Circuit’s damage opinion can be downloaded here.