False Claims Act

Fifty-five hospitals located throughout the United States have agreed to pay the U.S. government over $34 million to settle allegations that the facilities knowingly submitted or caused the submission of false claims to Medicare for kyphoplasty procedures, the U.S. Department of Justice announced this week. 

Kyphoplasty is a minimally-invasive procedure used to treat certain spinal fractures, often related to osteoporosis.  In many cases, kyphoplasty can be performed safely and effectively as an outpatient procedure without any need for a more costly hospital admission.  The agreements announced today resolve allegations that the settling hospitals frequently billed Medicare for kyphoplasty procedures on a more costly inpatient basis, rather than an outpatient basis, in order to increase their Medicare billings.   

A sampling of the hospitals involved, and the amounts they settled for, include:

• Atrium Medical Center, Middletown, Ohio: $4,232,992.50.
• Cedars Sinai Medical Center, Los Angeles, Calif.: $1,485,846.
• Mount Sinai Medical Center, Miami, Fla.: $1,846,194.00.
• Twenty-three hospitals affiliated with HCA Inc., Nashville, Tenn.: $7,145,842.72 (including hospitals located in Florida, Texas, California, Georgia, and more).

The Justice Department has now reached settlements totaling approximately $75 million, with over 100 hospitals, to resolve allegations that they mischarged Medicare for kyphoplasty procedures. 

In addition to today’s settlement, the government previously settled with Medtronic Spine LLC, the corporate successor to Kyphon Inc., for $75 million, to settle allegations that the company defrauded Medicare by counseling hospital providers to perform kyphoplasty procedures as inpatient rather than outpatient procedures.

All but four of the settling facilities announced today were named as defendants in a lawsuit brought by Craig Patrick and Charles Bates, former Kyphon employees, under the whistleblower provisions of the False Claims Act.  The False Claims Act allows private citizens with knowledge of fraud against the government to sue on behalf of the government and share in the recovery.  Patrick and Bates will receive approximately $5.5 million as their share of the settlement.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

Ohio-based General Electric Aviation Systems (GEAS) has agreed to pay $6.58 million to resolve allegations that the company knowingly submitted or caused the submission of false claims in connection with contracts made with the Department of Defense, the U.S. Department of Justice announced today.  GEAS manufactures and sells integrated systems and components for commercial, corporate, military and marine aircraft.

GEAS was contracted to manufacture and deliver to the Navy external fuel tanks for use on the F/A-18 Hornet strike fighter jet, which GEAS manufactured at its plant in Santa Ana, California.  In March 2008, a GEAS-manufactured tank failed government testing, which led to a multi-year investigation by local and federal agencies.  As a result, the United States alleged that GEAS knowingly failed to comply with contract specifications and failed to undertake proper quality control procedures in connection with 641 external fuel tanks it delivered to the Navy between June 2005 and February 2008.

The settlement also resolves allegations that, between June 2010 and June 2011, GEAS knew that it falsely represented to another government contractor that GEAS had performed a complete inspection of 228 drag beams to be used on Army UH-60 Blackhawk helicopters, and that those 228 drag beams conformed to all contract specifications. 

Allegations about GEAS’s misconduct at the Santa Ana facility were originally included in a lawsuit filed by Jeffrey Adler, a former GEAS employee, under the whistleblower provisions of the False Claims Act.  The False Claims Act allows a private citizen with knowledge of fraud against the government to sue on behalf of the government and claim a share of the recovery.  Adler’s share of the settlement has not yet been determined.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

Connecticut-based United Technologies Corporation has been found liable by a federal court for over $473 million in damages and penalties arising from a contract with the U.S. Air Force for fighter aircraft engines for F-15 and F-16 aircraft between 1985 and 1990, the U.S. Department of Justice announced today.

United Technologies allegedly proposed prices for the engine contract that misrepresented how the company calculated those prices.  Specifically, the government alleged that United Technologies failed to include in its price proposal historical discounts that it received from suppliers, and instead knowingly used outdated information that excluded such discounts.  As a result, the government paid hundreds of millions more than it otherwise would have paid for the engines

The court awarded the government False Claims Act damages and penalties of $364 million, which is the highest recovery ever obtained by the government in a case tried under the Act.  The court also awarded an additional $109 million in damages on the government’s common law claims.  With the addition of prejudgment interest on the latter claims, which the court has yet to calculate, the government anticipates that the total judgment against United Technologies could be in excess of half a billion dollars.  No whistleblowers were involved in initiating this case.  Had there been whistleblowers involved, their share of the recovery would likely have been record-setting as well.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

Virginia-based Science Applications International Corporation (SAIC) has paid $11.75 million to resolve allegations that the company violated the False Claims Act by charging inflated prices against grant money provided by the U.S. government to train first responder personnel to prevent and respond to terrorist attacks, the U.S. Department of Justice announced last week.

SAIC received federal grant money through the New Mexico Institute of Mining and Technology to provide course management, development, and instruction to first responder personnel to prevent and respond to terrorist attacks involving explosive devices.  The United States alleged that SAIC’s cost proposals falsely represented that SAIC would use far more expensive personnel to carry out its efforts than it intended to use and actually did use, resulting in inflated charges to the United States.

The lawsuit was originally filed by Richard Priem, SAIC’s former project manager for the first responder training program, under the whistleblower provisions of the False Claims Act.  Under the False Claims Act, a private citizen with knowledge of fraud against the government can sue on behalf of the government and share in the recovery.  Priem’s share has not yet been determined.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.

American Commercial Colleges Inc. (ACC), a Texas-based for-profit corporation, has agreed to pay the United States government up to $2.5 million, including interest, to resolve allegations that they knowingly submitted or caused the submission of false claims to federal student aid programs, the U.S. Department of Justice announced last week.

In order to be eligible for federal student aid programs authorized by Title IV of the Higher Education Act of 1965, for-profit colleges such as ACC must obtain no more than 90 percent of their annual revenues from Title IV student aid programs.  The other 10 percent of their revenue must come from other sources, such as student payments or private loans.  ACC allegedly violated the False Claims Act when it orchestrated certain short-term private student loans that ACC repaid with federal Title IV funds.  The short-term loans at issue in this case were not sought or obtained by students on their own; the United States contends ACC orchestrated the loans for the sole purpose of manipulating its 90/10 Rule calculations.

Under the terms of the settlement, ACC will pay the United States $1 million, plus interest, over five years, and could be obligated to pay an additional $1.5 million under the terms of the agreement.

The lawsuit was originally brought by Shawn Clark and Juan Delgado, former directors of ACC campuses in Odessa and Abilene, Texas, under the whistleblower provisions of the False Claims Act.  The False Claims Act allows private citizens with knowledge of fraud perpetrated against the government to sue on behalf of the government and share in the recovery.  Clark and Delgado will receive $170,000 of the $1 million fixed portion of the government’s recovery, and an additional $255,000 if ACC becomes obligated to pay the maximum $1.5 million contingent portion of the settlement.

The Chanler Group, in association with the Hirst Law Group, represents whistleblowers who take action under the False Claims Act to report fraud committed against the federal and state governments.  We have years of experience representing whistleblower clients who expose every kind of fraud against the government, including health care fraud, contract fraud, and tax fraud.  Read more about our expertise in False Claims Act cases and how you can take action.