The New York Times reports that the more than $3 billion in settlements that the Department of Justice has achieved with companies under the Foreign Corrupt Practices Act (FCPA) since the passage of the act in 1977 have been primarily with foreign companies. The best-known case is that of Siemens, the German global engineering company that paid $800 million to the U.S. and another $800 million to Germany to settle charges that 8 former executives paid $100 million in bribes to Argentine officials to secure a $1 billion contract for Siemens.
Of the top ten settlements, only one company, KBR, the former Kellogg, Brown and Root, a subsidiary of Halliburton, is an American company. However, The Times also reports that of the 78 companies now under investigation for suspected violations of the FCPA, most are American, including Alcoa, Goldman Sachs, Pfizer and Wal-Mart.
For more information, please see:
http://www.nytimes.com/2012/09/04/business/global/bribery-settlements-under-us-law-are-mostly-with-foreign-countries.html?emc=eta1 Read More
On August 31, 2012, a jury convicted three former financial services executives for wire fraud and conspiracy to commit wire fraud in relation to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts. According to the Department of Justice, Peter Ghavami, Gary Heinz and Michael Welty participated in separate fraud conspiracies and schemes with various financial institutions and with a broker, at various time periods from as early as March 2001 until at least November of 2006.
The financial institutions offered a type of contract to state, county and local governments and agencies, and not-for-profit entities, throughout the United States, known as “investment agreements.” Public entities typically hire a broker to assist them in investing their money and to conduct a competitive bidding process to determine a winning provider. According to DOJ, the public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects.
The jury found that Ghavami, Heinz and Welty, with their provider and broker co-conspirators, corrupted the bidding process in order to increase the number and profitability of the agreements awarded to UBS. At other times, while acting as brokers, Ghavami, Heinz and Welty and their co-conspirators, arranged for UBS to receive kick-backs in exchange for manipulating the bidding process and steering investment agreements to certain providers. The result was to deprive the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities to refinance outstanding debt and for various public works projects.
The government presented evidence at trial that these actions cost municipalities around the country and the U.S. Treasury millions of dollars. Among the issuers and not-for-profit entities whose agreements or contracts were subject to the defendants’ schemes were the Commonwealth of Massachusetts, the New Mexico Educational Assistance Foundation, the Tobacco Settlement Financing Corporation of Rhode Island and the RWJ Healthcare Corp. Read More
On August 21, 2012, the Securities and Exchange Commission (SEC) announced that an individual who had provided documents and other significant information in the investigation of a multi-million dollar securities fraud scheme had been awarded nearly $50,000. This is the first pay-out from a new SEC program designed to reward people who provide evidence of securities fraud. The award represents 30% of the dollar amount collected in an SEC enforcement action against the perpetrators of the scheme. This (30%) is the maximum percentage pay-out allowed by the Whistleblower Law.
The Whistleblower’s assistance led to a court ordering more than $1 million in sanctions, of which approximately $150,000 has been collected thus far. It is still possible that additional sanctions will be issued. Any such increase, will increase payments to the Whistleblower.
Robert Khuzami, director of the SEC’s Division of Enforcement, stated, “this Whistleblower provided the exact kind of information and cooperation we were hoping the Whistleblower program would attract.” He indicated further that, “had this Whistleblower not helped to uncover the full dimensions of the scheme, it is very likely that many more investors would have been victimized.”
The SEC did not approve a claim from a second individual seeking an award in this matter, because of the information provided that did not lead to or significantly contribute to the SEC’s enforcement action, as required for an award.
The SEC indicates that the quality of tips that has been receiving is on the increase. It indicates that it has received about 8 tips per day since establishment of the program in August of 2011. Read More
On August 28, 2012, the DOJ announced that Jawad Ahmad, a Detroit area resident entered a plea of guilty for his role in managing a $13.8 million psychotherapy fraud scheme. He is scheduled to be sentenced on November 28, 2012, and faces a maximum potential penalty of 10 years in prison and a $250,000 fine.
According to the government, the fraud scheme began in July of 2008 when Ahmad and two other co-conspirators acquired control over a home health care company known as Physicians’ Choice Home Healthcare LLC (Physicians’ Choice). Ahmad managed the operations of Physicians’ Choice from January 2009 to March of 2010, and in doing so managed numerous aspects of fraud at Physicians’ Choice, including the delivery of payment of kickbacks to beneficiary recruiters. The beneficiary recruiters would obtain Medicare beneficiaries’ information needed to bill Medicare for home health services that, in fact, were never rendered.
Ahmad also provided information to employees of Physicians’Choice to check the billing eligibility of the Medicare beneficiaries before Physicians’ Choice began billing them. Physicians’ Choice co-opted the Medicare beneficiaries by providing kickbacks in exchange for pre-signed forms and visit sheets that were later falsified to indicate that they received home health services that they never received. Ahmad would deliver the pre-signed beneficiary paper work to various medical professionals to create and/or sign fictitious patient files to document purported home health services that were never rendered.
From May of 2010 through September of 2011, Ahmad also managed Phoenix Visiting Physicians, PLLC. DOJ claimed that his co-conspirator, Dr. Dwight Smith, signed home health care referrals for beneficiaries he had not seen or treated. In addition, Phoenix employed individuals who held themselves out to be “doctors,” but who were not licensed in the State of Michigan to perform any medical services. The unlicensed “doctors” met and purported to examine non-home bound Medicare beneficiaries for home health care services. Read More
On August 8, 2012, a panel of the U.S. Court of Appeals for the Second Circuit reversed the District Court’s dismissal of an SEC claim against former Terex CFO, Joseph Apuzzo, wherein the SEC had alleged that Mr. Apuzzo aided and abetted securities law violations to his role in a fraudulent accounting scheme.
Apuzzo’s employer, Terex Corporation, manufactures equipment for use in the construction, infrastructure and service to mining industries. United Rentals, Inc. is one of the largest equipment rental companies in the world. Michael J. Nolan was United Rentals’ Chief Financial Officer from 1997 until December of 2002. According to the SEC, United Rentals and Nolan, with Apuzzo’s assistance, carried out two fraudulent “sale – lease back”transactions. These transactions were designed to allow United Rentals to recognize revenue prematurely and to inflate the profit generated from United Rentals’ sales. Here’s how it worked:
URI would sell used equipment to General Electric Credit Corporation, and leased the equipment back for a short period.
In order to obtain General Electric Credit’s participation, United Rentals convinced Terex to agree with General Electric Credit to resell the equipment for General Electric Credit at the end of the lease periods.
Terex and United Rentals also agreed that Terex would provide a “residual value guaranty” (“RVG”) to General Electric Credit, which provided that after resale, General Electric Credit would receive no less than 96% of the purchase price that General Electric Credit had paid to United Rentals for the used equipment.
However, to secure Terex’s participation, United Rentals secretly agreed to indemnify Terex for any losses incurred from the RVG that it had provided to General Electric Credit
URI also agreed to make substantial purchases of new equipment from Terex to improve Terex year-end sales.
URI sought to immediately recognize the revenue generated by the sale of equipment to General Electric Credit. Read More
On August 28, 2012, a panel of the Third Circuit Court of Appeals dismissed the appeal by Sevenson Environmental Services regarding the sentencing of its former employee, Norman Stoerr. United States v. Stoerr, No. 11-2787 (3rd Cir. August 28, 2012). The Court ruled that Sevenson, as a non-party, lacked standing to appeal Stoerr’s sentence.
On July 23, 2008, Stoerr entered a plea of guilty to bid rigging (15 U.S.C. §1); conspiracy to provide kick-backs and to defraud the United States (18 U.S.C. §371); and assisting in the preparation of false tax returns (26 U.S.C. §7206(2)). The convictions stemmed from kick-backs that Stoerr solicited and accepted from subcontractors in connection with projects managed by Sevenson, his employer.
Sevenson is an environment services company that had contracts with the United States to serve as a contractor at the Federal Creosote Superfund Site in Manville, New Jersey, and also had a contract with Tierra Solutions, Inc. to service the general contractor at the Diamond Alkali Superfund Site in Newark, New Jersey. The Environmental Protection Agency (EPA) paid Sevenson for its services at Federal Creosote, and Tierra was responsible for paying Sevenson for its services at Diamond Alkali. Sevenson hired contractors at both sites, and would ultimately seek reimbursement from the payer (EPA or Tierra) for the subcontractor charges.
Stoerr, as part of his employment with Sevenson was responsible for soliciting vendors at Diamond Alkali and soliciting bids for subcontracts at Federal Creosote. In that capacity, he solicited and accepted kickbacks valued at $77,132 from several subcontracting companies in exchange for favorable treatment in awarding subcontracts for Federal Creosote and Diamond Alkali projects. Stoerr and his project manager, Gordon McDonald, passed the cost of the kickbacks onto Tierra and to the EPA by including the amounts of the kickbacks in the subcontractor’s invoice that they had submitted for reimbursement. Read More
In U.S. v. Alderson, 686 F.3d 791 (9th Cir. July 18, 2012), a case of first impression, the Ninth Circuit Court of Appeals found that a relator’s share should be treated as ordinary income for tax purposes rather than as capital gain. Given the lack of authority for both the qui tam relator and the Government’s positions, the Ninth Circuit analyzed the correct treatment of relator’s share based on the text of the Internal Revenue Code. Under the Internal Revenue Code, a capital gain is a gain from the sale or exchange of a capital asset. Using this analysis, the Ninth Circuit found that (1) the information provided to the Government by a relator was not a “sale or exchange” and (2) that neither the information provided to the Government nor the relator’s share itself constituted a capital asset. Finally, the Ninth Circuit also found that the increase in value of the relator’s share did not amount to a capital gain from when the relator filed the qui tam action in 1993 to when the case was settled in 2003.
Background
In 1993, James Alderson, the former CFO of North Valley Hospital in Montana, filed a qui tam suit under the False Claims Act against Quorum Health Group (Quorum) as well as other entities including the Hospital Corporation of America (HCA). After litigating the cases on his own for five years, the United States intervened in 1998 and settled the case against HCA for $631 million and the case against Quorum for $85.7 million. After accounting for attorney’s fees and expenses, Alderson received $27.1 million as his share of the HCA settlement. Prior to receiving the settlement, Alderson transferred 40% of his interest of the potential share to a family partnership he established. He then gave his two children 49% interests in the partnership, his wife a 1% interest, and retained a 1% interest for himself. Read More
As part of its ongoing effort to improve the quality of health care and eliminate Medicaid waste, fraud and abuse, the Office of the Inspector General (OIG) for the U.S. Department of Health and Human Resources issued its June 2012 report concerning its oversight of quality of care in home and community-based services (HCBS) waiver programs.[1] While not specifically naming the state of Pennsylvania in its report, the OIG subsequently identified Pennsylvania as one of the three states with the most persistent problems relative to its compliance in home and community-based waiver programs.[2]
States participating in HCBS waiver programs must demonstrate that they have systems in place to show that: (1) each beneficiary must have a written service plan based on an assessment of the individual’s needs; (2) each beneficiary must be served by qualified providers; and (3) each State must have necessary safeguards to protect the health and welfare of beneficiaries.[3][4]
According to the report, the OIG found that some States have no monitoring systems for service plans, qualified professionals and health and welfare assurances, while others had inadequate strategies to correct problems in these areas. Centers for Medicare and Medicaid Services (CMS) officials explained that, although CMS has the authority to terminate programs when States do not meet assurances, it generally does not do so because these programs serve vulnerable beneficiaries who might be left without critical services. Therefore, expect CMS to develop a broader array of approaches to ensure compliance with each of the assurances.
Given the OIG report, we can reasonably anticipate that the PA Department of Welfare, under Governor Corbett’s administration, will consider or improve upon the following practices:
(1) Reviewing service plans, perhaps multiple times throughout the year and assigning different experts to assess various aspects of the plans;
(2) Selecting a sample of service plans to review to ensure that the services in the plan matched the Medicaid claims submitted for the beneficiaries;
(3) Reviewing provider qualifications and conducting onsite visits with each provider before allowing the provider to enroll in the HCBS program;
(4) Scheduling visits with beneficiaries and/or mailing surveys to them to assess their satisfaction with providers;
(5) Tracking license expirations electronically;
(6) Automatically decertifying providers who did not renew their licenses;
(7) Systematically tracking and correcting incidents of alleged abuse, neglect and suspicious death; and
(8) Coordinating with other State agencies, when necessary, to review and resolve cases in which beneficiaries’ health and welfare were at risk. Read More
PITTSBURGH, PA- On August 8, 2012, Mark Gordon, founding partner of Pietragallo Gordon Alfano Bosick & Raspanti, LLP, spoke at the American Cancer Society’s 3rd Annual Making Strides Against Breast Cancer Kick-off Breakfast. Through encouraging words, Mr. Gordon and other guest speakers inspired team leaders to unite and to raise both money and awareness to fight the disease and create a world with more birthdays. Some of the participating sponsors included: Quest Diagnostics, Pittsburgh Steelers, Siemans, WPXI, Diehl Auto, McKesson and KISS Radio.
Pietragallo Gordon Alfano Bosick & Raspanti, LLP is entering its third year as a flagship sponsor of the American Cancer Society’s Making Strides Against Breast Cancer 5K walk. For the past four years running, the firm has also co-sponsored the American Cancer Society’s Premier Golf event.
If you, or your company, is interested in joining Team Pietragallo in the 5K walk on October 6, or for more information on the American Cancer Society of Greater Pittsburgh’s Making Strides Against Breast Cancer event, please visit: 2012 Making Strides Against Breast Cancer Read More
Background Facts of Case
In 2005, claimant sustained a work related low back injury which the employer accepted as compensable and for which claimant initially received disability benefits. He eventually returned to work and his indemnity benefits payments were properly suspended. However, in October 2006, claimant contended that he experienced intense back pain with lower left extremity radiation. He filed a Reinstatement Petition, alleging again that he was disabled and unable to work, as the result of his occupational injury, as of November 1, 2006, and this matter was litigated before a Workers’ Compensation Judge (WCJ).
Claimant testified at three hearings for this case held in February 2007, November 2007, and April 2008. On the latter occasion, he testified in detail as to his self-impressions about his symptomatology and difficulties. He alleged that his back and leg pain intensified with sleep, that constant use of a cane was necessary, that he must undergo Cortizone treatments, that he was considering surgery, that he had difficulty stair climbing, that he experienced leg numbness and increasing pain, that he cannot drive much, that he must build a first floor bathroom and bedroom in his home to accommodate his disability, that he must urinate in his kitchen sink because he could not navigate the stairs to a second floor bathroom, and that he likes to fish but could do this activity only occasionally because of back problems.
Testimonies of three of claimant’s friends was also presented at this hearing, confirming his difficulties with standing and walking. The deposition testimony for this case was also presented from claimant’s treating and examining doctors, who believed that claimant could not return to work. Both doctors’ opinions were based, in part, upon claimant’s complaints and his own descriptions of his self-perceived physical difficulties.
However, surveillance videotape was filmed of claimant on April 24, 2008, the day he had testified. Read More
