False Claim Act Settlement News – Department of Justice – September 2023

The Department of Justice issued a number of press releases over the last month, summarizing multiple False Claim Act and Qui Tam settlements. The False Claim Act was the nation’s first whistleblower law, intended to combat fraud against the government.  

The False Claims Act was updated to add additional penalties and protections including the addition of whistleblower rewards.  Rewards of up to 30% of the eventual fine or fee paid by bad actors could be awarded to the whistleblower who reported the fraud. 

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Genomic Health, Inc. to Pay $32.5 Million for Alleged Medicare Violations 

Genomic Health, Inc. (GHI), based in Redwood City, California, has agreed to a $32.5 million settlement over allegations of violating the False Claims Act. GHI is known for providing genomic-based clinical diagnostic tests including the Oncotype DX® for breast, colon, and prostate cancer. The company allegedly violated Medicare’s 14-Day Rule concerning the billing of such tests. 

According to the DOJ allegations: 

  1. GHI wrongfully sought direct reimbursement from Medicare for Oncotype DX® tests ordered within 14 days post inpatient discharge, which should have been covered by the hospital’s Diagnosis-Related Group (DRG) payment. 
  2. Similarly, GHI sought direct Medicare payment for tests ordered within 14 days following a beneficiary’s outpatient procedure. 
  3. GHI reportedly conspired with hospitals and physicians, encouraging them to reorder tests, especially those within the 14-day window. 
  4. GHI allegedly neglected to send prompt invoices for services falling under the 14 Day Rule and subsequently wrote off unpaid laboratory service fees, a potential violation of the Anti-Kickback Statute. 

Naomi D. Gruchacz of the HHS-OIG highlighted the priority of patient well-being over profits: 

“Health care providers that unnecessarily delay services to evade Medicare requirements put their own profits over the well-being of vulnerable patients. With our law enforcement partners, HHS-OIG is committed to investigating potentially fraudulent billing that can compromise patient well-being and the integrity of our federal health care programs.” 

This settlement resolves allegations from two whistleblower actions under the False Claims Act. The whistleblowers, or relators, will receive $5,687,500 from the settlement. The settlement signifies allegations only, with no liability determination made. 

For more information: 

  1. Department of Justice Settlement 
  2. False Claim Act Frequently Asked Questions

SMC Systems Inc. Pays $2.35 Million Over Energy Star Program Violations 

SMC Systems Inc., operating as Skyetec, based in Jacksonville, Florida, has settled for $2.35 million regarding allegations of violating the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA).  [Explanation of FIRREA] 

Between 2014 and 2021, Skyetec allegedly made false declarations to the Environmental Protection Agency (EPA) and others about inspections under the EPA’s Energy Star Program. U.S. Attorney Handberg: 

“The strength and integrity of the Energy Star program depends on accurate information provided by those who inspect and certify homes as energy efficient. The U.S. Attorney’s Office is committed to ensuring integrity in that process for both home buyers and financial institutions that assist borrowers in financing their homes, as well as holding accountable those who falsely certify Energy Star homes.” 

Under the Energy Star Program, newly built homes undergo energy inspections, receiving Energy Star Certificates for meeting requisite efficiency standards. An essential aspect involves a “thermal bypass inspection” to check insulation quality, air barriers, framing, and a home’s overall seal. Skyetec, during the period in question, reportedly misled the EPA and RESNET by claiming to have adequately conducted these inspections, acquiring Energy Star certification based on misrepresentations. 

The case was a collaborative effort involving the Justice Department’s Civil Division, Commercial Litigation Branch, the U.S. Attorney’s Office for the Middle District of Florida, and the EPA-OIG. The settlement signifies allegations, with no liability determination. 

For more information: 

  1. Department of Justice Settlement 
  2. FIRREA 
  3. False Claims Act

BioTek reMEDys Inc. Settles for $20 Million Over False Claims Act Allegations 

BioTek reMEDys Inc., based in New Castle, Delaware, and its CEO, have agreed to pay $20 million regarding allegations of breaching the False Claims Act by providing kickbacks to both patients and physicians, ensuring continued revenue. The alleged kickbacks pertained to the waiving of copayments, which are an essential component of the Medicare program, meant to regulate healthcare costs.  

It is alleged that from August 2015 to May 2020, BioTek consistently waived copayments for Medicare and TRICARE patients without assessing their financial need, encouraging them to avail of their expensive specialty drugs and services. BioTek is also accused of offering inducements, such as gifts and dinners to physicians, to persuade them to refer patients to BioTek. One doctor has separately settled these allegations. 

Principal Deputy Assistant Attorney General Brian M. Boynton summarized the settlement and allegations: 

“Participants in federal health care programs may not offer improper inducements to physicians or patients to generate business. This settlement reflects the government’s continuing commitment to protect the integrity of these programs and the healthcare decisions made by and on behalf of beneficiaries.” 

In the DOJ press release, agents from various departments reiterated the significance of curbing healthcare fraud and the importance of ensuring genuine medical judgment in patient treatment decisions. 

The resolution incorporates whistleblower claims under the False Claims Act by former employees, who will receive a total of $4 million. 

For more information: 

  1. Department of Justice Settlement 
  2. False Claim Act Whistleblower Rewards

Navmar to Pay $4.4M in Settlement Over Double Billing Allegations 

Navmar Applied Sciences Corporation (Navmar), based in Pennsylvania, has agreed to a $4.4 million settlement following allegations of violating the False Claims Act. The company is accused of double billing, and improperly shifting labor and material costs across various government (Navy) contracts. The U.S. claims Navmar knowingly billed costs to one Navy contract, then billed the same expenses to another.

Special Agent Greg Gross of the NCIS Economic Crime Field Office had this to say on the settlement: 

“Procurement fraud threatens military readiness and therefore poses a significant threat to our national security. NCIS remains committed to ensuring the good stewardship of U.S. taxpayer dollars by thoroughly investigating all allegations of fraud that damage the integrity of the Department of the Navy procurement process.” 

The settlement underscores the collaborative efforts of the Justice Department, DCIS, NCIS, and other agencies, dedicated to preserving the integrity of governmental procurement processes. There has been no formal determination of liability. 

For more information: 

  1. Department of Justice Settlement 
  2. Procurement Fraud

Verizon Business Network Services Settles for Over $4M on Cybersecurity Concerns 

Verizon Business Network Services LLC has agreed to settlement False Claim Act allegations with a $4,091,317 settlement. Verizon was alleged to have not fully meet cybersecurity controls related to IT services, rendered to federal agencies.  

It is notable that the U.S. recognized Verizon’s cooperative efforts in addressing these concerns, including its self-disclosure, initiating an independent investigation, identifying individuals involved, preserving and collecting relevant documents, and comprehensive remedial actions. Corrective actions can reduce liability by earning credit with the government, when facing False Claim Act allegations. This settlement only addresses allegations, with no formal determination of liability. 

Deputy Assistant Attorney General Michael Granston highlighted the critical importance of cybersecurity standards in protecting sensitive government information: 

“When government contractors fail to follow required cybersecurity standards, they may jeopardize the security of sensitive government information and information systems. We will continue to pursue knowing cybersecurity related violations under the Department’s Civil Cyber-Fraud Initiative and to provide credit in settlements to government contractors that disclose misconduct, cooperate with pending investigations and take remedial measures, all of which are critically important to protecting the nation against cyber threats.” 

The allegations related to Verizon’s Managed Trusted Internet Protocol Service (MTIPS). It was alleged that from 2017 to 2021 Verizon’s MTIPS did not fully adhere to three mandatory cybersecurity controls concerning Trusted Internet Connections as per the General Services Administration (GSA) contracts. This settlement is part of the broader Civil Cyber-Fraud Initiative launched in October 2021 to ensure accountability for cybersecurity shortcomings. 

For more information: 

  1. Department of Justice Settlement 
  2. Remediation in False Claim Act cases: Justice Manual section 4.4.112. 
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