Posts in category: Blog

Poland’s Central Anti-Corruption Bureau (CAB) and the Polish Appellate Prosecutor’s Office have recently stepped up their anti-corruption efforts in two international anti-corruption investigations.

Hewlett Packard. Hewlett Packard entered into a $108 million settlement with the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) in connection with a “global labyrinth of financial transactions used by HP to facilitate bribes to foreign officials” in Russia, Mexico, and Poland.

Pursuant to a deferred prosecution agreement, DOJ also filed a criminal information against HP Polska (Poland), United States v. Hewlett-Packard Polska, SP. ZOO, No. CR-14-202 (N.D. Ca. April 9, 2014), for violating the accounting provisions of the Foreign Corrupt Practices Act (FCPA). According to the criminal information filed against HP Polska, from 2006 to 2010, HP Polska falsified HP books and records and circumvented HP internal controls to conceal a scheme to obtain lucrative multi-million dollar technology contracts with Komenda G’owna Policji (KGP), the Polish National Police Agency. To obtain the technology contracts, HP executives delivered bags of cash, laptops, mobile devices, a BMW motorcycle, a Nissan SUV, and other accoutrements to KGP’s Director of Information and Communications Technology. HP also took the official on a leisure trip to Las Vegas which included, among other things, drinks, dining, entertainment, and a private tour flight over the Grand Canyon. HP Polska falsified corporate books and records relied on HP’s officers and external auditors to authorize transactions and prepare HP’s consolidated financial statements.

The DOJ press release

The criminal information

Glaxo SmithKline (GSK). On the heels of the anti-corruption allegations against GSK in China and Iraq, including violations of the UK Bribery Act from the Serious Fraud Office (SFO), the CAB announced that they are currently investigating GSK, and have already charged several individuals, in connection with alleged bribes paid to Polish doctors between 2010 and 2012 to promote GSK’s asthma drug Seretide.

Criminal charges have been filed against thirteen individuals and prosecutors with the Polish Appellate Prosecutor’s Office maintain that they have sufficient evidence to demonstrate that, at a minimum, GSK paid 13 health centers. Furthermore, according to the CBA, GSK engaged sales representatives in Poland to make payments to physicians, which were allegedly recorded as “educational services” even though the physicians knew that the payments were designed to increase the volume of prescriptions of certain GSK medications, including Seretide. One physician has admitted guilt and has been fined and given a suspended sentence after accepting 100 pounds ($170) for a lecture on Seretide he never delivered.

GSK also admitted that, in 2011, after conducting an internal investigation into the Polish allegations, they unearthed “inappropriate communication” in violation of GSK policy by a single employee. GSK reported that they subsequently disciplined the concerned employee.

GSK continues to investigate the claims and is cooperating with CBA. Notably, the conduct at issue may also violate both the UK Bribery Act and the FCPA.

Sources:

http://www.moneyweb.co.za/moneyweb-international/gsk-faces-criminal-bribery-investigation-in-poland

http://www.theguardian.com/business/2014/apr/14/gsk-accused-bribing-doctors-poland

http://www.bbc.com/news/business-26970873

Given the changing enforcement landscape in Poland, doing business in Poland in 2014 presents risks to businesses. Businesses seeking opportunities in Poland should, where applicable, reevaluate their anti-corruption policies and procedures to ensure that those policies address the UK Bribery Act, the Foreign Corrupt Practices Act, and applicable anti-corruption laws in Poland.

Health Care Fraud Opinion Affirming a Conviction Deserves a Second Look

In a recent Eleventh Circuit opinion, United States v. Houser, No. 12-14302 (11^th Cir. June 19, 2014), the Court of Appeals affirmed the health care fraud conviction of George Houser, a graduate of Harvard law school and the owner and operator of several skilled nursing facilities in Rome, Georgia. On appeal, Mr. Houser’s counsel argued that the conviction should be reversed since it was premised on a “worthless services” theory of health care fraud which is more appropriate in the context of civil False Claims Act prosecutions and that, for this reason, the health care fraud statute as applied to Mr. Houser was unconstitutionally vague.

The Court rejected these arguments reasoning, in part, that the “district court’s order of conviction also rested, at least in part, on the facilities’ failure to provide necessary services,”for example, residents never received the medications that they were supposed to have, residents went without diapers and medical care for their wounds,laboratory services were not performed, and residents were not transported for dialysis or provided with physical therapy.  So while the government reinforced that George was the modern day equivalent of a skilled nursing home slum lord, cutting corners and providing substandard, essentially “worthless care,” part of the district court’s determination was based on George’s wholesale failure to provide services for which he billed or caused to be billed to government health care programs and private insurance companies.

Thus, the Court properly resisted the temptation to directly address, what arguably was, the most significant issue in this case: whether or not the government could have prosecuted Mr. Houser for a violation of the health care fraud statute under a “worthless services” theory when Mr. Houser billed Medicare and private insurance companies for services that were deficient, inadequate, and otherwise substandard.

So, the question remains: if George Houser (or anyone else) provides services that are simply “worthless” because they are substandard, inadequate, or, in some cases, downright offensive, then can the perceived worthlessness of those services provide the government with the legal basis for prosecuting a provider or supplier for a violation of the health care fraud statute?

Further, the Houser prosecution is only one of several cases nationwide in which the government used a quasi-civil theory of liability related to quality of care as a basis for a criminal health care fraud allegation. Notably, the government in these cases is also relying heavily on 18 U.S.C. Section 1035 (False Statements in Related Health Care Matters).

Thus, Houser is certainly relevant because of the novel “worthless services” defense raised by Mr. Houser, but the other ongoing criminal health care prosecutions directly addressing medical necessity and quality of care issues should be closely monitored.

OIG Elaborates on Fraud and Abuse Concerns, Including Prescription Drug Fraud in Miami

Yesterday, Brian Martens, Office of Inspector General, Assistant Special Agent in Charge based in the Miami Region testified before Congress and emphasized how taxpayers can prevent and protect against Medicare fraud.

Mr. Martens first noted that, due to law enforcement efforts last year, the government realized a $8 to $1 return on investment. In other words, they collected eight times what they spent on their budget in connection with recoveries and settlements related to fraud and abuse. Mr. Martens also singled-out Florida and Miami as “ground zero” for healthcare fraud. On this point, he further explained that:

In Florida, we are seeing fraud schemes quickly evolve. As enforcement efforts target certain schemes, new permutations of those schemes arise. Not only are fraud schemes mutating, they are migrating – geographically and even between parts of the Medicare program.

One example of these permutations was in the conduct related to HIV fraud schemes. In Florida and Detroit, they investigated one of the first Medicare B HIV fraud schemes. According to Mr. Martens, however, some of those schemes appear to have migrated to Medicare C managed care plans.

During his testimony, Mr. Martens also highlighted his office’s success in deterring the amount of fraud related to community healthcare centers in Florida and underscored other areas of serious concern including home health agencies in Florida and pharmaceutical fraud. Indeed, Mr. Martens testified that:

Medicare Part D, specifically pharmacy fraud, is an area where we are seeing the largest increase in our South Florida case work. Prescription drug fraud is a complex crime that can involve many co-conspirators – drug distributors and traffickers, health care professionals, patient recruiters, drug-seeking patients, and pharmacies may all play a role. Criminal enterprises are also becoming an increasing presence in prescription drug fraud.

It is important to note that OIG prescription drug fraud cases are not limited to investigating schemes involving only controlled substances. Our work is increasing in matters involving high-cost, non-controlled, name brand prescription drugs such as respiratory, anti-psychotic, and HIV/AIDS medications.

According to Mr. Marten, in the Part D world, OIG’s caseload has also quadrupled in the last five years and, moreover, prescription drug fraud in Miami continues to be a serious concern.

The full transcript of his testimony is available here

Florida Patient Self-Referral Act: Is It a Private Cause of Action?

That was one of the questions that a court in the Middle District of Florida answered several months ago, but which has not garnered much attention.

More specifically, in State Farm Mutual Automobile Insurance Company v. Physicians Group of Sarasota, LLC, No. 8:13-CV-1932-17-TGW (M.D. Fla. March 25, 2014), plaintiff State Farm alleged that defendants, a physician group, and their principal interest holder, along with various shell companies, and a consulting company, orchestrated a fraudulent referral scheme to unlawfully collect automobile accident victims’ PIP coverage and Medical Payment Coverage benefits for treatment services rendered by the defendant- physician group throughout Florida.

Plaintiff filed a complaint describing the above scheme in detail and alleged several different causes of action, including fraud, unjust enrichment, violations of the Florida Deceptive Unfair Trade Practices Act (FDUPTA), and, of importance here, a violation of the Florida Patient Self-Referral Act (Florida PSRA).

Defendants filed a motion to dismiss the complaint, including Count IV in Plaintiff’s complaint alleging a cause of action under the Florida PSRA, which the court denied and reasoned that:

Defendants argue that Florida’s Patient Self-Referral Act does not provide a private right of action. The provision in dispute states, “[n]o claim for payment may be presented . . . for a service furnished pursuant to a referral prohibited under this section. . . . If an entity collects any amount that was billed in violation of this section, the entity shall refund such amount on a timely basis to the payor or individual, whichever is applicable.” Fla. Stat. § 456.053(5)(c)-(d). In determining whether a statute provides a private cause of action, the court must determine whether the statute purports to establish civil liability or “merely makes provision to secure the safety or welfare of the public[.]” Villazon v. Prudential Health Care Plan, Inc., 843 So. 2d 842, 852 (Fla. 2003). In answering this question, the intent of the legislature should be the court’s primary consideration. Murthy v. N. Sinha Corp., 644 So. 2d 983, 985-986 (Fla. 1994). There also exists an assumption that the legislature does not create a statutory right absent some means of enforcing it, “for where a statute gives a right, there, although in express terms it has not given a remedy, the remedy which by law is properly applicable to that right follows as an incident.” Smith v. Piezo Tech. & Prof’I Adm’r, 427 So. 2d 182, 184 (Fla. 1983).

The language of Section 456.053(5)(d) clearly establishes a payor’s right to a refund, and the provision cannot rightfully be considered as a tool to ensure the public’s safety or welfare. Accordingly, Defendants’ motion to dismiss Count IV is DENIED.  (emphasis ours)

Thus, as the district court noted, a closer reading of Fla. Stat. Section 456.053(5)(d) appears to permit plaintiffs to allege a private cause of action under the Florida PSRA to collect monies obtained in violation of the Florida PSRA.

HHS Contractors May Have Additional Disclosure Obligations As Contractors 

Earlier this week, I posted Part I which dealt specifically with the Guidance released by OIG-HHS on contractor disclosures and the relevant Sections included in the Guidance.

Today, I will focus on why OIG’s guidance is a bit, well, misguided. In issuing its guidance on disclosure on its site, OIG-HHS stated, in unambiguous terms, as follows:

The HHS OIG’s contractor self-disclosure program provides a means for contractors to self-disclose potential violations of the False Claims Act and various Federal criminal laws involving fraud, conflict of interest, bribery or gratuity. The Federal Acquisition Regulation (FAR) requires certain Federal contractors (those with contracts valued over $5,000,000) to disclose when they have credible evidence of one of these violations. These contractors are required to make their disclosures to the Office of Inspector General. HHS OIG accepts contractor self-disclosures regarding contracts awarded by any HHS Operating or Staff Division.

At first blush, someone reading this statement might believe that the disclosure requirement above only applies to contactors with contracts valued at more than $5 million. Technically, this is correct.  The mandatory disclosure requirement mentioned above is set forth in 48 C.F.R. Section 52.203-13 (“Contracts Clause”), which applies to contracts with a value of more than $5 million.

Yet, in practice, it would be borderline reckless to advise a contractor client that disclosure may only be required when the contractor client has entered into a contract with HHS with a value of more than $5 million because a failure to timely disclose “credible evidence” of  certain Title 18 criminal violations, a violation of the False Claims Act, or any “significant overpayments,” entitles HHS to suspend or debar the contractor. This is true regardless of the amount or value of the contract.

Indeed, pursuant to 48 C.F.R. Sections 9.406-2, 9.407-2, the debarring official may debar a contractor, based upon the preponderance of the evidence, for any of the following:

a knowing failure by a principal, until three years after final payment on any government contract awarded to the Contractor, to timely disclose to the Government, in connection with the award, performance, or close out of the contract or subcontract… credible evidence of a (i) violation of the False Claims Act, (ii) a violation of federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18, or (iii) significant overpayments, other than overpayments resulting from contracting finance payments..

Accordingly, HHS contractors (and contractors, generally) should view disclosure more broadly.

Further, there are significant differences  (e.g., to whom, when, what, and how a violation must or should be reported) between the suspension and debarment disclosure provisions found at 48 C.F.R. Sections 9.406-2, 9.407-2 and the mandatory disclosure provision or Contracts Clause found at 48 C.F.R. Section 52.203-13  as follows:

1. Who Should Report. Pursuant to the suspension and debarment provision, a “principal” includes an owner, director, partners, or person having management or supervisory responsibilities within a business entity; head of a subsidiary, division, or business segment, and similar positions, whereas the affirmative disclosure requirement set forth in the Contracts Clause only applies to the “Contractor.”

2. How to Report. Under the Contracts Clause, disclosure must be made in “writing” to OIG  (so, the Guidance provided by OIG-HHS on this point is helpful), but the suspension and debarment clause states that disclosure is to be made to the “Government,” which, read literally, could be a phone call or a letter to the Contracting Officer. Furthermore, in this context, a failure to disclose is a ground for debarment. So, the contractor may want to disclose the violation to the Contracting Officer and may also prefer to disclose “credible evidence” of the violation and any steps that the contractor has taken to remediate the violation (internal investigation, discipline, etc) to the SDO and/or HHS debarment counsel. After all, the SDO decides whether to debar a contractor.

3. When to Report. The Contracts Clause does not expressly provide a time limitation governing when a disclosure must be made, whereas the suspension and debarment provision contains a three year period governing disclosure. In fact, once a final payment on the government contract at issue has been made, the three year clock starts running on when a “principal” should disclose “credible evidence” of a violation in order to potentially avoid receiving a Notice of suspension and proposed debarment from HHS. As such, deciding when “final payment” on the contract occurs is a critical determination since it will determine when the 3 year clock begins running. Regardless of when the final payment occurs, contractors should not “sit on” their disclosure because, in practice, SDO’s may be less inclined to view such disclosures as “timely.”