Implied False Certification : Not Every Regulatory Violation Gives Rise to FCA Liability

This week I came across United States ex rel. Wilkins v. United Health Group, Inc.,  659 F.3d 295 (3^rd Cir. 2011) which was decided in late June and just published in F.3d.  In Wilkins, the Third Circuit joined several other circuits in holding that an “implied false certification” made by a provider in conjunction with its claim for payment to the government may give rise to False Claims Act (“FCA”) liability.  “Implied false certification the Court explained, “attaches when a claimant seeks and makes a claim for payment from the government without disclosing that it violated regulations that affect its eligibility for payment.” Id. at 305.  The Wilkins Court found that FCA liability could be based on a claimant seeking payment when it knew it had violated the Anti-Kickback Statute. Id. at 313.  FCA Alert and Whistleblower Qui Tam Law Blog both analyzed Wilkins, and I commend their analyses to you.  Additionally, take a look at FCA Alert’s discussion of Amgen’s recent Petition for Writ of Cert to the Supreme Court wherein Amgen challenges the implied false certification theory and discusses the differences in the Circuits that apply it.

I found the more interesting portion of Wilkins to be where the court found that violations by the Medicare Advantage provider of marketing rules contained in provider’s contract with the Centers for Medicare and Medicaid (“CMS”) did not give rise to an implied false certification FCA violation even though the provider had certified that it complied with all CMS guidelines. Id. at 299-300.  The relator in Wilkins alleged that the provider had violated  several “marketing rules” including “using  marketing flyers and forms that CMS did not approve” in making presentations, “ “using an excessive number of  sales representatives at presentations,” and “giving out door prizes” at presentations to prospective clients in “excess of $15 in value contrary to CMS guidelines.”  The Court, however, rejected FCA claims based on these alleged violations of regulations that were not preconditions to the provider’s claim for payment.

OIG-HHS Reports its Accomplishments for 2011 and Priorities for 2012

The Office of Inspector General ("OIG") for the U.S. Department of Health & Human Services has recently issued its 2011 Fall Semi-Annual Report as well as the OIG Work Plan for 2012.  For those of you wanting to know what's "hot" in health care fraud and abuse and what will be the OIG's areas of investigative focus in 2012, these are two important sources.

Mintz Levin's Health Law & Policy Matters Blog ("HLPM") has summarized some of the highlights of both the Report and Plan.  For those not wishing to review the lengthy report, the Report's "Highlights" section summarizes the Semi-Annual Report's main points.  As HLPM explains:  the Semi-Annual Report "describes the actions the agency undertook between April 1 and September 30, 2011 and summarizes its Medicare and Medicaid claims reviews and its legal, investigative, and monitoring activities," the later of which include "enhanced data mining, predictive analytics, trend evaluation, and modeling technology" aimed at strengthening the OIG's ability to identify, investigate and prevent health care fraud, waste, and abuse. 

As for the 2012 Work Plan, HLPM notes that the OIG's  focus on investigating fraud and abuse will include the following areas:

• "Home health: monitoring of “questionable billing characteristics” of home health services;
• Home health: Medicare administrative contractors’ oversight of home health agency claims;
• Hospitals: hospital claims with high or excessive payments;
• Nursing homes: questionable billing patterns during non-Part A nursing home stays;
• Medical equipment and supplies: questionable billing for Medicare diabetic testing supplies; and
• Ambulance: questionable billing for ambulance services."

 

Merck Settles Claims with DOJ and 43 States Relating to Vioxx Marketing

Merck and the U.S. Department of Justice (“DOJ”) announced yesterday that Merck will pay $950 million to resolve criminal charges and civil claims related to its promotion and marketing of the painkiller Vioxx.   Merck joins a number of pharmaceutical makers, including GlaxoSmithKline, Pfizer and Eli Lilly, who have entered into settlements with the DOJ relating to their promotion and marketing of “off label” uses of their drugs. 

Merck will plead guilty to a one-count misdemeanor information charging a single violation of the Food Drug and Cosmetic Act (“FDCA”) for illegally promoting Vioxx and will pay a $321,636,000 criminal fine.  Merck’s criminal plea relates to misbranding of Vioxx by promoting the drug for treating rheumatoid arthritis, before that use was approved by the Food and Drug Administration (FDA).   Under the provisions of the FDCA, a company is required to specify the intended uses of a product in its new drug application to FDA.   Once approved, the drug may not be marketed or promoted for so-called “off-label” uses – any use not specified in an application and approved by FDA – unless the company applies to the FDA for approval of the additional use.   

Merck is also entering into a “civil settlements” agreement with the DOJ and 43 states under which it will pay $628,364,000.  DOJ did not post the civil settlement documents, but presumably these are False Claims Act type settlements as these settlements resolve allegations that Merck (i) “made inaccurate, unsupported, or misleading statements about Vioxx’s cardiovascular safety in order to increase sales of the drug, resulting in payments by the federal government;”  (ii) made false statements to state Medicaid agencies about the cardiovascular safety of Vioxx that those agencies relied on in making payment decisions about the drug;” and (iii) also “recovers damages for allegedly false claims caused by Merck’s unlawful promotion of Vioxx for rheumatoid arthritis.” 

Once the settlements are posted on line, I will link them. 

Fearing FCA Claims, Banks Delay Filing Claims with FHA to Cover Bad Loans

In contrast to the recent Allied Home Mortgage case reported on last week, banks are apparently getting smart about potential False Claims Act (FCA) liability when it comes to collecting on Federal Housing Administration (FHA) insurance for their failed FHA insured loans. In More on FHA:  Robo-Signing Effect , The Wall Street Journal Developments Blog observed this week that the FHA has millions more cash on hand than it probably should given the high failure rates of FHA insured loans.  The extra cash on hand results from the fact that although they are foreclosing on FHA insured loans, the banks are not submitting insurance claims for the bad loans to the FHA " because of the 'robo-signing' and other dubious back-office practices that surfaced last year."  Banks fear the  FCA and its treble damages if they submit to the FHA what could amount to a false claim for payment.  Accordingly, the WSJ Blog reports that banks will not submit an FHA insurance claim until they have "double- and triple-checked their processes to ensure that their reimbursement requests to Uncle Sam are iron proof. "

Qui Tam Relator's Vague But Real Fears Not Enough to Justify Seal in False Claims Act Case

Just days ago, I characterized courts as being “skeptical” of relators’ requests to seal their dismissed False Claims Act qui tams cases when the government declines to intervene. See 10/31 entry.   Skepticism, however, is an understatement.  As seen in this recent case, the relator is treated like any other litigant, and the Court dismisses her vague, though real, fears of  possible retaliation and never being able to find work as a result of having filed a qui tam suit as insufficient to justify maintaining the seal of a dismissed case.

In US ex rel Ruble v. Skidmore, 2011 WL 5389325 (S.D. Ohio), issued 11/8/2011, the Court again denied a relator’s request to continue the seal of her qui tam suit which she had brought against her former employer, an orthopedic surgeon, and which she now sought to dismiss since the government declined to intervene.  In pleading with the Court to continue the seal of her case, the relator expressed her fears that she would be ostracized for having filed suit, saying:  “If my role in this case becomes public, I will be forever be viewed with suspicion and distrust in the local medical community  . . . . . [which is] quite small and tight knit. . . . I believe my job prospects . . . would be substantially curtailed . . . and doctors who know I reported one of their colleagues to the Government will be leery of trusting me.  . . . .  I have no other professional training . . . .  . It is imperative that I be able to continue working in this medical community.”  The relator went on to add that her husband was elderly and unable to work and that she feared “physical retaliation” from her former employer because she had received numerous “hang up” calls and once had been pushed by her former employer’s wife.

The Court denied her request to continue the seal as well as her alternative request to redact her name if the complaint were unsealed.  The “primary purpose,” the Court explained, for sealing a complaint is to permit the government to decide whether to intervene, and the False Claims Act “expressly contemplates” the unsealing of the complaint.  Only the “most compelling reasons,” the Court noted, “can justify non-disclosure of judicial records,” and “harm to reputation” is not one of those reasons.  The Court acknowledged that the relator’s ability to practice her professional locally does “depend[] in part on her reputation in the local community,” but “[e]ven under these circumstances . . . Relator has not demonstrated her privacy interest is sufficient . . .”

I do not mean to harp on about these cases, but I am truly surprised at these opinions.  Readers, is this how relators are treated in your districts?  For those readers who represent qui tam plaintiffs, in light of these cases are you having to counsel your relator clients more now about the possibility of their complaints becoming unsealed even if dismissed?

US Attorney Intervenes in Whistleblower Suit Against Allied Home Mortgage

Ever since the financial meltdown and the crash of real estate, the U.S. Department of Justice (DOJ) has been looking to bring big mortgage fraud cases, both civil and criminal, against banks and other lending institutions. Assistant Attorneys General Breuer of the Criminal Division and West of the Civil Division identified mortgage fraud as a top priority.

There have been lots of mortgage fraud prosecutions:  a few big ones such as against the mortgage firm Taylor Bean & Whitaker, and lots of smaller ones against individuals and small companies such as in the Middle District of Florida's Mortgage Fraud Surge.  But, I have not heard of a large civil fraud case against a big lender until now.  This week the U.S. Attorney for the Southern District of New York filed an amended complaint against Allied Home Mortgage and two of its executives:  US ex rel Belli v. Allied Home Mortgage Capital Corp. The government alleges that the defendants' fraudulent mortgage lending practices led to huge default rates and over $800 million in losses that the FHA, the government insurer of the loans, had to cover.

I bring the matter up here because the case against Allied started as a qui tam brought by an Allied branch manager from Massachusetts, Peter Belli, who filed the initial case under seal. See ProPublica article.  The case involves claims pursuant to the False Claims Act and also provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (codified in Title 12 and 15 and better known as "FIRREA").

FIRREA contains a whistleblower provision, 12 U.S.C. §§ 4201-4212, though few people seem to know about it --which is understandable as it is hard to find and almost never cited.  The Act was codified over two different statutory titles and almost all the cites I have seen to it reference only the public law citation and not the United States Code.  I did find it . . . on another blog of course.  The Whistleblower Qui Tam Law Blog has a short section explaining the provisions of the FIRREA whistleblower provisions and the rewards that relators can obtain under that Act.

Relator Sentenced to Prison for Making False Statements to Government

Now here is something I have never seen:  a relator charged and sentenced for making false statements to the U.S. Department of Justice (DOJ).  Readers, have you seen other instances when a relator has been charged?  Please share your experiences.

The criminal case against the relator grew out of a qui tam that the relator brought against his former employer, Champion Laboratories, Inc., and other competitors alleging that they had conspired to fix prices.  To bolster his qui tam claim and to prompt a parallel criminal investigation, the relator falsified a letter from one Champion's competitors, and then gave it to DOJ's Antitrust Division, telling them that it had been faxed to him by one of his supervisors at Champion.  The relator created this letter with the aim of getting the Antitrust Division to open a criminal investigation against Champion for price fixing, which it did before discovering the letter was false and dropping the investigation.  The U.S. Attorney for the Eastern District of Pennsylvania charged the relator with creating the false document and making false statements to the government.

Just law week, the Court sentenced the relator to two years in prison and imposed $83,000 in restitution which represented the value of the attorney time "wasted" by the Antitrust Division on the grand jury investigation of the relator's claims.

Who Am I and Why Am I Writing This Blog on FCA/Qui Tam?

Dear Readers:

A colleague has suggested to me –my first blog comment—that I introduce myself, explain my expertise and experience in this area, and explain why I am writing this False Claims Act/Qui Tam blog. So, here goes:

First, as to my experience, I have practiced law here in Tampa and throughout Florida for over 20 years, and much of my practice has concentrated in the areas of white collar criminal defense and the defense of regulatory matters. A number of the white collar matters that I have defended involved allegations of health care fraud. Though many of these cases were criminal, over the years the criminal health care fraud cases gave way to more and more cases and investigations involving health care fraud related False Claims Act and qui tam cases. I see far more False Claim Act cases now than ever before.

I served as U.S. Attorney for the Middle District of Florida from 2008 to 2010. The Middle District of Florida has traditionally been one of the nation’s most active districts in the prosecution of health care fraud cases and in the number of qui tams filed, and that was certainly true when I served. As U.S. Attorney, I oversaw numerous investigations and prosecutions of False Claims Act matters, qui tams, and health care fraud cases, including U.S. v. WellCare Health Plan, Inc., which arose from a qui tam filed in the Middle District of Florida.

Second, I write about the False Claim Act and qui tams because I have genuine interest in the False Claims Act statute, 31 U.S.C. §§ 3729–3733, and how it is applied in practice. It is an incredibly powerful weapon to combat fraud given its treble damages, fees, ruinous penalties, and in some industries, terrible collateral consequences if a company is found to have violated it. In my experience, the government often uses it aggressively, especially while the cases are under seal and it is able to apply maximum settlement leverage. Add to that weapon, the financial incentives enjoyed by relators and plaintiffs’ counsel to bring such suits and you have a formidable threat to corporations who receive funds from either the state or the federal government.