Drug Testing Lab Pays Nearly $12 Million to Settle False Claims Act Allegations
On July 20, 2020, the Department of Justice (DOJ) announced a civil settlement with Sterling Healthcare Opco, LLC d/b/a Cordant Health Solutions (“Cordant”), a drug-testing lab with operations in Tacoma and Denver. The settlement resolved allegations that Cordant illegally paid kickbacks to generate urine testing business from beneficiaries of federal health care programs in violation of the Anti-Kickback Statute and the False Claims Act.
According to the settlement, between January 1, 2013, and July 31, 2015, Cordant paid millions of dollars to two entities — Northwest Physicians Laboratories, LLC (NWPL) and Genesis Marketing Group — in exchange for referrals of urine drug tests paid for by federal healthcare programs such as Medicare and TRICARE.
As part of the settlement, Cordant has agreed to pay various government healthcare programs $11,942,913 to settle the allegations, 20% of which will go to the relator who filed the qui tam suit regarding Cordant’s conduct in 2015. Cordant has not admitted any wrongdoing but agreed to cooperate fully in the government’s investigation. Cordant also entered into a Corporate Integrity Agreement with the Office of Inspector General, which requires, among other things, that Cordant retain an Independent Review Organization to monitor its arrangements with other individuals and entities.
See here for the DOJ press release.
Transportation Broker to Pay $300,000 to Settle False Claims Allegations
On July 21, 2020, the DOJ announced that Montachusett Regional Transportation Authority (MART), a transportation broker for MassHealth, agreed to pay $300,000 to resolve alleged False Claims Act violations.
MassHealth, a state Medicaid program jointly financed by the federal government, must provide members with non-emergency transportation to and from medical appointments. To do so, MassHealth uses transportation brokers, including MART, which, in turn, contracted with other third parties to provide transportation for MassHealth members. The DOJ alleged that, from January 1, 2011, through December 31, 2015, MART submitted claims to MassHealth for thousands of rides that were not actually provided. The DOJ further alleged that MART’s procedures to verify that scheduled trips were performed as authorized and billed were not sufficient to prevent the transportation companies from submitting false invoices to MART, which caused MART to bill the false claims to MassHealth.
See here for the DOJ press release.
Silicon Valley Start-Up and CEO Charged with Defrauding Investors
On July 20, 2020, the Securities and Exchange Commission (“SEC”) charged YouPlus, a California-based technology start-up, and its chief executive officer, with violating the antifraud provisions of federal securities laws by misleading investors regarding the company’s finances and sources of revenue. In a separate action, the U.S. Attorney’s Office for the Northern District of California has also brought criminal charges against YouPlus’s CEO.
According to the SEC, YouPlus purported to have developed a machine-learning tool to analyze videos on the Internet for marketing and research purposes, when human workers were performing that analysis — not artificial intelligence. From 2018 to 2019, the CEO of YouPlus raised over $17 million from investors by falsely representing that YouPlus earned millions of dollars in annual revenue and had more than 100 customers, including Coca-Cola, Kraft, and Netflix, and producing falsified bank statements to bolster the claims. The CEO also allegedly used funds received from investors to pay for personal luxury goods. In late 2019, the CEO confessed to certain investors that YouPlus had earned less than $500,000 and obtained only four paying customers since 2013. In addition, the SEC is seeking to bar the CEO from serving as an officer or director of a company with securities registered by the SEC.
See here for the SEC press release and here for the Law360 article.