Compound Ingredient Supplier to Pay Over $22 Million to Resolve Allegations Brought Under Qui Tam Provisions of FCA
On November 7, 2019, the Department of Justice (DOJ) announced that Fagron Holding USA LLC (Fagron) had agreed to pay $22.05 million to resolve allegations regarding false and inflated Average Wholesale Prices (AWPs) established by its subsidiary, Freedom Pharmaceuticals Inc. (Freedom), a supplier of compound ingredients utilized in prescriptions. The DOJ alleged that Freedom knew that compound prescription reimbursement under federal healthcare programs (such as the Department of Defense’s TRICARE Program and the Department of Labor’s Office of Workers Compensation Program) was based in part on the AWPs listed for its ingredients and, with this knowledge, increased the AWPs for its ingredients in order to increase the reimbursement that its customers received. The DOJ alleged that Freedom promoted its high AWPs (and the resulting net profit that could be received from reimbursement of the compound prescriptions) to induce customers to purchase its ingredients.
The settlement resolves allegations contained in two separate actions against Freedom and two other Fagron subsidiaries brought under the qui tam provisions of the False Claims Act. The whistleblowers will receive a total of $3,749,000 plus accrued interest from the settlement.
Read the DOJ press release.
Hospital to Pay $12.3 Million to Resolve Medicare Fraud Allegations
On November 8, 2019, the DOJ announced that Lenox Hill Hospital (Lenox Hill) and Northwell Health, Inc. (Northwell) would pay $12.3 million to resolve allegations that they violated the False Claims Act by fraudulently billing Medicare for healthcare services that did not comply with Medicare law. The DOJ alleged that Lenox Hill and Northwell submitted claims for, among other things, hospital services deemed medically unnecessary, endoscopic procedures performed by insufficiently supervised residents, and robotic surgeries where the patient was improperly left unattended.
Pursuant to the settlement, Lenox Hill and Northwell admitted, acknowledged, and accepted responsibility for the conduct alleged in the DOJ’s Complaint in Intervention, which primarily focused on the conduct of the former chair of Lenox Hill’s Department of Urology in encouraging and facilitating practices that violated Medicare rules. Northwell and Lenox Hill both acknowledged that the practices set forth in the DOJ’s Complaint resulted in the submission of several million dollars of inappropriate Medicare claims.
Read the DOJ press release.
US Attorney’s Office Drops Insider Trading Case After Guilty Plea Vacated
On November 7, 2019, the US Attorney’s Office for the Southern District of New York (the USAO) dropped its insider trading case against a former portfolio manager at SAC Capital. The former portfolio manager pled guilty in 2017 to one count of conspiracy and one count of fraud related to multiple trades, including the purchase of stock of Yahoo, Inc. after making a call with an analyst who had learned from an insider at another company about a pending collaboration between the two companies. In June, US District Judge Paul G. Gardephe vacated the former portfolio manager’s plea allocution as insufficient to support a conviction under the Second Circuit’s 2014 decision in US v. Newman, 773 F.3d 438 (2d Cir. 2014), because the allocution did not show that the former portfolio manager knew that the insiders were receiving a personal benefit for providing stock tips.
The USAO announced that dismissing the charges would be in the public interest because the evidence in the case was over ten years old and because the former portfolio manager had already paid penalties to the US Securities and Exchange Commission.
Read the Law360 article regarding this decision.
Former Executive Found Guilty of FCPA Violations
On November 8, 2019, a federal jury in the District of Connecticut found a former executive of Alstom SA guilty of six counts of violating the FCPA, one count of money-laundering conspiracy, and three counts of money laundering related to a scheme to bribe Indonesian officials. Evidence presented at trial demonstrated that the former executive helped hire consultants who were paid a percentage of a $118 million energy contract that was awarded to Alstom SA’s US subsidiary, Alstom Power Inc. (Alstom Power). Additional evidence was presented to show that these payments were not for legitimate consulting services, but instead for the benefit of officials at Indonesia’s state-owned power company, Perusahaan Listrik Negara.
In finding the former executive guilty, jurors were required to consider whether he was an “agent” of Alstom Power because the FCPA only applies to (i) those who take some action in the United States, (ii) issuers of stock traded in the United States, and (iii) companies and residents of the United States, as well as their “agents.” The DOJ argued that the former executive acted as an “agent” of Alstom SA’s US subsidiary, notwithstanding the fact that the former executive worked directly for the parent company based out of Paris.
Read the Law360 article regarding this verdict.
