Headlines that Matter for Companies and Executives in Regulated Industries
Medical Device Company to Pay Over $700,000 To Resolve Criminal Allegations
On January 4, 2023, a criminal information was filed in the Southern District of Illinois, in which Jet Medical Inc. (Jet), a medical device distributor, and two related companies agreed to pay over $700,000 to resolve criminal allegations involving a migraine headache treatment. The government alleged that between April 2014 and April 2019, Jet introduced medical devices into interstate commerce that were misbranded under the Federal Food, Drug and Cosmetic Act (FDCA) because the company did not obtain the Federal Drug Administration’s (FDA) approval before distributing the devices.
According to the government, Jet never sought approval or clearance from the FDA to distribute the device for the intended use of treating migraine headaches by administering nerve blocks. The company also did not conduct an investigational study regarding the device’s safety and effectiveness.
The resolution announced on January 4, 2023, includes criminal penalties and a civil settlement, together totaling over $700,000, and a deferred prosecution, which still must be approved by the court. The company admitted, as part of the deferred prosecution agreement, that it distributed the misbranded devices in violation of the FDCA. The company further agreed to enhance compliance measures related to the distribution of the devices.
The civil settlement resolved a qui tam lawsuit previously filed under the False Claims Act, which alleged that Jet and its related companies violated the False Claims Act by causing medical providers to submit false claims to Medicare for procedures using the misbranded device and encouraged providers to bill Medicare using improper codes for use of the device.
The DOJ press release can be found here.
Former NJ Official Admits Roles in Scheme to Defraud More Than $4.5 Million From Health Benefit Fund
On January 4, 2023, the former manager of a publicly funded New Jersey health care benefit program, along with a co-conspirator, admitted to their roles in a scheme to defraud the fund of more than $4.5 million. The defendant and his co-conspirator each pled guilty to one count of conspiracy to commit healthcare fraud, and the co-conspirator also pled guilty to tax evasion.
In January 2021, the defendant and co-conspirator, along with another co-defendant, were all charged in a criminal complaint relating to a scheme to defraud the New Jersey Traumatic Brain Injury Fund (TBI Fund) of millions of dollars of public funds.
According to court documents and statements made in court, the TBI fund, run by the New Jersey Division of Disability Services, supports New Jersey residents who have suffered a traumatic brain injury with support and services, including by providing physical, occupational, and speech therapy; assistive technology; cognitive therapy; and home modification and maintenance, such as wheelchair ramp installation. The defendant was responsible for the TBI Fund’s daily operations, including supervising and overseeing the process by which vendors were paid for services rendered to TBI Fund patients. From 2009 through approximately 2019, the three conspirators allegedly conspired to defraud the TBI Fund by misappropriating more than $4.5 million in fraudulent vendor payments for services that were never actually provided to TBI Fund patients.
The healthcare fraud conspiracy charge to which the defendant pled guilty carries a maximum penalty of 10 years in prison and a fine of up to $250,000 or twice the gross receipts to the defendants or gross loss sustained by victims, whichever is greater. The tax evasion charge to which the co-conspirator pled guilty carries a similar sentence. The defendant and his co-conspirator are each scheduled for sentencing in early May 2023. The charges against the other co-defendant remain pending.
The DOJ press release can be found here.
Florida Attorney Sentenced for $1.6 Million PPP Fraud
On January 4, 2023, an attorney from Palm Beach County, Florida, was sentenced to 41 months in prison for submitting fraudulent loan applications requesting over $1.6 million in Economic Injury Disaster Loans (EIDL) and Paycheck Protection Program (PPP) loans, both of which are forgivable and guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security Act.
The attorney obtained over $1.6 million by submitting fraudulent COVID-19 relief loan applications for companies he either fully or partially owned. The loan applications allegedly misrepresented the gross revenues, number of employees, and payroll expenses of the companies. According to the government, the attorney then used a portion of the funds received from the loans as a down payment for the purchase of his home, in addition to travel purchases, buying jewelry, and making repairs on his boat and home.
In October 2022, the attorney entered a guilty plea to conspiracy to commit wire fraud. He was ordered to pay $1.26 million in restitution and $1.6 million in asset forfeiture, in addition to his prison sentence.
The DOJ press release can be found here.
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