Investigations Newsletter: Patient Recruiter Convicted in $1.3 Million Kickback Conspiracy Scheme

Arent Fox

DOJ Litigation News

Patient Recruiter Convicted in $1.3 Million Kickback Conspiracy Scheme

After a six-day trial, a federal jury in Detroit found a patient recruiter guilty of one count of conspiracy to pay and receive health care kickbacks, and three counts of receiving health care kickbacks. From 2009 to 2017, the defendant, owner of Trumbo Consulting Agency, allegedly solicited and received kickbacks to refer Medicare beneficiaries to home health agencies, which in turn billed Medicare for those patients’ services. The evidence presented at trial indicated that this kickback scheme defrauded Medicare of $1.3 million in false home health claims. Sentencing is scheduled for December 3, 2019. 

The DOJ press release can be found here.

Tennessee Federal Court Certifies $891 Million Class on Hospital Medicare Fraud

A federal court in Tennessee certified a shareholder class alleging that Community Health Systems Inc. covered up an alleged Medicare fraud scheme that cost investors $891 million once it was exposed.

The shareholder class alleged that CHS made a series of public statements to detract from allegations in an earlier lawsuit that CHS had profited from its “Blue Book” — a guide provided to doctors to direct them to treat Medicare patients on an inpatient basis, where they otherwise may have done so in an outpatient setting. In an attempt to defeat class certification, the hospital company had alleged that the lead plaintiff, NYC Funds, could not properly represent the class because a top investment manager working for NYC Funds knew of the alleged fraud when it acquired the hospital company’s stock.

The court held that the employee’s alleged knowledge could not be imputed to NYC Funds because he was not involved in purchasing and selling securities, and thus there was an insufficient connection between the employee’s knowledge and NYC Funds’ purchase of CHS stock, for purposes of compromising the lead plaintiff’s theory of reliance on CHS’s public statements. The case is Norfolk County Retirement System et al. v, Community Health Systems Inc. et al., case number 3:11-cv-00433, in the U.S. District Court for the Middle District of Tennessee.

Minnesota Real Estate Company Pleads Guilty to Kickback Scheme

Detloff Marketing and Asset Inc., its owner, and its accountant, pled guilty in a Minnesota federal court for their role in a kickback scheme involving foreclosed properties. The owner of Detloff allegedly conspired to defraud mortgage lenders and guarantors, which had hired him to oversee work done on foreclosed homes, by steering contracts for that work to contractors that would pay a kickback to Detloff. Meanwhile, the accountant allegedly sought to ensure that the contractors indeed paid the kickbacks to Detloff, which ultimately amounted to $291,505.

The government also alleged that Detloff incorporated the kickbacks into the bids and invoices it submitted to the lenders and guarantors for reimbursement. The company and its owner pled guilty to conspiracy to commit mail and wire fraud affecting a financial institution, and the accountant pled guilty to aiding and abetting mail fraud affecting a financial institution. The remaining counts, including the principal offense of mail fraud affecting a financial institution, will be dismissed upon sentencing. The maximum penalty for the charges to which defendants pled guilty is 30 years in prison and a $1 million fine, which may be increased depending on the gain derived from the crime or the loss suffered by the victims, if greater than the statutory penalty. In connection with their guilty pleas, defendants also agreed to restitution in the amount of the kickbacks.

The DOJ press release can be found here.

DOJ Settlement News

Wireless Communications Company to Pay $435,000 to Settle FCA Allegations

Silvus Technologies, Inc., a wireless communications systems company, agreed to pay $435,806 to settle allegations that the company’s billing on government contracts violated the False Claims Act. The government alleged that the Air Force overpaid Silvus on three different contracts because Silvus engaged in cost-based billing but failed to accurately track certain direct and indirect costs, which caused the company to improperly attribute employee labor costs to the contracts and include improper charges in its incurred cost proposals. 

The DOJ press release can be found here.

Written by:

Arent Fox

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