Headlines that Matter for Companies and Executives in Regulated Industries
Recent Filings Shed Light on DOJ’s View of Supreme Court’s Recent FCA Ruling
On June 1, 2023, the US Supreme Court explained that an assessment of a defendant’s subjective beliefs — rather than what an objectively reasonable person may have known or believed — about potential wrongdoing is required based on the text of the False Claims Act (FCA) scienter standard. As a continuation of our coverage of the Supreme Court’s FCA ruling, recent US Department of Justice (DOJ) filings suggest that the DOJ appears to see this as a far-reaching victory regarding the FCA’s standard for scienter.
Law360 provides additional coverage here.
Pharmacy’s Chief Compliance Officer Convicted of $50 Million Fraud
Steven King, the chief compliance officer of A1C Holdings LLC (A1C) — a holding company that owned pharmacies in multiple states — was convicted on Thursday, June 8, of conspiracy to commit health care fraud and wire fraud. A1C allegedly fraudulently billed Medicare over $50 million for dispensing unnecessary and unwanted lidocaine and diabetic testing supplies to Medicare beneficiaries, thus violating Medicare and pharmacy benefit manager rules.
King and his co-conspirators allegedly took multiple steps to conceal this scheme. For example, they enrolled mail-order pharmacies as physical retail locations, shipped prescription refills and transferred patients among pharmacies without patient consent, and concealed the ownership structure of A1C.
King faces a maximum penalty of 20 years in prison, and his sentencing is scheduled for September 14, 2023.
DOJ’s press release is here.
Texas Pharmacist Convicted for $1 Million Opioid Distribution Conspiracy
On Friday, June 9, a federal jury in Texas convicted a pharmacist of one count of conspiracy to unlawfully distribute and dispense controlled substances and one count of maintaining a drug-involved premises.
Sokari “Momma” Bobmanual was the owner of Cornerstone Rx Pharmacy. Based on the evidence presented at trial between May 2018 and August 2019, Cornerstone illegally distributed nearly 160,000 opioid pills, and Bobmanuel, through Cornerstone, distributed controlled substances outside the scope of professional practice and without a legitimate medical purpose. Specifically, those opioid pills were distributed to individuals who bought prescriptions in other individuals’ names who then improperly sold the pills purchased from Cornerstone.
According to the government, Bobmanuel often charged over $1,000 for a single oxycodone prescription and generated over $1 million from the scheme. Thus far, 11 other defendants have pleaded guilty for their roles in the conspiracy.
Bobmanuel faces a maximum penalty of 20 years in prison. Her sentencing is scheduled for September 20, 2023.
DOJ’s press release is here.
Mississippi Construction Firm Executive Pleads Guilty to Tax Crime
On Tuesday, June 13, Julian Russ, the chief financial officer of Community Construction Company LLC, a Mississippi-based construction company, pled guilty to willfully failing to report and pay employment taxes withheld from employees’ paychecks.
According to the government, between 2012 and October 2018, Russ did not file the required quarterly employment tax returns or pay taxes withheld from employees’ wages to the US Internal Revenue Service (IRS), despite knowing that he was obligated to do so. Russ caused the IRS to lose more than $6 million.
Russ faces a maximum penalty of five years in prison.
DOJ’s press release is here.
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