Investigations Newsletter: Where’s the Beef? Two Charged with $650 Million Cattle Ponzi Scheme

Arent Fox

Headlines that Matter for Companies and Executives in Regulated Industries
Where’s the Beef? Two Charged with $650 Million Cattle Ponzi Scheme

On May 12, the Department of Justice (DOJ) announced that a federal district court in Colorado unsealed an indictment alleging that two individuals ran a Ponzi scheme that raised approximately $650 million from investors around the country from late 2017 to early 2019.

The defendants allegedly solicited hundreds of millions of dollars from victim-investors based on false and fraudulent pretenses, including misrepresentations that the investments would be backed by short-term investments in cattle. The defendants also allegedly solicited funds using false and fraudulent pretenses for their Colorado-based marijuana business. The defendants allegedly promised investors returns of approximately 10% to 20% over periods as short as several weeks and never told investors that, in actuality, the defendants were primarily using investments to repay other investors as part of a Ponzi-style scheme or to enrich themselves. The defendants were each charged with one count of conspiracy to commit wire and bank fraud, five counts of wire fraud, and one count of conspiracy to engage in monetary transactions in property derived from specified unlawful activity.

The DOJ press release can be found here.

New Jersey District Court Dismisses False Claims Act Complaint Alleging Tenuous Fraudulent Inducement and False Certification Theories

On May 12, a federal district court in the District of New Jersey dismissed a qui tam relator’s False Claims Act (FCA) suit, filed on behalf of the federal government and the State of New Jersey.

In United States ex rel. Freedman v. Bayada Home Health Care, Inc., No. 3:19-cv-18753, 2021 WL 1904735 (D.N.J. May 12, 2021), the plaintiff alleged that the defendant acquired a home health care agency from a county board by fraudulent inducement, and then submitted $36 million in Medicare bills to the federal government, in violation of the federal and state FCA statutes. In dismissing the complaint, the district court rejected the relator’s fraudulent inducement theory, reasoning that the complaint failed to demonstrate “how [the] acquisition touches or concerns the United States, or induced action on its part, other than by permitting [the defendant] to enroll as a service provider with CMS seven months later.” The district court further held that the complaint failed to plead materiality because there were “no factual allegations showing that CMS would not have reimbursed [the defendant’s] claims” had the alleged fraudulent inducement been disclosed. The court further held that the relator failed to adequately plead a false or implied certification theory under the FCA.

Having dismissed the federal FCA claims, the district court declined to exercise supplemental jurisdiction over the New Jersey FCA claims, and dismissed the complaint in its entirety.

Multilateral Pharmaceutical Merger Task Force Seeks Public Comment

On May 11, the Multilateral Pharmaceutical Merger Task Force—a task force composed of the Federal Trade Commission (FTC) Staff, DOJ’s Antitrust Division, State Attorneys General, Canada’s Competition Bureau, the European Commission Directorate-General for Competition, and the U.K.’s Competition and Markets Authority—announced that it has issued a notice seeking public comment to inform the Task Force’s review of how best to update the approaches of the component agencies in analyzing the effects of pharmaceutical mergers. The Task Force has posed seven questions to the public focused on the potential harms and risks that can arise from pharmaceutical industry mergers, as well as on how the agencies should review and assess competitive concerns raised by such mergers. Interested parties are invited to submit written comments to the Task Force by June 25, 2021.

The FTC’s announcement can be found here, and the Task Force’s notice seeking public comment, which includes the seven questions raised by the Task Force, can be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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