“In a COVID-19 world, when the government is spending billions and billions of dollars to assist businesses, we need far better vetting of companies that seek public funds,” said Michael Hirst, who supervised False Claims Act cases in the U.S. Department of Justice and represented the whistleblower in the suit against Stryker and Alliant.   

"That's especially important for companies that have already shown a willingness to defraud the public."

Article:  https://www.usatoday.com/in-depth/news/investigations/2020/07/07/covid-19-contracts-overlook-fraud-claims-masks-sanitizer-and-ppe/5352886002/

Hirst Law Group, P.C., announced a settlement of over $31 million today in a whistleblower case with the United States Department of Justice and the California Attorney General's Office.  The settled claims, brought in a lawsuit filed by whistleblower Laurie Hanvey in 2014, resolve only some of the on-going allegations of fraud against Sutter Health and Sutter Medical Center, Sacramento (“Sutter”), Sacramento Cardiovascular Surgeons Medical Group, Inc. (“Sac Cardio”), and other defendants.

The False Claims Act (“FCA”) complaint, filed under seal by the whistleblower and her counsel Hirst Law Group, P.C., Wilbanks and Gouinlock, LLP, and Withrow, McQuade & Olson, LLP, alleged that the Defendants knowingly paid and received kickbacks for referrals of patients to Sutter and violated the Stark law with illegal financial arrangements.  Under the settlement, Sutter will pay $30.5 million, and Sac Cardio, comprised of Dr. Michael T. Ingram, Dr. Robert Kincade, and Dr. James Longoria, will pay over $500,000 without admitting the fraud allegations.

According to Michael A. Hirst, of Hirst Law Group, P.C.: “The Settlement Agreement provides that Sutter and Sac Cardio will receive a release from the whistleblower of her fraud allegations for limited claims and limited time periods in the case, while the remaining fraud allegations against Sutter and the other defendants will continue.”  Hirst stated, “We congratulate the whistleblower and look forward to presenting additional evidence in the case.”

The released claims allege that Sutter and Sac Cardio engaged in an illegal course of conduct from September 2012 through September 2014, through which Sutter knowingly provided Sac Cardio kickbacks for referrals of Sac Cardio's patients to Sutter for inpatient and outpatient procedures.  Specifically, the complaint alleges that Sutter provided paid physician assistants to Sac Cardio, and paid Sac Cardio exorbitant rates for both “medical director” and “call coverage” agreements to induce referrals from Sac Cardio to Sutter, rather than to other hospitals.

Under the arrangements discussed in the complaint, which the whistleblower alleged violate the Anti-Kickback Statute and Stark law, for conduct beginning in 2006 and 2008: (1) Sac Cardio received free physician assistants paid by Sutter at over $56,000 per month and $680,000 annually, for which Sac Cardio billed Medicare and other payors for the services performed by these Sutter-provided physician assistants; (2) Sac Cardio surgeons received up to $318,264 annually for services they allegedly performed as “medical directors” of various service lines at Sutter, including as medical directors for the Sutter Heart Institute, the Transplant Ventricular Assist Device Program, and the Surgical Ablation Program; and (3) the Sac Cardio doctors also received up to $912,500 annually to supposedly assure the availability of surgeons on an emergency call basis, although the whistleblower alleged that other cardiovascular surgeons with fewer referrals to Sutter were not included in the call coverage contracts.  As alleged, these “call coverage” contracts allowed Sac Cardio to bill for any services they performed, as well as to receive from Sutter $2,500 per shift for 365 days each year.  In total, the complaint alleges that Sac Cardio received $1,910,764 in illegal annual payments from Sutter designed to induce referrals. 

“When physicians receive exorbitant payments to induce referrals of their patients to a hospital, everyone but the physicians and the hospital loses,” Hirst stated.  “Patients have a right to believe their doctor's judgment is not affected by the doctor's personal compensation.  And health insurers like Medicare have a right to believe the medical services they pay for are reasonable and necessary, not medical services ordered as a “thank you” for a generous kickback.”

Whistleblower Laurie Hanvey worked with hospitals in California for over 25 years, including work at Sutter starting in 2012 as the compliance officer at Sutter Medical Center.  When she saw the alleged kickbacks and Stark violations at Sutter, she consistently tried to get her supervisors and management at Sutter to discontinue its practices.  But the practices continued.  

For blowing the whistle and presenting her evidence to the government, Ms. Hanvey and her counsel will receive $5,795,000 plus interest from settlement of this portion of her claims.  Hirst stated: “Ms. Hanvey is exactly the kind of deserving whistleblower the False Claims Act envisions.  Without her courage in coming forward, none of this would likely have come to light.”

Hirst praised the Government's efforts in investigating the FCA complaint allegations and in working to ensure that the remaining allegations were not released in the settlement.  “We appreciate the Government's support in allowing us to go forward, litigate the remainder of the case, and present our evidence,” Hirst said.

The case was investigated for the Government by Assistant U.S. Attorneys Sara Winslow and Kimberly Friday of the U.S. Attorney's Office in San Francisco, Rohith Srinivas of the Department of Justice in Washington, D.C., and Deputy Attorney General Elizabeth Voorhies of the California Department of Justice.

The U.S. Attorney's office for the Eastern District of California issued a press release on the case on November 15, 2019, available here:

https://www.justice.gov/opa/pr/california-health-system-and-surgical-group-agree-settle-claims-arising-improper-compensation

A sample of articles about the case from the Sacramento Bee and Davis Enterprise are available here:

https://www.sacbee.com/news/business/article236865558.html

https://www.davisenterprise.com/local-news/sutter-to-pay-30m-settlement-in-federal-whistleblower-case/

The United States District Court today unsealed a case in which the United States Department of Justice and the California Attorney General settled whistleblower fraud allegations against Alternative Learning Center and its owner and president, Alice Soard, and Adult Educational Technologies and its owner and executive director, Wendell James.

The False Claims Act ("FCA") complaint, filed under seal by whistleblower Beverly McCaffery and her counsel Hirst Law Group, P.C., alleged that the Defendants knowingly and routinely defrauded the California Department of Developmental Services ("DDS") by submitting claims for services that were never performed.  Under the settlement, the Defendants will pay over $1.15 million and Defendant Soard will sell her house, with an estimated value of over $1.34 million, and transfer the net proceeds to the government.  As a whistleblower award, McCaffery will receive 20% of the payments to the United States, and 24% of payments to California. 

Under the settlement agreement, each of the defendants agreed to pay the United States and the State of California monthly amounts for a total payment as follows:

          Alternative Learning Center:  $562,600

          Alice Soard:  $159,400

          Adult Education Technologies:  $322,500

          Wendell James:  $107,500

In addition to those sums, Alice Soard agreed to sell her house located at 5115 Pinecrest Drive, in Oakland, California, 94605, and to transfer the net proceeds from the sale as part of the settlement to repay the government programs.  The four bedroom, three bathroom, 3294 square foot home is currently listed by Zillow with a estimated value of $1,342,593.

Ms. McCaffery's complaint alleged that she was instructed, along with others, to falsify records and create false evidence of services that were never provided to individuals with developmental disabilities.  Fake time logs listed services with false dates and times, and provided the names of fictitious staff members who supposedly provided care.  Among other examples, the complaint alleged that Ms. Soard's house cleaner, who speaks no English, and her daughter were among the fictitious staff members who were represented as providing needed help to developmentally disabled individuals.

Ms. McCaffery originally reported the fraud to DDS in September 2004.  She later contacted Hirst Law Group, P.C., which filed a False Claims Act case to bring the matter to the attention of the United States Department of Justice and the California Attorney General. 

Attorney Michael A. Hirst of Hirst Law Group, P.C., stated:  "Ms. McCaffery's actions in blowing the whistle by filing a False  Claims Act case have helped restore funds to those most in need."

Hirst stated that a problem often encountered in cases to protect a vulnerable patient population is that witnesses are not willing to testify about the services.  "In these cases, having whistleblowers willing to come forward is essential.  Ms. McCaffery's courage will improve the DDS program and benefit all who rely on it." 

ALC and AET were authorized to provide services to individuals with developmental disabilities under Medicaid's '1915(c) waiver" program, which enables disabled persons to live in the community instead of being institutionalized.  "The program facilitates the provision of services such as homemaking, personal care, and habilitation.

"The return of much needed funds to this program is crucial," said Hirst.  "Especially in times of reduced federal and state payments for these kinds of services, those willing to blow the whistle make a huge difference."

As part of the settlement agreement, the Defendants entered into a 5-year Corporate Integrity Agreement ("CIA") with the Department of Health and Human Services, Office of Inspector General, which allowed Defendants to continue in the program.  Among other things, the CIA requires appointment of a Compliance Officer, formation of a Compliance Committee, regular reports showing compliance with federal health care statutes and regulations, training and certifications, and engagement of an Independent Review Organization to review claims submitted by Defendants.

Hirst praised the Government's efforts in investigating the FCA complaint allegations, and in working to ensure the integrity of program funds.  The case was investigated for the Governments by Assistant U.S. Attorney Colleen Kennedy of the U.S. Attorney's Office in Sacramento, Deputy Attorney General David Zlotnick of the California Department of Justice, Bureau of Medi-Cal Fraud, and Heather Sowa and Sara Guzman at the U.S. Department of Health and Human Services, Office of Inspector General.  

Article from the Davis Enterprise is here:

https://www.davisenterprise.com/local-news/crime-fire-courts/davis-law-firm-announces-settlement-in-whistleblower-lawsuit/

Hirst Law Group, P.C. represented the whistleblowers in a False Claims Act case against military transportation contractors Menlo Worldwide Government Services, LLC, Menlo Logistics, Inc., Con-Way Inc., XPO Logistics, Inc. (collectively “Menlo”) and Estes Forwarding Worldwide LLC, and
Estes Express Lines (collectively “Estes”). The Defendants together paid $13 million to settle claims that they knowingly and falsely inflated charges to the Government for shipping military freight throughout the United States. The whistleblowers shared 22% of the settlement, or $2,860,000.    

The U.S. Attorney's office for the Eastern District of California issued a press release on the case on May 3, 2016, available here:

https://www.justice.gov/usao-edca/pr/menlo-worldwide-services-inc-and-its-subcontractor-estes-pay-us-13-million-resolve

Articles from the Sacramento Bee and Davis Enterprise are available here:

http://www.sacbee.com/news/local/article75360247.html

http://www.davisenterprise.com/local-news/crime-fire-courts/whistleblowers-help-recover-13-million-in-false-claims-act-settlement/

Quest Diagnostics paid $1.79 million to settle fraud allegations brought by a whistleblower who was represented by Hirst Law Group, P.C. The whistleblower alleged that Quest Diagnostics billed Medicare for duplicate blood tests performed on the same patient on the same day.

The qui tam lawsuit, brought under the federal False Claims Act, was filed under seal in federal court in the Eastern District of California.

The United States Attorney for the Eastern District of California issued a press release on August 25, 2015, which is available here: http://www.justice.gov/usao-edca/pr/quest-diagnostics-pays-united-states-179-million-resolve-false-claims-act-allegations.

St Helena Hospital paid $2.25 million to settle fraud allegations brought by a whistleblower who was represented by Hirst Law Group, P.C. The settlement resolved allegations that the hospital, an acute care facility within the Adventist Health System, knowingly charged Medicare for medically unnecessary percutaneous coronary interventions during the period from January 1, 2008 through July 31, 2011. The claims included allegations that St. Helena Hospital unnecessarily admitted angioplasty patients who should have been treated on a less costly, outpatient basis.

The United States Attorney for the Northern District of California issued a press release on the case on December 19, 2014, which is available here:

https://www.justice.gov/usao-ndca/pr/st-helena-hospital-agrees-pay-225-million-settle-false-claims-act-allegations.

Hirst Law Group represented a whistleblower, a former Stryker employee, who alleged that Stryker Corporation and Alliant Enterprises failed to disclose complete pricing information to federal government negotiators, which resulted in government agencies overpaying for medical equipment.

Stryker Corporation, a Fortune 500 company, was alleged to have used Alliant,  a privately held company, to sell Stryker-manufactured products to the government without providing Stryker's commercial pricing history for price comparison purposes.

To resolve the case, Stryker paid the federal government $911,219 and Alliant paid $151,215.

The United States Attorney for the Central District of California issued a press release on the case on March 24, 2014, and is available here: http://www.justice.gov/usao/cac/Pressroom/2014/032a.htmlhttp://www.justice.gov/usao/cac/Pressroom/2014/032a.html  

Hirst Law Group represented the whistleblower in a case against a Virginia company, Vector Planning and Services, Inc., that paid $6.5 million to settle allegations of fraud in its Navy contracts. Based on evidence from the whistleblower, the government joined the case and agreed with the whistleblower's allegations that the company inflated its indirect cost billings in accounts allocated across government contracts and submitted false claims for expenses never incurred. The whistleblower's share of the recovery was $1.28 million.

The government entities involved in the case included the Department of Justice's Civil Division, the Civil and Criminal Divisions of the U.S. Attorney's Office for the Southern District of California, the Defense Criminal Investigative Agency, the Naval Criminal Investigative Service, and the Defense Contract Audit Agency.

The DOJ press release (2/18/14) is available here: http://www.justice.gov/opa/pr/2014/February/14-civ-167.html

The Department of Justice put out its own release on the Chan settlement, available here: 

http://www.justice.gov/usao/waw/press/2013/June/chan.html

June 20, 2013 Lakewood, Washington -- A whistleblower lawsuit and a government investigation has led to an agreement by Alfred H. Chan, M.D., his wife and office manager Judy Chan, and their children, to pay the federal government $3.1 million.  The payment settles allegations that Dr. Chan, an oncologist, and his practice placed patients at risk and fraudulently overbilled Medicare and other government programs by falsifying the amount of chemotherapy administered to patients and then falsifying the patients' medical charts so that the practice's records would be consistent with the inflated charges submitted to the government.

The “qui tam” (whistleblower) lawsuit, brought under the federal False Claims Act, was filed under seal in September 2008 in federal court in the Western District of Washington by Ruth L. Ruckman, who was employed as a receptionist by the medical practice, Alfred H. Chan, M.D., P.C.  The government investigated Ruckman's allegations and then joined the case in September 2010.

“Ms. Ruckman had the courage to blow the whistle on the fraud scheme when others looked away or simply left the practice.  By doing so, she ensured the safety of patients and stopped the false billings to the government.  She is the hero in this story,” said Michael A. Hirst of Hirst Law Group, P.C., in Davis, California, who represented Ruckman in the case.

While working in the office, Ruckman noticed that after examining patients, Dr. Chan would prepare handwritten treatment orders on scraps of paper and provide them to the office nurse.  Dr. Chan required that the paper scraps be returned directly to him at the conclusion of the patient's infusion or injection.  The scraps contained the patient's name and an abbreviated list of the chemotherapy medications and dosages.  Dr. Chan would promptly shred the treatment orders.  Thereafter, he transcribed medical notes and completed billing records, on both of which he routinely inflated the amount of chemotherapy provided to patients and the duration of the infusion.  Judy Chan, his wife, would then submit the inflated bills to Medicare and other federal programs for payment.  The billed and recorded quantities were usually increased by multiples of 2 to 4, and occasionally by a multiple of 8.  If the government were to have audited Dr. Chan's medical records, the falsely inflated records would have matched the falsely inflated billings, with no preserved records showing the true quantities administered to patients.

Over time, Ruckman was able to remove, copy, and replace several scraps of paper left for Dr. Chan before the doctor could shred them or discover Ruckman retrieving the scraps.  She provided the scraps to her counsel, who provided a roadmap of the fraud to the government. 

“Without the whistleblower's willingness to get involved and stop the fraud, it is unlikely that the government would have uncovered the fraud scheme on its own,” said Jerry L. Hurst, a health care fraud auditor at Hirst Law Group, P.C., and a former auditor for both the U.S. Attorney's Office and Department of Health and Human Services, Office of Inspector General.  “In a case like this, with the patients' records showing the same quantity of medications as the billings, a routine audit would typically not catch the fraud.”

Both Ruckman's complaint and the government's subsequent complaint in 2010 noted the potential harm to patients.  If another physician or hospital were to request Dr. Chan's medical records, the false information in those records regarding a patient's past cancer treatment could influence the subsequent treatment provided -- or not provided -- to the patient.

When the fraud was exposed, the Chans first tried to blame Ruckman.  In papers filed with the court, they claimed that Ruckman “daily conducted activities that perpetuated what she now claims was Dr. Chan's ongoing fraudulent behavior.”  Hirst stated: “Unfortunately, that's all too common.  Some defendants try to blame the whistleblower for the fraud.  The problem with that tactic is that government lawyers and agents are way too smart to fall for it, and the government team in this case never took that contention seriously.”

In April 30, 2009, government agents executed a federal search warrant on the clinic practice, and copied patient files, computer data, and other evidence.  In February 2011, before Alfred and Judy Chan were criminally prosecuted for fraud, they fled to Taiwan.  Because Taiwan does not have an extradition treaty with the United States, the Chans cannot be forced to return for the prosecution if they remain within Taiwan's borders, even though a grand jury has issued a criminal indictment against them.  The government contended that, before they fled, the Chans fraudulently transferred millions of dollars in real property and other assets to their children, the children's trusts, and the Chan family LLCs -- assets beyond those already garnished by the government in the case. 

In the settlement agreement, the Chan children agreed to sell property, not contest the forfeiture of assets, and give up claims to garnished funds.  In total, the settlement provides a repayment to the government of $3.1 million.   

The civil settlement agreement resolves the whistleblower's allegations that Dr. and Judy Chan submitted false claims to the government from April 2006 to April 2009 by:

Overcharging for quantities of medications administered to patients

Overstating chemotherapy infusion times

Double billing for medications

The settlement also resolves claims against the Chans and their children for the alleged fraudulent transfer of assets to the children, their trusts, and the family LLCs.  

Hirst said that the case resolution demonstrates the diligent and successful work of Assistant United States Attorneys Harold Malkin and David East, and their investigative team led by DCIS Special Agent Andreas Kaltsounis.

The False Claims Act enables private citizens to sue entities that defraud federal and state governments and receive a reward if funds are recovered.  For her work in the case, Ruckman will be awarded 20% of the government's recovery.

Hirst Law Group P.C. represents whistleblowers in federal and state False Claims Act and employment cases around the country.  Cases handled by the firm's attorneys have been reported on television, radio and newspapers nationally and abroad, including the largest recovery against a single hospital in US history, which became the subject of a book Coronary (Simon and Schuster, 2007). The firm's staff includes a former supervisor of False Claims Act cases for the government and a former government fraud auditor. See www.hirstlawgroup.com.