False Claims Act Recoveries Could Hit Record in 2006

20 Corporate Crime Reporter 5(4), January 24, 2006

This could be a record year for False Claims Act recoveries.

The government has already recovered $1 billion in the first three months of FY 2006 – out of $17 billion recovered since the passage of the False Claims Act amendments in 1986.

And 80 percent of all False Claims Act cases are now filed in the health care arena.

"The scale of fraud in the prescription drug arena is breathtaking," notes Jim Moorman, president of Taxpayers Against Fraud, a group set up by plaintiff lawyers to track and defend the law. "Only 14 cases have been settled so far, but they have returned over $3.44 billion to the U.S. Government. Over 150 cases, involving more than 500 drugs, are now under investigation."

FY 2006 was jump started with a $704 million settlement with Serono Inc. for the illegal marketing of an anti-AIDS wasting drug called Serostim.

Other large False Claims Act cases in the first three months of FY 2006 include a $124 settlement with King Pharmaceuticals, a $40 million settlement with Erlanger Medical Center in Tennessee, a $24.75 million settlement with various companies defrauding Amtrak, and a $62.55 million settlement with Tenet Healthcare.

In the first two weeks of January, an additional $42 million was recovered from ABN AMRO Mortgage Group, and a $25 million settlement was announced involving four national accounting firms that had been pocketing travel rebates that should have gone back to the U.S. government.

Moorman said that FY 2006 could be a record year for the False Claims Act because of some potentially large cases that appear to be moving towards resolution.

Here are the cases Taxpayers Against Fraud see coming down the pike this year:

* Pratt & Whitney/ United Technologies. The Government awaits a judge's decision in a False Claims Act case involving hundreds of millions of dollars allegedly stolen from U.S. taxpayers by United Technologies and Pratt & Whitney during the Alternate Fighter Engine program of the 1980s.

* Medco Health Solutions. A June trial date has been set in a large case involving Medco Health Solutions. In this case, the Government has joined a whistleblower lawsuit that alleges that Medco defrauded hundreds of millions of dollars from Medicare, Medicaid and other federal health care programs.

* Mario Gabelli. A June trial date has been set in a case involving Wall Street financier Mario Gabelli and various companies he owns. The charge is that Mr. Gabelli and partners created various front companies to act as "small business" investors in a scheme to purchase radio bandwidth at a discount. The bandwidth was later resold, netting Gabelli and partners more than $250 million profit.

* Tenet Healthcare. A massive fraud case against Tenet Healthcare involving Medicare "outlier" payments remains under investigation. Tenet is known to have reserved over a billion dollars in expectation of a settlement in this case. An unrelated criminal case against Tenet is now before a jury in San Diego. However that case is decided, some analysts expect Tenet to move to settle the Federal outlier case, and perhaps a related state case in Florida, as well. It is unknown what percentage might be settled under the Federal or Florida False Claims Act(s).

* Pharmaceutical Fraud. Only 14 pharmaceutical fraud cases that have been settled so far, but they have returned well over $3.44 billion to the U.S. Government. But more than 150 other cases, involving more than 500 drugs, are now under investigation. In all likelihood, at least one or two large pharmaceutical cases will be settled sometime in the next 9 months, and possibly more.

* Dialysis Fraud. Most of the major renal care facilities in the country are now under investigation for fraud. One large case, against Gambro, has already been settled for $325 million, but investigations against Fresenius, DaVita, Renal Care Group, Quest Diagnostics, and Bone Care International are still underway.

“These cases suggest FY 2006 will produce a record amount of settlements and there are likely to be some sizeable settlements that the above list does not anticipate,” Moorman said. “All in all, FY 2006 should be the FCA's best year ever."



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