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Five individuals have been charged with defrauding California’s recycling program out of $80.3 million by getting recycled containers from other states like Arizona and trucking them into California where they sold them to the state. It’s not clear how the scheme affected other states’ recycling programs. There is no difference between cans and bottles sold in California and in other states, making it difficult for authorities to stop smugglers from bringing in containers sold elsewhere to be recycled in California. The owner and four employees of Recycling Services Alliance Corporation are charged with swindling the state’s beverage container recycling program over several years by accepting recyclables purchased in other states and faking the paperwork, California Attorney General Xavier Becerra announced.California authorities said it’s the largest ever alleged fraud involving the 5- or 10-cent deposits consumers pay on certain beverage containers. The self-funded program has recently been having substantial financial problems leading to the closure of many of the state’s private recycling centers.

Consumers can recoup the deposits by turning in the containers at recycling centers. Centers are responsible for accepting only eligible bottles and cans that were sold in California.

Company owner Shengchien Tseng, 49, of Cupertino, and employees Maximina Perez, 50, of San Leandro; Alejandra Lazaro-Martinez, 26, of Hayward; Veronica Castillo, 35, of Sacramento; and Marlene Davalos-Mendez, 28, of Rocklin, were indicted in December on 166 counts including grand theft, recycling fraud, perjury and conspiracy.

 The anticipated trade war with China appears to have actually started as severalships carrying more than $216m worth of sorghum were at sea but several changed course within hours of China’s announcement this week that it would place stiff tariffs on the grain. China said it would begin requiring deposits of 178.6% of the value of grain shipments. The diverted ships were all loaded in Texas, would have had to pay that deposit, rendering their shipments unprofitable.

US regulators focused on Chinese technology companies, banning American companies from selling products telecom equipment maker ZTE. US telecom are also be barred from buying equipment from foreign companies deemed a security risk, a move likely to hurt Chinese telecom Huawei as well as ZTE.

At the same time, there has been an increase in Chinese companies shipping to the U.S. which are finding ways to evade existing U.S. customs duties by shipping products to other nations and re-labeling them with a different country of origin, such as Vietnam or Mexico which does not have high duties on the same products including steel and sea food goods. U.S. agencies are seeking ways to try to stop this practice including allowing whistleblowers to report the fraud and collect up to 30% of what the government collects.

Wells Fargo has agreed to pay over $1 Billion in fines and penalties for fraudulently creating accounts without customers’ authorizations; forcing customers to pay fees the bank should have covered requiring borrowers to pay for insurance policies they did not need and in some cases pushing them into default. The bank paid $185  million to federal regulators in 2016.The Federal Reserve said that Wells Fargo had engaged in widespread consumer abuses and other compliance breakdowns. In addition, in March Wells Fargo reported to federal agencies that it has been asked about its wealth-management business which may have directed customers to inappropriate investments which benefitted the bank.

The Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency are the regulators levying the penalty. Notably, the bureau is led by Mick Mulvaney, who wants the agency to take a gentler towards banks. Some analysts wonder whether the bank has been punished enough to alter its culture.Wells Fargo can afford the $1 Billion sanction as it earned a profit of $22.2 billion last year and $5.9 billion in this year’s first quarter.

Jeffrey A. Newman represents whistleblowers

Ambulance company employeeAharon Aron Krkasharyan, 54, of Los Angeles, California, was sentenced by U.S. District Judge George H. Wu of the Central District of California, who also ordered Krkasharyan to pay $484,556 in restitution to Medicare, jointly and severally with his co-conspirators, who await sentencing.  On Nov. 27, 2017, Krkasharyan pleaded guilty to one count of conspiracy to commit health care fraud. According to court documents, during the course of the conspiracy, Mauran submitted over $28 million in claims to Medicare.  Krkasharyan’s co-defendants admitted that at least $6.6 million of those claims were false and fraudulent claims for medically unnecessary transportation services.  Medicare paid at least $3.1 million on those false and fraudulent claims.

Krkasharyan was employed as the Quality Improvement Coordinator for Mauran Ambulance Inc. (Mauran) of San Fernando, California, an ambulance transportation company operating in the greater Los Angeles area that provided non-emergency services to Medicare beneficiaries, many of whom were dialysis patients.  As part of his plea, Krkasharyan admitted that between June 2011 and April 2012, he conspired with other Mauran employees to submit claims to Medicare for ambulance transportation services for individuals who did not need such services.  Krkasharyan also admitted that he and his co-conspirators instructed Mauran emergency medical technicians to conceal the patients’ true medical conditions by altering paperwork and creating fraudulent reasons to justify the ambulance services.

Krkasharyan was charged along with Toros Onik Yeranosian, 55, the former owner of Mauran; Oxana Loutseiko, 57, the former general manager of Mauran; and Maria Espinoza, 47, a former employee of a Los Angeles dialysis treatment center.  Yeranosian, Loutseiko and Espinoza each pleaded guilty and are pending sentencing.  The former dispatch supervisor at Mauran, Christian Hernandez, 37, who was previously charged in the case, has also pleaded guilty and awaits sentencing.

Many online retailers have a strong advantage over local stores they may not have to pay a 6 plus percent sales tax which the local stores must pay. That means billions of dollars in uncollected revenue for the states and what is being argued as an unfair advantage in a major case being argued before the United States Supreme Court tomorrow. If S.C. decides in favor of the states, it could also affect whistleblowers who reveal the companies who try to evade state sales taxes which they owe.  The states, led by South Dakota, are seeking to overturn a 26-year old ruling that exempts many internet companies from collecting billions of dollars in sales taxes. The decision rendered in 1992 says that retailers can be forced to collect the taxes only if they have a physical presence in a state such as a store or a warehouse. The decision could affect Amazon.

Retailers who are battling the states say they would be hit by heavy costs in complying with the rules for thousands of products in thousands of cities. The case before the court involves Wayfair, Overstock and Newegg, three retailers who were sued by South Dakota for not charging sales taxes to customers there, even though they do not have a presence there. South Dakota requires retailers with more than $100,000 in annual sales in the state to pay 4.5% taxes on the purchases.  A lot of people are watching this case–from states to online retailers.

The United States, which filed a brief in the action and has asked to argue, says that the states have ample authority to require the online retailers to collect state sales taxes owed by their customers. This is because, says the U.S., the internet retailers have a pervasive and continuous virtual presence in the states where their websites are available. Imposing a sales tax collection on out of state sellers will provide significant benefits to the states, it is argued. The U.S. Census Bureau estimated that in 2017 the retail e-commerce sales totaled more than $452 billion.

The Securities and Exchange Commission today announced a whistleblower award of more than $2.1 million to a former company insider whose information led to multiple successful enforcement actions.  The whistleblower’s information strongly supported the findings in the underlying actions and the whistleblower provided ongoing assistance to the staff during the investigation. “The SEC has issued nearly $90 million in whistleblower awards in the past month alone,” said Jane Norberg, Chief of the SEC’s Office of the Whistleblower.  “As these awards demonstrate, we continue to receive high-quality information from whistleblowers, which we use to detect and prosecute securities violations and safeguard investors.”

Since issuing its first award in 2012, the SEC has awarded more than $266 million to 55 individuals under the whistleblower program.  In that time, almost $1.5 billion in monetary sanctions have been ordered against wrongdoers based on actionable information received from whistleblowers, including more than $740 million in disgorgement of ill-gotten gains and interest, the majority of which has been or is scheduled to be returned to harmed investors.

All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards. Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action.  Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.

Banner Health has agreed to pay the United States over $18 million to settle allegations that 12 of its hospitals in Arizona and Colorado knowingly submitted false claims to Medicare by admitting patients who could have been treated on a less costly outpatient basis, the Justice Department announced today.  Headquartered in Arizona, Banner Health owns and operates 28 acute-care hospitals in multiple states. The settlement resolves allegations that 12 Banner Health hospitals knowingly overcharged Medicare patients unnecessarily.  In particular, the United States alleged that from Nov. 1, 2007 through Dec. 31, 2016, Banner Health billed Medicare for short-stay, inpatient procedures provided at the 12 hospitals that should have been billed on a less costly outpatient basis.  The settlement also resolves allegations that Banner Health inflated in reports to Medicare the number of hours for which patients received outpatient observation care during this time period.

Banner Health also entered into a corporate integrity agreement with the U.S. Department of Health and Human Services – Office of Inspector General (HHS-OIG) requiring the company to engage in significant compliance efforts over the next five years.  Under the agreement, Banner Health is required to retain an independent review organization to review the accuracy of the company’s claims for services furnished to federal health care program beneficiaries. This settlement resolves a lawsuit filed in the U.S. District Court for the District of Arizona by Cecilia Guardiola, a former employee of Banner Health, under the qui tam or whistleblower provisions of the False Claims Act, which permit private citizens to bring lawsuits on behalf of the United States and obtain a portion of the government’s recovery.  Guardiola will receive roughly $3.3 million.  The case is captioned United States ex rel. Guardiola v. Banner Health and NCMC, Inc. No. 2:13-cv-02443.

Jeffrey Newman represents whistleblowers

Michael Brian Anderson, a shrimper and fisherman, was convicted by a federal jury on three counts of false statements, four counts of mail fraud, and two counts of money laundering.

According evidence presented at trial, Anderson submitted multiple false claims to Customs & Border Protection (CBP) seeking millions of dollars in subsidies under the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA). The CDSOA protected American shrimp producers by imposing anti-dumping taxes on foreign producers and permitting domestic shrimpers to apply for the money they would have made but for unfair foreign competition.

Anderson, an eligible domestic shrimper, mailed multiple false certifications to CBP, stating that his shrimping business expenses for the years 2005 to 2007 were more than $24 million.Anderson claimed he spent almost all of this money on the purchase of 3.9 million pounds of raw shrimp from R&R Seafood, a small seafood store on Tybee Island.

Massachusetts Whistleblower Law

Massachusetts Medicaid fraud hit a new record, rising to  $17 million, says the state auditor. Suzanne Bump. Bump released an annual report Monday outlining a nine percent year-over-year increase in public assistance benefit fraud in fiscal year 2017. She noted that the fraud “represents a small percentage of overall spending, but has a disproportionate impact in weakening public trust in these programs.” The average amount of fraud found after investigations are complete comes to $14,678.

The Massachusetts state budget is about $40 billion a year.

PNC Investments LLC, Securities America Advisors Inc., and Geneos Wealth Management Inc. failed to disclose conflicts of interest and violated their duty to seek best execution by investing advisory clients in higher-cost mutual fund shares when lower-cost shares of the same funds were available. The SEC also charged Geneos for failing to identify its revised mutual fund selection disclosures as a “material change” in its 2017 disclosure brochure.  Collectively, the firms will pay almost $15 million, with more than $12 million going to harmed clients. The Share Class Selection Disclosure Initiative gives eligible advisers until June 12, 2018, to self-report similar misconduct and take advantage of the Enforcement Division’s willingness to recommend more favorable settlement terms, including no civil penalties against the adviser.

The SEC’s orders also found that PNCI and Geneos failed to disclose the conflict of interest associated with compensation they received from third parties for investing clients in particular mutual funds, and that PNCI improperly charged advisory fees to client accounts for periods when there was no assigned investment advisory representative.The SEC’s orders find that PNCI, SAA, and Geneos each violated provisions of the Investment Advisers Act of 1940, including an antifraud provision.  Without admitting or denying the findings, the advisers each consented to a cease-and-desist order and a censure.  The orders require PNCI to pay $6,407,770 in disgorgement and prejudgment interest along with a $900,000 penalty. SAA must pay $5,053,448 in disgorgement and prejudgment interest along with a $775,000 penalty. Geneos must pay $1,558,121 in disgorgement and prejudgment interest along with a $250,000 penalty.

“These disclosure failures cause real harm to clients,” said C. Dabney O’Riordan, Co-Chief of the Asset Management Unit.  “We strongly encourage eligible firms to participate in the recently announced Share Class Selection Disclosure Initiative as part of an effort to stop these violations and return money to harmed investors as quickly as possible.”