Articles Posted in Whistleblower law

The Food and Drug Administration (FDA) is warning consumers to avoid sunscreen pills. It has sent warning letters to four companies claiming to make diet supplements that can protect people from sun damage and reminded consumers that, “There’s no pill or capsule that can replace sunscreen. The four products — GliSODin Skin Nutrients,Napa Valley Bioscience’s sunsafe Rx, Pharmacy Direct’s Solaricareand Sunergized LLC’s Sunergetic— that it says “are putting people’s health at risk by giving consumers a false sense of security that a dietary supplement could prevent sunburn, reduce early skin aging caused by the sun, or protect from the risks of skin cancer.” The companies have been directed to reverse all violations associated with their products and review their marketing claims. The FDA is also supporting new research and regulations related to the safety and delivery of the active ingredients in conventional sunscreens since growing evidence suggests some of them may be absorbed through the skin.

Jeffrey Newman represents whistleblowers

Eric St-Cyr, a Canadian investment advisor working from his Cayman Island-based financial advisory firm, Clover Asset Management and Canadian Attorney Patrick Poulin, have been sentenced to 14 months in prison for conspiring to launder money. Now, the two men are cooperating with the Internal Revenue Service (IRS) in investigations from the information they have provided. According to reports, the two men created offshore entities designed to help their US clients evade taxes and other legal requirements. They also used them to launder purported criminal proceeds.

The case represents the IRS commitment to investigate and prosecute individuals worldwide who seek to evade U.S. taxes or who conduct illegal financial transactions, launder money or try to hide the true source of their income to evade paying taxes.

St.-Cyr lived in the Cayman Islands and worked for investment firm Clover Asset Management.  Many of its clientele work or reside in Canada, as well as Turks and Caicos, as well as the United States. St-Cyr and Poulin solicited US citizens to use their services to hide assets from the US government, including the IRS. According to reports, Poulin established an offshore corporation called Zero Exposure Inc. and served as a nominal board member. He transferred about $200,000 that he and St. Cyr believed were the proceeds of bank fraud but was actually part of a sting operation. The investment firm represented that it would neither disclosure the investments or any investment gains to the government, nor would it provide monthly statements or other investment statements to the clients. When the investments were sent back to the US the investment firm charged clients fees to launder the proceeds.

The United States has intervened in five lawsuits against Insys Therapeutics Inc., alleging violations of the False Claims Act in marketing of Subsys, an opioid painkiller manufactured and sold by Insys.  Subsys is a sublingual spray form of fentanyl, a powerful, but highly addictive, opioid painkiller.  In 2012, Subsys was approved by the Food and Drug Administration for the treatment of persistent breakthrough pain in adult cancer patients who are already receiving, and tolerant to, around-the-clock opioid therapy. The United States alleges that Insys paid kickbacks to induce physicians and nurse practitioners to prescribe Subsys for their patients.  Many of these kickbacks took the form of speaker program payments for speeches to physicians that were, in fact, shams; jobs for the prescribers’ relatives and friends; and lavish meals and entertainment.  The United States also alleges that Insys improperly encouraged physicians to prescribe Subsys for patients who did not have cancer, and that Insys employees lied to insurers about patients’ diagnoses in order to obtain reimbursement for Subsys prescriptions that had been written for Medicare and TRICARE beneficiaries.

The qui tam provisions of the False Claims Act allow whistleblowers to file lawsuits on behalf of the United States when they believe that a party has submitted false claims for government funds, and to receive a share of any recovery.  The United States has the right to intervene and take over responsibility for litigating these cases.  Here, the United States has intervened in five separate lawsuits that have been consolidated together in the Central District of California.  They are: United States, et al., ex rel. Guzman v. Insys Therapeutics, Inc., et al., 13-cv-5861; United States ex rel. Andersson v. Insys Therapeutics, Inc., 14-cv-9179; United States ex rel. John Doe and ABC, LLC v. Insys Therapeutics, Inc., et al., 14-cv-3488; United States ex rel. Erickson and Lueken v. Insys Therapeutics, Inc., 16-cv-2956; and United States ex rel. Jane Doe, et al. v. Insys Therapeutics, et al., 16-cv-7937.

Jeffrey Newman represents whistleblowers

Panasonic Avionics Corporation has agreed to pay a $137.4 million criminal penalty to settle charges arising out of a scheme to retain consultants for improper purposes and conceal payments to third-party sales agents, in violation of the accounting provisions of the Foreign Corrupt Practices Act (FCPA). The company, based in Lake Forest, California, designs and distributes in-flight entertainment systems and global communications services for airlines and airplane manufacturers.  According to court documents, PAC knowingly and willfully caused Panasonic to falsify its books and records with respect to its retention of consultants for improper purposes.  The consultants, which did little or no actual consulting work for PAC, were retained through a third-party service provider and were paid for out of a budget over which a senior PAC executive had complete control and discretion, without meaningful oversight by anyone at PAC or Panasonic.  One such individual was offered the consulting position by PAC at the time that he was employed by a state-owned airline and involved in negotiating a lucrative contract amendment on behalf of the airline with PAC.  According to court documents, that consultant was subsequently paid $875,000 by PAC over a six-year period and PAC earned over $92 million in profits from portions of the contract over which the consultant had some involvement or influence while employed with the airline.  PAC admitted that it mischaracterized these payments as “consultant payments” on its general ledger, which it knew caused Panasonic to incorrectly designate those payments as “selling and general administrative expenses” on Panasonic’s books, records, and accounts.

PAC also admitted that employees in its Asia region concealed PAC’s use of certain sales agents, which did not pass the Company’s internal diligence requirements.  According to admissions and court documents, PAC formally terminated its relationship with these sales agents, as required by its compliance policies, but PAC employees then secretly continued to use the agents by having them rehired as sub-agents of another company, which had passed PAC’s due diligence checks.  Through this process, PAC employees hid more than $7 million in payments to at least 13 sub-agents.By mischaracterizing the payments made to consultants and sales agents and providing false or incomplete representations and Sarbanes-Oxley subcertifications to Panasonic about PAC’s financials and financial controls, PAC caused Panasonic to falsify its books, records, and accounts in violation of the FCPA.PAC entered into a deferred prosecution agreement (DPA) in connection with a criminal information, filed today in the U.S. District Court for the District of Columbia, charging the company with one count of knowingly and willfully causing the falsification of the books, records, and accounts of its parent company Panasonic.  As part of the DPA, PAC will pay a total criminal penalty of $137,403,812.  PAC also agreed to continue to cooperate with the department’s investigation, enhance its compliance program, implement rigorous internal controls and retain an independent corporate compliance monitor for at least two years.

In a related proceeding, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against Panasonic, whereby the company agreed to pay approximately $143 million in disgorgement to the SEC, including prejudgment interest.  Thus, the combined total amount of U.S. criminal and regulatory penalties to be paid by Panasonic and PAC is over $280 million.

Canada Drugs, an online Canadian pharmacy is expected to be fined $34 million for importing counterfeit cancer drugs and other unapproved pharmaceuticals into the United States. The company has filled millions of prescriptions. U.S. prosecutors assert Canada Drugs’ business is based on illegally importing unapproved and misbranded drugs not just from Canada, but from all over the world. The company earned about $78 million through illegal imports, including two that were counterfeit versions of the cancer drugs Avastin and Altuzan that had no active ingredient, prosecutors said.

Canada Drugs also will permanently cease the sale of all unapproved, misbranded and counterfeit drugs and will surrender all of the domain names for the myriad websites it used to sell the drugs, under the deal.Federal prosecutors wrote in court documents that the recommended sentence is appropriate.“The United States believes that the above-referenced sentence in an appropriate one reflecting the seriousness of Thorkelson’s conduct, the need for just punishment and adequate deterrence to future criminal conduct,” Assistant U.S. Attorney Chad Spraker and Special Assistant U.S. Attorney Paul Joseph wrote.

The case is being handled in the U.S. state of Montana, where Canada Drugs bought another company for its drug inventory and customer list when it was expanding in 2009. Canada Drugs continued to deposit money into that company’s Montana bank account from doctors’ purchase of the illegally imported drugs before the proceeds were shipped to offshore accounts in the Caribbean, prosecutors said.

Dun & Bradstreet firm will pay $9.2 million to securities regulators to settle charges by the S.E.C. that its subsidiaries in China made unlawful payments to win or keep business from 2006 through 2012.The S.E.C. the illegal payments weren’t properly recorded in the company’s books and the company’s accounting controls were too weak to detect the problem.

Dun & Bradstreet terminated 11 people involved in the misconduct, disciplined others and will pay the SEC “the full amount of disgorgement” determined by the securities regulator. The SEC said the company will pay $6.1 million of profit gained via its misconduct, interest of $1.1 million and a penalty of $2 million, bringing the total to $9.2 million.

Dun & Bradstreet didn’t admit or deny wrongdoing. The company confirmed it resolved matters with the SEC and said it takes seriously its obligation to run its business legally and responsibly.

Verizon Communications, Inc. bought Yahoo’s operating business in June 2017. After the acquisition, Yahoo became known as Altaba Inc. Yahoo is still one of the world’s largest internet media companies providing over one billion users worldwide with products and services. The company is publicly traded. In addition to the failure of Yahoo to disclose the data breach to the investors, Yahoo’s senior management did not disclose information about the breach with Yahoo’s auditors or outside counsel. During the internal investigation, the company’s Chief Security Officer concluded that Yahoo’s entire user database, including the personal data of its users, had likely been stolen by nation-state actors through several hacker intrusions. Despite this information, which was communicated to a senior management person, nothing was said to anyone outside the company and Yahoo affirmatively represented to Verizon that it was unaware of any security breaches in its stock purchase agreement.

Jeffrey Newman represents whistleblowers

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.

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

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.