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An experienced whistleblower attorney, successful trial attorney, former criminal prosecutor, and former reporter Representing whistleblowers reporting fraud on the Federal State Governments

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Alden, New York-based contractors, Zoladz Construction Company Inc. (ZCCI), Arsenal Contracting LLC (Arsenal), and Alliance Contracting LLC (Alliance), along with two owners, John Zoladz of Darien, New York, and David Lyons of Grand Island, New York, have agreed to pay the United States more than $3 million to settle allegations that they violated the False Claims Act by improperly obtaining federal set-aside contracts designated for service-disabled veteran-owned (SDVO) small businesses, the Justice Department announced today.    

To qualify as a SDVO small business, a service-disabled veteran must own and control the company.  The United States alleged that Zoladz recruited a service-disabled veteran to serve as a figurehead for Arsenal, which purported to be a legitimate SDVO small business but which was, in fact, managed and controlled by Zoladz and Lyons, neither of whom is a service-disabled veteran.  The United States alleged that Arsenal was a sham company that had scant employees of its own and instead relied on Alliance and ZCCI employees to function.  After receiving numerous SDVO small business contracts, Arsenal is alleged to have subcontracted nearly all of the work under the contracts to Alliance, which was owned by Zoladz and Lyons, and ZCCI, which was owned by Zoladz.  Neither Alliance nor ZCCI were eligible to participate in SDVO small business contracting programs.  Zoladz and Lyons are alleged to have carried out their scheme by, among other things, making or causing false statements to be made to the U.S. Department of Veterans’ Affairs (VA) regarding Arsenal’s eligibility to participate in the SDVO small business contracting program and the company’s compliance with SDVO small business requirements.

“The contracting companies and principals allowed greed to corrupt a federal process intended to benefit service-disabled, veteran-owned small businesses,” said Special Agent in Charge Adam S. Cohen of FBI Buffalo Field Office. “The FBI and our partners will continue to identify and investigate companies and individuals who target these types of programs for personal gain.”

Business that are active in importing goods for sale in the United States are revealing their competitor’s fraud in cheating on customs tariffs and collecting upto 30% of what the government recovers from their claims.  Filing a claim under the False Claims Act  stops cheating competitor from fudging on tariffs and allows for a significant bounty  for reporting this fraud to the federal government. L Toyo Ink SC Holdings Co. Ltd. (“Toyo”), a l Japanese manufacturer of printing inks with affiliates in New Jersey and Illinois, agreed to pay $45 million to settle claims of tariff evasion brought under the False Claims Act. The suit alleged that Toyo was deliberating evading paying required duties on imports by knowingly misrepresenting the country of origin for a particular colorant product. While Toyo represented the country of origin for the colorant to be Japan and Mexico, the colorant was actually imported from China and India and undergoing a superficial finishing process in Japan and Mexico.

The Department of Justice is aware of an increase in customs fraud  including such  illegal conduct such as mislabeling products to conceal their true country of origin, removal of required labeling prior to delivery of products out of the country, undervaluing products to avoid paying import duties and other forms of tariff evasion.

The government settled a $6.3 million case under the False Claims Act brought by a former sales account manager for a Chinese-owned logistics and warehousing company, CMAI. CMAI imports automotive parts which are distributed to Ford, General Motors and Chrysler. CMAI paid $6.3 million to resolve charges that the company evaded customs duties on the imported automotive parts.

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AmerisourceBergen Specialty Group,  a  drug wholesale company  providing pharmaceuticals a, pled guilty to illegally distributing misbranded drugs and agreed to pay $260 million to resolve criminal liability for skirting regulatory oversight. The Government says that Between 2001 and 2014, the group’s now-defunct subsidiary Medical Initiatives prepared millions of syringes that had been filled with cancer drugs and shipped them to providers in all 50 states.  Medical Initiatives removed the drugs from their original glass vials and repackaged them into plastic syringes in an unclean and unsterile environment, allowing the company to sell excess drug product in the vials known as “overfill,” according to court records. It combined the contents of multiple vials in a process known as “pooling,” despite many of the vials carrying a “single-use” designation.

In order to avoid the Food and Drug Administration’s regulatory oversight, AmerisourceBergen Specialty Group did not register Medical Initiatives as a repackager or manufacturer with the agency, records show. Instead, the group portrayed Medical Initiatives as a state-regulated pharmacy, exploiting an exemption to the FDA registration requirement that is reserved for legitimate pharmacies, not for manufacturers or repackagers, authorities said.

“Injectable drugs prescribed for patients—especially vulnerable cancer patients—must be pure, sterile and produced in an FDA-compliant facility that is within the supply chain that FDA oversees,” special agent in charge Mark McCormack of the FDA Office of Criminal Investigations Metro Washington Field Office said in a statement. “We will continue to pursue and bring to justice those manufacturers who would violate the public’s trust and endanger their health by attempting to avoid FDA’s oversight authority.”

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The Visiting Nurse Service of New York,, which says it is the largest U.S. nonprofit home health care agency, will face  a whistleblower lawsuit accusing it of defrauding Medicare and Medicaid and failing to provide patients with care prescribed by doctors. U.S. District Judge Alison Nathan in Manhattan said the plaintiff whistleblower Edward Lacey properly  alleged that the nonprofit filed false payment claims based on several alleged fraudulent schemes, violating the federal and state False Claims Acts.

Lacey had been a Visiting Nurse Service vice president of operations improvement and integration and worked there for 16 years before leaving in January 2015.The company said it served 142,057 patients last year in New York City, Nassau, Suffolk and Westchester counties.

He says his former employer of fraudulently  billed and received hundreds of millions of dollars from Medicare and Medicaid through false and improper billings, including services that doctors ordered but which it never provided for tens of thousands of “elderly, disabled and impoverished” patients. Lacey detailed many instances of alleged improper care, including for 14 patients with such conditions as Alzheimer’s disease, coronary disease, diabetes and a kidney transplant who received only small fractions or none of the care they were prescribed.

The Securities and Exchange Commission today filed fraud charges against a Massachusetts-based biopharmaceutical company that exaggerated how many new patients actually filled prescriptions for an expensive drug that was its sole source of revenue.

Aegerion Pharmaceuticals, now a subsidiary of Novelion Therapeutics, has agreed to pay a $4.1 million penalty to settle the charges that it misled investors on multiple occasions in 2013.  The SEC’s complaint alleges that Aegerion told investors that the number of unfilled prescriptions for Juxtapid was not material and the “vast majority” of patients receiving prescriptions ultimately purchased the drug.  The SEC alleges that Aegerion’s records reflect that it was actually around 50 percent of prescriptions that resulted in actual drug purchases.

“By no one’s math is 50 percent a vast majority,” said Paul Levenson, Director of the SEC’s Boston Regional Office.  “When companies publicly discuss their financial data, they must be truthful.  Whether they supply hard numbers or give broader descriptions, they cannot mislead investors.”

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The owner of the nursing home where eight patients died after the air conditioner stopped working during hurricane Irma, had a history of fraud charges including a False Claims Act case which was settled in 2006 for $15.4 million. In that case Dr. Jack Michel and five others were alleged to have agreed to send patients to his Miami hospital, Larkin Community, for unnecessary treatment according to The Department of Justice. DOJ said that Michel received kickbacks as part of the deal and some of the patients came from assisted living facilities he owned.

The facility where the eight patients died also had a poor records and an inspection rating much below average before Hurricane Irma. The building was said to be in disrepair and it was fined $5500.

On September 10, this year, during Hurricane Irma, according to state regulators the Rehab Center at Hollywood Hills became aware that its air conditioning equipment had stopped operating. Between 1:30 am and 5 am, several residents suffered respiratory arrest or cardiac distress. Health Department spokesman reported that as late as 7:30 am, the nursing home reported that they had partial power and that the generator was operational. Rescue workers found eight patients had died, allegedly as a result of dehydration and scorching heat levels. There was a hospital three minutes away.

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Swedish telecom giant Telia will pay nearly $1 billion in penalties  settle a United States Department of Justice probe on bribes paid in Uzbekistan. U.S. prosecutors described the Uzbek government official who received the bribes as “a close relative of a high-ranking government official and who exercised influence over Uzbek telecommunications industry regulators.” U.S. authorities charged that Telia, its Uzbek subsidiary,  had conspired to pay an Uzbek government official more than $330 million in bribes in exchange for help in expanding into Uzbekistan’s telecommunications market, one of the largest in Central Asia.

That official is widely known to be Gulnara Karimova, whose father ruled Uzbekistan for a quarter-century until his death in 2016.

In a similar Uzbekistan bribe case,  VimpelCom admitted in February 2016 to having paid more than $114 million in bribes to a high-ranking Uzbekistan official, and agreed to pay $795 million in penalties to resolve related U.S. and Dutch probes.

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Allied Home Mortgage will have to pay the Government $296 million by order of a federal judge in a major case for falsely certifying the quality of loans insured by the Federal Housing Administration over a ten year period. Last year, a federal jury found Allied liable for civil mortgage fraud and awarded the US $92,982,775. However, the presiding Judge George C. Hanks Jr. increased the award under the provisions of The False Claims Act which has a mandatory trebling provision. Under those guidelines, Hanks trebled the $92 million in damages. Hanks also imposed a penalty of $10,000 for each violation of the FCA found by the jury for a total of $12,950,000 in FCA penalties, and the maximum $1.1 million penalty for each violation of FIRREA for a total of $6.6 million in FIRREA penalties. That brings the total judgment to $296,298,325.

According to court documents, as an FHA-approved lender, Allied Capital needed approval from the Department of Housing and Urban Development for each branch office where originated FHA loans. Instead of complying with this rule, Allied Capital, with Hodge’s knowledge and approval, operated over one hundred “shadow” branch offices that originated FHA loans without HUD authorization, the government said.Allied Capital then tagged the loans from those “shadow” branches with the ID numbers of other approved branch locations, allowing those shadow branches to escape HUD oversight and enabling Allied to hide the default rates at those branches with the default rates of branches whose IDs they were using.

The government said that this “fraudulent misconduct” resulted in losses to HUD of $85,612,643 when those loans defaulted. The government also claimed that Allied operated a “dysfunctional quality control program and lied to HUD about it,” employing only a “handful” of quality control employees to review loans from as many as 600 branch offices, “many” of whom were not qualified to conduct FHA compliance reviews.

On March 31, 2017, President Trump signed an executive order calling for US CUstoms and Border Protection to increase its efforts to combat customs violations. One are of major focus is now transshipment frauds which involve disguising imports of country origin in order to evade the antidumping and  duties. Goods are shipped to third nations of origin and are re-shipped to the US with documents designed to conceal the true nation of origin. Often there are false product markings. In one case involving Univar, the duties on imports of the artificial sweeteneer saccharin from the PRC were evaded by shipping through Taiwan, re-bagging and identifying it as from Taiwan. The whistleblower was a US saccharin distributor that competed with the violator which did a major investigation tracking the true country of origin. The whistleblower is allowed to receive between 15-30% of what the government recovers under The False Claims Act (FCA). As this law also calls for double or treble damages, the rewards can be quite substantial. To even the playing field for the U.S. the Department of Justice is hot on the trail of many companies trying to evade our customs duties.

Jeffrey Newman represents whistleblowers nation-wide.

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Galena Biopharma will pay more than $7.55 million to resolve allegations that it paid kickbacks to doctors to induce them to prescribe its fentanyl-based drug Abstral. The allegations rose from a whistleblower suit filed under the False Claims Act. “Given the dangers associated with opioids such as Abstral, it is imperative that prescriptions be based on a patient’s medical need rather than a doctor’s financial interests,” said Justice Department official Chad Readler said. “The Department of Justice intends to vigorously pursue those who offer and receive illegal inducements that undermine the integrity of government health care programs.”

Federal officials alleged that Galena Biopharma paid multiple types of kickbacks to induce doctors to prescribe Abstral, including providing more than 85 free meals to doctors and staff from a single, high-prescribing practice, paying doctors $5,000 honoraria, and speakers $6,000, plus expenses, to attend an “advisory board” that was partly planned, and was attended by, Galena sales team members; and paying approximately $92,000 to a physician-owned pharmacy under a performance-based rebate agreement to induce the owners to prescribe Abstral.

Federal officials alleged that Galena paid doctors to refer patients to the company’s Relief patient registry study, which was nominally designed to collect data on patient experiences with Abstral, but acted as a means to induce the doctors to prescribe Abstral. Galena Biopharma sold Abstral in November 2015 after booking net losses on Abstral in each year that it owned the drug, beginning in June 2013. During that period, Medicare, TRICARE, and the Federal Employees Health Benefits program paid $13.6 million for Abstral prescriptions.