WASHINGTON, D.C. - The United States obtained over $1.4 billion in settlements and judgments in the fiscal year ending September 30, 2005, pursuing allegations of fraud against the federal government, the Justice Department announced today. This brings total recoveries since 1986, when Congress substantially strengthened the civil False Claims Act, to $15 billion. “This year's outstanding recoveries in civil fraud cases demonstrate this Administration's unwavering commitment to root out government fraud and to ensure that citizens' tax dollars are well spent,” said Peter Keisler, Assistant Attorney General for the Department’s Civil Division. “It also attests to the fortitude of whistle-blowers who report fraud and the tireless efforts of the civil servants who investigate and prosecute these cases, from Justice's Civil Division, the U.S. Attorney's Offices, and other agencies." Mr. Keisler also paid tribute to Senator Charles Grassley of Iowa and Representative Howard L. Berman of California who sponsored the 1986 amendments to the False Claims Act, the government's primary weapon to fight government fraud. "Without this important legislation strengthening the Act and, in particular, the qui tam provisions which give ordinary citizens the courage and protection to blow the whistle on government fraud, such recoveries would not have been possible." Of the $1.4 billion, $1.1 billion is associated with suits initiated by whistle-blowers under the False Claims Act's qui tam provisions. These provisions authorize individuals, known as relators, to file suit on behalf of the United States against those who have falsely or fraudulently claimed federal funds. Such cases run the gamut of federally funded programs from Medicare and Medicaid to defense contracts, disaster assistance loans, and agricultural subsidies. Persons who claim federal funds they know they aren’t entitled to are liable for three times the government’s loss plus a civil penalty of $5,500 to $11,000 for each false claim. If the government intervenes in a qui tam action, the person who filed the suit can recover from 15 to 25 percent of any settlement or judgment attributable to the fraud identified by the whistleblower. The relator’s share increases up to 30 percent if the United States declines to intervene and the whistleblower pursues the action alone. In fiscal year 2005, whistle-blowers were awarded $166 million. As in the last several years, health care accounted for the lion's share of fraud settlements and judgments-$1.1 billion. The Department of Health and Human Services reaped the biggest recoveries, largely attributable to its Medicare and Medicaid Programs. Substantial recoveries were also made by the Office of Personnel Management which administers the Federal Employees Health Benefits Program, the Department of Defense for its TRICARE insurance program, the Department of Veterans Affairs and the Railroad Retirement Board. Outside the health care arena, Department of Defense procurement fraud accounted for over $112 million in settlement and judgment awards, with another $41.9 million recovered from PriceWaterhouseCoopers, L.L.P., for alleged false claims for travel expenses in connection with its contracts with numerous federal agencies, and $30.5 million from Harvard University and its agents in connection with a United States Agency for International Development agreement to advise Russia in its transition to a market economy. Among the most significant recoveries in fiscal year 2005 were: • $327 million from HealthSouth Corporation to settle allegations of fraud against Medicare and other federally insured health care programs. The United States alleged that HealthSouth, the nation’s largest provider of rehabilitative medicine services, engaged in three major schemes to defraud the government. The first, comprising $170 million of the settlement amount, resolved Health South’s alleged false claims for outpatient physical therapy services that were not properly supported by certified plans of care, administered by licensed physical therapists or for one-on-one therapy as represented. Another $65 million resolved claims that HealthSouth engaged in accounting fraud which resulted in overbilling Medicare on hospital cost reports and home office cost statements. The remaining $92 million resolved allegations of billing Medicare for a range of unallowable costs, such as lavish entertainment and travel expenses incurred for HealthSouth's annual administrators' meeting at Disney World, and other claims. Government-initiated claims accounted for $251 million of the settlement amount, with the remaining $76 million attributable to four qui tam law suits. Five relators received $12.6 million for their contributions to the litigation. HealthSouth also entered into a corporate integrity agreement with the Inspector General of HHS to prevent future misconduct. • $310 million from Gambro Healthcare for false claims for Medicare and Medicaid in connection with dialysis services. Allegations against Gambro included providing home dialysis patients with equipment and supplies through a sham durable medical equipment company to increase Medicare reimbursement, billing for phantom supplies, billing for ancillary medications and services that were not medically necessary-a requirement for Medicare reimbursement, and paying kickbacks to physicians for referring patients to Gambro clinics in violation of the Medicare Anti-Kickback Act. The company also paid $15 million to resolve state Medicaid liabilities and paid a $25 million criminal fine. • $140 million from GlaxoSmithKline to settle allegations of fraudulent drug pricing and marketing that resulted in inflated claims to Medicare, Medicaid, and other federally funded health care programs. The government alleged that GlaxoSmithKline, one of the world’s largest pharmaceutical manufacturers, reported inflated prices for the drugs Zofran and Kytril, knowing that those prices would be used by federal programs to set reimbursement rates. The company used the artificial spread between the reported, inflated prices and its customers’ significantly lower actual cost to purchase the drugs as a marketing tool. Zofran and Kytril are anti-emetic drugs used primarily to reduce the negative side effects of radiation and other cancer treatments. The settlement was the result of a qui tam suit filed by Ven-A-Care of Florida Keys, Inc., a small home-infusion company, and its principals. In addition to the $140 million federal share of the recovery, GlaxoSmithKline paid $10 million to reimburse state Medicaid funds. • $138.5 million from AdvancePCS, a subsidiary of Caremark, Inc. in the pharmacy benefit management business, to resolve allegations that AdvancePCS exacted kickbacks, disguised as administrative fees and sales and service agreements, from drug manufacturers in exchange for marketing their drugs to providers reimbursed by federally insured health programs; and accepted kickbacks in the form of cash payments and rebates from drug manufacturers in exchange for marketing their drugs to providers reimbursed by federally insured health programs. Additionally, it was alleged the company paid kickbacks to providers reimbursed by federally insured health programs to ensure that AdvancePCS was selected or retained as the pharmacy benefit manager for the health plans.
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