2002-12-19 -- Medical World Communictions -- Civil Complaint -- News Release

Jamesburg Trade Magazine Publisher Sued by Government for Defrauding Postal Service

TRENTON - A federal judge this week unsealed a civil complaint alleging that a Jamesburg medical magazine publisher defrauded the United States by failing to pay more than $2 million in postage for mailing its periodicals, U.S. Attorney Christopher J. Christie announced today.

U.S. District Judge Garrett E. Brown, Jr. on Tuesday signed a order unsealing a civil complaint against Medical World Communications ("Medical World"), company Chairman, President and Chief Executive Officer John J. Hennessy, and Media/Communications Partners of Boston, 70 percent owner of Medical World and other defendants.

The complaint alleges violations of the False Claims Act and seeks triple the amount of the company's more than $2 million in fraud proceeds. The government also seeks penalties of between $5,000 and $10,000 for each one of "hundreds of false records and/or statements [used] to conceal, avoid or decrease their obligation to pay money to the Postal Service," according to Assistant U.S. Attorney Michael A. Chagares, chief of the U.S. Attorney's Office Civil Division.

The next step in the proceeding will be civil discovery, followed by an eventual jury trial, unless the case is settled with the government.

The lawsuit was originally filed under seal under the whistle blower provisions of the False Claims Act by Peter F. Sprague, a former Chief Operating Officer of Medical World. These whistle blower provisions permit private citizens to bring suit on behalf of the United States and share in any recovery obtained by the government.

The complaint states that if more than 50 percent of persons receiving a mailed periodical requested the periodical, then the periodical qualifies for a reduced postage rate.

The complaint alleges that the defendants knowingly misstated the rate of requesters on numerous publications from about 1994 until 2000, inflating the numbers reported to over 50 percent, to avoid paying higher postage rates.

The complaint further alleges that the fraud scheme continued despite Sprague's attempts to enlist his superiors to stop the fraud.

The alleged postage fraud scheme affected periodicals including Physical Therapy Products, Chiropractic Products, Plastic Surgery Products, Podiatric Products, Orthodontic Products, Compendium of Continuing Education in Dentistry, Cardiology Review, Resident and Staff Physician, Family Practice Re-certification, Surgical Rounds and Clinical Lab Products.

Christie credited Postal Inspectors with the U.S. Postal Inspection Service, under the supervision of Postal Inspector in Charge Martin Phanco, with investigating the case.

The case is being handled by Assistant U.S. Attorney Chagares, chief of the U.S. Attorney's Civil Division in Newark.

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Attorney for Sprague: Nicholas Harbist, Esq. Cherry Hill

Defense Counsel for Medical World: Samuel Moulthrop, Esq. Morristown