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Mahany Law Thu, 23 Feb 2017 16:30:14 +0000 en-US hourly 1 115803835 Military, Private Security & Private Military Contractor Whistleblowers Fri, 17 Feb 2017 15:16:19 +0000 As soldiers, veterans or protective service contractors, you pride ourselves on the services you provide to our nation. The government pays hundreds of billions of dollars each year to defense contractors and private security companies. While the VA struggles to provide services to our nation’s warriors, some defense contractors are living high on the hog. […]

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As soldiers, veterans or protective service contractors, you pride ourselves on the services you provide to our nation. The government pays hundreds of billions of dollars each year to defense contractors and private security companies. While the VA struggles to provide services to our nation’s warriors, some defense contractors are living high on the hog. They are also defrauding the government, taxpayers and sometimes their own workers.

No matter what your personal politics, we can all agree that defense contractor fraud does nothing to help our service member and contracted security personnel clients. If anything, their fraud puts our nation and personnel at risk. Kevlar body armor that won’t stop bullets? Hiring poorly trained and under-equipped security officers to defend overseas military facilities?

Our firm has a rich history of successfully representing whistleblowers. Whistleblowers can be found in many industries. Healthcare, banking and mortgage industry, etc. This post is directed to private security and especially private military contractor whistleblowers.

Why would anyone become a whistleblower? For most folks, it simply is the right thing to do. Those that defend our freedom have a great sense of right and wrong. They know fraud when they see it.

If that isn’t enough of a reason, a Civil War era anti-fraud law allows whistleblowers with inside information about fraud to earn cash awards. The information must relate to private contractors or vendors that are misusing government funds. Generally, only the first to report is eligible for an award although there are a few exceptions.

The law that pays whistleblowers is called the False Claims Act and it pays between 15% and 30% of whatever the government collects from the wrongdoers. With triple damage provisions and big statutory penalties, the awards can quickly grow quite large. In the last 5 years, we have collected and turned over more than $100,000,000.00 to our whistleblower clients.

What types of things might be eligible for an award?

  • the private pharmacy that overcharges the government for prescriptions that are covered by Tricare
  • the private military contractor that bills the State Department for 1000 hours of service when the people assigned the contract only worked 500 hours
  • the defense contractor that sells equipment or goods to the military knowing those goods are defective or do not perform as required
  • the private company that wrongfully represents itself as being owned by a combat disabled veteran simply to secure a VA set aside contract.

These actions are illegal yet they happen daily.

The faces of our freedom fighters are changing. So is the way we fight wars. More and more protective services work is being assigned to private contractors. For example, embassy security is now becoming the province of private security vendors instead of the Marine Corps. Last year the State Department issued security contracts worth more than $20 billion to Aegis Defense Services, Chenega Patriot Group, GardaWorld Government Services, Sallyport Global Holdings, SOC, Sterling Operations and Triple Canopy. The numbers are staggering and so is the potential for fraud.

Current State Department Private Military Contracts

According to GovCon Wire, last year the U.S. State Department released billions of dollars of protective services contracts to a handful of companies. Those companies are:

Aegis Defense Services – $2.8 billion
Chenega Patriot Group – $3.5 billion
GardaWorld Government Services – $3.8 billion
Sallyport Global Holdings – $4.9 billion
SOC – $4.6 billion
Sterling Operations – $2.9 billion
Triple Canopy – $3.7 billion

Until these contracts were authorized, the State Department’s contracts were issued through a 2010 program called Worldwide Protective Services. The vendors back then were:

Aegis Defense Services, LLC

DynCorp International

EOD Technology, Inc.

Global Integrated Security (USA), Inc.

International Development Solutions

Torres International

Triple Canopy, Inc.

Let’s look at some of these companies.

Aegis Defense Services

Aegis Defense Services LLC received government contracts to provide services to the U.S. embassy in Kabul, Afghanistan and elsewhere. In 2013, a group of Aegis guards sued the company claiming they were forced to work 18 hour shifts. Guard Jason Boatright filed the lawsuit claiming that guards were contracted to work 12 hour shifts but often forced to work longer.

While working long hours in combat operations is sometimes unavoidable, these officers were assigned to embassy security tasks and were required to be constantly alert and vigilant.

While some folks might think that the 18 hour shifts were not particularly egregious, Boatright said that the company also fudged it bills to the government. He says the company would promote some of the protective services guards yet fail to pay them more. That didn’t stop the company from billing the government at higher rates, however.

According to his complaint, “Aegis has been able to bill [the State Department] at a higher rate for employees’ work under more highly paid positions than it could have if the employees filled the contracted-for positions,” the complaint said.

One guard told the Project on Government Oversight (POGO), “[I]f we ever got seriously hit [by terrorists], there is no doubt in my mind the guard force here would not be able to handle it, and mass casualties and mayhem would ensue.” That guard claimed inadequate training and an overextended guard force.

According to POGO, this guard wasn’t alone. In July 2012, 40 Aegis Defense Services protective services workers assigned to the embassy’s Emergency Response Team gave no confidence vote to three of their leaders, saying that they suffered from “tactical incompetence” and “a dangerous lack of understanding of the operational environment.”

Aegis’ predecessor was ArmorGroup North America (AGNA), a division of Wackenhut. Yet another expose suggested a series of problems including overworked guards and low morale with that private military contractor.

After our embassy in Benghazi was attacked, the State Department’s Inspector General did an audit of the security at Kabul. Its findings were not surprising. Billing errors, overbilling, lack of training records… In one finding, the report said 14 of Aegis’ Explosive Detection Dog handlers may not have received proper training.

Is this the guards fault? No. The responsibility lies squarely with the company.

DynCorp International is another American private military contractor. Based in McLean, Virginia, the company has over 16,000 employees. One of its contracts was issued by the State Department and required the company to train Iraqi police forces.

In July of 2016, the Justice Department filed a False Claims Act whistleblower complaint against DynCorp International.  According to the government’s complaint, DynCorp knowingly allowed one of its main subcontractors to charge “excessive and unsubstantiated rates for hotel lodging, translator, security guard and driving services and overhead expenses”, and included these charges in the claims it submitted under the contract to the State Department.  Prosecutors also alleged that DynCorp added its own markup to its subcontractor’s excessive charges, thereby further inflating the claims it submitted to the government.

In a press statement after the lawsuit was filed, DynCorp’s CFO claimed its prices were reasonable and “comparable to other prices that folks were charging on the ground, at that time.”

We are a bit skeptical of that argument, especially since we believe that many of the other companies were overcharging!

Prior to the Iraqi police training scandal, DynCorp was embroiled in allegations that it overbilled the Defense Department for training pilots to fly drug interdiction missions in Afghanistan. The private military contractor was acting as a subcontractor for Northrup Grumman. The issues came to a head after a DOD Inspector General report noted serious concerns on how DynCorp billed over $100 million under that contract.

Triple Canopy

Triple Canopy, Inc is an American based private military contractor that provides protective services to the military, government and corporate clients. Based in Virginia, the company has approximately 5,500 employees.

Triple Canopy was hired by the Department of Defense in 2009 to provide security to the Al Asad Airbase. The base was the second largest in Iraq and home to thousands of armed forces personnel. In 2011, the company was sued by a whistleblower under the False Claims Act. In 2012, the government intervened and took over the prosecution of the case.

In its complaint, prosecutors said that Triple Canopy was required to hire trained marksmen to provide protective services for the base. They say that the company didn’t hire guards. Instead they hired dozens of people from Uganda, most of whom couldn’t shoot straight.

The complaint says that despite that most of these guards could not qualify – even after repeated training attempts – the company continued to “bill the government the full price for each and every one of its unqualified security guards.”

The complaint was originally filed by a former Triple Canopy employee who grew disgusted by the fraud he observed.

While our brave troops slept at night, the government said poorly trained and unqualified guards were standing watch over the base’s perimeter.

Worse, the complaint also says that the company inflated the number of guards on duty and the hours they worked.

One commentator claims to have been at the US embassy in 2004 when security was turned over to the State Department. He told POGO, “Triple Canopy became the new private military contractor / vendor for security.  He said the new security people were “ex-military from Latin America. They had no clue, didn’t speak English, and were nowhere as observant or disciplined as the Gurkhas.”

Chenega Patriot Group (Chenega Technology Services Corp)

It’s hard to accuse Chenega of being guilty of fraud. Despite being a private military contractor on paper, the company subcontracted all its work.

After 9/11, the Pentagon hired thousands of private military contractor security personnel. These guards were hired to replace military police officers. As America geared up for war, soldiers were pulled from the States and readied for combat operations in the mideast.

The Defense Department sought bids to backfill the loss of soldiers and provide security services to 40 military installations. Wackenhut expected to be the successful bidder but lost. Actually, no one won. Instead the Pentagon issued two no bid contracts worth almost $500 million dollars. The recipients of those contracts were two little known Native Alaska Corporations, including Chenega. The contract called for 4,385 private security guards.

Did Chenega hire thousands of Native Alaskans to fill the contracts? Actually no. They and the other Alaskan Native Corporation simply subcontracted out the work to other companies including Wackenhut. The Washington Post would later warn that Chenega was not following the rules on contracting and charging far more than other (and we think better qualified) vendors.

Our research shows that Alaska Native Corporations resulted in few jobs for their constituents. Rather the jobs were contracted away, often to companies that underpaid their workers and cut corners. Wackenhut, a British company, has been accused of providing substandard security at critical US facilities.

Need an example? Investigators from the Project for Government Oversight were able to drive up to a building at the Oak Ridge National Laboratories in Tennessee. Oak Ridge is where we make nuclear weapons. The investigators say they “easily parked in front of the building which is “protected” by a single chain link fence, walked around for about 15 minutes, and were leaving before guards finally approached them and escorted them from the area.” The building they are describing is one that contains hundreds of cans of enriched uranium 233!

POGO also claims that Wackenhut and the Oak Ridge nuclear facility miserably failed a simulated security breach exercise.

Sallyport Global Holdings

Sallyport Global Holdings is one of the new State Department contract recipients. Its current contract could be worth $4.9 billion. The company is a veteran private military contractor, however.

After the U.S invaded Iraq, one of the biggest private military contractors was a company called Custer Battles. Their life on the battlefield was cut short after being accused of stealing from US government financed Iraqi reconstruction efforts. The company and some of its principals were cut off from further government work while the investigation was proceeding. (More on them below.) One of the principals facing suspension was Joe Morris.

An AP writer says Morris was accused of submitting fake invoices to the government while at Custer Battles.

Did that stop Morris from working in the industry? No. The AP writer, Deborah Hastings, says he simply went to work for another private military contractor, Sallyport.

(We note that on a subsequent challenge to the 2016 contract, the General Accounting Office released prior “technical evaluation panel” ratings for the bidders. Sallyport and Triple Canopy received “substantial confidence” ratings while Aegis was “satisfactory” and GardaWorld was redacted! Torres received a “no confidence” rating.)

Custer Battles, LLC

Custer Battles was an early private military contractor. It won one of the first contracts after the U.S. invaded Iraq. Although the company was a start up with little experience, its leaders were decorated military veterans. Despite the pedigree of its leadership team, the company soon suffered serious setbacks.

Custer Battles received widespread media attention after one of its security convoys allegedly shot at unarmed civilians in a minivan. The company vigorously denied those charges. No one was killed or prosecuted.

Later the company would be accused of massive billing fraud and sued by two former employees who filed a False Claims Act whistleblower lawsuit.

Blackwater Worldwide

Blackwater was one of the most well known private security contractors. Founded by former Navy Seal Erik Prince in 1997, the company is today known as Academi. It achieved its notoriety after members of a Blackwater security convoy shot and killed 17 Iraqi civilians in Nisour Square, Baghdad. Four of its guards were later convicted in a Washington DC federal court and sentenced to terms of 30 years to life. The four men maintain their innocence despite the convictions. More on that below.

The story that is not often told is the pending False Claims Act whistleblower lawsuit against Blackwater. The suit was brought by two former Blackwater security specialists with deployment in Afghanistan and Iraq.

Their lawsuit alleges that Blackwater defrauded the United States from June 2009 through May 2011 “by repeatedly billing the U.S. State Department for (a) contractors’ services in positions that they did not hold, in order to avoid contractual penalties for inadequate staffing; and (b) for the worthless services of contractors who had not passed weapons qualifications, who had failed a required drug test or were under the influence of alcohol, or whose biographies had been falsified.” Their suit also claims that Blackwater defrauded the government by billing the State Department for personnel gear that they did not actually issue.

In one example, the men say that the company billed an office worker as a “defensive marksman.” In another example, the men say that the company would warn employees of upcoming drug tests.

The whistleblower case against Blackwater is still pending.

The Need for Private Military Contractor Whistleblowers

This post isn’t about the politics of using private contractors instead of soldiers in war zones. In fact, we believe there is a place for contractors. Any military unit or private military contractor is liable to have a few bad actors. Our complaint isn’t with the brave security specialists on the front lines both in the US and abroad.

The Blackwater – Nisour Square incident became the focal point of the political focal point for the discussion on whether we should use contractors and how they should be held accountable in the event of civilian casualties. We leave those decisions to those in Washington.

A properly staffed, trained and equipped private military contractor offers flexibility to our military and more experienced boots on the ground. Using contractors frees up military assets for more important deployment. Whatever one’s feelings on the use of these contractors, the men and women who fill the guard and security specialist positions put their lives on the line every day.

Our issue isn’t political. It’s fraud. Private military contractor vendors have a history of defrauding the government (and often shortchanging their workforce.) As a former law enforcement officer, I have several friends who went to work for these companies. They were well trained but tell stories of many companies that were cutting corners.

False Claims Act – Cash Awards for Whistleblowers

Passed in 1863 during the Civil War, the False Claims Act empowers ordinary people to do extraordinary things. During the Civil War, unscrupulous contractors would provision the Union Army with rancid food, moth invested blankets and wagons that would quickly lose their wheels. Today we have weapons sights that don’t perform as needed and body armor that won’t stop bullets.

There was no such thing as a private military contractor during the Civil War. Had the Army contracted for services then, we probably would have similar schemes to the ones we see today.

Common Forms of Private Military Contractor Fraud

Common forms of private military contractor fraud today include:

  • Billing for services not provided
  • Overbilling on hours
  • Understaffing contracts
  • Overworking guards to the point of fatigue
  • Billing for a higher level of service than provided (Billing the officer worker as a combat team leader.)
  • Billing for guards / security specialists that are not qualified
  • False weapons certification
  • Misuse of government property
  • Billing Ugandan farmers as trained marksmen (our personal favorite)

Under the False Claims Act, if you have inside knowledge of these frauds, you may be eligible for an award. The Act pays between 15% and 30% of whatever the government collects from the wrongdoers. Because the law allows triple damages and statutory penalties of over $20,000 per false invoice, the penalties can quickly mount.

We have met several security specialists working for these companies. Most are experienced law enforcement and ex-military. Whether working for Uncle Sam or a private contractor, our brothers and sisters in arms tend to be highly patriotic with a strong sense of right and wrong. Simply doing what they do makes them heroes. Standing up to corrupt contracting fraud makes them truly standout.

While some vendors fail to properly train and equip their guards and while the VA struggles to provide services to our nation’s warriors, some defense contractors are living high on the hog. We have no problem with a private military contractor seeking to make a profit. Putting profits before people and committing fraud is simply wrong, however.

Because of the False Claims Act, you can do something about fraud and greed and earn a significant award.

When it comes to inadequate training and equipment or understaffing, your information may help save a life.

Interested in learning more? Call us. The consultation is without charge or obligation. It is also protected by the attorney – client privilege and kept confidential. We can help you decide if you have a case and what your case may be worth.

In the military or government service but still have information about government contractor fraud? Call us. In many cases your government service does not preclude you from being earning a whistleblower award.

For more information, contact attorney Brian Mahany at *protected email* or by telephone at (414) 704-6731 (direct).

MahanyLaw – Proudly representing Private Military Contractor Whistleblowers

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Venezuela Public Corruption and Fraud: More Whistleblowers Needed Tue, 14 Feb 2017 14:41:20 +0000 Hugo Chavez, former Venezuelan strongman, rose to power after the public became fed up with decades of corruption. Instead of improving things, many say the public corruption got worse. Chavez’ life was cut short by cancer. He died in 2012. Prior to his death, however, Chavez radically changed how business operates in Venezuela. His actions, […]

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Hugo Chavez, former Venezuelan strongman, rose to power after the public became fed up with decades of corruption. Instead of improving things, many say the public corruption got worse.

Chavez’ life was cut short by cancer. He died in 2012. Prior to his death, however, Chavez radically changed how business operates in Venezuela. His actions, whether well intended or not, resulted in widespread public corruption and fraud.

This year his successor, President Nicolas Maduro, passed a sweeping anti-corruption reform package but public corruption and fraud are now entrenched within Venezuelan government. In fact, things are so bad that rates the country as the 15th most corrupt in the world. In the Americas, only Haiti has a worse ranking and most companies steer clear of Haiti unless they absolutely must do business there. (The Economist magazine put Venezuela as the 8th worst and even below Haiti and Zimbabwe!)

Overview of Public Corruption in Venezuela

Chavez was the head of the PSUV, the Socialist Party of Venezuela. Under his watch, many industry sectors were nationalized. Oil, electricity, communications, even much of the food industry, was largely expropriated by the government. Suddenly there were tens of thousands of additional government officials. There can’t be “public bribery” without public officials and Chavez created legions of new officials.

The Venezuelan oil giant, PDVSA, is probably the most scandal rocked public company in the country. And it does business with thousands of contractors, vendors and licensees. (Some estimates say that PDVSA has lost $11 billion to fraud.)

Adding to the problem are the country’s currency controls. The local currency doesn’t buy much and taking money out of the country is illegal. Of course, a ready black market opened to smooth the way for corrupt officials who want to get their money out of Venezuela.

The country has also become much more violent. Kidnappings and homicides are off the charts. When Chavez took power the murder rate was less than 20 per 100,000 people. Now it hovers around 100!

Business Between a Rock and a Hard Place

No legitimate business wants to pay bribes and offer kickbacks but doing business in Venezuela without offering bribes can be difficult. Fail to pay off a key official and you could find your business closed or permits denied. Many would-be whistleblowers are afraid of reprisals and physical violence.

With so many public officials, rampant inflation, shortages of essential goods, currency controls and crime, President Maduro has his work cut out. Meanwhile, the country’s public corruption and fraud problems are virtually unchecked.

The Foreign Corrupt Practices Act

The US Congress passed the Foreign Corrupt Practices Act (FCPA) to help stop public corruption and fraud worldwide. Any payment or item of value to a government official in exchange for a business benefit is illegal. Violations are both criminal and civil. We aren’t the only country with foreign corruption measures, although the United States is one of the most aggressive.

Bribe a Venezuelan official, and you could go to jail in the United States.

How is that possible? The U.S. law extends to any conduct which may have taken place in the United States or involves American companies.

That means that a bribe that is paid to an official in Venezuela can be prosecuted here if the wire was sent through a U.S. correspondent bank or an email in furtherance of the scheme was sent from the U.S.

If a U.S. company hires a consultant to pay the bribe, the matter can also be prosecuted here even if all the dirty work took place on foreign soil.

And both foreign and domestic companies are subject to the U.S. law if they sell stock or ADR’s on an American stock exchange.

The FCPA has a myriad of very complex jurisdictional rules. For purposes of this post, remember that Congress drafted the law very broadly with an eye to reaching as many bribery schemes as possible.

US Anti Retaliation Protections for Foreign FCPA Whistleblowers

With Venezuela being such a dangerous place, why would any whistleblower come forward? Good question!

The FCPA is jointly enforced by the American Securities and Exchange Commission (SEC) and the Department of Justice. For whistleblowers in the U.S., the SEC offers potent anti-retaliation tools and will frequently enter a case on its own to protect a whistleblower.

The best protection, however, may be your anonymity. The SEC has a long and successful history of protecting the identities of its whistleblowers.

Whistleblower Awards for Public Corruption and Fraud

Most whistleblowers are motivated by the knowledge that they are doing the right thing. Knowing that it is often hard to stand up to one’s employer, however, the SEC Whistleblower Program allows the government to pay an award of between 10% and 30% of whatever the government collects from wrongdoers. If the government collects $10 million from the wrongdoer, the whistleblower can receive between $1 million and $3 million in U.S. dollars.

Average fines and penalties in FCPA cases have been in the millions of dollars meaning the potential awards are also huge.

Collecting an Award under the FCPA and SEC Whistleblower Program

To qualify for an award, one first must possess information about bribery of a foreign official. In foreign countries, it is not unusual to have doctors and hospitals being employed by the government. That makes them “foreign officials” within the definition of the law. In Venezuela, many industry officials are considered public officials because the companies are owned by the state,

The whistleblower should also be an original source of that information. That means hearsay or “a friend of a friend said…” type information won’t work.

Not a U.S. citizen? Don’t worry. SEC FCPA whistleblower awards are available regardless of residency, citizenship or resident alien status.

Not All Bribes Are Monetary

Bigger companies are smart enough to know that paying kickbacks or bribes by wire transfer, check can leave a messy trail. We have all watched movies where the criminal wants money wired to his secret Swiss bank account. That works in movies but wires leave a trail and large cash withdrawals trigger suspicious activity reports in the U.S.

For these reasons, companies often use a third party consultant or intermediary to pay the bribe or kickback. That “consultant” has no real duties, of course, but auditors don’t necessarily know that. They see money being paid to a consultant, not a bribe to a foreign official.

Another way of concealing public corruption and fraud is by making payment with services and favors. A trip to a Hawaii could be a legitimate business expense or could be meant as a payoff to a foreign official who okayed a building permit.

In one recent case, a U.S. company gave paid internships and cushy jobs to the adult kids of foreign officials. If the kids are qualified, it might not be illegal. Often, however, the jobs are simply no show, no responsibility positions with ridiculous salaries.

Active Foreign Bribery Investigation – PDVSA

Petróleos de Venezuela, S.A. (PDVSA) is the Venezuelan state-owned oil and natural gas company. With over $100 billion in revenues, it spends a tremendous amount of money and controls millions of barrels of oil.

The resources and energy sectors are hotbeds of public corruption and fraud activity and PDVSA is no exception. We believe that dozens of companies have paid or offered bribes to managers and others at PDVSA. Because the company is publicly owned, any such bribery attempt is probably an FCPA violation. (Meaning the possibility of an SEC whistleblower award).

Already, prosecutors in Texas and Washington DC have indicted 8 people and companies for public corruption connected to PDVSA.

Last year, the Huffington Post did an investigative journalism piece on Unaoil. Although not a Venezuelan company, certain parallels can be made. According to the article, Unaoil acted as a third party to help big American companies such as Halliburton, Honeywell, KBR and FMC Technologies; Korean manufacturers Samsung and Hyundai; U.K.-based Rolls-Royce; and Germany-based Man Turbo win contracts. Companies like Halliburton and KBR have been investigated outside of Unaoil for other FCPA foreign bribery schemes.

Could all these companies also be paying bribes to PDVSA? Who knows?

From Venezuela to Brazil

A recent case involving Brazilian oil producer Petrobas had two foreign companies facing charges in the U.S. for their role in a FCPA scheme. Brazilian construction firm Odebrecht SA and petrochemical company Braskem SA admitted to U.S. Foreign Corrupt Practices Act charges. The charges were part of a $3 billion deal resolving a sweeping corruption probe of the state owned oil company.

In our experience, companies that pay bribes in one country often do it in others. As noted above, the oil and natural resources industries seem especially prone to public corruption and fraud.

Active Public Corruption Investigation – Ferrominera

C.V.G. Ferrominera Orinoco C.A. is the Venezuelan state owned iron ore mining company. An investigation started by President Maduro suggested that over $1.2 billion of iron ore was sold at bargain basement prices in return for kickbacks. According to the Economist, the government admitted that there was more corruption than had even been made public.

How much corruption? We may never know. The special prosecutor sent to investigate the scandal was himself arrested after allegedly blackmailing the very managers he was sent to investigate.

Ferrominera exports much of its ore to the U.S. and buys much of its mining equipment from U.S. suppliers.

Corruption Hurts Venezuelans and the Business Community

Legitimate companies can’t compete with companies that pay illegal bribes and kickbacks. These dishonest companies get a competitive advantage that other companies don’t. The goal of the FCPA is to level the playing field so that honest companies have a chance to create jobs and grow the economy.

It isn’t just the business community that suffers from public corruption and fraud, however. In the final analysis, everyone but the wrongdoers suffer. Goods and services cost more because so much money is lost to fraud.

In the case of Venezuela, things are so bad that grocery store shelves are often bare. A Congressional commission says that $70 billion is missing from public companies including PDVSA. The Wall Street Journal says that many public hospitals are going without medicine. In fact, the infant mortality rate in Venezuela is now worse than war ravaged Syria!

US Lawmakers Call for Crackdown on Venezuelan Foreign Bribery and Corruption

The U.S. and Venezuela have not exchanged ambassadors since 2010. Relations between the two countries remain tense. This month a bipartisan group of 34 lawmakers have called on President Trump to sanction those who offer, solicit or accept bribes.

Why? The 34 Congressmen and women say the country is responsible for human rights abuses and that corruption is spiraling out of control. There is also a suspected link between the country’s new vice president and both drug cartels and terror groups.

The lawmakers wrote to Trump asking that he take immediate action. Their letter said, “Decisive, principled action in response to unfolding developments in Venezuela as one of the first foreign policy actions of your administration would send a powerful message to the Maduro regime and the Venezuelan people.” The letter was authored by Rep. Ileana Ros-Lehtinen (R-Florida), the former chair of the house Committee on Foreign Affairs and Senator Robert Menendez (D-New Jersey), the ranking member of the foreign relations subcommittee that oversees Latin American affairs. (Ironically, Menendez is himself under indictment. Unfortunately, corruption doesn’t recognize lines drawn on a map and can be found everywhere.)

Call for Whistleblowers

Venezuela urgently needs whistleblowers. Never has the need been greater. American companies that pay bribes or offer kickbacks are only making the problem worse. While the corrupt public officials get fatter, some folks are going without food.

If you are a Venezuelan government official with information about bribes or corruption, contact us. We can help you collect an award and remain anonymous.

If you work for a foreign or American company actively bribing or that recently bribed Venezuelan officials or engaged in other types of illegal influence peddling, chances are you may also be eligible for a whistleblower award.

It doesn’t matter if you are in the U.S. Venezuela or elsewhere. Foreign bribery is illegal in most countries. Unlike most other anti-corruption laws, however, the U.S. SEC Whistleblower Program offers cash awards and anonymity.

MahanyLaw – America’s FCPA Foreign Bribery Whistleblower Lawyers

The FCPA whistleblower lawyers at MahanyLaw have helped our whistleblower clients collect over $100 million in awards. Unlike many other law firms who handle whistleblower cases as an afterthought, we concentrate in these cases. It is what drives us each day.

There will always be corruption in the world. But with the right legal team at your side, you can help level the playing field and achieve justice. That is why we have teamed up with former SEC enforcement lawyers in all our FCPA cases.

Our founder, Brian Mahany, is a former prosecutor and law enforcement officer. We bring together decades of unique experience you won’t find at any other law firm.

For a confidential consultation, contact attorney Brian Mahany at *protected email* or by phone at US 414-704-6731. Callers are reminded to never call from a work phone, work computer or using a work email address.

English not your primary language? We have Spanish speakers available.

[A note on the companies mentioned in this post. Media sources have identified Halliburton, KBR, FMC Technologies, PDVSA, C.V.G. Ferrominera Orinoco C.A, Unaoil, Petrobas, Honeywell, Samsung, Hyundai Man Turbo and Rolls Royce as having links to Foreign Corrupt Practices Act violations, public corruption or using consultants to secure contracts. We quoted or relied on these media sources in producing this post. All companies are innocent until and unless charged and convicted in a court.]

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Whistleblower Awards, CFPB & Loan Officer Compensation Sat, 04 Feb 2017 18:02:15 +0000 After the financial meltdown in 2007 and 2008, Congress began carefully scrutinizing many banking practices. Loan officer compensation schemes were identified as one of the contributing factors to the crisis that gripped he nation. Subsequent legislative fixes included provisions in the SAFE Act, Dodd Frank Wall Street Reform and Consumer Protection Act and the Truth […]

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After the financial meltdown in 2007 and 2008, Congress began carefully scrutinizing many banking practices. Loan officer compensation schemes were identified as one of the contributing factors to the crisis that gripped he nation. Subsequent legislative fixes included provisions in the SAFE Act, Dodd Frank Wall Street Reform and Consumer Protection Act and the Truth in Lending Act (TILA). Provisions on loan officer compensation were codified in Regulation Z.

Regulation Z regulates how loan originators and mortgage brokers can be compensated. The goal of the rule is to protect consumers.

This post examines the rules and identifies opportunities for whistleblowers to earn awards and stop illegal lender behavior. Mortgage industry professionals already familiar with the rules may wish to scroll down to the whistleblower awards subsection.

Loan Officer Compensation Rule Explained

The current Reg Z Loan Officer Compensation rule impacts how loan originators get paid in three ways:

  1. The rule prohibits a loan officer’s compensation from being based on the terms of the transaction.
  2. The rule also prohibits loan officers from being compensated by both the borrower and a third party (generally the lender).
  3. Compensation based on bonus or other formulas tied to the lender’s mortgage related profits may be allowed if not tied to specific transactions.

Although not part of the compensation rules, Regulation Z has many other components. These include certain licensing and training requirements. The rule also imposes specific restrictions and borrower protections in HELOC (home equity) loan transactions.

Definition of Loan Originator (Loan Officer)

We use the term “loan officer” but many folks instead use the term “loan originator”. They are interchangeable for purposes of this post.

According to the rule and CFPB, a loan originator includes “individuals and entities that perform loan origination activities for compensation, such as taking an application, offering credit terms, negotiating credit terms on behalf of a consumer, obtaining an extension of credit for a consumer, or referring a consumer to a loan originator or creditor.” Loan servicers, real estate brokers and salespeople and seller financers are excluded, although it is possible for an individual to where more than one hat in an organization or transaction.

What Loans Are Included?

Almost all residential loan transactions are covered by the rule. (Remember, however, that there are special rules for HELOCs.) The general rule is that if the loan is secured by a dwelling, the transaction is covered by the rule.

The exceptions are commercial transactions, open ended credit arrangements (e.g. HELOC), loans secured by more than 4 residential units and time shares.

What Activities Trigger the Rule?

You are probably a loan originator if you:

  • Take a loan application
  • Arrange a loan
  • “Assist” a borrower in applying for a loan
  • Advises a borrower of different products or financing options
  • Negotiates loan terms with the borrower
  • Extends credit
  • Advertises loan services to the public
  • Refers a borrower to another loan officer or lender

You are not a loan originator if you are:

  • A real estate broker that isn’t compensated by the lender or a loan originator
  • An employee that simply prefers clerical tasks for a lender or mortgage broker
  • Certain manufactured home retailers
  • Most low volume seller financers

What is “Compensation”?

Compensation includes commissions and much more. Bonus payments, salaries, financial incentives, trips, prizes, and merchandise are within the rule’s purview. Also included are stock options and third party payments (commission for selling title insurance).

Some clever mortgage companies have tried to circumvent the rule by calling a bonus an equity dividend. If the loan officer truly has an equity ownership in the company, he and she is entitled to dividends. Those ownership interests must be real and based on one’s capital contribution to the company.

Prohibition Against Compensation Based on Loan Terms

The prohibition against loan officer compensation based on loan terms is the heart of the rule. Congress and regulators want to prevent loan officers from steering borrowers into loans that pay the highest commission. What is good for the lender is often not in the borrower’s best interests.

The most common loan term that lenders previously used to determine commissions was interest rate. Often the higher the rate, the more excesses money that is available to pay commissions. There was a natural incentive to put borrowers in more costly loans simply to get more in commissions. If you are a loan officer, do you want a loan that pays you $500 or $2000?

Because the prohibition against loan term based compensation is the core of the rule, some examples are helpful.

Examples of Legal and Illegal Loan Originator Compensation Schemes

Sally Jones gets a $1000 bonus because she closed more than 5 loans in January with an interest rate of 6% or higher. ILLEGAL!

John Smith gets a $200 bonus because he sold title insurance directly to his borrower. The insurance was sold by an affiliate of the loan officer’s employer instead of a third party. ILLEGAL!

ABC Mortgage pays loan officers a 2% commission on loans with interest rates of 6% or more. Loans with a lower interest rate only carry a 1.5% commission. ILLEGAL!

Sally gets a $50 bonus if the loan she writes has a prepayment penalty clause. ILLEGAL!

The amount of the loan is not considered a term of the loan for purposes of the loan officer compensation rule. Let’s go back to our ABC Mortgage example. If ABC pays a 2% commission and Sally writes a $100,000 loan, she gets $2,000. A $200,000 lon would generate a $4000 commission. As long as the commission percentage remains fixed, the commission arrangement is probably okay.

Other LEGAL arrangements include:

  • Hourly wages based on the actual hours worked
  • Compensation based on the loan term performance of the officer’s loans
  • Pay based on the loan officer’s overall dollar volume

Consult the CFPB or Federal Reserve for More Details

The examples above barely scratch the surface. Lenders have become very creative in how they structure compensation and bonus programs. We can’t cover every scheme in a single blog post.  The takeaway is that labels are meaningless. If the compensation is anyway tied to a loan term, it is probably illegal.

For more technical questions, refer to the CFPB Loan Officer Compensation guide booklet.

Whistleblower Rewards for Loan Officer Compensation Violations

We often hear from mortgage industry insiders hoping to clean up dishonest and fraudulent lending practices. It’s hard for an honest loan originator to make a living when so many others are cutting corners and writing bad loans.

The federal False Claims Act allows people with “original source” inside information about fraud to collect an award. The information must relate to loans backed by the FHA, Fannie Mae, Freddie Mac or the VA. The amount of the award is based on the amount of money collected by the government from the wrongdoers. It’s like a commission based on the size of the penalty recovered. (Only the award checks are often in the millions of dollars.)

If you have information about an illegal loan officer compensation scheme or know of other fraud in the underwriting, origination or serving of residential loans, give us a call We have collected over $100,000,000.00 for our mortgage industry whistleblower clients. The next award could be yours.

RPM Mortgage Case

In June of 2015, the CFPB sued RPM Mortgage and its CEO Erwin Hirt for violating the Loan Originator Compensation Rule.

According to the government’s complaint, RPM Mortgage violated the compensation rule. They said RPM paid loan officers in part based on the terms of the loans they wrote. Their plan “gave loan officers a financial incentive to steer customers into higher-rate loans by paying them, in part, based on the interest rates of the loans they closed.” Loans with higher rates created more profits both for RPM and the individual loan officers.

To hide their illegal scheme, the CFPB says “RPM disguised this interest-rate-based compensation by funneling it through so-called employee-expense accounts. RPM deposited profits from an officer’s closed loans – profits that were a direct product of the loans’ interest rates – into the loan officer’s employee-expense account, and then used it to pay her bonuses and increased commissions. RPM also allowed loan officers to use their employee-expense accounts to offset interest-rate reductions or credits for RESPA-tolerance cures or appraisal costs they sometimes granted to avoid losing loans to a competitor.”

This scheme was remarkably similar to a whistleblower case filed against USA Mortgage in St. Louis. In that case, the lender allegedly created expense accounts called “ME accounts.”

History of RPM’s Loan Originator Compensation Scheme

Prior to 2011 and passage of the Loan Officer Compensation Rule, RPM simply allowed loan officers to share in the profits of each loan. Higher interest rate loans, of course, meant more money for RPM and the individual loan officers.

After passage of Regulation Z, RPM simply camouflaged their compensation plan. Under the new scheme, loan officers would get a standard (legal) commission. The company would then deposit an additional sum of money into a designated “employee expense account.” That deposit was – you guessed it – based on the loan terms.

The scheme was so blatant that employees with positive balances didn’t even have to use the money for expenses. Regulators say that loan officers could simply tap their “expense” balance to pay themselves a bonus. It shouldn’t come as a surprise that the bonus amounts “strongly correlated” to the balances in each employee’s expense account.

Court records suggest that although disguised, this scheme was too obvious. CFPB says that RPM soon stopped allowing loan officers to pay themselves bonuses out of their expense account balances. They next allowed the originator to cover the cost of individual commission rate resets. This allowed the originator to effectively get a raise on future loans.

Typically, a significant increase in a loan officer’s commission rate would render a loan unprofitable for RPM. If a loan officer’s commission exceeded the total revenue the loan generated on the secondary market, the transaction would result in an “underage”. This meant that RPM lost money on the deal. The commission resets did not cause RPM to lose money, however. Why?  Because any underage was covered by a withdrawal from the employee’s expense account.

CFPB Names CEO Erwin Hirt as a Defendant

Most fraud complaints against banks and lenders only name the company itself. That model is changing. Former Attorney General Loretta Lynch pushed a policy to also name the individual responsible for the alleged scheme. Although the Justice Department did not get involved in this case, many agencies have adopted a similar policy.

The CFPB says that Hirt is both the CEO and a significant owner of RPM. They say that he directly benefitted from the illegal loan officer compensation scheme. More importantly, they say he was the architect of the scheme.

RPM and Hirt Settle

The case against RPM Mortgage was settled the same day it was filed. It was a prenegotiated resolution.

According to the settlement, RPM and Hirt were allowed to settle without any findings of wrongdoing.

Under the terms of the settlement, both RPM and Hirt paid a civil penalty of $1 million. RPM Mortgage agreed to a permanent injunction preventing future violations of the loan officer compensation rules.

Both defendants also agreed to pay the CFPB $18 million to be used to fund restitution for borrowers negatively affected by their actions.

Stand Up Against Fraud (and Perhaps Earn an Award)

Loan officers, underwriters, quality control analysts and servicing reps have a front row seat on illegal mortgage and lending schemes. Millions of Americans lost their jobs, their homes or both because of Wall Street excesses. While we have no problem with companies making healthy profits, they should only be allowed to keep those profits if they play by the rules.

If a scheme impacts on federally backed residential mortgages, chances are good that there is a violation of the False Claims Act. Awards of up to 30% of whatever the government collects from the wrongdoers are available to those who step forward. Because they fight greed and corruption, whistleblowers are the new American heroes.

We aren’t afraid of big mortgage companies and their lawyers. In fact, we proudly represented the whistleblowers that helped the government hit Bank of America for $16.67 billion dollars. (The whistleblower awards in that case were over $150,000,000.) We can’t bring a case, however, without you. If you are interested in learning more, call us and visit our financial fraud whistleblower information page.

For a confidential consultation, contact attorney Brian Mahany at *protected email* or by phone at (414) 704-6731 (direct). We keep all inquiries in strict confidence.

MahanyLaw – Whistleblower Lawyers for the Mortgage Industry

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]]> 11221 American Advisors Group Fraud Post (Reverse Mortgage Fraud) Fri, 03 Feb 2017 05:30:57 +0000 On New Years day, we posted an extensive piece on Reverse Mortgage Fraud. In that post we listed three companies that were recently the target of Consumer Financial Protection Bureau (CFPB). Those companies are American Advisors Group, Reverse Mortgage Solutions and Aegean Financial. Aegean also goes by the name Jubilados Financial. Recently we teamed up […]

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On New Years day, we posted an extensive piece on Reverse Mortgage Fraud. In that post we listed three companies that were recently the target of Consumer Financial Protection Bureau (CFPB). Those companies are American Advisors Group, Reverse Mortgage Solutions and Aegean Financial. Aegean also goes by the name Jubilados Financial. Recently we teamed up with Consejo de Latinos Unidos to identify victims and investigate claims against these companies.

Reverse Mortgage Loans Explained

Reverse mortgages allow folks to pull the equity out of their home. Unlike a traditional home equity loan which must be paid back over a specified time period, in a reverse mortgage the homeowner gives up his or her equity in the home and receives regular monthly payments. They are a tool that allows senior citizens to supplement their income. Unfortunately, they are often misunderstood and subject to abusive schemes.

The recent reverse mortgage schemes typically target elderly homeowners. (Federally insured reverse mortgages, called a Home Equity Conversion Mortgage (HECM), are only available to those 62 or older.) The aggressive marketing tactics and false advertising surrounding some of the products have been sickening.

In December of 2016, the CFPB acted against the above three companies. This post details the allegations against American Advisors Group.

American Advisors (AAG) is the largest of the reverse mortgage lenders. Based in California, AAG operates in all but 49 states.

American Advisors Group Misleading Ad Campaign

AAG markets to prospective borrowers through TV ads, radio and print media. The company also does direct mailings. One of those mailings was billed as an “information kit.” The kit included a DVD featuring former U.S. Senator Fred Thompson. Other videos featured Peter Graves or Tom Selleck.

The CFPB says that American Advisors Group ad campaign was misleading. For example, one DVD script featured the following colloquy

Q. “Can I lose my home?”

A. “No you cannot lose your home.”

Another script said a reverse mortgage “allows seniors to convert the equity locked in their homes into tax free income without any monthly payments.”

A TV ad began with the statement, “Some people have told me reverse mortgages sound too good to be true, I mean you get cash out of your home, no monthly payments, and still own your home, there’s gotta be a catch…well there isn’t.”

Yet another ad suggested that reverse mortgages are a way of eliminating debt.

Federal Rules on Reverse Mortgage Disclosures and Ads

What the ads failed to clearly explain is that homeowners must continue to pay taxes and insurance payments in order to keep their home. The CFPB say the ads violate the “Mortgages Acts and Practices Advertising Rule. The rule is often referred to as Regulation N.

Mortgage lenders have a legal obligation to be truthful in all statements made to borrowers.

Regulation N requires mortgage company ads to:

  • Fully explain how reverse mortgages work;
  • Plainly state the interest charged for the loan including monthly payments;
  • Disclose the loan’s annual percentage rate (APR);
  • Indicate whether interest is simple or compounded;
  • Disclose any fees or costs to the consumer;
  • Explain how taxes and insurance will be collected;
  • Disclose of any prepayment penalties and fees;
  • Explain how the default process works and what could cause a default; and
  • Describe any restrictions or limitations on the borrower’s ability to modify the loan or refinance.

American Advisors Group CFPB Consent Order

In addition to paying a fine, the American Advisors Group also entered into a consent order. The order requires AAG’s ads comply with Regulation N. Specifically its advertisements cannot suggest:

  1. That a consumer will have “no payments” or “no monthly payments” if

he takes out a reverse mortgage;

  1. That a consumer with a reverse mortgage cannot lose his home;
  1. That a consumer with a reverse mortgage has the right to stay in the

home for the remainder of his life;

  1. That a consumer with a reverse mortgage is completely out of debt;
  1. That a reverse mortgage eliminates a consumer’s debt;
  1. That a reverse mortgage is a free government benefit or a loan from the

government, rather than a loan from a private company;

  1. That a homeowner has no ongoing financial obligations after obtaining

a reverse mortgage;

  1. That property taxes or insurance payments are not required with a

reverse mortgage;

  1. That there are no risks associated with a reverse mortgage; or
  1. Any other fact material to consumers concerning any consumer

financial product or service, such as: the total costs; any material

restrictions, limitations, or conditions; or any material aspect of its

performance, efficacy, nature, or central characteristics.

CFPB Warns Reverse Mortgage Industry

In announcing the consent order and settlement, CFPB Director Richard Cordray said, “These companies tricked consumers into believing they could not lose their homes with a reverse mortgage. All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.”

Abusive Practices and State Laws

In addition to Regulation N, the federal Dodd Frank law includes a prohibition against Unfair, Deceptive, or Abusive Acts or Practices (UDAAP). Many states have similar laws that impact reverse mortgages on properties within that state.

Under most of these rules, an abusive act or practice is one that an act that interferes with the ability of a consumer to understand a term or condition of a financial service product.

Illinois Lawsuit Targets American Advisors Group

In 2015, a 67-year-old African American woman claimed she was “deceived and unfairly induced” to obtain a $100,000 reverse mortgage. The woman claimed she signed up for a reverse mortgage after a door-to-door solicitor explained that she could obtain a loan which would not have to be paid back.

Although the people who came to the woman’s door did not work for AAG, the loan she received was underwritten by the company. The door-to-door solicitor claimed she was helping the elderly and “black people” make repairs to their homes. The scheme appeared very high pressure with the title company even sending a notary to the woman’s home to help close the deal.

If you think you know how the story ends, you are probably right. The same people who solicited the loan also promised to make the repairs. The repairs didn’t get made, the homeowner says she lost $115,000 in equity and received no money. Of course, she owes tens of thousands of dollars and interest continues to accrue on the loan.

Although the misrepresentations were not made by American Advisors, the homeowner claims that no one from the mortgage company ever explained the mortgage or how it works.

Despite our and CFPB’s concerns, the company has maintained a relatively favorable rating in on line reviews. At this point, our investigation is in our early stages. We hope to here from both homeowners and present / former AAG employees.

American Advisors Group and Whistleblower Awards

AAG is the largest lender presently writing reverse mortgages. (Wells Fargo has the most outstanding reverse mortgage loans but has not written any new loans in years.)

Many of the reverse mortgages written by AAG are HECM loans. That means are backed by the FHA. If American Advisors is violating Regulation N or misleading seniors, there may be whistleblower awards available for those with inside information about reverse mortgage scams.

The federal False Claims Act pays awards of between 15% and 30% of whatever the government collects. While the awards are a big draw, most whistleblowers come forward simply because they don’t like seeing fraud and corrupt greed. In this case, reverse mortgage schemes often have real victims. Victims who are frequently elderly and lacking in financial sophistication.

Whether a whistleblower case filed on behalf of an American Advisors Group employee or a class case filed on behalf of homeowners, we certainly want to hear from you. All inquiries are kept confidential.

For more information, contact attorney Anthony Dietz at *protected email* Whistleblowers (present or former employees) can contact attorney Brian Mahany as well (*protected email*).

MahanyLaw – America’ Whistleblower and Fraud Recovery Lawyers – “We Sue Banks

[Need information about Reverse Mortgage Solutions or Aegean Financial? Visit our reverse mortgage fraud page. Need more information on becoming a whistleblower? Visit our False Claims Act whistleblower information page.]

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Tenet Exec INDICTED (Tenet Healthcare Whistleblower Post) Thu, 02 Feb 2017 22:25:48 +0000 Tenet Healthcare is no stranger to fraud. It wasn’t that long ago that the for-profit hospital chain paid a record $514 million fine to the government. That case involved paying kickbacks for patient referrals. The patients in that case were pregnant, undocumented Hispanic women. Some thought the case ended when the company and its subsidiaries […]

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Tenet Healthcare is no stranger to fraud. It wasn’t that long ago that the for-profit hospital chain paid a record $514 million fine to the government. That case involved paying kickbacks for patient referrals. The patients in that case were pregnant, undocumented Hispanic women.

Some thought the case ended when the company and its subsidiaries paid the record fine. It didn’t. In January, the Justice Department indicted the Tenet Healthcare Senior VP of Operations, John Holland. This week Holland pleaded not guilty to four counts of fraud. He faces decades in prison if convicted of all counts.

The indictment goes well beyond the recent scheme involving the kickbacks. The Justice Department says that Tenet Healthcare had been ignoring a Corporate Integrity Agreement since 2006.

Indictment Against Holland

Holland has been charged with single counts of mail and healthcare fraud and two counts of Major Fraud Against the United States. In addition to the criminal charges, the government wants to seize and forfeit Holland’s property. He was released on a $3 million bond after his arraignment.

The charges all stem from a Corporate Integrity Agreement signed by Tenet in 2006. That is the same year that Holland became Tenet’s SVP in charge of operations in the southern United States.

The Agreement stemmed from an earlier case involving Tenet Healthcare and alleged violations of the federal Anti-Kickback Statute. In the 2006 case, not only was Tenet fined but they also entered into an agreement where they promised to “strengthen their policies” and insure there were no further violations of the Anti-Kickback Statute.

Senior managers were also required to attend annual compliance training.

Finally, the agreement required the company to self report any violations or questionable conduct.

Between 2007 and 2012, Holland certified to the government that the company complied with the agreement. Obviously, it wasn’t in compliance.

Mail Fraud Charge

The indictment says that Holland and others were part of a larger scheme to “unlawfully enrich themselves, Tenet, and the Tenet Hospitals by, among other things: (a) paying bribes and kickbacks in return for the referral of patients to the Tenet Hospitals’, and (b) falsely and fraudulently representing to HHS-OIG that Tenet was in compliance with its C1A when, in fact, Tenet was not in compliance with its CIA.” [HHS-OIG refers to the Inspector General of the Department of Health and Human Services.]

Instead of complying, the government says that Tenet Healthcare paid over $12 million in bribes in a scheme to gain patient referrals. They say that he actively worked with others to conceal their crimes from government review.

The scheme itself is thought to involve $400 million in fraudulent billing. Prosecutors claim, however, that the company received over $10 billion in federal monies between 2007 and 2012. Had the government known of the fraud, the company would have been ineligible for any of these payments.

Why mail fraud? The government charged mail fraud because the false certifications were allegedly sent by mail.

Health Care Fraud Charge

Much of the money that Tenet receives comes from Medicare and Medicaid. Under state and federal law, Medicare and Medicaid fraud is a crime. The government claims that Tenet Healthcare lied to the government for years by falsely claiming to comply with the 2006 Agreement.

Major Fraud Against the United States

The crime of Major Fraud Against the United States is rarely charged. It is used only when a government program has been defrauded of at least $1,000,000.00. The violations alleged relate to the annual compliance certifications they say were approved by Holland in 2010 and 2011.

As noted above, Holland has been released on $3 million bail. As part of his release conditions, he was forced to surrender his passport and is barred from working in the healthcare industry while his case is pending.

DOJ Issues Strong Statements About Tenet Healthcare and Holland

A Justice Department prepared statement removes any lingering doubt about how the new administration reacts to white collar crime. Acting Assistant Attorney General Kenneth Blanco said, “These charges underscore our continued commitment to holding both individuals and corporations accountable for their fraudulent conduct. We will follow the evidence where it takes us, including to the corporate executive ranks.”

The comment about “following leads” suggests that more indictments may be forthcoming. With Holland facing 50 years in prison, there is certainly an incentive for him to cooperate with prosecutors. (We imagine there are many nervous people today in Dallas, the headquarters of Tenet Healthcare.)

An FBI spokesperson said, “Medicaid patients have the right to seek healthcare without fearing that care is tainted by bribes and illegal kickbacks. Not only did patients suffer because of these alleged actions, but this kind of alleged abuse threatens to drive up the cost of healthcare for everyone.  The FBI is committed to ensuring that federal laws related to the healthcare industry are enforced, and this case is an example of that commitment.”

President Trump has asked the current FBI director to remain in command of the agency.

What This Case Means for Tenet Healthcare and Corporate Integrity Agreements

Prior to the election, then Attorney General Loretta Lynch announced a new policy of going after the folks responsible for corporate fraud. The so-called Yates Memo suggested that big corporations could no longer buy their way out of fraud schemes by simply paying a fine.

We have long advocated that the best way to stop fraud is to convict the senior executives behind the fraud. Did Wells Fargo and the other big banks learn after their $8 billion settlement in 2013? Probably not, Wells paid an additional $1.2 billion in penalties last year and Bank of America was soaked for $16.67 billion in 2014. (We served as one of lead relators’ counsel in that case.)

The only thing that gets the attention of the C-Suite Mafia is watching one of their own doing the “perp walk” on the evening news.

Whistleblower Awards and Tenet Healthcare

The $514 million fine last October resulted in an $84.4 million whistleblower award! A former Tenet Healthcare hospital CFO got the ball rolling when he filed a claim under the federal False Claims Act.

Passed in 1863, the False Claims Act allows ordinary people to file claims in the name of the U.S. government in Medicare and Medicaid fraud cases. (29 states have a similar law that pays even more money when state Medicaid dollars are abused.)

To claim an award, one needs inside information. Not only must the information be “inside” or non-public, the one claiming the award must be an original source of that information. If you work at Tenet or some other healthcare provider, chances are you qualify as an original source.

Assuming you qualify, you must generally be the first to file a lawsuit in federal court. These complaints are filed under seal meaning they remain secret while the government investigates.

Ultimately, the Justice Department can take over the case, ask that it be dismissed or allow the whistleblower’s own lawyers to prosecute. Depending on the facts, the award is 15% to 30% of whatever the government collects.

Tenet Healthcare Serial Medicare Fraud Offender?

Last year I was interviewed in connection with the $513.8 million Tenet settlement. My comments then were: “Tenet has to be one of the most despicable healthcare companies in the United States. The company has pled to numerous felonies, paid record fines and penalties and has entered into multiple corporate integrity agreements. Why are they still in business? It is time to shut them down and find buyers for their facilities.”

Nothing has changed since I uttered those words.

Why do we believe the company should be shut down?

It certainly isn’t because of the 100,000+ employees, almost all of whom are dedicated healthcare professionals. Tenet’s problems aren’t with the employees. Rather, we believe the problem is senior management. The decision to pay millions in kickbacks didn’t start with a nurse, doctor, lab tech or orderly. It came from management.

Let’s look at the many previous cases against Tenet Healthcare

Psychiatric Hospital Kickbacks and Healthcare Fraud

In 1994 Tenet was known as National Medical Enterprises. Even back then, the company was paying record fines for fraud and wrongdoing, however. That year the company paid $380 million in civil and criminal fines. The violations? Kickbacks!

That case involved tenet substance abuse clinics and hospitals keeping patients longer than necessary and providing unnecessary treatment. In addition to the fine, Tenet signed into the first of several corporate integrity agreements.

Unnecessary Heart Procedures

In 2003, Tenet broke another record. This time for the largest fine in a medical necessity fraud case. The government claimed that a Tenet Healthcare hospital performed more than 600 unnecessary invasive heart procedures. The fine for that violation was $54 million.

A year later in 2004, the company had to pay patients $395 million for those unnecessary procedure claims.

Upcoding, Overbilling and Illegal Kickbacks

Two years later, Tenet was back in the hot seat. In 2006, the company paid $900 million to settle a wide variety of Medicare fraud claims. These claims included “upcoding”, inflating costs, billing for services not provided and yes, kickbacks. In addition to the new record fines, the company entered into a second corporate integrity agreement.

It is that 2006 agreement that has landed John Holland in the dock.

Physician Kickback “Relocation Fee” Scheme

That same year, Tenet went to trial in a kickback case that resulted in a deadlocked jury and a mistrial. Rather than face another jury, the company paid $21 million to settle the case.

The 2006 criminal case involved allegations that Tenet Healthcare disguised illegal kickbacks as physician relocation fees. Prosecutors say that the payments were really payments made to reward doctors that admitted more patients.

Rehab Facility Ineligible Patients (Medicare Fraud)

In 2012, Tenet Healthcare agreed to pay $42 million in yet another Medicare fraud case. In that case, prosecutors say that the company was billing Medicare for inpatient stays at rehabilitation hospitals even though many patients didn’t qualify.

That case was one of the first to stem from a violation of an earlier corporate integrity agreement.

Physician Office Lease Kickbacks

Its alleged physician relocation payment scheme exposed, Tenet came up with yet another scheme. In 2014, the company paid $5 million to settle another False Claims Act whistleblower case. That suit alleged that the company disguised kickbacks as below market rate rentals.

It is common for physicians to rent space in hospitals or nearby medical office parks. That makes it easier for doctors to see their hospitalized patients. Instead of paying kickbacks to doctors who admitted more patients, Tenet allegedly concocted a scheme in which these physicians were given below market lease rates in facilities owned by the hospital.

Overcharged Spine Fracture Procedures

One year later and Tenet was again in trouble. In 2015, five Tenet owned hospitals paid $2.2 million to resolve a whistleblower suit claiming the hospital admitted patients that could have been treated on an outpatient basis. The case involved a simple spinal procedure that rarely requires an inpatient stay.

Whistleblowers and the Future Tenet Healthcare

The above summary highlights some of the larger Medicare fraud cases involving Tenet Healthcare. As we said earlier, our concern isn’t with the rank and file healthcare workers. If anything, they are victims too. In 2009, the company paid $85 million to settle wage theft claims related to unpaid overtime.

What amount of fraud and deception will trigger Tenet’s exclusion from participation in the Medicare program? After 2 decades of Medicare fraud and three corporate integrity agreements, it’s time for the company to clean up its act once and for all or be sold to new owners. No one will lose their jobs except the executives responsible for this mess.

We hope that the indictment of John Holland and the hint of more prosecutions to come finally gets Tenet’s attention. If not, we know that whistleblowers will continue to lead the charge.

As leading Medicare fraud whistleblower lawyers, we welcome hearing from other concerned present and former Tenet Healthcare workers. All inquiries are confidential. If there was ever a time to come forward, the time is now.

Uncle Sam is listening. We are listening.  Taxpayers and patients are demanding better.

For more information, contact attorney Brian Mahany at *protected email* or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept confidential. Even if you were once involved in wrongdoing, it is better to come forward now.  We can help and can also help protect workers against illegal whistleblower retaliation.

MahanyLaw – America’s Medicare Fraud Whistleblower Lawyers – We Sue Tenet!

[Note: The indictment against John Holland is not a finding a guilt. We also remind readers that in many of the prior Tenet Healthcare cases, the company was allowed to settle without a finding of guilt.]

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Big Pharma Wants Your Hearts, Minds and Wallets (Pharma Whistleblower) Fri, 27 Jan 2017 01:21:46 +0000 What do Donald Trump, Bernie Sanders and Bernie Sanders have in common? The answer? They all think that big pharmaceutical companies put profits before patients. Before the election, Hillary’s website had this to say about the pharmaceutical industry, “Her plan will demand a stop to excessive profiteering and marketing by denying tax breaks for direct-to-consumer […]

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What do Donald Trump, Bernie Sanders and Bernie Sanders have in common? The answer? They all think that big pharmaceutical companies put profits before patients.

Before the election, Hillary’s website had this to say about the pharmaceutical industry, “Her plan will demand a stop to excessive profiteering and marketing by denying tax breaks for direct-to-consumer advertising and demanding that drug companies invest in R&D in exchange for taxpayer support – rather than marketing or excessive profits. She will encourage competition to get more generics on the market and create a Federal backstop for when there are excessively high-priced drugs that face no competition.”

Bernie Sanders outlined a 6 point strategy to lower prescription drug prices. He also correctly noted that the United States has the highest drug prices in the world. The cost to fill a prescription is so high that nearly 1 in 5 adults didn’t get their prescriptions filled last year.

And President Trump? Just before his inauguration he claimed the industry is “getting away with murder.” According to Trump, “Pharma has a lot of lobbies, a lot of lobbyists and a lot of power. And there’s very little bidding on drugs. We’re the largest buyer of drugs in the world, and yet we don’t bid properly.”

So if everyone agrees that drug prices need to come down, will they?

Maybe not!

A report today suggests big pharma is spending $10’s of millions on an ad campaign to win our hearts and minds! Not only is the pharmaceutical industry raising a $100 million for its war chest, they want to spend millions to show us they are good guys.

The trade publication Endpoint News says much of pharma’s money will be spent on advertising the “exciting breakthroughs in science” made possible by the pharmaceutical industry and also the high costs necessary to bring a new drug to market.

Maybe so. We don’t deny either of those premises are true. But prices for the same drugs in Canada are often half of what they cost in the U.S. And why did companies such as Valeant and Mylan dramatically raise prices on certain critical drugs virtually overnight?

One poll says that only 9% of Americans believe that the industry puts patients first.  With a public approval rate that abysmal, we don’t think any amount of advertising will change the public’s mind.

We know that the industry will try to spend their way out of the things. A $100 million war chest seems like a huge amount to spend on a PR campaign. Remember, however, that the drug companies are making billions of dollars each year.

So, what can be done to hold the industry accountable?

First, make sure you let you let your elected representatives know exactly how you feel. Big pharma is one of the biggest donors to political campaigns. During this last campaign, the pharmaceutical industry donated an average of between $32,000 and $82,000 to every House and Senate member. That’s millions of dollars each year.

This year, the Republicans received more than the Democrats. But candidates from both sides are getting big checks. It’s no wonder why a resolution to lower drug prices failed in the Senate last week.

All the donations in the world are meaningless if your representative doesn’t get re-elected. That is why it is critical to let these folks know exactly how you feel. They may like the big check they get from the drug companies but they still need your vote.

Next, report wrongdoing. For that average consumer that is difficult but if you are one of the tens of thousands of people working in the industry or a healthcare provider, read on. You may be eligible for an award.

False Claims Act and Pharma Whistleblower Awards

The False Claims Act is a Civil War era anti-fraud law that is still on the books and more powerful than ever. Under the Act, whistleblowers with inside information about wrongdoing can earn a substantial cash award.

To qualify for a pharma whistleblower award, one should be the original source of information relating to misuse of federal or state funds and programs. A large percentage of prescriptions drugs are paid through Medicaid, Medicare, the VA or Tricare. That means tax dollars.

There are several fraudulent pharma schemes that may be eligible for an award. These include prescribing drugs for a use not approved by the FDA (off labeling), allowing contaminated or understrength products into the market (cGMP violations) and not giving the government the best prices (Medicaid). With average awards in pharma case exceeding $1 million, big whistleblower awards are possible.

We understand that pharmaceutical companies are entitled to make a profit. Some of the recent conduct by big pharma, however, is outrageous. If you have inside information about fraud or corrupt greed involving the pharma industry, call us.

Attorney Brian Mahany can be reached at *protected email* or by phone at (414) 704-6731 (direct). We welcome calls and questions! You can also visit our pharmaceutical fraud whistleblower page. All inquiries are protected by the attorney – client privilege and kept confidential.

MahanyLaw – Big Pharma Whistleblower Lawyers

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Anatomy of a Force Placed Insurance Scheme (California) Thu, 26 Jan 2017 01:54:13 +0000 If you are reading this post and don’t know what “force placed insurance” is, we are happy for you. Unfortunately, millions of Americans know the term all too well. When you finance the purchase of a home, your lender requires the home be insured. If your home is destroyed by a flood, fire or earthquake, […]

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If you are reading this post and don’t know what “force placed insurance” is, we are happy for you. Unfortunately, millions of Americans know the term all too well.

When you finance the purchase of a home, your lender requires the home be insured. If your home is destroyed by a flood, fire or earthquake, the bank wants to be sure it will still get paid. We have no problem with that. A few unscrupulous lenders and insurance companies, however, have been figured out a way to profit from struggling homeowners.

Read the fine print of your mortgage. We are 99.9% sure you will find a provision that says if you miss an insurance payment and your insurance lapses, the bank can purchase replacement insurance for you. Since many borrowers escrow their property taxes and insurance, the bank collects these monies each month as part of your mortgage payment. That means missing a mortgage payment can also cause your insurance to lapse.
Again, no problem. Simply because you can’t pay doesn’t mean the bank can’t be protected. When the borrower allows insurance to lapse or can’t make payments, the bank gains the opportunity to insure the property. If done right, that action can protect both the bank and the borrower.

The banks might like you to believe that they are white knights but just ask anyone who has force placed insurance. Their stories are often best described as nightmares.

We routinely here of premiums skyrocketing by 500% or more, of coverage that only benefits the bank and of policies that didn’t even need to be purchased.

When a borrower defaults, it’s usually because of financial problems. Perhaps the homeowner got ill or lost her job. Often, the situation is just temporary. Instead of helping struggling homeowners, some banks like to kick people when they are down. To take advantage of homeowners who are most vulnerable.

What should come as no shock to anyone, some banks were even getting kickbacks from the insurance companies. Everyone making money off the struggling homeowner. Often, the homeowner gets so overwhelmed with force placed insurance charges, default interest, fees and penalties that they can never dig out. For them, the American dream often ends at a sheriff’s sale when their dream is auctioned away.

One would think that banks would want to keep homeowners in their home. That may sound logical but things don’t work that way.

In the typical home mortgage, the bank makes it money from commissions. You purchase a home; they provide a mortgage. Once the closing takes place, the loan is packaged into a security and sold. The bank makes it money from a commission on the sale of your loan.

The banks often retain the rights to service the loans they write giving them a second source of income. Even though the loan may now be owned by a Residential Mortgage Backed Security trust, borrowers still send payments to the bank.

When things are going smoothly, the bank doesn’t make much money. Their only duty is to process your payment and make sure the taxes and insurance get paid. In a default, they have more to do and hence charge more money.

When loans were not insured by the FHA or Fannie Mae or Freddie Mac and when banks kept the loans they wrote, the banks had an incentive to keep you in your home. They had an incentive to help you through rough patches.

No more. Now, they view defaults as a way to make money.

In this post, we will examine a case brought by homeowners in California. Depending on the bank or company servicing your loan and depending on where you are, the story line may be a bit different. We are beginning with this story detailing how homeowners fought back and won in California.

The heroine of our story is Michelle Wahl of Santa Cruz. Located in the high tech area of California, Santa Cruz has some of the most expensive housing in the nation. Ms. Wahl’s home was in Santa Cruz County.

In January 2006, Wahl missed a premium payment on her insurance. When she missed her payment on January 12th, her insurance company (Farmers) mailed her a notice on January 13th. A copy of the notice was sent to her lender / servicer, EMC Mortgage Corporation.

EMC immediately secured an insurance policy on the home. This so-called force placed insurance was issued by American Specialty Insurance Company (ASIC). Insurance giant Assurant owns ASIC and dominates the force placed insurance market.

After the missed premium payment and issuance of a force placed insurance policy, ASIC wrote to Wahl to tell her of the new policy. The letter said,

“We have incurred expenses in placing this insurance binder and policy on your structure. Such expenses are recoverable by us as stated on your loan documents.

“This policy only insurers the structure. It does not protect any personal property nor does it protect you from liability against accidents that may occur on your property. For example, if your house were burglarized, this policy would not cover any loss or replacement of the stolen property.”

The ASIC force placed insurance cost $4052 per year. Her Farmers policy was only $2457. More importantly, the Farmers policy provided much better coverage.

Unlike many homeowners who can never catch up on their bills, Ms. Wahl was able to keep her home and catch up in July of 2007. At that time she was able to get insurance once again from Farmers.

If you are just thinking that ASIC provided her crappy insurance at a ridiculous price you are wrong. Many states have laws that protect homeowners that miss a payment. In California, there are specific notices that must be sent and coverage usually continues for at least 60 days and sometimes 130 after a default.

In Wahl’s case, that means she had duplicate coverage for months. There was no need to immediately obtain replacement insurance. In Wahl’s case, the force placed policy was even retroactive even though the house hadn’t burned down or was destroyed by floods.

There’s more to this story!

Lenders typically contract with force placed insurance companies to monitor insurance policies. Companies like ASIC typically offer this “service” to lenders free of charge.

Not only don’t the lenders or servicers pay for the monitoring, often they get a kickback from the insurance company.

It goes without saying that there is no bidding or shopping around for a better price.

Wahl filed her lawsuit in 2008. She named ASIC as the defendant. It was filed as a class action meaning it was brought on behalf of all California homeowners who had claims similar to hers.

Homeowners Can’t Afford to Sue Banks

Suing a bank, servicer or insurance company is expensive. This case cost $4.9 million. Individual homeowners could never afford such fees and even if they could, who would spend millions of dollars to fight over a couple thousand dollars?

Banks know this and know they will rarely be sued. A class action, however, filed by the right law firm can really level the playing field.

In 2011, Wahl’s case settled. Homeowners were awarded millions of dollars in relief. ASIC also agreed to cut its rates for force placed insurance.

Wahl is just one of many lawsuits either targeting dirty insurance tactics or the lenders themselves for taking kickbacks. The market has cleaned up somewhat but once again we are seeing new abuses.

MahanyLaw Investigates Force Placed Insurance Scams

History always seems to repeat itself and once again we are seeing new schemes and scams involving force placed insurance. For an individual homeowner, it is almost impossible to take on a big bank or insurance company.

We are currently considering new class action claims for homeowners who feel they were harmed by these policies. We are specifically investigating possible claims against CitiMortgage (Citibank, Citi) and Ocwen.

If you have been the recipient of force placed insurance over the last 24 months, please contact us at the email below. We regret that we cannot accept phone calls.*

MahanyLaw is a full service boutique law firm that concentrates in lender liability claims AGAINST banks. We sue banks, loan servicers and insurance companies. Unfortunately, we cannot accept individual cases but do consider class cases.

For more information, please write to *protected email* We promise that all emails will be answered.

The Fine Print

* A note about contacting us. We receive dozens of phone calls each day from people asking “How do I sue my bank?,” “Can I sue my bank”, Can you represent me in a foreclosure action?, etc. Unfortunately, we don’t take individual cases regarding home mortgages, can’t provide legal advice to non-clients and can’t process every call. The only way to contact us if you have a possible force placed insurance claim is by email.

Every email will be reviewed by a lawyer. Please tell us when you received force placed insurance, the name of the insurance company (if you know it), your lender or mortgage servicers (Bank of America, CitiMortgage, Ocwen, etc.) and where your home is located. If you have received force placed insurance in the last two years we will review your email.

Disclosure: Contacting us by email or through a web form does not create a lawyer – client relationship.

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MassHealth Fraud Lawyer – 2016 In Review Sun, 22 Jan 2017 14:54:56 +0000 On paper, it looks like 2016 was a great year for MassHealth fraud recoveries. State officials claim they have recovered $80 million. That number is a bit misleading, however. While we certainly praise the efforts of the Massachusetts Attorney General and the Massachusetts Medicaid Fraud Division, their efforts have barely made a dent in the […]

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On paper, it looks like 2016 was a great year for MassHealth fraud recoveries. State officials claim they have recovered $80 million. That number is a bit misleading, however. While we certainly praise the efforts of the Massachusetts Attorney General and the Massachusetts Medicaid Fraud Division, their efforts have barely made a dent in the state’s burgeoning fraud epidemic. Without whistleblowers, the state doesn’t have a chance.

To better understand why we say whistleblowers are so necessary, let’s look at some facts.

Medicaid is the health insurer of last resort. In Massachusetts, Medicaid is called MassHealth and is funded by both the state and federal government. In other words, it is funded with tax dollars.

MassHealth provides health insurance for about 1.8 million low and moderate income and disabled people in the Commonwealth. That’s about 25% of the state’s population. Insuring all those folks is expensive. In 2015, the taxpayers tab for MassHealth was $14.7 billion.

Unfortunately, the FBI says that as much as 10% of Medicaid and Medicare funds are lost to fraud and waste. By our math that is as much as $1.5 billion. Suddenly, an $80,000,000 recovery isn’t so much. While those numbers appear enormous, they are just a small percentage of the total dollars lost to fraud.

2016 MassHealth Fraud Recoveries

Let’s break down the recoveries in 2016. The $80 million figure comes from 29 settlements.

The biggest chunk of the MassHealth fraud recovery totals comes from a single case. Last May, pharmaceutical giant Pfizer paid $784 million to resolve charges that the company was overcharging the government for drugs. $68 million of that settlement was allocated to Massachusetts.

The remaining $12 million came from 28 cases. That suggests an average recovery of less than $500,000 per prosecution.

Some folks may say that the AG’s office and the Medicaid Fraud Division is not doing enough. Considering everything on their plate, they do a great job.

In addition to their Medicaid fraud responsibilities, the division is also tasked with investigating patient abuse, neglect, mistreatment and financial exploitation claims. Patient safety comes first meaning prosecutors and investigators are often forced to wear two hats.

There are other reasons why MassHealth fraud recoveries are so low. Absent a hot tip, the fraud investigators must rely on auditors to find overpayments and waste. Unfortunately, auditors nationwide are only able to review one half of one percent of all providers each year.

Massachusetts False Claims Act and Whistleblower Awards

Massachusetts is one of 29 states with a Medicaid fraud whistleblower award law. Called the Massachusetts False Claims Act, the law allows whistleblowers with inside information about MassHealth fraud to receive an award of up to 30% of whatever the state collects from wrongdoers. With treble damages and large fines for each violation, the awards can be substantial.

Let’s look at an actual example.

$784 Million Medicaid Fraud Recovery from Wyeth and Pfizer

The $784 million settlement that netted the Bay State $68 million was started by a whistleblower. In March of 2002, Dr. William St. John Lacorte filed a complaint under the federal False Claims Act. Since Medicaid is funded with both state and federal dollars, Dr. Lacorte decided to file his complaint in federal court.

Dr. Lacorte claimed that Wyeth was overcharging the Medicaid program for a drug called Protonix.
Because Medicaid is funded with tax dollars, Congress says that pharmaceutical companies must give the government their best price on drugs. Dr. Lacorte claimed that Wyeth was selling Protonix to some hospitals for 16¢ per pill. He said the government, however, was being charged $3.00 per tablet! (Wyeth was acquired by Pfizer while the case was pending.)

Do you remember the stories of the government paying $1400 for a toilet seat and $900 for a hammer? According to Dr. Lacorte, Wyeth had marked up the price of Protonix by 1875%.

Why did Wyeth mark up drug costs so much? Dr. Laporte believes that the company wanted to “induce hospitals to utilize Protonix so that patients would be discharged on this drug thereby requiring these patients to seek outpatient acquisition of this drug at higher the market prices.”

Like street level drug dealers that give samples of highly addictive drugs to get their customers hooked, Wyeth was allegedly doing the same thing. They got the hospitals to prescribe their drug knowing that patients would need to keep taking those drugs when discharged.

Whistleblowers, the Number One Weapon in the Fight against MassHealth Fraud

Dr. Laporte’s case was filed in New Orleans but was national in scope. It also took 15 years to resolve, one of the longest cases we have seen. Unlike the Wyeth case where the defendant chose to fight, most cases settle quickly. Because the government can impose massive penalties for each violation and can triple damages, companies that are guilty often elect to cooperate and minimize penalties.

Dr. Laporte may have had to wait 12 years but in the end, he and a second whistleblower were awarded $98,058,190. Not a bad payday for speaking up against fraud.

In announcing the settlement, a Justice Department spokesperson said, “This settlement demonstrates our unwavering commitment to hold pharmaceutical companies responsible for pursuing pricing schemes that attempt to manipulate and overcharge federal health care programs – programs that protect the poor and disabled – for drugs sold to commercial customers at much lower prices.”

The Next Medicaid Fraud Whistleblower Award Could be Yours

Not every case pays out $98 million. Awards in the millions are not uncommon, however. Each of those awards started with an ordinary person that decided to speak up and report fraud.

Obtaining an award requires several steps:

  1. You must have inside (original source) knowledge of fraud involving Medicare, Medicaid, MassHealth or Tricare.
  2. Only the first to file generally gets an award.
  3. You must file a sealed lawsuit in court.

Many lawyers are willing to file these claims but few are willing or have the experience to try these cases on their own if the government declines prosecution. During the next several years, we expect significant budget cuts. That will likely continue the trend of more and more cases being declined by the government and prosecuted privately.

For more information, visit our Medicare and Medicaid Fraud information page. Ready to start or have questions? Contact attorney Brian Mahany at *protected email* or by phone at (414) 704-6731 (direct).

MahanyLaw – Medicaid and MassHealth Fraud Lawyers

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More Convictions in Venezuela Foreign Bribery Scheme Thu, 19 Jan 2017 12:33:24 +0000 Two more Americans have been convicted in for participating in a scheme to obtain contracts from the Venezuelan national oil company, Petróleos de Venezuela SA. (PDVSA)*. Juan Jose Hernandez Comerma of Florida and Charles Quintard Beech of Texas were both convicted of criminal conspiracy. Hernandez was also convicted of a foreign bribery charge. The US […]

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Two more Americans have been convicted in for participating in a scheme to obtain contracts from the Venezuelan national oil company, Petróleos de Venezuela SA. (PDVSA)*. Juan Jose Hernandez Comerma of Florida and Charles Quintard Beech of Texas were both convicted of criminal conspiracy. Hernandez was also convicted of a foreign bribery charge.

The US Foreign Corrupt Practices Act (FCPA) prohibits the bribing of foreign officials in the hope of gaining a business advantage. The United States has joined dozens of other countries in prohibiting foreign bribery. Congress wants all businesses to compete on a level playing field. Those that pay bribes shouldn’t be given an advantage over those that follow the law.

Foreign Bribery Charges Against Jose Hernandez

According to court records, Hernandez served as manager of a company that supplied equipment and services to PDVSA. One of the purchasing managers for the Venezuelan state owned oil company was Alfonzo Gravina. Although a US citizen living in Houston, the FCPA still considers Gravina to be a foreign official.

Prosecutors say Hernandez made and paid for a hotel reservation in New York City for Gravina. When he paid for the hotel, Hernandez emailed Gravina and said, “I take care of you.”

Later Hernandez would facilitate the payment of $14, 502 for hotel bills in Miami for another PDVSA employee. He also assisted in making wore transfers to a bank account controlled by Gravina. Prosecutors say that the travel and cash transfers were made to facilitate contract awards from PDVSA.

Foreign Bribery Charge Against Charles Beech

Beach was convicted of behavior very similar to that of Hernandez. Prosecutors say Beech paid bribes to multiple PDVSA officials, including Gravina. In exchange for the bribes, these officials put Beech’s companies on PDVSA bidding panels. The officials also helped expedite payments on previously awarded contracts. Beech also admitted that he worked with the foreign officials to hide bribes.

To date, eight people have been convicted in connection with the Petróleos de Venezuela SA foreign bribery scheme.

Foreign Bribery and Whistleblower Awards

People with inside information about violations of the Foreign Corrupt Practices Act are eligible for whistleblower awards. Both the SEC and U.S. Department of Justice prosecute FCPA violations. Under the SEC’s Whistleblower Program those with “original source” information about the violations can receive up to 30% of whatever the government collects from wrongdoers.

Getting an award often means being the first to file. Delay too long and someone may beat you to an award.

Foreign bribery is a huge problem worldwide. We see these cases in virtually all sectors of the economy and especially in mining, natural resources (oil), manufacturing and pharmaceuticals. Even the banking industry has been dragged into these scandals.

It takes just one person to step forward and blow the whistle. Just one person can make a difference. Your efforts can help honest companies trying to make a living and could mean an award in the millions of dollars. Last year was a record year for FCPA enforcement.

Something else to consider. The SEC has a fantastic track record of protecting the identity and privacy of the whistleblower. If you don’t want your name revealed and don’t want any publicity, the SEC will listen.

Need more information? Please visit our foreign bribery whistleblower page or better yet, contact us directly. Attorney Brian Mahany can be reached at *protected email* or by phone at (414) 704-6731 (direct). All inquiries kept strictly confidential. Awards payable to people anywhere in the world.

MahanyLaw – America’s Foreign Corrupt Practices (FCPA) Whistleblower Lawyers

*PDVSA was not charged. It is unclear if any charges will be forthcoming. As of January 1o, 2017, the Justice Department says its investigation is ongoing. The company says it did not solicit the bribes and the any wrongdoing were acts of individual employees. The company says it is also a victim of the scheme.

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Pharmaceutical Whistleblowers – The WAR on Big Pharma Begins Tue, 17 Jan 2017 02:41:34 +0000 Donald Trump and Bernie Sanders are about as polar opposites as two politicians can be. Sanders is a “tax the rich” liberal Democrat. Trump is the rich guy Bernie wants to tax and a conservative Republican to boot. But they both appear to agree that big pharma is screwing the little guy and must be […]

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Donald Trump and Bernie Sanders are about as polar opposites as two politicians can be. Sanders is a “tax the rich” liberal Democrat. Trump is the rich guy Bernie wants to tax and a conservative Republican to boot. But they both appear to agree that big pharma is screwing the little guy and must be stopped.

We hear countless stories of people forced to choose between food or medicine. While we understand that drug companies need to make a profit to fund more research, there is little sympathy when a drug price suddenly skyrockets by 1000% or more.

Americans pay the highest drug prices in the world. The same drugs you have in your medicine cabinet are often half the price in Canada. Yet last week, the Senate refused to endorse a measure to allow patients to get their drugs in Canada. Even liberal NJ Senator Cory Booker voted against it.

Why? Because big pharma funnels millions of dollars into political campaigns.

During the campaign Sanders claimed that one on five adults in the US don’t fill prescriptions because they cannot afford them.

Donald Trump was apparently listening! Last week he tweeted that “[Drug companies] are getting away with murder. Pharma has a lot of lobbyists and a lot of power. We’re going to save billions of dollars over a period of time,”

Big pharma is apparently taking that threat seriously. The stock price of pharmaceutical companies dropped within minutes of his comments. The industry lost billions of dollars of market value. According to Stat News, one lobbyist said, “Nobody’s provoking him into talking about it. Pharma should be soiling themselves over this.”

So, what will actually happen? It’s hard to tell. In the first legislative test, senators on both sides of the aisle got cold feet. Both Democrats and Republicans blocked a measure to allow cross border purchases.

Getting Congress to wean itself off millions of dollars of campaign contributions won’t be easy.

Is there a better way?

Pharmaceutical Whistleblowers and the False Claims Act

The best fix for runaway drug prices and outrageous pharmaceutical executive salaries must come from Congress. Whistleblowers, however, can be a very effective weapon in enforcing existing laws.

There are several big scams today involving the pharmaceutical industry. These include, “pay to delay,” off label use, illegal kickbacks and production or importation of adulterated / sub potent drugs. Each of these violations can be prosecuted under the False Claims Act.

Pay to delay occurs when a pharmaceutical company with a drug coming off patent pays generic companies to stay out of the marketplace. That gives big pharma a couple more years to gouge U.S. consumers.

Off label use occurs when a drug company pushes doctors to prescribe a medication for a use not approved by the FDA. While doctors can do this, Medicare and Medicaid won’t pay for off label use.

Kickbacks and manufacturing defects are self explanatory.

Under the Act, a pharmaceutical whistleblower can receive up to 30% of whatever the government collects from a wrongdoer. (The average award is 15% to 20%.)

It’s not just drug prices that are high. Fines levied on pharmaceutical companies for violating the Act are also high. Often they are $100 million or more. And big fines mean big awards for pharmaceutical whistleblowers.

MahanyLaw – America’s Whistleblower Lawyers

The False Claims Act (qui tam) lawyers at MahanyLaw have helped clients collect over $100 million in awards. We are not afraid to take on big pharma. We want to help our clients stop fraud, end greed and collect the maximum award possible.

Need more information? Visit our pharmaceutical whistleblowers information page or contact us directly. The author of this post, attorney Brian Mahany, can be reached at *protected email* or by phone at (414) 704-6731 (direct).

All inquiries are kept strictly confidential.

MahanyLaw – America’s Whistleblower Lawyers – We Sue Big Pharma

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