Headlines that Matter for Companies and Executives in Regulated Industries
DOJ News & Litigation Updates
DOJ Intervenes Against Home Health Agency and Owners in FCA Suit
DOJ filed a complaint in intervention against Doctor’s Choice Care Inc., a home health agency, and two part-owners of Doctor’s Choice, in litigation filed under the qui tam provisions of the False Claims Act by a relator in the Middle District of Florida. The government alleges that Doctor’s Choice paid kickbacks in the form of sham medical directorships to three physicians to induce their referrals of patients to Doctor’s Choice, in violation of the Anti-Kickback Statute and the Stark Law. The government also alleged that Doctor’s Choice paid certain employees in a manner that took into account the volume of referrals by their physician spouses, in violation of the Stark Law. The case is United States ex rel. Herbold v. Doctor’s Choice Home Care Inc., et al., No. 8:15-cv-01044 (M.D. Fla.).
Pharmaceutical Company Agrees to Pay $6.6 Million to Resolve Kickback Allegations
The US Attorney’s Office for the Eastern District of Pennsylvania announced that pharmaceutical company Almirall, LLC (f/k/a Aqua Pharmaceuticals, LLC) (Aqua), has agreed to pay $3.5 million to resolve allegations that it paid illegal kickbacks to physicians to induce them to prescribe Aqua’s dermatology pharmaceutical drugs. Specifically, the government alleged that Aqua improperly provided physicians with meals and food items, entertainment, trips, gift cards, and gifts, and engaged physicians for speaking engagements, advisory boards, and consulting services in part to induce them to prescribe Aqua products. The settlement resolves allegations in a False Claims Act suit brought by a qui tam relator, who will receive $735,000 as her share of the recovery. DOJ reported that the California Department of Insurance also conducted an investigation and agreed to a separate resolution of $3.1 million based on similar allegations, bringing the total settlement amount to $6.6 million. The case is United States ex rel. Doe v. Aqua Pharmaceuticals, LLC, Civil Action No 15-5086 (E.D. Pa.)
DOJ Nets Sixteenth Guilty Plea in PDVSA Bribery Investigation
DOJ announced that yet another individual has pleaded guilty to charges related to the alleged bribery of officials at Petroleos de Venezuela S.A. (PDVSA), Venezuela’s state-owned energy company, to corruptly secure and retain energy and logistics contracts. According to DOJ, the defendant admitted that in 2012 and 2013 he and a co-conspirator paid at least $629,000 in bribes to officials at PDVSA subsidiaries in return for inside information concerning PDVSA procurement processes and efforts to direct contracts to the defendant’s companies. The defendant pleaded guilty in federal court in the Southern District of Texas to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA), one count of violating the FCPA, and one count of failing to report foreign bank accounts. Overall, DOJ has charged 21 individuals in connection with the investigation, 16 of which have pleaded guilty.
SEC Pays Whistleblower $4.5 Million Award
The SEC announced that it paid a whistleblower more than $4.5 million for providing a tip that led to a successful SEC resolution with a company. The whistleblower allegedly sent an anonymous tip to the company regarding wrongdoing and then submitted the same information to the SEC within 120 days, as required under the applicable SEC rules. Although the SEC did not identify the whistleblower or company in its press release, the Wall Street Journal reported that the whistleblower was a former orthopedic surgeon in Brazil who raised concerns with the SEC and DOJ about an alleged kickback scheme involving a subsidiary of medical device maker Zimmer Biomet Holdings Inc., which agreed to pay roughly $30 million to resolve DOJ and SEC charges in January 2017. The SEC has reportedly awarded roughly $381 million to 62 individuals since issuing its first whistleblower award under the Dodd-Frank Act in 2012.
North Carolina Investment Adviser Charged with Fraud by SEC
The SEC announced fraud charges against an investment adviser who allegedly overcharged clients by at least $367,000 in customer advisory fees. The SEC alleges that the defendant overcharged clients in 2015 and 2016 while he owned and operated a now-defunct registered investment adviser in North Carolina, River Source Wealth Management, LLC. The custodian of the funds allegedly requested information from the defendant after identifying billing irregularities, but the defendant failed to adequately explain the irregularities, the SEC reported. After the defendant transferred customer funds to a different asset custodian, the defendant also allegedly misled customers about the reasons for doing so. The SEC further alleges that the defendant overstated River Source’s assets under management and failed to implement required compliance policies and procedures. The SEC order found that the defendant violated Sections 206(2) and 207 of the Investment Advisers Act, and aided and abetted and caused River Source’s violations of the books and records and compliance provisions of the Act. The order prohibits the defendant from acting in a supervisory or compliance capacity or from charging advisory fees without supervision for at least three years, and requires that the defendant provide notice of the order to clients and prospective clients. The defendant also agreed to pay disgorgement and prejudgment interest of $405,381, as well as a $100,000 penalty.