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TAF Qrv39.Indd The False Claims Act and Qui Tam Quarterly Review is published by the Taxpayers Against Fraud Education Fund. This publication provides an overview of major False Claims Act and qui tam developments including case decisions, DOJ interventions, and settlements. The TAF Education Fund is a nonprofit charitable organization dedicated to com- bating fraud against the Federal Government through the promotion and use of the qui tam provisions of the False Claims Act (FCA). The TAF Education Fund serves to inform and educate the general public, the legal community, and other interested groups about the FCA and its qui tam provisions. The TAF Education Fund is based in Washington, D.C., where it maintains a com- prehensive FCA library for public use and a staff of lawyers and other professionals who are available to assist anyone interested in the False Claims Act and qui tam. TAF Education Fund Board of Directors President’s Council Advisory Committee Neil Getnick, Chairman James Helmer, Chairman Michael Behn James Alderson James Alderson John Clark Fred Anderson James Breen Erika Kelton Albert Campbell Neil Getnick Mark Kleiman Joseph Gerstein Kenneth Nolan Candace McCall John Phillips John Phillips Timothy McInnis Margaret Richardson Scott Powell Philip Michael Linda Sundro Marc Raspanti Gregory Wetstone Lesley Skillen Shelley Slade Professional Staff James Moorman, President and CEO Joseph E. B. White, Staff Attorney, Quarterly Review Editor Patrick Burns, Communications Director Amy Wilken, Consultant Anthony Cotto, Legal Resources Administrator Carmen Ruffin, Office Administrator Takeia Garner, Executive Assistant Taxpayers Against Fraud Education Fund 1220 19th Street, NW Suite 501 Washington, DC 20036 Phone (202) 296-4826 Fax (202) 296-4838 www.taf.org Copyright © 2005 TAF Education Fund. All Rights Reserved. TABLE OF CONTENTS FROM THE EDITOR vii Recent False Claims Act & Qui Tamam Decisions 1 I. FALSE CLAIMS ACT LIABILITY 3 A. Violations of the Anti-Kickback Statute U.S. ex rel. McNutt v. Haleyville Medical Supplies, Inc., 2005 WL 2179164 (11th Cir. Sept. 9, 2005) B. Definition of “False” Claim U.S. ex rel. Morton v. A Plus Benefits, Inc., 139 Fed. Appx. 980 (10th Cir. July 19, 2005) C. FCA Liability for Lack of Quality of Care U.S. ex rel. Phillips v. Permian Residential Care Center, 2005 WL 2224982 (W.D. Tex. Sept. 12, 2005) D. Mere Knowledge of FCA Violation U.S. ex rel. Camillo v. Ancilla Systems, Inc., 2005 WL 1669833 (S.D. Ill. July 18, 2005) E. Claims For Non-Governmental Funds U.S. ex rel. DRC, Inc. v. Custer Battles, LLC, 376 F. Supp. 2d 617 (E.D. Va. July 8, 2005) II. STATUTORY INTERPRETATIONS 17 A. Section 3729(a)(7) Lack of Presentment Requirement U.S. ex rel. Rafizadeh v. Continental Common, Inc., 2005 WL 2061018 (E.D. La. Aug. 2, 2005) III. JURISDICTIONAL ISSUES 19 A. Section 3730(B)(5) First-to-File Bar U.S. ex rel. Campbell v. Redding Medical Center, 2005 WL 2001085 (9th Cir. Aug. 22, 2005) U.S. ex rel. Smith v. Yale-New Haven Hospital, Inc., 2005 WL 2072514 (D. Conn. Aug. 25, 2005) Vol. 39 • October 2005 iii B. Section 3730(e)(4) Public Disclosure Bar and Original Source Exception U.S. ex rel. Englund v. Los Angeles County, 2005 WL 2089216 (E.D. Cal. Aug. 30, 2005) C. Impact of Deficient Qui Tam Complaint Upon Subsequent Government FCA Action U.S. ex rel. Williams v. Bell Helicopter Textron, Inc., 417 F.3d 450 (5th Cir. July 13, 2005) IV. FALSE CLAIMS ACT RETALIATION CLAIMS 31 A. Section 3730(h) Retaliation Claims Mack v. Augusta-Richmond County, Georgia, 2005 WL 2270518 (11th Cir. Sept. 19, 2005) U.S. ex rel. Hartman v. Allegheny General Hospital, 2005 WL 2106627 (W.D. Pa. Aug. 26, 2005) B. Statute of Limitations for FCA Retaliation Claims Foster v. Savannah Communication, 140 Fed. Appx. 905 (11th Cir. July 25, 2005) V. COMMON DEFENSES TO FCA ALLEGATIONS 37 A. Materiality Requirement U.S. ex rel. Schell v. Battle Creek Health System, 419 F.3d 535 (6th Cir. Aug. 22, 2005) B. Government Acceptance U.S. ex rel. Stebner v. Stewart & Stephenson Services, Inc., 2005 WL 1865309 (5th Cir. Aug. 8, 2005) VI. FEDERAL RULES OF CIVIL PROCEDURE 43 A. Rule 9(b) Failure to Plead Fraud with Particularity U.S. ex rel. Gross v. AIDS Research Alliance-Chicago, 415 F.3d 601 (7th Cir. July 6, 2005) U.S. ex rel. Schmidt v. Zimmer, Inc., 2005 WL 1806502 (E.D. Pa. July 29, 2005) iv TAF Quarterly Review B. Rule 15(a) Leave to Amend U.S. ex rel. Lee v. Fairview Health System, 413 F.3d 748 (8th Cir. July 6, 2005) U.S. ex rel. Camillo v. Ancilla Systems, Inc., 2005 WL 1926559 (S.D. Ill. Aug. 8, 2005) C. Rule 26(b) Discovery Scope and Limits U.S. ex rel. Tyson v. Amerigroup Illinois, Inc., 2005 WL 2234747 (N.D. Ill. Sept. 15, 2005) U.S. ex rel. Smith v. The Boeing Company, 2005 WL 2105972 (D. Kan. Aug. 31, 2005) VII. LITIGATION DEVELOPMENTS 53 Agyeman v. Corrections Corporation of America, 2005 WL 1847033 (9th Cir. Aug. 5, 2005) U.S. ex rel. Braham v. Alameda County Superintendent of Schools, No. 02-56780 (9th Cir. Aug. 4, 2005) U.S. ex rel. Fisher v. Network Software Associates, 377 F. Supp. 2d 195 (D.D.C. July 20, 2005) INTERVENTIONS & SUITS FILED/UNSEALED 55 JUDGMENTS & SETTLEMENTS 59 DEVELOPMENTS IN THE LAW 69 Roberts Discusses the False Claims Act During Confirmation Hearings Joseph E. B. White, TAFEF Staff Attorney IN THEIR OWN WORDS 73 Reflections Walter F. DeNino LESSONS FROM THE FRONTLINES 81 The Intervention Decision Stephen Altman The New York City False Claims Act: A Tale of One City Lesley Ann Skillen Vol. 39 • October 2005 v OUTSIDE OF THE LAW 103 Media Relations and the Qui Tam Bar Richard Lavinthal Success In False Claims Cases Often Depends On Protecting Qui Tam Relator With Psychological Evaluation & Support Donald R. Soeken, LCSW-C, Ph.D. LEGAL ANALYSIS 113 Penalty Points, Part Two: Number of Penalties Lani Anne Remick Courageous Whistleblowers Are Not “Left Out In The Cold”: Legitimate Justifications Exist For Collecting Evidence of False Claims Act Violations Michael R. Grimm, Dean S. Rauchwerger, James F. Smith and Allison K. Baten The Interplay Between the False Claims Act, Securities Fraud, and ERISA Reuben A. Guttman, Kirk Chapman and Ann Lugbill IN THE SPOTLIGHT 143 False Statements and False Claims Jeremy Baker and Rebecca Young THE BIG PICTURE 177 Fighting Fraud at the Source: Modifying the Federal False Claims Act to Deter Corporate Fraud at the Individual Level Joseph E. B. White vi TAF Quarterly Review FROM THE EDITOR Teamwork divides the task and doubles the success. -Unknown n 1986, when the Justice Department was buried beneath an overflowing inbox of fraud cases, the U.S. Congress enlisted the help of the private bar to “enhance Ithe Government’s ability to recover losses sustained as a result of fraud against the Government.” S.Rep. 99-345, at 1, U.S. Code Cong. & Admin. News 1986, 5266. Indeed, in amending the False Claims Act, Congress envisioned a “coordinated effort” between private citizens and the Government, fighting side by side to effectively and to efficiently protect the U.S. Treasury. Id. at 2, U.S. Code Cong. & Admin. News 1986, 5266, 5266–67. Under the “United We Stand, Divided We Fall” banner, the qui tam bar has now mobilized into a united force of nearly 300 attorneys dedicated to combating fraud against the Federal Government. Justice Department, the qui tam bar is ready for duty. Until we receive our marching orders, we will continue preparing for battle, arming ourselves with the necessary weapons of knowledge and expertise. Sincerely, Jeb White [email protected] Vol. 39 • October 2005 vii Recent False Claims Act & Qui Tam Decisions JULY 1–SEPTEMBER 30, 2005 FALSE CLAIMS ACT LIABILITY A. Violations of the Anti-Kickback Statute U.S. ex rel. McNutt v. Haleyville Medical Supplies, Inc., 2005 WL 2179164 (11th Cir. Sept. 9, 2005) The Eleventh Circuit affirmed an Alabama district court’s denial of the defendant- owners’ motion to dismiss, in an action in which a former employee of a medical services company filed qui tam action against owners of medical services company, alleging that they violated the FCA by submitting claims for Medicare reimburse- ment with knowledge that they were ineligible for that reimbursement. The court of appeals, agreeing with the lower court, held that such a violation of the Anti- Kickback Statute could form basis for a claim under the FCA. In December 2001, Brent McNutt, a former employee of a medical services company owned by the Gerald and Frances Burleson, filed an FCA qui tam action against the Bur- lesons and five medical services companies that they owned, including Haleyville Medi- cal Supplies, City Pharmacy, Care Medical, Care Pharmacy, and Winfield Medical. The qui tam complaint alleged that the owners of the company routinely provided medical services for which they submitted claims for reimbursement to Medicare, that they violated the Anti-Kickback Statute by paying kickbacks to pharmacists and oth- ers which were camouflaged as rental payments or commissions, and that the owners certified that they complied with the Anti-Kickback Statute, which was a condition of receiving reimbursement from the Medicare program. The Government subsequently filed a complaint-in-intervention, in which the Government clarified that Medicare providers are required to enter a provider agree- ment with the Government, and under the terms of the agreement, the Medicare provider certifies that it will comply with all laws and regulations concerning proper practices for Medicare providers.
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