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iStock-1311468531-300x200The Rensselaerville Institute allegedly overstated its average monthly payroll to receive a larger PPP loan

The Rensselaerville Institute of Albany, New York, a community nonprofit, has paid $86,676 to settle allegations that it violated the False Claims Act by fraudulently overstating its eligibility for a loan under the Paycheck Protection Program, thereby obtaining more funds than it was entitled to receive.  In the settlement, Rensselaerville admitted it fraudulently overstated the organization’s average monthly payroll on its PPP loan application and, despite being alerted to the issue by auditors, did not return the excess funds but instead applied to the government for forgiveness of the entire loan.

The fraud was exposed by Rensselaerville’s former Chief Financial Officer, who filed a qui tam whistleblower lawsuit under the False Claims Act and received a whistleblower award of $17,000 from the settlement, the U.S. Department of Justice said.

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The settlement caps the DOJ’s nearly 20-year pursuit of False Claims Act lawsuits, prompted by a whistleblower complaint, against companies in the body-armor supply chain involving Zylon vests

Honeywell International, Inc. (Nasdaq: HON) has agreed to pay $3.35 million to resolve allegations it violated the False Claims Act by supplying defective ballistic material for bulletproof vests purchased by the U.S. Department of Defense and other federal agencies.  The settlement ends the DOJ’s decades-long pursuit of False Claims Act lawsuits against companies in the body armor supply chain that allegedly continued to manufacture, market, and sell Zylon bulletproof vests even after becoming aware that Zylon rapidly degraded in hot and humid conditions, compromising its ability to stop bullets.

Dangerous degradation
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The lawsuit is part of an effort by the U.S. Justice Department to investigate and litigate fraudulent diagnosis-coding practices by Medicare Advantage (Part C) insurers

 The U.S. Department of Justice has announced that it has sued health insurance company Cigna Corporation (NYSE: CI), alleging that it violated the False Claims Act by knowingly submitting false and invalid diagnosis codes to artificially inflate the capitation payments it receives from Medicare in connection with its Medicare Advantage health insurance plans.  The DOJ complaint-in-intervention was filed in a lawsuit initiated by a qui tam whistleblower under the False Claims Act.

The case is part of an ongoing effort by the DOJ to investigate and litigate improper diagnosis coding by private insurers operating Medicare Advantage (Part C) health plans.

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iStock-1153436387-300x199The settlement follows Cardinal Health’s payment of $13M to resolve related False Claims Act allegations earlier this year

A Florida medical group has paid $130,000 to resolve allegations it violated the Anti-Kickback Statute (AKS) and False Claims Act by knowingly taking illegal kickbacks from pharmaceutical distributor Cardinal Health (NYSE: CAH).  The settlement, by the U.S. Department of Justice with Southeast Florida Hematology and Oncology Group, follows Cardinal Health’s payment of $13.1 million back in January to settle related False Claims Act allegations.

The scheme was exposed by two qui tam whistleblowers—a former Cardinal Health executive and a different medical practice in Florida that dealt with the drug distributor.  They shared $2.6 million of the Cardinal Health settlement as a whistleblower award.

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Qui tam whistleblower alleged that Bayer fraudulently paid kickbacks, conducted off-label marketing, and hid safety risks

Bayer, the U.S. division of the German drug giant Bayer AG (OTC: BAYRY), has agreed to pay a total of $40 million to settle a pair of False Claims Act whistleblower lawsuits alleging that it illegally marketed three drugs.  According to the lawsuits, Bayer illegally paid kickbacks to doctors, promoted off-label uses, and downplayed safety risks.  The qui tam whistleblower—a former Bayer marketing research analyst—will receive an $11 million whistleblower award from the settlement proceeds.

Illegal off-label marketing and downplaying of risks
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Importer of welded outlets knowingly evaded applicable anti-dumping duties

A federal court in California has awarded $24 million damages—and an additional $2.7 million in attorney’s fees—to a corporate qui tam whistleblower that successfully sued a rival company under the False Claims Act claiming that it unlawfully evaded anti-dumping duties on “welded outlet” imports from China.  The whistleblower—Tennessee-based Island Industries, Inc.—accused importer Sigma Corp. of being able to undersell law-abiding competitors like Island by cheating U.S. Customs and Border Protection (CBP) out of the anti-dumping tariffs.

Jury rules in favor of whistleblower
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As the IRS and state tax authorities cracking down on crypto investors and traders, cryptocurrency tax fraud whistleblowers stand to receive significant awardsCryptocurrency tax fraud

Mark A. Strauss Law, PLLC, a whistleblower law firm, is encouraging individuals with information regarding tax evasion in connection with cryptocurrency transactions to contact whistleblower attorney Mark A. Strauss for a free consultation.

In Notice 2014-21, the IRS made clear that convertible digital currencies comprise intangible “property”—just like shares of stock or other financial assets—for tax purposes.   What that means is that when crypto currencies like Bitcoin (BTC), Etherium (ETH), Ripple (XRP) are sold or exchanged—or simply used as a means of payment—the transaction in question is a taxable event.  Capital gains taxes are owed on any price increases realized.  Parties accepting crypto as payment for goods or services must include the value thereof in their gross income.  Moreover, a wide range of transactions involving cryptocurrencies are potentially taxable, including staking, mining, and crypto-to-crypto trading.

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Extruded aluminum imports fraudulently misclassified as warehouse pallets to evade anti-dumping and countervailing (AC/CVD) duties

A group of California companies affiliated with CiStock-1131702041-1-300x169hinese Billionaire Liu Zhongtian—known as “Uncle Liu” or “Big Boss”—have been ordered to pay the U.S. government $1.83 billion in restitution after having been convicted of a scheme to evade customs duties on imports of Chinese aluminum.  The judgment is believed to be one of the largest in U.S. history involving customs fraud.

On April 11, 2022, United States District Judge R. Gary Klausner sentenced the affiliated warehousing and aluminum companies to five years probation and ordered them to pay the $1.83 billion.  The sentence followed a trial in August 2022 where the defendants were convicted of conducting a scheme with Zhongtian and others to evade U.S. anti-dumping and countervailing duties (AC/CVD) on extruded aluminum products from China.  The jury found the defendants guilty of conspiracy, wire fraud, and passing false and fraudulent papers through a customshouse.

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Service member wearing Army uniform (ACU) filling real estate related paperwork.Court takes “holistic approach” to materiality, rejecting strict focus on the ultimate “payment decision” in significant win for qui tam whistleblowers and the government

A few weeks ago, I blogged about United States v. Strock. There, the Second Circuit Court of Appeals determined that the Supreme Court’s decision in Universal Health Services v. Escobarwhich held that misrepresentations regarding compliance with a statutory, regulatory, or contractual requirements “must be material to the Government’s payment decision” to be actionable under the False Claims Act—did not invalidate the “fraudulent inducement” theory of False Claims Act liability. Under that theory, which predates Escobar, a violation of the False Claims Act can be established by showing that the defendant submitted claims for payment under a contract obtained by fraud—even if the subsequent claims for payment under the contract were themselves entirely truthful. The focus in a such a case, the Second Circuit confirmed, still includes the fraudulent statements’ impact on the government’s initial decision to award the contract. Any subsequent payments are “tainted” by that original fraud.

Now—in another key victory for whistleblowers and the government—the Eleventh Circuit has taken a similarly broad view of Escobar’s materiality requirement. In United States ex rel. Bibby v. Mortg. Inv’rs Corp., the court adopted a “holistic approach” to the assessment of materiality under the False Claims Act, rejecting a “strict focus” on the ultimate “payment decision.”

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Second Circuit rules that relevant government “payment decision” under Escobar included Veterans Administration’s initial decision to award contracts based on claim that contractor qualified as aservice-disabled, veteran-owned small business”—not just the VA’s subsequent decisions to make payments under those contracts

In a key victory for the federal government and qui tam whistleblowers, the Second Circwhistlebloweruit Court of Appeals has affirmed that false statements regarding eligibility to take part in government programs—and not just subsequent false claims for payment after being allowed to participate—are actionable under the False Claims Act notwithstanding the U.S. Supreme Court’s 2016 landmark decision in Universal Health Services v. Escobar. The court in United States v. Strock rejected the idea that the only relevant “payment decision” under Escobar was the decision to pay a contractors’ invoices without regard to the initial decision to award the contract.

Impact on False Claims Act cases involving eligibility