Hospital to Pay Over $2 Million to Settle Alleged False Claims Act Violations

DOJ News & Litigation Updates

ITT Cannon to Pay $11 Million to Settle False Claims Allegations

ITT Cannon (ITT), a division of ITT Inc., has agreed to pay $11 million to settle whistleblower claims that it supplied electrical connectors to the military that had not been properly tested, in violation of the False Claims Act.

The settlement resolves allegations that from September 2008 to March 2017, ITT, which specializes in the manufacture of connectors, electrical cable assemblies, keypads and local area network (LAN) components, did not conduct the required periodic testing on six models of the electrical connectors that were sold both directly and indirectly to the government through distributors and other contractors who incorporated the pieces into technology and equipment.

The government first learned that ITT had not performed the required testing in December 2010, but ITT promised that it would conduct remedial testing and report the results to the government. In February 2011 however, ITT experienced several failures in its remedial testing. ITT did not immediately disclose these failures to the government and, instead, represented that it was behind in the remedial testing. In March 2017, the Defense Logistics Agency (DLA) issued an order stopping the shipment of the six connectors. In June 2017, ITT issued six Government Industry Data Exchange Program notices disclosing to the industry its failure to conduct the required testing, its test failures, and changes in the processes, materials, construction, sourcing and design of the connectors. DLA then removed the six ITT connectors from the Qualified Products List.

The settlement resolves allegations filed in a lawsuit by whistleblower Ralph Tatgenhorst, the former regional quality manager at ITT’s Santa Ana facility, under the qui tam provisions of the False Claims Act. Of the $11 million that ITT is required to pay, Mr. Tatgenhorst will receive $2,090,0000 as his share of the settlement amount.

Read the DOJ press release here.

Hospital to Pay Over $2 Million to Settle Alleged False Claims Act Violations

On Monday, the US Attorney’s Office for the Western District of Pennsylvania announced that Millcreek Community Hospital (Millcreek) agreed to pay $2,451,000 to resolve claims that it violated the False Claims Act. Millcreek, located in Erie, Pennsylvania, has an inpatient rehabilitation unit located within its hospital. The US Attorney’s Office alleged that, between July 1, 2013 and December 31, 2017, Millcreek admitted patients to its inpatient rehabilitation unit who did not qualify for inpatient rehabilitation services, and failed to adequately document on the patients’ medical records that such services were medically necessary and reasonable.

In addition to agreeing to pay $2,451,000, Millcreek also agreed to enter into a Corporate Integrity Agreement with the United States Department of Health and Human Services, Office of Counsel to the Inspector General. The Corporate Integrity Agreement requires, among other things, the regular monitoring of Millcreek’s billings for five years.

Read the DOJ press release here.

SEC News

Nomura to Pay Over $25 Million to Settle SEC Claims of Shoddy Supervision

On Monday, the SEC instituted two enforcement actions against Nomura Securities International Inc. (Nomura), alleging that the bank failed to supervise bond traders who made false and misleading statements to customers while negotiating the sales of commercial mortgage-backed securities (CMBS) and residential mortgage-backed securities (RMBS). The CMBS and RMBS traders allegedly made misrepresentations to customers through e-mails and electronic messages, including by telling customers that Nomura paid more for a given security than it actually did or that Nomura was receiving a smaller spread than it actually was for brokering a trade. According to the SEC, these actions inflated the profits that Nomura received on the CMBS and RMBS trades.

The SEC alleged that Nomura had inadequate compliance and surveillance procedures that were reasonably designed to detect this misconduct. In order to settle these charges, Nomura agreed to be censured and to reimburse customers the full amount of profits earned on any RMBS or CMBS trades in which a misrepresentation was identified. In total, Nomura will pay over $20.7 million to RMBS customers and over $4.2 million to CMBS customers. Nomura also agreed to pay a $1 million penalty with respect to the RMBS misrepresentations and a $500,000 penalty with respect to the CMBS misrepresentations. The SEC has noted that the penalties against Nomura reflect the substantial cooperation provided by the bank during the SEC’s investigation, including by exercising internal controls and other remedial efforts to improve its surveillance procedures.

Read the SEC press release here.