Pharmaceutical Company Agrees to Pay $15.4 Million to Resolve Alleged False Claims Act Violations

DOJ News

NY Ambulette Owners Plead Guilty to $8.6 Million Health Care Kickback Scheme

On September 5, the Department of Justice announced that two New York ambulette owners pleaded guilty to one count of conspiracy to offer and pay health care kickbacks and one count of conspiracy to defraud the lawful function of the IRS. Igor and Aleksandr Radinovskiy, father and son, were co-owners of Sabe Ambulette Services, Inc. and, according to court filings and admissions, paid more than $8.6 million in kickbacks to co-conspirator companies not enrolled in the Medicaid program. In exchange, the defendants were referred beneficiaries by the co-conspirators and falsely billed Medicaid claiming that they transported the beneficiaries to various clinics. Defendants then under-reported business income by reporting to the IRS that the illegal kickback payments were business expenses.

The case was investigated and prosecuted by the US Attorney’s Office for the Eastern District of New York and the Medicare Fraud Strike Force, which is a joint initiative between the DOJ and Department of Health and Human Services.

The DOJ Press Release is here.

Pharmaceutical Company Agrees to Pay $15.4 Million To Resolve Alleged False Claims Act Violations

Pharmaceutical company Mallinckrodt ARD LLC, formerly known as Questcor Pharmaceuticals, Inc., agreed to pay $15.4 million to resolve charges brought by the US Attorney’s Office for the Eastern District of Pennsylvania claiming that Questcor paid illegal kickbacks to doctors to induce them to prescribe the company’s drug, H.P. Acthar Gel.

Between 2009 and 2013, 12 Questcor sales representatives responsible for marketing H.P. Acthar Gel allegedly provided lavish meals and expensive entertainment to doctors with the intent of persuading them to prescribe the product, resulting in a violation of the Federal Anti-Kickback Statute and submission of false claims to Medicare.

The claims were originally brought in two cases filed pursuant to the whistleblower provision of the False Claims Act. The whistleblowers will receive approximately $2.9 million of the settlement. The settlement does not resolve all the claims brought in the two lawsuits, however, and the government continues to pursue claims that the company used a foundation as a conduit for paying illegal kickbacks in the form of copay subsidies for the drug.

The DOJ Press Release is here.

Insider Trading Conspirator Sentenced to One Year in Prison

On September 9, an Illinois federal judge sentenced a California stock trader to a year and one day in prison for his role in trading on insider information that Life Time Fitness, Inc. was going to be taken private.

Prosecutors from the US Attorney’s Office for the Northern District of Illinois said that Eric Weller made about $550,000 on an initial $50,000 investment by trading on insider information about Life Time Fitness’s acquisition by two private equity firms. Weller was one of nine co-defendants; the remaining defendants pleaded guilty or cooperated with prosecutors in exchange for deferred prosecution. In August, former Life Time executive Shane Fleming, who was the original source of the non-public information, was sentenced to two months in prison. In explaining Weller’s one year sentence, US District Court Judge Matthew Kennelly stated that Weller’s experience as a trader allowed him to better use the insider information to earn a greater return and thus a harsher sentence. Trial evidence indicated that out of the approximately $860,000 made by the nine defendants, Weller earned $550,000 alone. The defendants are also facing a civil action brought by the Securities and Exchange Commission.

The criminal case is USA v. Beshey et al., case number 1:17-cr-00643, in the US District Court for the Northern District of Illinois. A copy of the indictment can be found here.

The civil case is Securities and Exchange Commission v. Fleming et al., case number 1:17-cv-07049, in the US District Court for the Northern District of Illinois.