Volume 10 | October 2020

DOJ Announces Record-Breaking Healthcare Takedown Involving 345 Defendants and $6 Billion in Alleged Fraud Losses

On September 30, 2020, the U.S. Department of Justice (“DOJ”) announced a nationwide enforcement action involving 345 defendants allegedly responsible for submitting more than $6 billion in fraudulent healthcare claims. According to the DOJ, the enforcement action is the largest healthcare fraud and opioid enforcement action or “takedown” in the department’s history. Chilivis Grubman attorneys have written about the increasing trend of large scale takedowns by the DOJ. For example, in 2019, the DOJ announced “Operation Brace Yourself,” which included charges against 24 criminal defendants related to dispensing orthotic braces using telemedicine that resulted in an estimated $1.5 billion in cost avoidance, according to the DOJ.  

The DOJ’s latest takedown involves alleged fraudulent actions related to telemedicine, sober homes, and other opioid and traditional healthcare fraud schemes.


In its latest takedown, the DOJ charged 86 defendants who were allegedly responsible for over $4.5 billion in fraudulent claims involving telemedicine. The alleged fraud was operated across 19 judicial districts and included alleged kickbacks, medically unnecessary testing and orders, and the submission of fraudulent claims. The government’s focus on telemedicine is not new. In July 2020, Chilivis Grubman attorneys wrote about the DOJ’s continued scrutiny of and enforcement efforts related to telemedicine, even during a national pandemic. The increased scrutiny of telemedicine is not limited to the DOJ and includes efforts by multiple agencies, such as the Centers for Medicare & Medicaid Services (“CMS”). For example, the DOJ’s press release also noted that CMS revoked the Medicare billing privileges of 256 additional medical professionals involved in telemedicine schemes.  

Sober Homes

The DOJ’s takedown included charges against more than a dozen defendants for fraudulent claims associated with tests and services for patients seeking drug and alcohol addiction treatment, including allegedly performing medically unnecessary tests, billing for services not performed, and engaging in kickback schemes. The fraudulent claims amount to more than $845 million, according to the DOJ. The defendants include medical providers, owners and operators of substance abuse treatment facilities, and patient recruiters, which evidences the government’s willingness to pursue non-medical providers in healthcare fraud schemes.  

Opioid and Traditional Healthcare Fraud Schemes

The DOJ’s historic takedown also ensnared over 240 defendants allegedly involved in schemes to submit more than $800 million to federal and private healthcare payors. The schemes allegedly involved illegal opioid distributions, kickbacks, and submission of claims that were medically unnecessary or never performed. Besides the massive takedown, the DOJ noted the collaborative efforts of HHS-OIG, FBI, DEA, 43 U.S. Attorney’s Offices, state agencies, and other unnamed federal enforcement agencies. The DOJ also announced the creation of a new task force, the “National Rapid Response Strike Force,” whose objective is to investigate and prosecute fraud cases involving healthcare providers that operate in multiple jurisdictions. The National Rapid Response Strike Force will join a host of investigative teams and task forces, such as the Appalachian Regional Strike Force, the Newark/Philadelphia regional Strike Force, and the Medicare Fraud Strike Force.

Healthcare industry participants (physicians, nurses, licensed medical professionals, and non-providers) must remain vigilant in compliance efforts and with potential fraud and abuse concerns. The government’s collaboration and enforcement actions will continue to increase. “[C]ollaboration is critical in our fight against health care fraud. We will continue working with our law enforcement partners to hold accountable those who steal from federal health programs and protect the millions of beneficiaries who rely on them,” explained the U.S. Department of Health & Human Services’ Deputy Inspector General Gary Cantrell.
Profiteering Whistleblowers Beware: Court Upholds Dismissal of Opportunistic Qui Tam Action

The False Claims Act (“FCA”) was enacted in 1863 as a tool to deter fraud against the government. The FCA prohibits, among other things, presenting to the government a false or fraudulent claim for payment or approval. Congress strengthened the FCA in 1986 when it amended the qui tam provisions of the law to provide financial incentives and a procedural structure to whistleblowers – known as "relators" – so that individuals could bring FCA cases on behalf of the government. 

Qui tam actions, particularly healthcare-related, have increased exponentially in recent years. Of the $3 billion recovered by the Department of Justice from civil fraud and abuse cases in 2019, $2.6 billion involved the healthcare industry. In 2019 alone, the government paid $265 million to whistleblowers in healthcare-related qui tam actions. While qui tam actions provide an important tool in the government’s fight against fraud, the potential recovery for whistleblowers presents a lucrative opportunity. Just as opportunists will seek to take advantage of the government when presenting false or fraudulent claims, opportunists will seek to take advantage of whistleblower rewards. 

That hypothetical became a reality in U.S. v. UCB, Inc. In that case, the relator, CIMZNHCA, LLC, filed a complaint alleging that UCB illegally paid physicians for prescribing a drug that UCB manufactured to treat Crohn’s disease. CIMZNHCA is a subsidiary of Venari Partners LLC, which formed 10 other daughter companies, each for the purpose of filing a separate qui tam action. All eleven qui tam actions allege virtually identical FCA violations against defendants in pharmaceutical and related industries. 

The DOJ moved to dismiss the qui tam complaint because, after investigating the Venari companies’ claims, including CIMZNHCA’s, it found the claims “to lack sufficient merit to justify the cost of investigation and prosecution and otherwise to be contrary to the public interest.” After grappling with jurisdictional, statutory construction, and constitutional issues, the Seventh Circuit Court of Appeals sided with the DOJ and ruled that the qui tam complaint must be dismissed. In so doing, the court agreed with the government that the FCA was used as a guise for a business opportunity rather than an effort to protect against government fraud and abuse. “These relators, created as investment vehicles for financial speculators, should not be permitted to indiscriminately advance claims on behalf of the government against an entire industry that would undermine practices the federal government has determined are appropriate and beneficial to federal healthcare programs and their beneficiaries.” 

Although the DOJ relies heavily on relators to enforce the FCA, UCB provides insights to the government’s and the courts’ tolerance for whistleblowers who seek to convert the FCA into a profit-making endeavor.
Does DOJ’s Antitrust Indictment Signal a New Enforcement Approach Towards the Healthcare Industry?

While the FCA has long been considered one of the DOJ's most powerful tools for preventing wrongdoing in the healthcare industry, the DOJ’s Antitrust Division has been actively investigating anti-competitive behavior in the oncology market and is using federal antitrust laws as its enforcement hook. 

The DOJ recently announced that Dr. William Harwin, founder and former President of Florida Cancer Specialists & Research Institute, LLC (“FCS”), was indicted for conspiring to allocate certain oncology treatments for patients in Southwest Florida. According to the indictment, from 1999 through 2016, Dr. Harwin and his co-conspirators entered into an agreement to allocate medical oncology treatments, such as chemotherapy, to FCS and to allocate radiation oncology treatments to a competing oncology group. Dr. Harwin faces up to 10 years in prison and a $1 million fine if convicted.

The indictment is the result of an ongoing investigation into market allocation and other anticompetitive conduct in the oncology industry. FCS previously entered into a deferred prosecution agreement with the DOJ whereby it agreed to pay the statutory maximum penalty of $100 million. Dr. Harwin is the first individual charged pursuant to this investigation, but the indictment also referenced other unnamed individual co-conspirators. 

Assistant Attorney General Makan Delrahim announced that the charges demonstrate the DOJ’s Antitrust Division’s commitment to “holding culpable executives accountable for their crimes,” and that “the Antitrust Division will continue to work to protect competition and integrity in the healthcare industry.” Michael F. McPherson, Special Agent in Charge of the FBI Tampa Field Office, also emphasized that the “FBI will persist in exposing unscrupulous medical providers who deny the public access to a competitive healthcare marketplace.”

Historically, antitrust cases in the healthcare industry have been rare. Whether this case is an aberration in enforcement trends or portends a shift in enforcement priorities for the DOJ’s Antitrust Division remains to be seen. However, federal antitrust laws are another arrow in the DOJ’s enforcement quiver. It behooves every healthcare provider to be aware of antitrust issues that can arise from collaborative agreements with competitors, particularly when the COVID-19 crisis continues to put pressure on the healthcare industry. 
Mom, Apple Pie, and Georgia Constitutional Amendments

As voters in Georgia go to the polls and continue to vote by absentee ballot, voters will be asked to consider three amendments to the Georgia constitution. Georgia’s constitution has been amended 87 times since Georgians adopted the current version of the constitution in 1983. Voters commonly do not know what exactly they are voting on when they consider constitutional amendments and the ballot language sometimes reads as patriotic as mom and apple pie. To help provide more information as you consider the constitutional amendments this year, we prepared the following short summary of the three amendments on the ballot. These amendments require a majority vote of the public to become law. All of these amendments passed the Georgia General Assembly with strong bipartisan support and very little opposition.  

Amendment # 1

Wording: “Shall the Constitution of Georgia be amended so as to authorize the General Assembly to dedicate revenues derived from fees or taxes to the public purpose for which such fees or taxes were intended?”

Though state law imposes certain fees or taxes, once collected, those fees or taxes commonly are paid into the State’s general fund and not to address the specific issue for which the fee or tax was intended. A common example is the $1 state-mandated tire disposal fee that people pay when purchasing new tires. If passed, this amendment would require that the funds collected from certain fees or taxes would be used for their stated purpose and not put into the State’s general fund. 

Amendment # 2

Wording: “Shall the Constitution of Georgia be amended to waive sovereign immunity and allow the people of Georgia to petition the superior court for relief from governmental acts done outside the scope of lawful authority or which violate the laws of this state, the Constitution of Georgia, or the Constitution of the United States?”

As discussed previously on our blog, under current Georgia law, parties are limited in the types of lawsuits they can file against the government because of sovereign immunity, which means that sometimes parties are barred from suing state and local government officials who are alleged to have acted beyond their authority. If the constitutional amendment is passed by a majority of voters, people will be able to bring a lawsuit to seek declaratory and equitable relief against state and local governments for acts that are “outside the scope of lawful authority or in violation of the laws or the Constitution of this state or the Constitution of the United States.” Such cases could be brought regarding “past, current, or prospective acts which occur on or after January 1, 2021” and could be brought against state and local government officials.  

Amendment # 3

Wording: “Shall the Act be approved which provides an exemption from ad valorem taxes for all real property owned by a purely public charity, if such charity is exempt from taxation under Section 501(c)(3) of the federal Internal Revenue Code and such real property is held exclusively for the purpose of building or repairing single-family homes to be financed by such charity to individuals using loans that shall not bear interest?”

This amendment, if approved by the voters, would exempt from taxes all real property that is owned by 501(c)(3) public charities and that is held “exclusively for the purpose of building or repairing single-family homes” that are financed by such charities at zero interest loans. A common example of such a non-profit is Habitat for Humanity. Voting yes would waive the property taxes for such a non-profit.  
COVID 19: Botched Sale of Ventilators Results in Federal Action under New York State’s False Claims Act

On October 8, 2020, the City of New York filed a lawsuit against several South Florida entities and individuals and a Chinese company for allegedly failing to procure ventilators which were promised during the peak of the city’s battle with COVID-19. In its complaint, NYC argues, among other things, that it is entitled to relief under the New York False Claims Act (“NYFCA”), which is New York State’s corollary to the federal False Claims Act.

The events leading to the suit began in late March of 2020, when New York City was the epicenter of the COVID-19 crisis in the United States. At the time, the city was seeing a skyrocketing number of patients who were unable to breath on their own as a result of the coronavirus. An adequate supply of ventilators was critical to save these patients’ lives, but, as the state’s governor repeatedly explained during his daily press conferences, the city was in danger of running out of the devices and officials were in a desperate struggle to obtain an adequate supply. 

Seeking to capitalize on this unprecedented demand, the South Florida defendants agreed to sell NYC 130 ventilators imported from China for the price of more than $8.25 million. The South Florida defendants then allegedly agreed to pay their Chinese supplier more than $7.5 million for the ventilators.  

On March 30, 2020, NYC paid the South Florida defendants the purchase price in full and the South Florida defendants paid their Chinese supplier a few days later. Unfortunately, the ventilators never materialized.  

NYC alleges that, on April 10th, it was notified that the South Florida defendants had requested a refund from their Chinese supplier. The city then immediately demanded that the South Florida defendants refund the full purchase price to NYC. Two months later, NYC received approximately $4 million dollars from the South Florida defendants, but the remaining funds were never returned. 

NYC bases its NYFCA claims on several allegedly false statements made to induce its payment of $8.25 million to the South Florida defendants. According to the complaint, the South Florida defendants failed to inform NYC that they were not authorized to import goods, such as ventilators, regulated by the U.S. Food and Drug Administration. NYC also alleges that one of the defendants falsely stated that they had ventilators “on hand,” and that the ventilators would be “ready to ship Tuesday.” The South Florida defendants also allegedly claimed to have a direct relationship with the manufacturer of the ventilator and referred to “our factory in China,” when no such relationship existed. According to the complaint, these false statements constitute a false claim for payment, in violation of the NYFCA. Accordingly, NYC is seeking more than $4.2 million in damages, $12.8 million in treble damages under the NYFCA, plus punitive damages.

The case is captioned City of New York v. Global Medical Supply Group, LLC, et al., No. 9:2020cv81880, U.S. District Court for the District of Southern Florida.
COVID-19 Delays Opioid Bellwether Trial Until 2021

The COVID-19 pandemic has led to delays in trials across the country, beginning in March 2020 and continuing into 2021. A long-awaited trial in federal court in West Virginia is the latest addition to that list. 
An eagerly anticipated bellwether trial in multidistrict opioid litigation was supposed to go forward October 19, but the federal judge overseeing the matter granted a motion to delay the start date to January 4, 2021 and is expected to issue an order setting forth protocols to govern the rescheduled trial.  

The West Virginia trial was set to move forward non-jury, with a pair of six-week segments divided by a five-week break for the holiday season. In seeking a continuance, the defendants, three drug distributors, argued that in-person proceedings could become a “super-spreader event.” In particular, defendants raised the “recent experience within the tightly controlled world of professional sports” to highlight that “precautions taken by one trial team in this case can be easily and swiftly upended” by the conduct of another trial team whose members are unknowingly infected or who intentionally hide symptoms. The defendants also referenced the recent infection of several federal government officials, including the President, to “underscore the risks of bringing together large groups of people from across the country.” The plaintiffs, local governments in Cabell County and the city of Huntington, both opposed the continuance, arguing that the risks associated with COVID-19 will be even worse in January.

There are even more risks associated with jury trials. A federal judge in Ohio recently delayed, indefinitely, the start of another opioid bellwether trial against certain large national pharmacy chains citing “the ongoing COVID-19 pandemic.”

Chilivis Grubman recently wrote about the efforts in Georgia to safely reopen courts for jury trials. Whether jury trials begin, and if so under what conditions, is expected to vary greatly across both state and federal courts throughout the country. 
Atlanta: A Home for Cybercriminals

As we’ve written before, cybercrime continues to be one of the top risks facing businesses and organizations. It’s also a top priority for regulators and prosecutors. The most common form of cybercrime is Business Email Compromise (BEC) fraud, an email phishing scheme wherein the cybercriminal impersonates a company executive and convinces an employee to transfer money into fake accounts. Between 2013 and 2018, such BEC attacks have resulted in $12 billion in potential losses.

Though BEC fraud is understood to have originated in Nigeria, Americans might be surprised to learn that the phishing email they received last week may very well have come from someone operating just down the street. According to a recent study by Agri Data, approximately 25% of BEC attackers operate from the United States. More alarming for Atlantans, about 7% of these individuals are our neighbors, the highest percentage of any American city. One reason for this concentration may be that Atlanta is home to a large number of payment-processing companies. As the senior director of research at Agri explained, “the talent is already living here.” 
Georgia Prepares to Resume In-Person Jury Trials

In response to COVID-19, the Chief Justice of the Georgia Supreme Court, Justice Melton, issued a statewide judicial state of emergency in March, which suspended all in-person jury trials. Nearly 6 months have passed without jury trials, and the backlog of cases has reached unprecedented levels. In addition to logistical issues, the delays raise constitutional concerns related to the right to a speedy trial and to a trial by a jury of peers. Although the Georgia Council of Superior Court Judges considered amending state rules to allow certain proceedings to occur by teleconference, jury trials have remained suspended. 

In the latest judicial emergency order, Chief Justice Melton states that the continued prohibition against jury trials cannot continue, “even if the pandemic continues, because our judicial system, and the criminal justice system in particular, must have some capacity to resolve cases by indictment and trial.” The order directs each county to establish a local committee tasked with developing guidelines to safely resume jury trials and notes that courts in Georgia will likely be authorized to resume jury trials as early as October 10, with actual trials occurring as early as November. 

The Judicial COVID-19 Task Force issued guidance for resuming jury trials, even as the pandemic continues to plague the state. Initially noting that criminal cases should receive priority status given the unique constitutional rights that are at issue in those proceedings, the guidance then goes on to provide high-level protocols for various aspects of jury trials. 

Physical Space Protocols

The Task Force’s guidance incorporates much of the CDC’s recommendations with respect to social distancing and cleaning protocols. The guidance encourages courthouses to consider, among other things: 

  • Installing social distancing markets, plexiglass barriers, and hand sanitizing stations where appropriate; 
  • Implementing alternating schedules for use of certain rooms so that they can be cleaned between uses; 
  • Coordinating with courthouse security to implement screening protocols or other measures to allow for contact tracing in the event of a COVID-19 exposure; and
  • Providing masks upon entry. 

Jury Trial Scheduling and Pre-Trial Conferences

The guidance provides the following recommendations with respect to scheduling trials and summoning jurors: 

  • Schedule fewer jury trials than normal and coordinate schedules among judges to minimize the number of trials happening at one time; 
  • Consider options and develop a plan for the admission of exhibits to minimize the handling of evidence at trial; 
  • Summon more jurors than normal in anticipation that fewer jurors will report due to COVID-19 hardships, lack of child care, or holding a job in an essential industry; 
  • Provide safety information with jury summonses; 
  • Consider questionnaires to screen for potential COVID-19 exposure and illness; and
  • Stagger juror arrival time (noting that qualification may have to take place over several days).

Impaneling and Qualifying Jurors

The Task Force provided the following recommendations for voir dire and impaneling a jury: 

  • Consider use of transparent face shields during voir dire to reduce hearing impairments or language challenges; 
  • Question jurors in smaller panels;
  • Issue electronic or written questionnaires in advance to streamline voir dire; 
  • Consider conducting voir dire remotely; and
  • Prepare for jurors who refuse to appear.

Seating the Jurors and Conducting the Trial

During the trial itself, the Task Force recommends the following: 

  • Seat jurors in the gallery instead of the jury box to maximize social distancing; 
  • Allow juror deliberations to occur in larger rooms; 
  • Post social distancing reminders for jurors on breaks; 
  • Present evidence digitally where possible; 
  • Consider having certain witnesses appear remotely; 
  • Create a plan for sidebar conversations; 
  • Consider how sequestration will be affected by live-streaming of trials; and 
  • Implement protocols for attorneys to converse with their client without having to whisper in each other’s faces 

The commencement of jury trials understandably concerns many in the public who fear for their safety if called for jury duty. The Judicial COVID-19 Task Force has secured a $100,000 grant to create public service announcements intended to reassure those called for jury duty that the courthouses will abide by the Task Force’s guidance and other CDC recommendations. While much remains uncertain about the future course of the pandemic and its effect on the judiciary, Chief Justice Melton’s statements regarding the urgent need to resume jury trials is some indication that the judiciary’s appetite for continuing to push the pause button on jury trials is quickly dwindling. 
Paying Ransom Could Lead to Fines

On October 1, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued an Advisory on Potential Sanctions Risks for Facilitating Ransomware Payments announcing that companies that “facilitate” ransom payments on behalf of ransomware victims may be subject to steep civil monetary penalties. This could include intermediaries who negotiate on behalf of victims, cyber insurance firms, and even financial institutions that process the transaction. 

Federal law prohibits U.S. persons from engaging in transactions, either directly or indirectly, with certain persons, groups, or organizations owned or controlled by prohibited foreign governments, such as North Korea, or organizations such as terrorist groups. These persons, groups, or organizations are identified by the Treasury Department as “Specially Designated Nationals,” or “SDN,” and are listed on the Department’s “Specially Designated Nationals and Blocked List.” SDN’s are believed to have been behind several large-scale ransomware attacks in recent years, including “WannaCry 2.0” and “SamSam.”  

Although the Department guidance expressly only applies to “facilitators” of ransom payments, the reasoning behind the guidance seems to be equally applicable to ransomware victims who make direct contact with the cybercriminal and pay the ransom directly. Because payments to SDN’s are subject to strict liability, and therefore it is irrelevant whether the ransom recipient is known to be on the “Blocked List,” both ransomware victims and those who assist them in paying ransom now have an additional factor to consider in deciding whether to pay a ransom.  
Chilivis Grubman News
Chilivis Grubman Attorneys Present At Several Virtual Conferences

Although COVID continues to affect in-person professional conferences, the attorneys at Chilivis Grubman have been busy presenting at virtual conferences and webinars throughout the pandemic.

Last month, Scott Grubman presented at the virtual annual conference for the National Association of Spine Surgeons (NASS), on the topic of fraud and abuse enforcement affecting physicians. In October and November, he will present at virtual conferences for the Louisiana Pharmacy Association, the Health Care Compliance Association (HCCA), the American Health Lawyers Association (AHLA), and the American Society of Interventional Pain Physicians (ASIPP). Chilivis Grubman associate Christian Dennis will join Scott in presenting to the ASIPP.


We do not have government by the majority.
We have government by the majority who participate.


FINRA BrokerCheck Expungements: Proposed Rule Changes

In August, we wrote about amendments to the FINRA Rules that made it more expensive for registered representatives to seek expungement of their Central Registration Depository (CRD) records. In an effort to reform the expungement process even further, FINRA recently submitted additional proposed rule changes to the U.S. Securities and Exchange Commission (SEC) for approval. If approval is granted, registered representatives will need to be even more vigilant about how and when they seek expungement of their CRD records. 

For instance, under the current rules, a registered representative named as a party in a customer arbitration can wait until after the conclusion of the arbitration before making the related expungement request in a separate proceeding. The proposed rule changes prohibit such bifurcation and require that the expungement request be made during the underlying arbitration proceeding. 

The proposed rule changes still permit a registered representative not named as a party in the underlying arbitration to make an expungement request in a separate proceeding, but such a request must be made within 2 years of the conclusion of the underlying arbitration. In addition, a registered representative named in a customer complaint that does not result in an arbitration must make his or her expungement request within 6 years of the complaint.

The proposed rule changes also reform the expungement arbitration process. For instance, expungement requests may currently be heard by one arbitrator or a panel of three. Under the proposed rule changes, expungement requests made after the conclusion of the underlying customer arbitration or complaint must be heard by three panel members, all of whom must be selected from a newly created special roster of arbitrators with enhanced training and experience to make decisions about expungements. According to FINRA, “having three arbitrators available to ask questions, request evidence and to serve generally as fact-finders in the absence of customer input would help ensure that a complete factual record is created to support the arbitrators’ decision in such expungement hearings.”
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