MEDICAL CENTER TO PAY ALMOST $41 MILLION TO RESOLVE ALLEGED UNNECESSARY BILLING FOR CARDIAC PROCEDURES, KICKBACKS

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, May 28, 2014

King’s Daughters Medical Center to Pay Nearly $41 Million to Resolve Allegations of False Billing for Unnecessary Cardiac Procedures and Kickbacks

Ashland Hospital Corp. d/b/a King’s Daughters Medical Center (KDMC) has agreed to pay $40.9 million to resolve allegations that it submitted false claims to the Medicare and Kentucky Medicaid programs for medically unnecessary coronary stents and diagnostic catheterizations and had prohibited financial relationships with physicians referring patients to the hospital, the Justice Department announced today.

Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division, U.S. Attorney Kerry Harvey for the Eastern District of Kentucky and Special Agent in Charge Derrick L. Jackson at the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) Kentucky region made the announcement.

“Hospitals that place their financial interests above the well-being of their patients will be held accountable,” said Assistant Attorney General Delery.   “ The Department of Justice will not tolerate those who abuse federal health care programs and put the beneficiaries of these programs at risk by providing medically unnecessary care.”

The government alleged that, between 2006 and 2011, KDMC billed for numerous unnecessary coronary stents and diagnostic catheterizations performed by KDMC physicians on Medicare and Medicaid patients who did not need them.   The government also alleged that the physicians falsified medical records in order to justify these unnecessary procedures, which allegedly generated millions of dollars in Medicare and Kentucky Medicaid reimbursements for KDMC.

“The conduct alleged in this matter is unacceptable, victimizing both taxpayers and patients,” said U.S. Attorney Harvey.   “Treatment decisions motivated by financial gain undermine public confidence in our health care system and threaten vital federal programs upon which so many of our citizens rely.   We will not relent in our efforts to protect the public from the sort of systematic misconduct alleged in this case.”

The settlement also resolves allegations that KDMC violated the Stark Law by paying certain cardiologists salaries that were unreasonably high and in excess of fair market value.   The Stark Law is designed to limit the influence of money on physicians’ medical decision-making by prohibiting financial relationships between hospitals and referring physicians, unless these relationships meet certain designated exceptions.

In connection with this settlement, KDMC has agreed to enter into a Corporate Integrity Agreement with HHS-OIG, which obligates the hospital to undertake substantial internal compliance reforms and to commit to a third-party review of its claims to federal health care programs for the next five years.

“Medically unnecessary procedures can cause serious health issues, cost the taxpayers millions of dollars each year and drain the Medicare Trust Fund,” said Special Agent in Charge Jackson.   “The OIG will continue to protect beneficiaries and hold health care providers accountable for improper claims.”

“This type of alleged conduct deceives individuals when they are seeking medical treatment and are vulnerable,” said Special Agent in Charge Perrye K. Turner of the FBI’s Louisville Field Division.  “The level of funds involved in this matter is staggering.   This money has been stolen from the patients and the taxpayers.”

The Commonwealth of Kentucky will receive approximately $1,018,380, which represents the state’s share of the recovered Medicaid funds.   The Medicaid program is funded jointly by the federal and state governments.

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.

The investigation was conducted by the FBI, the HHS-OIG, the Kentucky Office of Attorney General, Medicaid Fraud and Abuse Control Unit, the Commercial Litigation Branch of the Department of Justice’s Civil Division and the U.S. Attorney’s Office for the Eastern District of Kentucky.   The claims settled by this agreement are allegations only, and there has been no determination of liability.

INVESTMENT ADVISER LOCATED IN VIRGIN ISLANDS CHARGED WITH DEFRAUDING CLIENTS

Off The Island Of St. Thomas.  Credit:  CIA World Factbook.

FROM: U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C., Feb. 21, 2013 — The Securities and Exchange Commission today charged an investment adviser located in the U.S. Virgin Islands with defrauding clients from whom he withheld the fact that he was receiving kickbacks for investing their money in thinly-traded companies. When he faced pressure to pay clients their returns on those investments, he allegedly used money from other clients in a Ponzi-like fashion to make payments.

The SEC’s Enforcement Division alleges that James S. Tagliaferri, through his St. Thomas-based firm TAG Virgin Islands, routinely used his discretionary authority over the accounts of his clients to purchase promissory notes issued by particular private companies. In exchange for financing those companies, TAG received millions of dollars in cash and other compensation — a conflict of interest that was never disclosed to investors. The Enforcement Division further alleges that when the promissory notes neared or passed maturity and his clients demanded payment, Tagliaferri misused assets of other clients to meet those demands.

"Tagliaferri was anything but forthcoming with his clients and he repeatedly failed to act in their best interests," said Andrew M. Calamari, Director of the SEC’s New York Regional Office. "He didn’t tell them about the compensation he received from the companies they were financing, and then compounded his fraud by using client assets to pay other clients when the conflicted investments came due."

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Tagliaferri.

According to the SEC’s order instituting administrative proceedings, Tagliaferri invested TAG clients primarily in conservative and liquid investments such as municipal bonds and blue-chip stocks until around 2007, when he began investing clients in highly illiquid securities. These investments included promissory notes issued by various closely-held private companies that were nothing more than holding companies through which an individual and his family effected personal and business transactions. He also invested at least $40 million of clients’ money in notes of a private horse-racing company, International Equine Acquisitions Holdings, Inc.

According to the SEC’s order, TAG received more than $3.35 million and approximately 500,000 shares of stock of a microcap company in return for placing various investments with these companies. The compensation that TAG received from the companies for the investments that Tagliaferri made on behalf of his clients created a conflict of interest that he was required to disclose to investors.

The SEC’s Enforcement Division alleges that Tagliaferri then further defrauded clients by investing their funds in microcap and other thinly-traded public companies in order to raise at least $80 million to pay the interest or principal due to other clients on certain of the promissory notes. Tagliaferri explained in e-mails he sent in April 2010 to the individual behind the companies that the real motivation for investing TAG clients in one of his microcap companies was to use the proceeds to pay off other clients invested in the initial series of promissory notes. "Where is the $125MM. As you are aware, this money was earmarked to clear all of the notes and other issues facing us both," Tagliaferri wrote. He later added, the "shares you transferred are being sold to clients. With those proceeds, you’re buying back your own notes." TAG clients were unaware, however, that Tagliaferri’s true motivation for having them buy these stocks was to repay other TAG clients on other conflicted investments he had made for them.

According to the SEC’s order, Tagliaferri willfully violated Sections 17(a)(1) and (3) of the Securities Act of 1933, Sections 10(b) and 15(a) of the Securities Exchange Act of 1934 and Rules 10b-5 thereunder, and Sections 206(1), 206(2) and 206(3) of the Investment Advisers Act of 1940.

The SEC’s investigation, which is continuing.