Quicken Loans Inc. Held Accountable For Past Actions!

The United States has filed a complaint in the U.S. District Court for the District of Columbia against Quicken Loans Inc. under the False Claims Act for improperly originating and underwriting mortgages insured by the Federal Housing Administration (FHA), the Justice Department announced today.  Quicken is a mortgage lender headquartered in Detroit.
“Those who do business with the United States must act in good faith, including lenders that participate in the FHA mortgage insurance program,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “To protect the housing market and the FHA fund, we will continue to hold responsible lenders that knowingly violate the rules.”
Quicken participated in the FHA insurance program as a direct endorsement lender (DEL).  As a DEL, Quicken had the authority to originate, underwrite and certify mortgages for FHA insurance.  If a DEL such as Quicken approves a mortgage loan for FHA insurance and the loan later defaults, the holder of the loan may submit an insurance claim to the U.S. Department of Housing and Urban Development (HUD), FHA’s parent agency, for the losses resulting from the defaulted loan.  Under the DEL program, neither the FHA nor HUD reviews the underwriting of a loan before it is endorsed for FHA insurance.  HUD therefore relies on DELs to follow program rules designed to ensure that they are properly underwriting and certifying mortgages for FHA insurance. And, to that end, a DEL must certify that every loan endorsed for FHA insurance is underwritten according to the applicable FHA standards.
The government’s complaint alleges that, from September 2007 through December 2011, Quicken knowingly submitted, or caused the submission of, claims for hundreds of improperly underwritten FHA-insured loans. The complaint further alleges that Quicken instituted and encouraged an underwriting process that led to employees disregarding FHA rules and falsely certifying compliance with underwriting requirements in order to reap the profits from FHA-insured mortgages.  For example, Quicken allegedly had a “value appeal” process where, when Quicken received an appraised value for a home that was too low to approve a loan, Quicken often requested a specific inflated value from the appraiser with no justification for the increase– even though such a practice was prohibited by the applicable FHA requirements.  Quicken also allegedly granted “management exceptions” whereby managers would allow underwriters to break an FHA rule in order to approve a loan.
The government’s complaint alleges that Quicken’s senior management was aware of these and other problems.  The complaint alleges that Quicken’s Divisional Vice President for Underwriting, the second most senior executive in Quicken’s Operations Department, wrote in an email discussing the value appeal process that “I don’t think the media and any other mortgage company (FNMA, FHA, FMLC) would like the fact we have a team who is responsible to push back on appraisers questioning their appraised values.”  In another email, the same Divisional Vice President for Underwriting wrote to a group of Quicken executives stating that 40 percent of the management exceptions on FHA’s early payment defaults should not have been granted, adding: “we make some really dumb decisions when it comes to client service exceptions.  Example, purchase loan we pulled new credit and the client stopped paying on almost everything and the scores fell by 100 points, we [still] closed it.”  In yet another email discussing an FHA loan, the Operations Director, a senior level executive, explained that the loan was approved based on “bastard income,” which he described as “trying to put some kind of income together that is plausible to the investor even though we know its creation comes from something evil and horrible.”
The government’s complaint alleges that as a result of Quicken’s knowingly deficient mortgage underwriting practices, HUD has already paid millions of dollars of insurance claims on loans improperly underwritten by Quicken, and that there are many additional loans improperly underwritten by Quicken that have become at least 60 days delinquent that could result in further insurance claims on HUD.  For example, the government’s complaint identifies a borrower whose bank account statement showed overdrafts in multiple months and during the loan application process requested a refund of the $400 mortgage application fee so that the borrower would be able to feed the borrower’s family.  Nevertheless, Quicken allegedly approved the loan.  The borrower made only five payments before becoming delinquent and as a result, HUD ultimately paid an FHA insurance claim of $93,955.19.  In another example, the complaint identifies a loan where the borrower was cashing out equity through a cash-out refinance.  Allegedly, Quicken originally received an appraised value of $180,000, but because the borrower wanted to receive more cash, Quicken requested the appraiser to inflate the value by $5,000.  The appraiser allegedly provided Quicken’s requested value of $185,000 even though the only difference between the two appraisals was the appraised value – the comparable sales analysis, and even the date of the appraiser’s signature, remained the same.  Quicken allegedly used the inflated appraisal value to approve the loan.  The borrower was delinquent on his first payment and as a result, HUD ultimately paid an FHA insurance claim of $204,208.
The complaint further alleges that Quicken failed to implement an adequate quality control program to identify deficient loans, and that Quicken failed to report to HUD the loans it did identify.  In particular, according to the government’s complaint, despite its obligation to report to HUD all materially deficient loans, during the period from September 2007 to December 2011, Quicken concealed its deficient underwriting practices and failed to report a single underwriting deficiency to the agency.
The investigation of this matter was a coordinated effort among HUD-Office of Inspector General, HUD, the U.S. Attorney’s Office of the District of Colorado and the Civil Division’s Commercial Litigation Branch.

Whistleblower Saves Medicare Millions!

- Thanks to a brave whistleblower the Justice Department said Tuesday that it is stepping into a long-running lawsuit against one of the nation's largest nursing-home chains, accusing it of systematic Medicare overbilling and sometimes putting frail, dying patients through arduous rehab schedules just to increase revenue.

The department is taking control of a whistleblower lawsuit in U.S. District Court in Alexandria against Toledo, Ohio-based HCR ManorCare after a yearslong investigation. The initial accusations against the company were filed by a northern Virginia occupational therapist in 2009.

The lawsuit alleges that ManorCare routinely pressured administrators of its nursing homes, assisted living and rehab facilities to meet financial targets by billing for unnecessary care.

ManorCare, which also operates under the Heartland and Arden Courts brands, denied wrongdoing and said the dispute revolves around providing care that exceeds government expectations.

"The government bases its allegations on retrospective analyses performed by a few alleged experts who have never cared for, spoken with or even seen the patients in question. Instead, these alleged experts second-guess the hands-on clinical judgment of tens of thousands of experienced, licensed, caring and compassionate doctors, nurses and therapists who actually provided care to our patients," the company said in a statement issued Tuesday. It declined to comment further.

But Jeffrey Downey, attorney for the original whistleblower, occupational therapist Christine Ribik, said the government's investigation of ManorCare was exhaustive and "uncovered an astonishing amount of really bad facts."

The lawsuit alleges that ManorCare routinely pushed the vast majority of its patients into Medicare's highest tier of rehabilitation services, whether they needed it or not. That allowed the company to increase the amounts it billed.

For instance, in 2006, ManorCare billed Medicare at the top reimbursement rate for 39 percent of its patients. That number more than doubled to 80 percent by 2009, according to the lawsuit.

The lawsuit describes an 85-year-old patient at a ManorCare facility in Palm Harbor, Florida, whose medical records called for hospice care only, instead being put through 100 days of therapy even though a therapist described him as "medically fragile." He was put into hospice care only at the end of the 100 days, which marked the length of time that Medicare would cover his therapy treatments.

"We strive for a system whereby health care providers provide reasonable and necessary services without overbilling Medicare for unreasonable and unnecessary services," said Dana Boente, U.S. Attorney for the Eastern District of Virginia, where the case has been brought.

The lawsuit does not specify the amount that investigators believe Medicare was overbilled, but says Medicare paid more than $6 billion to ManorCare's 281 skilled nursing facilities from January 2006 to May 2012.

ManorCare operates skilled nursing facilities in 30 states. It was purchased in 2007 by The Carlyle Group for $6.3 billion.

The lawsuit was initially filed under the False Claims Act, which allows private citizens to bring lawsuits on behalf of the United States when they have knowledge that the government is being defrauded. The U.S. can then investigate and decide whether it wants to take over the case. Whistleblowers whose cases are taken over by the government are entitled to collect anywhere from to 15 to 25 percent of any money recovered. The percentage increases slightly if they win a case without the government's help.

International Fraud Uncovered!

INTERNATIONAL FRAUD DISCOVERED!

24-count indictment has been unsealed today charging four corporations and five individuals with facilitating the illegal export of high-tech microelectronics, uninterruptible power supplies and other commodities to Iran in violation of the International Emergency Economic Powers Act (IEEPA). 

The announcement was made by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Assistant Director Randall Coleman of the FBI’s Counterintelligence Division, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office, Under Secretary of Commerce Eric L. Hirschhorn of the Department of Commerce, Special Agent in Charge Tracy E. Martin of the Department of Commerce’s Office of Export Enforcement’s Dallas Field Office and Special Agent in Charge Lucy Cruz of the IRS’ Houston Field Office. 

“The Office of Export Enforcement and our law enforcement partners will continue to investigate, pursue and dismantle these procurement networks that violate U.S. export control laws whether they operate within our borders or anywhere else in the world,” said Special Agent in Charge Martin.

The indictment alleges Houston-based company Smart Power Systems Inc. (SPS); Bahram Mechanic, 69, and Tooraj Faridi, 46, both of Houston; and Khosrow Afghahi, 71, of Los Angeles, were all members of an Iranian procurement network operating in the United States.  Also charged as part of the scheme are Arthur Shyu, and the Hosoda Taiwan Limited Corporation in Taiwan; Matin Sadeghi, 54, and Golsad Istanbul Trading Ltd. in Turkey; and the Faratel Corporation, co-owned by Mechanic and Afghahi in Iran.

 

According to the indictment, Mechanic and Afghahi are the co-owners of Iran-based Faratel and its Houston-based sister company SPS.  Faratel designs and builds uninterruptible power supplies for various Iranian entities, including Iranian government agencies such as the Iranian Ministry of Defense, the Atomic Energy Organization of Iran, and the Iranian Centrifuge Technology Company.  SPS designs and manufactures uninterruptible power supplies in cooperation with Faratel.  Faridi currently serves as a vice president of SPS.  Shyu is a senior manager at the Hosoda Tawain Limited Corporation, a trading company located in Taiwan, while Sadeghi is an employee of Golsad Istanbul Trading, a shipping company located in Turkey.

The indictment alleges that between approximately July 2010 and the present, Mechanic and the others engaged in a conspiracy to obtain various commodities, including controlled United States-origin microelectronics.  They then allegedly exported these to Iran, while carefully evading the government licensing system set up to control such exports.  The microelectronics shipped to Iran allegedly included microcontrollers and digital signal processors.  According to the indictment, these commodities have various applications and are frequently used in a wide range of military systems, including surface-air and cruise missiles.  Between July 2010 and the present, Mechanic’s network allegedly sent at least $24 million worth of commodities to Iran.

According to court documents, Mechanic, assisted by Afghahi and Faridi, regularly received lists of commodities, including United States-origin microelectronics, sought by Faratel in Iran.  Mechanic would approve these orders and then send the orders to Shyu in Taiwan, according to the indictment.  Shyu would allegedly purchase the commodities utilizing Hosoda Taiwan Limited and then ship the commodities to Turkey, where Sadeghi would act as a false buyer via his company, Golsad Istanbul Trading Ltd.  The indictment further alleges that Sadeghi would receive the commodities from Shyu and then ship them to Faratel in Iran.  Mechanic required his co-conspirators to notify him and obtain his approval for each of the transactions completed by the network, according to the allegations.

The individual defendants each face up to 20 years in federal prison, while the corporate defendants face fines of up to $1 million for each of the IEEPA counts, upon conviction.

Mechanic, Afghahi and Shyu are also charged with conspiring to commit money laundering and substantive money laundering violations, each charge carries a maximum potential term of imprisonment of 20 years.  Mechanic further faces a charge of willful failure to file foreign bank and financial accounts for which he faces up to five years in federal prison.  The charges also carry the possibility of substantial fines upon conviction.

Health Diagnostics Lab To Pay $47 Million in False Claims Settlement

 

 

Cardiovascular testing disease laboratories Health Diagnostics Laboratory Inc. (HDL), of Richmond, Virginia, and Singulex Inc., of Alameda, California, have agreed to resolve allegations that they violated the False Claims Act by paying off physicians in exchange for patient referrals and billing federal health care programs for medically unnecessary testing, the Department of Justice announced today.

Under the settlements, which stem from three related whistleblower actions filed under the federal False Claims Act, HDL will pay $47 million and Singulex will pay $1.5 million.  The government also intervened in the lawsuits as to similar allegations against another laboratory, Berkeley HeartLab Inc.; a marketing company, BlueWave Healthcare Consultants Inc., and its owners, Floyd Calhoun Dent and J. Bradley Johnson; and former CEO Latonya Mallory of HDL.

As alleged in the lawsuits, HDL, Singulex and Berkeley induced physicians to refer patients to them for blood tests by paying them processing and handling fees of between $10 and $17 per referral and by routinely waiving patient co-pays and deductibles.  In addition, HDL and Singulex allegedly conspired with BlueWave to offer these inducements on behalf of HDL and Singulex.  As a result, physicians allegedly referred patients to HDL, Singulex and Berkeley for medically unnecessary tests, which were then billed to federal health care programs.

 

The lawsuits were filed by Dr. Michael Mayes, Scarlett Lutz, Kayla Webster and Chris Reidel under the qui tam, or whistleblower, provisions of the False Claims Act.  Under the act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.  The whistleblowers’ share of the settlements has yet to be determined.  The act also permits the United States to intervene in and take over a whistleblower suit, as it has done in part in the three actions.  The United States advised the court that it would be filing its own complaint against the corporate and individual defendants against whom it has intervened within 120 days.

640,000 Altima Sedans Recalled

Nissan North America Inc. has recalled 640,000 Altima sedans after discovering the cars’ hoods can fly open while in motion. This brings the total number of Nissan and Infiniti vehicles recalled for the defect in the past year to nearly 1.1 million. On March 3, Nissan notified dealerships of the recall after the manufacturer discovered certain model year 2013 through 2015 Altimas contain secondary hood latches that may not fully engage when the hood is closed. The defect increases the risk that it will fly open unexpectedly while the vehicle is in motion and cause a crash. According to Nissan, there have been no reports of collisions or injuries caused by the defect.

In January, Nissan recalled 216,000 Nissan Pathfinder and Infiniti JX35s and QX60s for the same problem. Three months before that, hood latch issues prompted the recall of 238,000 model year 2013 Altimas. According to its report to the National Highway Transportation Safety Administration (NHTSA), Nissan said it is continuing to investigate which vehicles are involved in the current recall and said its work is ongoing. So far it had pointed to 625,000 Altimas sold in the U.S. and 15,000 sold in Canada. The agency said: Nissan is continuing to investigate the root cause of this issue. Once Nissan concludes its investigation, we may revise the defect description.

The manufacturer noted that it has not yet developed a remedy for the problem but plans to provide information as soon as it becomes available. The company plans to implement an interim procedure to inspect and lubricate the secondary hood latch assembly on all subject vehicles in dealer inventory prior to retail sale. “We will not include a statement in the Part 577 owner notification concerning reimbursement for the cost of obtaining a pre-notification remedy as the subject vehicles are under warranty,” Nissan said.

Nissan should complete notifications to customers of the defect by the end of this month. The automaker’s recalls so far this year have not been confined to only hood-related issues. In January, the automaker recalled 470,000 model year 2008 through 2014 Nissan Rogues that NHTSA found to be plagued by electrical shorts in a seat belt component due to a mixture of snow or water and salt seeping through the carpet on the driver side floor. The electrical shorts can cause a fire in the SUVs, according to NHTSA.

Power Morcellation Causing Uterine Cancer!!

 

In November of 2014, the U.S. Food and Drug Administration (FDA) issued an updated Safety Communication regarding power morcellation and its alleged link to uterine cancer.

Power morcellation is a type of technique used in laparoscopic surgery. Laparoscopic surgery is a type of surgery wherein surgeons use small, specialized tools to perform the bulk of the procedure inside the patient’s body. This allows surgeons to cut through less healthy tissue, shortening recovery times and making surgery an option for many patients who would be too weak for regular invasive surgery. One of the few downsides to laparoscopic surgery is that in some procedures, like hysterectomies, surgeons must remove large tissue from the body through the small incisions, which has created the necessity for power morcellation.

Power morcellation is a type of laparoscopic procedure where surgeons use a power morcellator to cut tissue into pieces small enough to be removed from the body. But there are growing concerns regarding morcellation cancer, a dangerous side effect of using these convenient medical devices.

 

The FDA’s November morcellation cancer statement was an update to earlier safety communications from earlier in 2014 on the subject of power morcellation. In this statement, the FDA strongly recommended against the use of power morcellators for hysterectomies because of concerns regarding uterine cancer.

A common reason for the use of power morcellation in hysterectomies is due to the presence of uterine fibroids, a type of benign tumor. However, post-surgical reports have strongly suggested that the many women whom have uterine fibroids may also have malignant cancer cells bound up within the fibroids that have gone undetected. The process of power morcellation is alleged to liberate these cancer cells and spread them within the abdomen, a condition known as morcellation cancer. How far the cancer cells spread is a major predictor of how severe a case of cancer is.

 

The FDA has advised patients who have had robotic hysterectomies to be vigilant for signs of morcellation cancer and undergo follow-up testing. The FDA has also recommended strongly against the use of power morcellators in hysterectomies and related procedures since this discovery. The FDA, however, stopped short of a full ban on power morcellators, stating that further evidence was needed to justify a full ban. However, the FDA did issue new boxed warning that power morcellators shouldn’t be used to remove uterine fibroids.

Power morcellation lawsuits have been filed by women who developed advanced uterine cancer after their uteruses were removed by power morcellation. Power morcellation lawsuits typically allege that the makers of power morcellators were aware—or reasonably should have been aware—of the risk of morcellation cancer associated with their medical devices. Morcellation cancer lawsuits typically seek to recoup the costs of medical care, lost wages, and other costs allegedly linked to morcellation cancer.

Medtronic Guilty Of Violating False Claims Act While Producing Medical Implants

Medtronic to Pay $4.41 Million to Resolve Allegations that it Unlawfully Sold Medical Devices Manufactured Overseas

The Justice Department announced today that Medtronic plc and affiliated Medtronic companies, Medtronic Inc., Medtronic USA Inc., and Medtronic Sofamor Danek USA Inc., have agreed to pay $4.41 million to the United States to resolve allegations that they violated the False Claims Act by making false statements to the U.S. Department of Veterans Affairs (VA) and the U.S. Department of Defense (DoD) regarding the country of origin of certain Medtronic products sold to the United States.

“Today’s settlement demonstrates our commitment to ensure that our service members and our veterans receive medical products that are manufactured in the United States and other countries that trade fairly with us,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.  “The Justice Department will take action to hold medical device companies to the terms of their government contracts.”

“Domestic manufacture is a required component of many military and Veterans Administration contracts,” said U.S. Attorney Andrew M. Luger of the District of Minnesota.  “Congress has mandated that the United States use its purchasing power to buy goods made in the United States or in designated countries.  We take that mandate seriously and will not hesitate to take appropriate legal action to ensure compliance.”

According to the settlement agreement, between 2007 and 2014, Medtronic sold to the VA and DoD products it certified would be made in the United States or other designated countries.  The Trade Agreements Act of 1979 (TAA) generally requires companies selling products to the United States to manufacture them in the United States or in another designated country.  The United States alleged that Medtronic sold to the United States products manufactured in China and Malaysia, which are prohibited countries under the TAA.The specific Medtronic products at issue included anchoring sleeves sold with cardiac leads and used to secure the leads to patients, certain instruments and devices used in spine surgeries, and a handheld patient assistant used with a wireless cardiac device.  The agreement covers the period from Jan. 1, 2007, to Dec. 31, 2013, and for one device (the handheld patient assistant), the period from Jan. 1, 2014, to Sept. 30, 2014.The settlement resolves allegations originally brought in a lawsuit filed by three whistleblowers under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and share in any recovery. The relators will receive a total of $749,700 of the recovered funds. 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 the Attorney General and the Secretary of Health and Human Services.  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 $23.9 billion through False Claims Act cases, with more than $15.2 billion of that amount recovered in cases involving fraud against federal health care programs.

The case was handled by the U.S. Attorney’s Office of the District of Minnesota with assistance from the Civil Division, DoD, Defense Logistics Agency and Defense Criminal Investigative Service and the VA’s Office of General Counsel.