Walter Investment Management Corp. Must Pay More than $29 Million

 

The Justice Department announced today that Walter Investment Management Corp. WIMC has agreed to pay $29.63 million to resolve allegations that WIMC, through its subsidiaries, Reverse Mortgage Solution Inc., REO Management Solutions LLC and RMS Asset Management Solutions LLC, violated the False Claims Act in connection with their participation in the Department of Housing and Urban Development’s Home Equity Conversion Mortgages program, which insures “reverse” mortgage loans.  WIMC, through subsidiaries such as RMS and Green Tree Servicing LLC, provides business support to the residential mortgage industry, including servicing of reverse or forward mortgages on behalf of major financial institutions.*

“The Department of Justice is committed to ensuring that those who service HUD-insured reverse mortgages are held accountable for their knowing failure to comply with important HUD requirements,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Schemes such as these undermine an important tool available to older Americans who wish to use a HUD-insured reverse mortgage loan to age in place.”

Reverse mortgage loans allow elderly people to access the equity in their homes.  To encourage reverse mortgage loans, HUD insures such loans through a program administered by HUD’s Federal Housing Administration.  Under HUD’s program, a loan becomes due and payable when the home is sold or vacant for more than 12 months or upon the death of the homeowner, whichever comes first.  The lender is repaid the amount of the loan, including the costs of servicing the loan and interest that accrues, after a loan becomes due and payable.  HUD will reimburse a lender that is unable to recoup the full amount of the loan.  In order to file a claim, the servicer is required to meet a number of requirements and deadlines.  Failure to meet these requirements and deadlines could result in denial of the insurance claim.

The government alleged that, from August 2009 to March 2015, RMS, with the knowledge and support of its corporate parent, WIMC, submitted false claims for debenture interest from HUD by failing to properly disclose that it had not met certain deadlines and, therefore, was not entitled to such interest payments.  In order to obtain such interest, HUD requires lenders and their servicers to obtain appraisals within 30 days of the loan becoming due and payable.  The significance of the 30-day appraisal requirement is, among other things, to establish a mutual understanding between the lender and HUD as to the market value of the property so that a decision can be made as to whether to proceed with foreclosure, engage in a workout with the lender or deal with estate rights issues.

The government also alleged that from July 2010 to October 2014, WIMC, through its subsidiaries, submitted false claims to HUD for the reimbursement of unlawful referral fees by falsely representing them to be lawful sales commissions.  As part of an insurance claim, HUD will reimburse lenders or their servicers for sales commissions paid to real estate agents as part of the liquidation of foreclosed properties.  HUD will not, however, reimburse lenders or their servicers for fees paid for the referral of liquidation business.  According to the government, RMS often used straw companies to liquidate foreclosed properties.  Upon sale of the foreclosed property, the straw companies split the six-percent sales commissions: the real estate agents shared a five-percent sales commission and the companies kept a one-percent referral fee.  These straw companies, in turn, deducted a small fee from the one-percent referral fee and kicked the remainder back to RMS.  Nonetheless, RMS submitted insurance claims to HUD that included payment for the full six-percent sales commission, when, in fact, the payment included a prohibited referral fee.

The settlement resolves allegations filed in a lawsuit by Matthew McDonald, a former executive of RMS, under the qui tam, or whistleblower, provisions of the False Claims Act.  The act permits private individuals to sue on behalf of the government for false claims and to share in any recovery.  The False Claims Act also permits the government to intervene in such lawsuits, as it did in this case.  Mr. McDonald will receive $5.15 million as his share of the recovery in this case.

This information verified by the Dept. of Justice

FDA Cannot Prohibit the Promotion of Truthful, Off-Label Uses

Last week, a federal judge ruled that the Food and Drug Administration (FDA) cannot prohibit a pharmaceutical company from marketing its drugs for off-label uses if its claims are truthful and not misleading. This ruling, while not precedential, alters the traditional compliance regarding the legality of off-label marketing.

In 2012, the FDA approved Amarin’s drug, Vascepa®, for patients with very high triglyceride levels, a condition known to increase the risk of pancreatitis and cardiovascular disease. However, the FDA rejected a second use of the drug that would have allowed Amarin to market Vascepa to patients with persistently high triglycerides who also take statins (i.e., drugs used to lower cholesterol). Although it was undisputed that Vascepa was safe and effective in reducing such triglyceride levels, the FDA told Amarin it needed to submit additional data regarding whether lowering triglyceride levels for patients on statins actually translates to a reduced cardiovascular risk. Absent formal approval, the FDA contended that distributing information about the alternate use would constitute misbranding under the Federal Food, Drug, and Cosmetic Act (FDCA).

Amarin subsequently filed a lawsuit seeking declaratory and injunctive relief that would prevent the FDA from prosecuting it for truthful, non-misleading speech concerning Vascepa. Amarin argued that the FDA’s efforts to stop it from sharing “off-label” information would violate its free speech protections. In a 71-page opinion, Judge Engelmayer agreed with Amarin and ruled that, consistent with the First Amendment, Amarin “may engage in truthful and non-misleading speech promoting the off-label use of Vascepa.”

The FDA has 60 days to appeal Judge Engelmayer’s ruling. If the decision stands, it could continue to pave the way for pharmaceutical companies and medical device manufacturers to engage in the off-label marketing of drugs that is truthful and not misleading. While Amarin and Caronia signal a potential change in the way the government will have to approach off-label marketing cases, it is important to note that these decisions both come out of the Second Circuit, and it still is uncertain how other circuits will rule when presented with similar facts.

Kmart Guilty of False Claims Act Violation

KMART Corp. (Kmart), a discount department store chain that operates approximately 780 in-store pharmacies, has paid the United States $1.4 million to resolve allegations that it violated the False Claims Act by using drug manufacturer coupons and gasoline discounts as improper Medicare beneficiary inducements, the Justice Department announced today. 

 

The settlement resolves allegations that Kmart violated the False Claims Act by providing illegal benefits to beneficiaries of the Medicare program.  The government alleged that from June 2011 to June 2014, Kmart knowingly and improperly influenced the decisions of Medicare beneficiaries to bring their prescriptions to Kmart pharmacies by permitting the Medicare beneficiaries to use drug manufacturer coupons to reduce or eliminate prescription co-pays that they otherwise would be obligated to pay.  Federal law prohibits a person from offering beneficiaries of certain federal health programs, such as Medicare, remuneration that is intended to influence the beneficiary’s choice of provider.  The government alleged that Kmart’s conduct caused the Medicare beneficiaries to seek expensive, brand name drugs in lieu of cheaper generic drugs, which caused the government’s costs to increase without any medical benefit to the beneficiary.  The government also alleged that Kmart improperly encouraged Medicare beneficiaries to bring their prescriptions to Kmart pharmacies by offering them varying levels of discounts on the purchase of gasoline at participating gas stations based on the number of prescriptions that they filled at Kmart pharmacies.

 

The settlement resolves allegations in a lawsuit filed by Joshua Leighr, a former Kmart pharmacist, under the qui tam, or whistleblower provisions of the False Claims Act.  The act authorizes private parties, such as Mr. Leighr, to sue for fraud on behalf of the United States and to share in any recovery.  Mr. Leighr will receive approximately $248,500 of the settlement.   

 

Medtronic Infuse Bone Graft Class Action Lawsuit

Medtronic Inc., the nation’s largest medical device maker, is facing over 1,000 Infuse Bone Graft lawsuits that accuse the manufacturer of intentionally concealing dangerous side effects. These spinal surgery patients claim they suffered serious Infuse Bone Graft problems, including male sterility and other genital injuries, nerve damage, excessive bone growth, chronic pain, and difficulty breathing, swallowing, and speaking. These patients further accuse Medtronic of marketing the Infuse Bone Graft for off-label uses, putting thousands of spine surgery patients at risk for dangerous complications.

Class action lawsuit attorneys are currently looking for patients who were injured after undergoing back surgery with an Infuse Bone Graft. These patients can receive a free legal review using the form on this page and determine if they’re eligible to pursue compensation for their injuries, medical expenses, pain and suffering, and more.

  

Medtronic’s promotion of off-label uses for the Infuse Bone Graft has led to two whistleblower lawsuits and a $40 million settlement with the U.S. Department of Justice in 2006. In addition, Medtronic recently agreed to an $85 million settlement with shareholders who filed a lawsuit over the drop in stock prices related to the DOJ’s investigation.

In 2012, the Senate Finance Committee announced the results of its year-long investigation into allegations Medtronic used false advertising and kickbacks to increase sales of their products. The study revealed that Medtronic paid more than $200 million in consulting fees to authors who were supposed to be studying the efficacy of Infuse.

Hundreds of Infuse Bone Graft lawsuits have been filed in state and federal courts by plaintiffs who allege they suffered serious Infuse Bone Graft complications.

EDF Resource Capital Inc. Violates False Claims Act

 

EDF Resource Capital Inc. and its CEO, Frank Dinsmore, have agreed to resolve allegations that they violated the False Claims Act and otherwise failed to remit payments owed to the Small Business Administration (SBA) under the 504 loan program, the Department of Justice announced today.  Under the settlement agreement, EDF and Dinsmore have agreed to make payments and turn over certain assets to the United States for a total settlement of approximately $6 million.

The SBA 504 loan program provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings.  Under the program, local lenders like EDF are responsible for arranging, servicing and collecting on these small business loans, which are guaranteed, in part, by the SBA.  In return for the authority to make determinations on 504 loans without prior SBA approval, EDF was required to bear a share of any losses suffered by the SBA on such loans and to maintain a loan loss reserve fund (LLRF) to help ensure payment of its loss-sharing obligations. 

This settlement resolves claims that EDF and Dinsmore violated the False Claims Act in connection with EDF’s failure to maintain adequate reserves in its LLRF.  EDF allegedly was required to fund its LLRF at a level determined by the riskiness of its 504 loan program portfolio yet knowingly concealed from the SBA hundreds of troubled loans to avoid its obligation to fully fund its LLRF.

The settlement also resolves a lawsuit filed by the United States against EDF and a related entity, Redemption Reliance LLC, alleging that EDF failed to remit required payments to the SBA to satisfy its loss-sharing obligations.  The lawsuit also alleges that the SBA agreed to advance funds to EDF in connection with certain defaulted 504 loans but that, after EDF assigned the loan documents for these loans to Redemption Reliance, neither EDF nor Redemption Reliance remitted the monies owed on these loans to the SBA. 

“The 504 Loan Program provides small businesses with access to the capital they need to start, grow and succeed,” said General Counsel Melvin F. Williams Jr. of the SBA.  “SBA has no tolerance for fraud, waste, or abuse by participants in the 504 Loan Program.  Working with the attorneys at the Department of Justice and SBA’s Office of Inspector General, this settlement marks the successful conclusion of a major enforcement action.”        

“The defendants’ misrepresentations to SBA knowingly put the taxpayer’s money at risk,” said Inspector General Peggy E. Gustafson of the SBA.  “As stewards of the taxpayers’ money, the SBA must guard against losses within its loan portfolios.  In this instance, the actions of the defendants did not allow SBA to protect taxpayers from such losses.  I want to thank the Department of Justice and our investigative partners for achieving this settlement.”

This information confirmed via the US Dept. of Justice.

Florida Health Fraud Uncovered

A federal jury in Miami late yesterday convicted the former medical director of, and three therapists employed by this health care provider of conspiracy to commit health care fraud and related charges for their roles in a scheme to fraudulently bill Medicare and Florida Medicaid more than $63 million.

Roger Rousseau, 73, of Miami; Doris Crabtree, 62, of Miami; Angela Salafia, 68, of Miami Beach, Florida; and Liliana Marks, 48, of Homestead, Florida, were found guilty of conspiracy to commit health care fraud.  In addition, Rousseau was convicted of two counts of health care fraud.  Sentencing is scheduled for Nov. 6, 2015, before U.S. District Judge Robert N. Scola Jr. of the Southern District of Florida.

Rousseau was the former medical director of Health Care Solutions Network Inc. (HCSN), a now-closed partial hospitalization program (PHP) that purported to provide intensive treatment for mental illness.  Crabtree, Salafia and Marks were therapists who worked for HCSN.

According to the evidence presented at trial, from approximately 2004 through 2011, HCSN billed Medicare and Medicaid for mental health services that were not medically necessary or never provided, and that HCSN paid kickbacks to assisted living facility owners and operators in Miami who, in exchange, referred beneficiaries to HCSN.

The trial evidence showed that Rousseau routinely signed what he knew to be fabricated and altered medical records without reviewing the substance of the records and, in most instances, without ever meeting with the patients.  The evidence at trial also demonstrated that Crabtree, Salafia and Marks fabricated medical records to support HCSN’s false and fraudulent claims for reimbursement for PHP services.

In total, HCSN submitted approximately $63.7 million in false and fraudulent claims to Medicare and Medicaid.  Medicare and Medicaid paid approximately $28 million on those claims.

In November 2014, following a jury trial, co-defendants Blanca Ruiz and Alina Fonts were convicted of conspiracy to commit health care fraud, and Fonts also was convicted of health care fraud.  In February 2015, both Ruiz and Fonts were sentenced to serve six years in prison.

This information provided on the US Dept. of Justice website

Payday Loan Lending Scheme Uncovered

The operators of a payday lending scheme that allegedly conned millions of dollars from consumers nationwide have agreed to more than $54 million in settlements with the Federal Trade Commission . The settlements, announced on July 7, arise from allegations by the that Timothy Coppinger, Frampton Rowland III and their companies targeted online payday loan applicants – consumers seeking short-term loans to tide them over until they received their next paycheck. Approximately 400,000 consumers were affected by the scheme, and the settlement funds will be used to reimburse them for losses, according to the FTC.

Using information gathered from data brokers and lead generators, the companies allegedly deposited funds in the applicants’ bank accounts without obtaining permission. The companies subsequently withdrew money to pay recurring “finance” charges without using any of the funds to pay the total allegedly owed, the FTC alleged. The companies also allegedly misrepresented the loans’ costs, finance charges, annual percentage rates payment schedule and other data. Consumers who closed their bank accounts in an effort to stop the unauthorized debits discovered that the companies had sold the purported loans to debt-collection companies that harassed them for payment, the FTC alleged. A federal court in Missouri stopped the operation and froze the Defendants’ assets pending resolution of the FTC allegations.

The Coppinger and Frampton limited liability companies involved in the lawsuit include: CWB Services; Orion Services; Sandpoint Capital; Basseterre Capital; Namakan Capital; Anasazi Services; Anasazi Group; Vandelier Group; St. Armands Group; Longboat Group and Oread Group. The settlements, which require federal court approval, erase any consumer debt purportedly owed to the Defendants and bar them from reporting the debts to credit-reporting agencies.

The agreements, according to the FTC, also ban the Defendants “from any aspect of the consumer lending business, including collecting payments, communicating about loans and selling debt.” If approved by the court, the FTC said the settlements will impose a more than $32.1 million consumer redress judgement on the Coppinger companies agreed and a similar judgement of nearly $21.9 million on the Frampton companies. The judgments against Coppinger and Frampton will be suspended upon their surrender of certain assets, according to the FTC.