Author: JGL Law

Reinstated case by relator under False Claims Act alleging that hospital knowingly submitted false or fraudulent claims for reimbursement to federally funded healthcare programs). United States v. Chattanooga-Hamilton County Hospital Authority (6th Cir. 2015)

In a recent interview with Westlaw Journal, Jay Holland discusses the “most robust fraud-fighting tool in the government’s arsenal: the False Claims Act.”

Westlaw Journals: Are companies and individuals in the financial industry frequent targets of the False Claims Act? What industries are frequently targeted?

Holland: Yes, the DOJ successfully uses the False Claims Act to target bad actors in the financial industry to recover misappropriated government funds. Most of these cases involve financial institutions that do business in the home mortgage industry. The Bank of America/Countrywide Mortgage $1 billion settlement is a prime example of this type of case, and the potential scope of a settlement. In that case, Countrywide (which was later purchased by Bank of America) was alleged to have falsified borrowers’ eligibility for Federal Housing Administration-insured home loans. By falsifying a borrower’s eligibility for FHA-backed mortgage insurance, the federal government carried the burden of paying hundreds of millions of dollars when ineligible homeowners inevitably defaulted on their mortgages. In that case, the federal government also alleged that Countrywide engaged in a scheme to over-value home appraisals to support loans that may have exceeded the actual value of the properties. Bank of America was forced to pay FHA $500 million for its losses, and devote another $500 million to establish a refinance program for Countrywide borrowers who were under water as a result of these practices and mortgage-bubble induced recession. 

 

Westlaw Journals: Has the False Claims Act been used before in conjunction with the government’s TARP program?

Holland: Use of The False Claims Act has been successful in recovering funds that were misappropriated under the TARP program. One common scheme was for financial institutions to falsify the status of their financial condition in order to receive TARP funds. This type of fraud occurred in a $4 million FCA settlement in October of this year against One Financial, as well as a $2.4 million FCA settlement against Regions Financial Corp. Some banking institutions saw the TARP fund as a very attractive way to boost both their institutional and personal bottom lines — as occurred in the One Financial case. Although TARP emanates from the 2008–2009 financial collapse, it is certainly still likely that additional TARP cases are in the works (FCA cases stay under seal while the federal government investigates the claims) as the audits and investigations can take years, and the statute of limitations can extend to 10 years for the government.

 

Westlaw Journals: When the government brings a False Claims Act lawsuit, what types of damages/recovery can be pursued?

Holland: By statute, the False Claims Act will apply a civil penalty of anywhere between $5,500 and $11,000 for each false payment that the federal government makes, plus three times the amount of damages the government sustains because of the fraudulent claims for payment. 31 U.S.C.A. § 3729. Also, as the vast majority of these cases are brought by whistleblowers, called “relators,” under the statute, defendants are also liable for the attorneys fees and costs incurred by relator’s counsel. Criminal penalties and liability are also possible. When fraud is in play, it may not be too far of a bridge to gap to hold individual bad actors criminally liable. We are now seeing a government emphasis on exploring and pursuing criminal penalties as result of what has become to be known as the DOJ “Yates” memo. By that memorandum, DOJ has stated its policy to intensively investigate whether criminal charges are appropriate in fraud cases.

Westlaw Journals: What lessons can be learned from the settlements in United States v. Estate of Layton P. Stuart, No. 15-CV- 01044, settlement announced (D.DC Oct. 16, 2015), and United States v. $17,693,837.10 from John Hancock Life Insurance Policy No. XXX6473 et al., No. 13-CV-00409, settlement announced (E.D. Ark. Oct. 16, 2015)?

Holland: Do not assume that because your business is not technically in “government contracting” that you are beyond the reach of the most robust fraud-fighting tool in the government’s arsenal: the False Claims Act. If you are in the financial services industry, then it is highly likely that federal purse strings are attached in some way to your industry. As seen from the Stuart settlements, if FHA, Fannie Mae or Freddie Mac may ultimately be liable for a borrower default, and if the lender does not turn square corners, it may be liable for up to three times the government’s losses. That holds true as well for specially created programs like TARP. The business community as a whole needs to be aware that whenever it receives any funds or financial benefit from the federal government, they are exposing themselves to possible liability.

 

This segment originally appeared in the November 16, 2015 issue of the Westlaw Journal (pg. 15).

On November 18, 2015, Jay Holland will be presenting at the Maryland State Bar Association’s conference, Essentials of Maryland Labor & Employment Law, on federal and state whistleblower issues. The event will take place at the Ecker Business Training Center in Columbia, MD from 9:00 am until 3:15 pm. Attendees will receive 4.5 CLE Credits. For more information, email Jay Holland at jholland@jgllaw.com.

Joseph, Greenwald & Laake, P.A. is pleased to announce that its client, Dr. Mara Rainwater, has helped the U.S. Government secure a $95 million settlement in a False Claims Act case involving a for-profit educational institution’s alleged misuse of U.S. Department of Education (DOE) financial aid funds.

The defendants in the case are Education Management Corporation, Education Management, LLC (EDMC) and its affiliates and subsidiaries that allegedly submitted fraudulent claims for millions of dollars from the DOE. The defendants are among the largest recipients of Higher Education Act, Title IV (HEA) federal student financial aid funds from the DOE.

Dr. Rainwater was a professor and also supervised other faculty members at EDMC, a Pennsylvania corporation, which operates schools on more than 100 ground campuses, and also offers online education programs. Other defendants in the case are South University, LLC; South University Online; Argosy Education Group, Inc.; and Argosy University Online.

“We were very honored to be able to successfully represent Dr. Rainwater to help return these federal funds to the student loan program,” said Brian J. Markovitz, a partner with Joseph, Greenwald & Lake, PA and the attorney for Dr. Rainwater. “The student loan program is the only avenue for many individuals, who otherwise would have no access to a college education, and Dr. Rainwater bravely spoke up to protect those critical funds.”

According to the complaint, the defendants falsely certified every year that they were in compliance with the HEA’s requirement that any unused funds from students who enrolled but never attended, or did not complete a certain percentage of the defendants’ classes, were returned to the DOE. This is a core prerequisite to eligibility for the receipt of Title IV funds, and a condition of payment to receive DOE funding. The complaint claims that the defendants further falsely certified every year that they were in compliance with HEA requirements that they made no substantial misrepresentations regarding their institutions, were adequately tracking HEA standards for academic progress, and were fiscally responsible.

“At the center of Dr. Rainwater’s complaint are allegations that EDMC continued students’ participation, who actually dropped out of school, instead of failing them so it could collect the full of amount of financial aid funds available from the federal government, monies that should have gone to other students who were actively participating at their educational institutions,” Markovitz explained.  

The qui tam lawsuit, United States of America ex rel. Dr. Mara Rainwater v. Education Management Corporation et al., was filed in the U.S. District Court for the Middle District of Tennessee.

Reestablished limitations on the scope of appellate review of the Prince George’s County District Council in local Planning Board matters. County Council of Prince George’s County v. Zimmer Development Co. (Md. 2015)

When we go to the doctor or the hospital, we expect our healthcare providers to perform their responsibilities without any errors. But the truth is that physicians are only human and are capable of making mistakes or committing oversights – just like the rest of us.

Unfortunately, though, a mistake in the medical field often has much more catastrophic consequences than an error made in most other professions. The wrong diagnosis or treatment regimen could result in injury or even death.

While those who have suffered injury at the hands of a negligent healthcare provider can file a medical malpractice lawsuit to recover damages for the wrong committed, the monetary award doesn’t necessarily make up for the burden of the years – or even lifetime – of pain caused by the erroneous act. That’s why the best solution for medical malpractice often is to attempt to prevent it from ever taking place.

Empowered Patients

The first line of defense in medical malpractice is you, the patient. While the legal responsibility falls on the medical provider, patients can educate themselves to help reduce the chances of a serious medical error being made. The following is a checklist you can use to empower yourself to avoid healthcare errors and to prevent becoming a victim of malpractice.

• Know your medications: It is imperative that you know the full extent of medications you are taking before you see a medical provider. Inform every healthcare professional you see about the list of medications you take. This can help prevent you from receiving a prescription that has a serious reaction to another drug you are currently taking. Put the list in writing and take it with you to every appointment with every doctor.
• Know what allergies you have: Just as some medications can react with one another, some people’s bodies can have negative reactions to certain medications. For example, someone who is allergic to penicillin could suffer serious health consequences if given certain antibiotics. To help prevent serious illness or injury, share the full extent of your allergies with every healthcare provider you see.
• Keep a journal: Document your healthcare journey. This is important for a couple reasons. First, by taking notes about your condition, your healthcare visits and your treatment plan, you are establishing a record that you can refer to if you need reminders about doctors’ instructions or if you need to explain your history of care to a new healthcare provider. In addition, having this kind of documentation can work toward your favor in a medical malpractice lawsuit should one of your healthcare providers commit an error.
• Ask questions, and do your research: Being an informed patient is important to your health and safety. Do not hesitate to ask your medical provider follow-up questions during or after your visit. Even before you seek out medical care, conduct independent research about your health issue – including finding information related to specific tests, procedures and medications your provider might suggest. Make sure you are getting your information from a reliable source, such as the Mayo Clinic website.
• Ask a relative or friend to accompany you: Besides offering the moral support you might need to overcome a health scare, a friend or relative can help serve as your eyes and ears in the doctor’s office. Not only can they help you remember the information and directions given to you by your healthcare provider, they can also serve as your informed advocate should you lose the ability to make medical decisions for yourself.

While the best-case scenario is that your healthcare needs are adequately attended to, there is always the chance that your provider – or another participant in the management of your care – will commit an error that could turn into a serious cause of action for a medical malpractice lawsuit. By empowering yourself with the tips above, you can help minimize the likelihood of an accident that could result in long-lasting pain and suffering. 

 

In a recent Maryland Daily Record article, New law allows divorce by consent but family law lawyers unsure of its long-term impact, Jeffrey Greenblatt discusses a new Maryland divorce law that may lead to faster divorces in some cases. Under the law, divorcing couples in Maryland without minor children, can now forego the state’s one-year separation requirement and file for divorce via a mutual settlement agreement. 

By removing the 12-month separation requirement, lawmakers have provided an option for “divorce by mutual consent,” thus reducing the potential acrimony of a trial and burden of a 12-month waiting period. According to Greenblatt, “Anyone who is able to come to an agreement is going to be able to get out of the marriage almost instantly. I don’t think it is going to make people who are not already predisposed to resolving their differences to move any more quickly. It’s not going to change people who want to fight. If they want to fight, they’re going to fight.”

Couples with minor children do not qualify under the new law and must still wait the 12-month period of separation before filing for divorce. For more information on the new law, or questions about divorcing in Maryland, contact Jeffrey Greenblatt at jgreenblatt@jgllaw.com.

Westlaw Journal’s October 12, 2015 issue covered a False Claims Act settlement of $1.75 million that two companies will pay to resolve allegations they defrauded the U.S. Army while working under contract to provide vehicle maintenance services to the Afghanistan military.

Jay Holland and Brian Markovitz weigh in on the settlement and discuss the importance of the False Claims Act and the role whistleblowers play in reporting fraud against the government.

For the complete Westlaw Journal article, 2 Firms Pay $1.75 Million to End Afghanistan Contract Fraud Case, click the PDF below. 

Following up on the Chattanooga-Hamilton County Hospital Authority v. USA ex rel. Robert Whipple case, the Supreme Court refused to reverse a Sixth Circuit ruling in a False Claims Act (FCA) case. As reported by Law360, Erlanger Medical Center’s claim that an administrative audit did not constitute public disclosure needed to kill an FCA claim was denied by the Supreme Court.

The high court ruling clears the way for an FCA suit filed in March 2011 against Erlanger for fraudulent Medicare and Medicaid reimbursements. Whistleblower, Robert Whipple accused the Tennessee hospital of improperly billing the government for claims between 2005 and 2006.

JGL’s Jay Holland and Brian Markovitz represent Whipple along with co-counsel Jamie Bennett. Commenting on the case, Markovitz said, “We look forward to moving on to the merits.”

This blog is a summary of recent significant appellate decisions by the Court of Special of Appeals of Maryland in the areas of Workers’ Compensation, Insurance, Landlord-Tenant, Guardianship, Lead Paint, Corporations and Associations, Foreclosure, and Family Law. 

Workers’ Compensation

Long v. Injured Workers’ Insurance Fund, No. 2615, Sept. Term, 2013 (Md. Ct. Spec. App. Sept. 30, 2015).

http://www.mdcourts.gov/opinions/cosa/2015/2615s13.pdf.

Issue:   As a matter of first impression, when an injured worker is a sole proprietor, should his or her compensation under the Maryland Workers’ Compensation Act, calculated as two-thirds of the employee’s average weekly wage (“AWW”), be based upon the income of the sole proprietorship after deducting business expenses or upon the gross profit of the sole proprietorship, without considering business expenses?

Held:   The court noted that the general rule applied by other jurisdictions is that “’profits derived from a business are not to be considered as earnings and cannot be accepted as a measure of loss of earning power unless they are almost entirely a direct result of [the claimant’s] personal management and endeavor.’” Slip op. at 16 (alteration in original).  The court recognized a built-in exception to the general rule, applicable in this case, where an individual is “the only employee of the sole proprietorship, and all of the income of the sole proprietorship was the direct result of his ‘personal management and endeavor.’”  Id.  Mindful of this, the court stated that, while there were some cases from other jurisdictions where wages were determined using gross income, they were distinguishable “because they involve situations where either: 1) the sole proprietorship had no net income; or 2) before the Commission, the claimant presented some alternative to net income as a basis of determining AWW.”  Id. at 16-17.  Therefore, the court held “that under the circumstances of this case, the Commission did not err in concluding that AWW should be based on Long’s net profits. As demonstrated, the overwhelming majority of cases decided by our sister states supports the conclusion reached by the Commission in this case. To disregard appellant’s business expenses in calculating the AWW of a sole proprietor would lead to an unjustifiably inflated AWW figure – a figure far higher than the economic advantage Long gained by working.”  Id. at 21.

Insurance

Rigby v. Allstate Indemnity Company, No. 0263, Sept. Term, 2014 (Md. Ct. Spec. App. Sept. 30, 2015).

http://www.mdcourts.gov/opinions/cosa/2015/0263s14.pdf.

Issue:   Whether the driver of an automobile “was a ‘dependent person’ and therefore an ‘insured,’ under [an] umbrella policy, which defines ‘insured’ to include ‘any dependent person’ in the policy holder’s care, ‘if that person is a resident of’ the policy holder’s household.”  Slip op. at 6.

Held:   Recognizing that no Maryland decision addressed this issue, the court analyzed two extra-territorial decisions providing analysis of the terms.  The court utilized the Kansas Supreme Court’s definition of “dependent person,” namely: “one who relies on another to provide ‘substantial contributions . . . , without which he would be unable to afford the reasonable necessities of life.’”  Id. at 12 (ellipsis in original).  In this case, although the driver lived in the same home as the policy holder, they were unrelated and he paid rent.  Moreover, he moved in and out of the home on three separate occasions.  Additionally, although they had a “semblance of familial relationship,” the policy holder never claimed the driver as a dependent on his tax return, never gave him any money, credit cards, or an allowance, never paid for his medical care or designated him as a beneficiary of his health insurance policy, and admitted that he exercised no control over his comings and goings.  Under the facts, the court held that the driver was not a “dependent person” within the meaning of the policy.  Id. at 13.

Citing the Michigan Supreme Court, the court also determined that the phrase “in the care of” is not ambiguous and applied that court’s non-exhaustive list of questions.  Considerations include: 1) legal responsibility for care; 2) dependency; 3) supervisory or disciplinary responsibility; 4) substantial essential financial support; 5) the circumstances of the living arrangements; 6) the age of the person alleged to be “in the care of”; 7) his or her physical or mental health status; and 8) whether he or she is gainfully employed.  Id. at 15-16.  The court observed that seven of the eight factors favored the conclusion that the driver was not “in the care of” the policy holder.  Id. at 16.  Therefore, the court held that the driver was neither a “dependent person” nor “in the care of” the policy holder.  Id. at 17.

Landlord-Tenant

Kirk v. Hilltop Apartments, LP, No. 2054, Sept. Term, 2013 (Md. Ct. Spec. App. Sept. 30, 2015).

http://www.mdcourts.gov/opinions/cosa/2015/2054s13.pdf.

Issue:   In a breach of lease action on a lease providing for automatically renewable one-year lease terms, whether the amount in controversy is calculated based on the number of months remaining in that year’s lease term or by multiplying the annual fair market rental payment by the number of years remaining in the lessee’s life expectancy.

Held:   The lessee’s lease, by its express terms, automatically renewed for successive one year terms unless terminated for good cause.  Therefore, the lessee had the right to possess the property for an indefinite period of time.  As such, “the correct method of calculating the amount in controversy in this case, that is, the value of [the Lessee]’s right to possession of the leased premises, should be determined by multiplying the annual fair market rental payment by her remaining estimated life expectancy.” Slip op. at 16.

Guardianship

James B. Nutter & Co. v. Black, No. 1563, Sept. Term, 2013 (Md. Ct. Spec. App. Sept. 30, 2015).

http://www.mdcourts.gov/opinions/cosa/2015/1563s13.pdf.

Issue:   Where a disabled person, who has a court appointed guardian, entered into a reverse mortgage but the guardian later refuses to ratify it, is the agreement void or merely voidable?

Held:   The court recognized that a disabled person lacks the capacity to enter into a contract or convey an interest in real property.  Slip op. at 13.  Importantly, guardianship proceedings afford constructive notice of one’s disability.  Id. at 13-14.  Although Maryland’s guardianship statute does not directly address whether a deed conveyed by a disabled person is void, the court has previously held that a disabled person holds no legal title to property.  Id. at 22.  Therefore, the court held that the purported reverse mortgage transaction was void ab initio.  Id. at 25.

Lead Paint

Barr v. Rochkind, No. 1152, Sept. Term, 2014 (Md. Ct. Spec. App. Sept. 29, 2015).

http://www.mdcourts.gov/opinions/cosa/2015/1152s14.pdf.

Issue:   “[W]hether a lead paint plaintiff who relies on circumstantial evidence to establish the elements of her prima facie negligence case — including proof that the defendant’s property contained lead paint — has a burden of production to present evidence ruling out any reasonable probability that her elevated blood lead levels were caused by other potential sources of lead exposure.”  Slip. op. at 8-9.

Held:   In a case where there is no direct evidence that a property contained lead paint, a party may rely on circumstantial evidence, but, as the Court of Appeals has previously explained, it must be based upon “a reasonable likelihood or probability rather than a possibility.”  Id. at 11. Quoting from the Court of Appeals, the court explained that a plaintiff must further “tender facts admissible in evidence that, if believed, establish two separate inferences: (1) that the property contained lead-based paint, and (2) that the lead-based paint at the subject property was a substantial contributor to the victim’s exposure to lead.”  Id.  In this case, the plaintiff primarily relied on an affidavit from a pediatrician with expertise in treating childhood lead poisoning who opined that there is a presumption that houses built during the relevant time period typically contained lead paint.  Id. at 14.  However, such an opinion is insufficient to display that a specific property contained lead paint and further fails to display that an increased lead level was not due to exposure from other known sources of lead that could reasonably account for it.  Id.; id. at 16.  Summary judgment was, therefore, appropriate.

Corporations and Associations

Hogans v. Hogans Agency, Inc., No. 775, Sept. Term, 2014 (Md. Ct. Spec. App. Aug. 28, 2015).

http://www.mdcourts.gov/opinions/cosa/2015/0775s14.pdf.

Issue:   Whether a stockholder may be required to sign a confidentiality agreement prior to inspecting a corporation’s books of account pursuant to Md. Code Ann., Corps. & Ass’ns §§ 2-512 and 2-513.

Held:   In this case, the stockholder was a minority shareholder in the company with a sufficient percentage of outstanding stock to inspect and copy the corporation’s books of account.  However, he also was an owner of a competitor of the corporation.  Therefore, the court agreed with the trial court’s exercise of discretion to “require the stockholder to sign a confidentiality agreement where the confidentiality agreement and its terms advance the purpose of “protect[ing] the corporation against disclosure and misuse of confidential documents and information by the stockholder.  Slip op. at 12.

Foreclosure

Anderson v. O’Sullivan, No. 654, Sept. Term, 2014 (Md. Ct. Spec. App. Aug. 27, 2015).

http://www.mdcourts.gov/opinions/cosa/2015/0654s14.pdf.

In a case of first impression in Maryland, a defendant in a foreclosure action sought to avoid foreclosure by asserting the “Redemptionist Theory” and the “Vapor Money Theory.”  Slip op. at 7.  The court quoted the Third Circuit’s summary of the “Redemptionist Theory”:

[T]he “Redemptionist” theory … propounds that a person has a split personality: a real person and a fictional person called the “strawman.” The “strawman” purportedly came into being when the United States went off the gold standard in 1933, and, instead, pledged the strawman of its citizens as collateral for the country’s national debt. Redemptionists claim that [the] government has power only over the strawman and not over the live person, who remains free. Individuals can free themselves by filing UCC financing statements, thereby acquiring an interest in their strawman. Thereafter, the real person can demand that government officials pay enormous sums of money to use the strawman’s name.

Id. at 8.  Quoting the Kentucky Court of Appeals, the court observed that “[t]he ‘Vapor Money Theory,’ on the other hand, contends that banks essentially lend a borrower their own money when a loan is issued:

The “vapor money” (or “no money lent”) theory posits that Congress has never given banks the authority to extend credit and, thus, banks act beyond their charters when making loans. Proponents claim banks create money “out of thin air,” through ledger entries and bookkeeping tricks, by “depositing” a borrower’s promissory note without the borrower’s permission, listing the note as an “asset” on the bank’s ledger entries, and then lending a borrower back his own “money.” Since banks do not have enough “real money in their vaults” to cover the sums lent, loans are not backed by actual money—the only real money is gold or silver; paper money is worthless since it is created by an illegitimate Federal Reserve—making them invalid ab initio and creating no obligation for repayment.

Id. at 9.  The Court noted that “[n]o Maryland court has directly opined on either theory in a reported opinion, but many federal and state courts have, and they have found unanimously, and unequivocally, that neither qualifies as a valid defense to or meritorious argument to foreclosure.”  Id. at 7 (footnote omitted).  The court held that these theories “have not, will not, and cannot be accepted as valid.”  Id. at 11.

Family Law

Conover v. Conover, No. 2099, Sept. Term, 2013 (Md. Ct. Spec. App. Aug. 26, 2015).

http://www.mdcourts.gov/opinions/cosa/2015/2099s13.pdf.

Issue:   Whether a non-biological, non-adoptive parent “may invoke Maryland’s paternity laws to confer upon her parental standing to seek custody or visitation without interfering with the constitutional rights of the natural parent…and without satisfying the stringent standards of Janice M. v. Margaret K., 404 Md. 661 (2008) and Koshko v. Haining, 398 Md. 404 (2007).”  Slip op. at 1.

Held:   In this same-sex divorce case, the non-biological, non-adoptive parent, Brittany Conover, asserted that she met the paternity factors for a father as set forth in Md. Code Ann., Est. & Trusts § 1-208(b).  The court held that “[a] non-biological, non-adoptive spouse who meets one, two or even three tests under ET § 1-208(b) is still a ‘third party’ for child access purposes.”  Id. at 12.  The court further stated that “[u]nder Janice M., he or she is not a ‘legal parent’… He or she must still show exceptional circumstances to obtain access to a child over the objection of a fit biological parent and to overcome the natural parent’s due process rights. Moreover, there is no gender discrimination or sexual orientation discrimination because all non-biological, non-adoptive parents face the same hurdle, no matter what sex or sexual orientation they are.”  Id. at 12.

Sieglein v. Schmidt, No. 2616, Sept. Term 2013 (Md. Ct. Spec. App. Aug. 25, 2015).

http://www.mdcourts.gov/opinions/cosa/2015/2616s13.pdf.

In this case, a child conceived by in vitro fertilization (“IVF”) was born during the parties’ marriage.  Md. Code Ann., Est. & Trusts § 1-206(b) provides: “A child conceived by artificial insemination of a married woman with the consent of her husband is the legitimate child of both of them for all purposes.”  Although the father asserted he was not the “father” within the meaning of the statute because the child was conceived through IVF, the court concluded that “within the context of marriage, the precise physical procedure has no necessary impact on the relationships of the parties involved—mother, father, and child.”  Slip op. at 20.  Thus, when individuals “were married at the time of conception and birth, and willingly and voluntarily agreed to conceive a child through assisted reproductive services using anonymously donated genetic material…§ 1-206(b) applies to establish the legal parentage of both” spouses.  Id. at 20-21.

Reinstated a verdict in favor of the parents of a child struck and killed by a car at a school bus cross-walk. Davis v. Board of Education for Prince George’s County (Md. Ct. Spec. App. 2015)