$2.3 Million Oral FCA Settlement Affirmed by Fifth Circuit

$2.3 Million Oral FCA Settlement Affirmed by Fifth Circuit

On June 15, the US Court of Appeals for the Fifth Circuit affirmed a district court order enforcing an oral settlement agreement reached at a mediation that settled a False Claims Act (FCA) case against Dr. Dongxin Ma, an acupuncturist, and the center he owned, Ma Acupuncture Center PC.

The government previously filed a complaint against Ma and the Center in February 2022, alleging that they defrauded the government by submitting inflated bills for acupuncture services to Veterans Affairs. The government sought $3.8 million in treble damages and $20 million in civil penalties.

In September 2023, during a pre-trial mediation, the parties agreed that the defendants would pay $2.3 million over 42 months, make an initial payment of $100,000, and make reasonable efforts to sell certain real property, while the government would dismiss its lawsuit and release its civil claims. The parties shook hands at the conclusion of the session, and the government filed a notice of settlement. Thereafter, the defendants refused to sign the written agreement and opposed the government’s motion to enforce the agreement, arguing that a final and binding agreement was not reached at mediation and that additional terms had been inserted into the written agreement.

The Fifth Circuit rejected the defendants’ arguments that the agreement had to be in writing and signed to be final and binding, holding that there is an agreement on “all of the material terms of settlement where the parties have agreed upon the monetary amount of the settlement payment and the fact that plaintiffs will release specific claims.” 

The case is captioned U.S. v. Ma, No. 25-50067 (5th Cir. June 15, 2026).

Fifth Circuit Affirms Convictions in Fraud Scheme

On June 10, the Fifth Circuit affirmed the convictions of Dehshid Nourian and Christopher Rydberg for their involvement in an over $145 million health care fraud scheme that recruited doctors to prescribe compound drugs to patients in return for a portion of the insurance proceeds. 

In November 2023, a federal jury convicted Nourian of 16 counts, including conspiring to commit health care fraud, committing health care fraud, conspiring to commit money laundering, committing money laundering, and conspiring to defraud the United States. The jury also convicted Rydberg of nine counts, including conspiring to commit health care fraud, conspiring to commit money laundering, committing money laundering, and conspiring to defraud the United States.

On appeal, Nourian and Rydberg challenged the sufficiency of the evidence, arguing in part that the Federal Employees’ Compensation Act (FECA) is not a health care benefit program within the meaning of the relevant federal statutes. The Fifth Circuit rejected this argument, noting that it interprets the term “healthcare benefit program” broadly and has previously included FECA in a list describing federal health care programs. The court further held that the defendants were also convicted of defrauding Blue Cross Blue Shield, which the defendants did not contest qualifies as a federal health care benefit program. 

The court also rejected challenges to the defendants’ money laundering convictions, finding that the government presented sufficient evidence — including evidence that both defendants provided pre-filled prescription pads to doctors participating in the scheme — to establish knowledge that the financial transactions involved unlawful proceeds. 

The case is captioned U.S. v. Nourian, et al., Nos. 3:17-CR-155-2, 3:17-CR-155-3 (N.D. Tex.), No. 25-10365 (5th Cir.). 

Former Chief Investment Officer Pleads Guilty to Obstruction in $600 Million Cherry-Picking Scheme

On June 12, S. Kenneth Leech II, the former chief investment officer of Western Asset Management Company, pleaded guilty to obstructing justice for giving false and misleading testimony to the US Securities and Exchange Commission (SEC) in connection with an investigation into his scheme to favor certain clients at the expense of others. 

According to the government, between 2021 and October 2023, Leech engaged in a fraudulent scheme to compensate for losses in his investment strategy by assigning trades that performed well during their first day into client accounts associated with that strategy, and assigning trades that performed poorly over their first day into the accounts of other clients, who were not aware that Leech was causing them losses to favor others. The government alleged that over the course of the scheme, Leech allocated trades with net first-day gains of at least approximately $600 million to his favored strategy and clients, and allocated trades with net first-day losses of at least approximately $600 million to strategies and clients to whom he owed an equal fiduciary duty. 

According to the government, to conceal his fraud, Leech testified before the SEC that he knew where he planned to allocate trades at the time he placed them. The facts showed differently. Between 2021 and October 2023, Leech improperly engaged in a scheme to delay his trades in order to allocate them in a manner that benefited some of his clients, to the detriment of others. 

Leech, of Pasadena, California, pled guilty to one count of obstructing justice, which carries a maximum sentence of five years in prison. He is scheduled to be sentenced on September 21. 

The case is being handled by the US Attorney’s Office’s Securities and Commodities Fraud Task Force. The US Department of Justice’s press release is available here.