DOJ Attorneys Comment on the Rise of Telehealth Fraud During the COVID-19 Pandemic

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DOJ Attorneys Comment on the Rise of Telehealth Fraud During the COVID-19 Pandemic

During the 2022 Qui Tam Conference of the Federal Bar Association, DOJ attorneys commented on the dramatic rise in the use of remote health care services during the COVID-19 pandemic, and the difficulty in bringing civil False Claims Act (FCA) actions against fraudulent telehealth schemes. The number of telehealth users increased from around one million unique users between March 2019 to February 2020, to 28 million unique users in the following year. According to DOJ attorneys, this increase in the use of remote health care services also brought a significant increase in fraudulent schemes that often involve the use of sham companies having doctors write unnecessary prescriptions that are billed to Medicare. DOJ attorneys noted that the use of complex agreements and the frequent involvement of cross-border syndicates make it difficult to bring successful civil FCA actions against these schemes.

Though the DOJ has brought criminal charges targeting telehealth schemes in the past year, including in September when charges were announced against 138 defendants, including over 40 medical professionals, for their alleged roles in a $1.4 billion telehealth fraud scheme, these actions have not involved the FCA. However, DOJ attorneys commented that the government is exploring how civil FCA actions can be brought to address telehealth fraud, and experts in health care fraud believe that there will be an increase in the number of FCA civil cases in the future.

Read the Law360 article here.

South Korea’s Largest Telecommunications Operator Settles FCPA Allegations

KT Corp., the largest telecommunications provider in South Korea, consented to an SEC order requiring it to pay $6.3 million to resolve allegations that it made improper payments benefitting government officials in Korea and Vietnam in violation of the Foreign Corrupt Practices Act (FCPA). According to the SEC order, KT Corp.’s lack of sufficient internal controls allowed employees and high-level executives to generate slush funds that were ultimately used for gifts and political contributions to government officials who had influence over the company’s business. The settlement with the SEC comes after South Korean authorities indicted KT Corp. and 14 executives in November 2021 for criminal violations relating to allegedly illegal political contributions.

The SEC order notes that KT Corp. has taken remedial actions, including terminating employees responsible for misconduct and enhancing its compliance program. The order requires KT Corp. to make at least four periodic reports to the SEC detailing its remediation efforts over the course of the next two years.

A copy of the SEC’s order can be found here.

Health Care Company Settles SEC Charges Over Accounting Practices

Baxter International Inc., a health care product company, agreed to an $18 million settlement with the SEC relating to allegations that it violated the negligence-based anti-fraud, reporting, books and records, and internal accounting control provisions of the federal security laws. In addition, Baxter’s former treasurer and assistant treasurer consented to pay $125,000 and $100,000 in civil penalties, respectively, for related misconduct. Baxter’s assistant treasurer further consented to pay nearly $90,000 combined in disgorgement and prejudgment interest.

According to the SEC order, from 1995 to 2019, Baxter used a convention to convert non-US dollar denominated transactions and assets and liabilities in its financial statements that was not in accordance with generally accepted accounting principles (GAAP). Beginning in 2009, these non-GAAP compliant conventions were allegedly used to generate foreign exchange accounting gains, resulting in misstatements of the company’s net income. The former assistant treasurer and others working at his direction were allegedly responsible for executing the transactions and, according to the SEC order, the former treasurer failed to investigate how the company generated consistent gains. The SEC order states that funds from the settlement are being distributed to harmed investors.

A copy of the SEC’s press release can be found here.

Hotel Manager and Owner Plead Guilty To Filing False Tax Returns and Witness Tampering

Harold Wells, a former Michigan hotel manager, pleaded guilty to filing a false tax return for failing to report to the IRS any income he received from managing the day-to-day operations of the hotel from 2013 to 2017. Wells allegedly hid wages by writing checks to himself from the hotel’s operating account and using the hotel bank account to cover personal expenses. 
According to the government, Wells also provided incomplete information to the hotel’s tax preparer, including the fact that 11 of the hotel’s rooms were not tracked in its reservation system, which resulted in the hotel’s income being understated. Wells is also alleged to have taken actions to obstruct the investigation, such as by instructing hotel employees to make false statements and denying his employment status to IRS special agents.

Harold Wells’ father and owner of the hotel, Karl Wells, is also alleged to have obstructed the investigation by instructing hotel employees preparing to provide grand jury testimony and the hotel’s tax preparer to state that his son was not a hotel employee. Karl Wells pleaded guilty to witness tampering for this conduct, which carries a maximum penalty of 20 years imprisonment. Harold Wells faces a maximum penalty of three-years imprisonment for the tax charges.

A copy of the DOJ press release can be found here.

Pakistani Man Sentenced to 12 Years for Health Care Fraud

Muhammad Ateeq, of Pakistan, was sentenced to 12 years imprisonment and ordered to pay about $48 million in restitution for his alleged role in a health care fraud scheme and money laundering conspiracy. According to the government, Ateeq worked in the Islamabad office of an entity that controlled Medicare billing for over 20 home health agencies located throughout the United States and is alleged to have used fake identities to cause the agencies to submit fraudulent Medicare claims. According to court documents, the scheme resulted in over $40 million in payments for services that were never rendered.

Ateeq then allegedly directed US employees to deposit the payments into US bank accounts, and then used money transmitting businesses to receive cash payments and bank deposits in Pakistan. The fraudulent proceeds were allegedly used to purchase luxury items, such as watches, for Ateeq’s associates located in Dubai.

A copy of the DOJ press release can be found here.


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