DOJ’s National Fraud Enforcement Division Announces Enforcement Priorities

DOJ’s National Fraud Enforcement Division Announces Enforcement Priorities

On August 13, US Assistant Attorney General (AAG) Colin M. McDonald issued a memorandum addressed to all Fraud Division personnel outlining the US Department of Justice’s National Fraud Enforcement Division’s (Fraud Division) enforcement priorities. The memorandum describes the Division’s mission to prosecute fraud “no matter its size or complexity” and signals a more aggressive, coordinated approach to enforcement.

Created earlier this year (which we covered here), the Fraud Division has reorganized personnel and resources across US Department of Justice (DOJ), growing its workforce to 500 attorneys and staff. AAG McDonald announced that the Division will continue to expand over the next two years, with the goal of “building the most sophisticated, innovative, and data-driven white-collar law enforcement component in the world.” 

The memorandum outlines the Fraud Division’s five enforcement priorities.

1. Public trust and financial integrity.
2. Health care.
3. Internal revenue.
4. Global trade and commerce.
5. Corporate misconduct.

For the health care industry, AAG McDonald emphasized that national health care expenditures are expected to grow from more than $3 trillion to more than $7 trillion annually, with an estimated 3% to 10% lost to fraud. The memorandum identifies several enforcement targets, including Medicare and Medicaid fraud, telemedicine fraud, controlled substance diversion, home health and hospice fraud, and deceptive marketing of unsafe products and services. The Division also plans to “supercharg[e]” the Health Care Fraud Strike Force with additional resources, including data analytics and other technology, to identify and prosecute wrongdoing.

The memorandum also highlights the Fraud Division’s focus on corporate fraud. AAG McDonald stated that the Division will hold business organizations accountable for employees’ criminal conduct while rewarding companies that voluntarily self-disclose, cooperate with investigations, and remediate wrongdoing.

Key Takeaway: Health care companies, government contractors, and corporations across regulated industries will want to evaluate their compliance programs in light of these priorities. Organizations operating in the identified target areas — particularly telemedicine, controlled substance distribution, and hospice services — can assess whether existing internal controls and monitoring are sufficient to detect and prevent the conduct the Division has flagged. 

Read the DOJ’s press release here and the full memorandum here.

SpineFrontier CFO Sentenced to Four Months in Prison for AKS Conspiracy

On August 6, Aditya Humad, the former chief financial officer of SpineFrontier, Inc. , was sentenced to four months in prison and one year of supervised release after pleading guilty to conspiracy to violate the Anti-Kickback Statute (AKS). The court also ordered him to pay a $9,500 fine.

Between 2013 and 2015, Humad directed SpineFrontier to pay approximately $540,000 through sham consulting agreements to three surgeons. Although the agreements provided hourly rates ranging from $250 to $1,000, the surgeons allegedly performed little or none of the stated work. Instead, the payments induced them to use SpineFrontier’s medical products, generating millions of dollars in revenue for the company.

Humad’s co-defendant, Dr. Kingsley Chin, SpineFrontier’s chief executive officer, previously pleaded guilty to making a false statement to the Centers for Medicare & Medicaid Services (CMS). He was sentenced to one year of supervised release, including six months of home confinement.

Separately, six physicians entered civil settlements resolving allegations that they accepted sham consulting payments in violation of the False Claims Act (FCA) and the AKS, collectively paying $3.3 million. We previously discussed a district court order allocating a share of those proceeds to the whistleblower here.

These resolutions demonstrate that consulting arrangements with health care professionals may draw heightened scrutiny when compensation does not correspond to documented services or appears tied to product use. Both executives and participating physicians may face liability if ostensibly legitimate consulting agreements disguise unlawful kickbacks.

Except for the admissions made by Humad and Chin as part of their criminal plea agreements, the claims resolved by the settlement are allegations only and there has been no determination of liability.

Read the DOJ’s press release here.

Defense Contractor Pays More Than $1 Million to Resolve FCA Allegations Over Required Navy Wire Testing

On August 10, Judd Wire Inc. agreed to pay $1,014,000 to resolve FCA allegations that, from September 2011 through August 2021, Judd Wire manufactured wire and cable products for the US Navy under 29 specifications without completing all required testing.

Judd Wire voluntarily reported the testing lapses, cooperated with the investigation, and implemented corrective measures that DOJ credited in reaching a more favorable settlement, underscoring the value of prompt self-disclosure, meaningful cooperation, and documented remediation.

The claims resolved by the settlement are allegations only, and there has been no determination of liability.

Read the DOJ’s press release here.

United States Intervenes in Whistleblower Suit Alleging Medicare and TRICARE Billing Fraud by Colorado Health Care Companies

On August 10, the US Attorney’s Office for the District of Colorado announced that the United States intervened in a qui tam action against Front Range Urgent Care, Inc.; Comfort Care Family Practice, Inc.; QwikCareMD, LLC; Anita Weiscamp; and Dr. Steven L. Wenrich. The complaint alleges that the defendants engaged in a nearly decade-long scheme to submit false claims to Medicare and TRICARE.

Front Range and Comfort Care are Colorado Springs-based medical practices established by Dr. Wenrich, who has since died. His spouse, Anita Weiscamp, established QwikCareMD, a medical management services company.

According to the complaint, nurse practitioners and physician assistants provided medical services that the defendants billed under Dr. Wenrich’s physician provider number, even though he allegedly did not participate in or supervise them. The government contends this practice allowed the companies to seek reimbursement at higher physician rates, resulting in tens of thousands of allegedly inflated claims.

Former QwikCareMD employees filed the action under the FCA’s qui tam provisions, which permit private relators to pursue claims on behalf of the United States. The government’s intervention means it has assumed primary responsibility for the claims, but the allegations remain unproven and no liability has been determined.

Read the DOJ’s press release here.

Tennessee Pharmacies Agree to Pay $450,000 and Accept Controlled-Substance Restrictions

On August 10, the US Attorney’s Office for the Middle District of Tennessee announced that Tomas K. Weir and two pharmacies in which he held a majority interest — Oakley Pharmacy, Inc., d/b/a Dale Hollow Pharmacy, and Xpress Pharmacy of Clay County LLC — entered into a consent judgment and permanent injunction resolving claims under the Controlled Substances Act and the FCA.

The judgment bars Weir, Dale Hollow, and Xpress from administering, dispensing, distributing, or possessing controlled substances with intent to distribute through March 1, 2040, and prohibits them from applying for or renewing a US Drug Enforcement Administration (DEA) registration during that period.

Weir previously pleaded guilty to conspiring to distribute and dispense controlled substances, commit health care fraud, and violate the AKS. On June 18, he was sentenced to 24 months in federal prison and ordered to pay $1,419,974 in restitution. The $450,000 civil penalty will be fully credited toward that obligation.

The parallel criminal and civil resolutions illustrate that the same conduct may lead to imprisonment, restitution, civil penalties, and lasting operational restrictions. 

Except for Weir’s admissions in his criminal plea agreements, the claims resolved by the civil settlement are allegations only, and there has been no determination of liability.

Read the US Attorney’s Office for the Middle District of Tennessee press release here.