Individual Executives Found Liable Under False Claims Act

Following a two-week trial, a federal jury in Charleston, SC, recently found three health care company executives individually liable under the False Claims Act and Anti-Kickback Statute in connection with the submission of more than 35,000 fraudulent claims for payment to federal health care programs.  The former CEO of a medical testing lab company and two other owners of the lab’s marketing partner were found personally liable for damages of around $17 million.  Due to the False Claims Act’s treble damages provisions, their total combined liability exceeds $50 million.

The U.S. Attorney’s Office in South Carolina relied on three “qui tam” whistle-blowers in bringing forward the False Claims Act cases, which date back to 2011.  In those cases, it was alleged that the three executives conspired to arrange for kickback payments to induce physicians to order medically unnecessary blood tests.

Those kickbacks took the form of excessive “process and handling fees” paid to doctors for each blood draw and test referral, and regular waivers of patient co-pays and deductibles.  Medicare guidelines permit a $3 fee for the service in the doctor’s office to draw and prepare a patient’s blood for testing.  In these cases, physicians were paid $17 process and handling fees by the defendants and were induced to order other expensive and often medically unnecessary blood tests for federally insured patients.  Ultimately, the Medicare and Tricare programs were billed for those unnecessary tests.

In 2015, the lab company at the center of the scheme settled for $45 million and eventually declared bankruptcy before being purchased by another company.  Two other defendants also previously settled with the government for $1.5 and $6 million, respectively.

While False Claims Act cases are more commonly brought against corporations over the submission of alleged false or fraudulent claims to the government, individuals are not immune from False Claims Act Liability.  As the instant case and jury verdict demonstrates, individuals can also be the subject of False Claims Act scrutiny.

A link to the U.S. Attorney’s Office announcement can be found here.