It is difficult to imagine looking for a woman’s dress and NOT shopping at JC Penney’s, Belk’s, Sears, Nordstrom’s, Lord and Taylor or online at “overstock.com”. Yet, to avoid purchasing clothes that were manufactured overseas, and imported to the United States under false pretenses, one would have to find somewhere else to shop to be completely sure. Motives, Motives Far East, Richard Stotter, and Barry Blikstein have all agreed to pay the federal government $13,375,000 to settle a False Claims Act case. The various defendants are alleged to have “undervalued” their imports to avoid paying millions of dollars in tariffs. The recent settlement is the largest customs fraud case ever resolved in New York. Interestingly, the settlement follows a similar settlement in 2014 by Dana Kay and Danny & Nicole, also importers of women’s dresses, in the amount of $10 million. Thus, in less than two years, dress producers have paid over $23 million to the federal government to settle False Claims Act cases involving the underpayment of applicable duties.

The fraudulent scheme was well hidden in these closely held corporations. The scheme was fairly simplistic in that Motives would supply a commercial invoice to US Customs officials declaring the value of the imported clothing items without disclosing that a separate payment was made to the factory for the same items. This fraudulent procedure, referred to as “undervaluing”, went on for over 10 years. In the case of Motives, the procedure involved preparing a “cost sheet” pricing out the cost of a particular garment and then deducting as much as $2.50 per garment BEFORE calculating the customs duty owed (generally around 24%) and then adding the $2.50 back into the amount to be paid for the garment. This scheme would result in ripping off Uncle Sam by between $.55 and $.75 per garment; however, since Motives was importing millions of dresses, skirts and other men’s and women’s garments, the fraud amounted to a significant loss to United States taxpayers.

“Customs fraud is a somewhat intricate area as there are many ways for an importer to “value” the imported product; however, this was a fairly straightforward fraud”, said Michael D Fitzgerald, a lawyer in Brielle representing the whistleblower who initiated this case under the federal False Claims Act.

You may have heard of an event called a “Botox party”. The basic concept is that a group of people get together and “share” a vial of Botox to address signs of age which may appear on a person’s face. These “events” are paid for individually and do not in any way utilize taxpayer dollars.

Dr. Raymond Brown of Cleveland, Tennessee has now reinvented the “Botox party”. Unfortunately for him, the party will now result in 20 months in prison and the forfeiture of $6 million as reimbursement for fake billing.

Dr. Brown set a record for billing Medicare for the most Botox injections. The doctor billed Medicare for 17,000 vials of Botox in one year. The math didn’t work for a number of reasons. Reason one: Cleveland, Tennessee has about 41,000 residents. The doctor would have had to inject one out of three residents of the entire city to get to this number. Reason two: the doctor would have to see one patient every 15 minutes, 10 hours per day for six days a week and he still would not have used the entirety of the 17,000 vials billed to Medicare. Reason three: when the search warrant was executed, the inspectors determined that the doctor had in fact only purchased 254 vials of Botox.

“HOW LOW CAN YOU GO”

Just when you think fraudsters can’t reach a new low, you read about Michael Mann, the owner of Seattle-based Wheelchairs Plus. Mr. Mann has been ordered to pay $2.7 million for fraudulently billing the Medicaid program for 119 new wheelchairs. Unfortunately, what Mann delivered were actually used wheelchairs purchased from nursing homes or off of websites such as Craigslist. Mann would actually go so far as creating a new serial number after cobbling together rebuilt chairs from various sources.

Mann applied the serial numbers because Medicaid will not pay for a used or rebuilt chair, but, rather, will only reimburse for a “new” chair. In fact, Medicaid would pay several thousand dollars for a “new chair” when the chairs would only cost a couple of hundred dollars to rebuild used.

A couple of months ago, the Department of Justice announced a settlement with VMware, Inc. and Carahsoft Technology. The two companies specialize in providing virtualization software and information technology products to federal, state and local governments. The allegation against these two entities was that they did not provide their “best price” to the United States General Services Administration (GSA).
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The Department of Justice announced a settlement with nearly 500 hospitals related to the implantation of cardioverter defibrillators (ICD’s). The surgeries did not meet the appropriate medical conditions for Medicare coverage established in the National Coverage Determination (NCD). Medicare will generally exclude coverage for ICD procedures when a bypass or angioplasty has been performed within the last 90 days or within 40 days of a heart attack.
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In what has to be one of the more bizarre cases of alleged Medicaid fraud, a Florida dentist has been accused of needlessly pulling children’s teeth as part of a Medicaid fraud scheme. The case has not yet been litigated; however, 58 notices of intent to sue by angry patients are known to exist. As an example of the level of anger and frustration, protests were held outside the offices of Dr. Howard Schneider in Jacksonville. A Medicaid fraud investigation has been opened by the Florida Attorney General’s Office.
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Historically, IRS tax whistleblower cases have been both frustrating and unproductive. In a Bloomberg article in 2012, Michael Fitzgerald was quoted as saying a referral to the IRS of a whistleblower case is akin to being in “purgatory” since there had historically been little to no communication from the service. Well, that may all be changing now.
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A False Claims Act, pending in The United States District Court for the District of New Jersey against Allied Dental Practices of New Jersey and a number of individual dentists, has been settled. The complaint alleges that local Dentists Edward Poller, Glenn Prager, Christopher Emma, Todd Prager, and Daniel DiCesare instructed employees to “delete” all credit balances for the patients in their 22 locations in New Jersey and Pennsylvania. This complaint is one of the first cases settled under the New Jersey False Claims Act and is believed to be the first “whistleblower” case involving a novel allegation under the New Jersey Unclaimed Property Act. The complaint alleges violation of the Federal and New Jersey False Claims Acts. The defendants have agreed to pay over $420,000.00 including payment for the State and Federal false claims ($200,000), a penalty to the New Jersey Unclaimed Property Office ($75,000), a wrongful discharge settlement ($87,500) and all attorney’s fees. It is not known whether insurance companies will also seek reimbursement.
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