Category: MIL-OSI

Source: United States Department of Justice Criminal Division

An Alaska man was sentenced yesterday to 30 months in prison for embezzling more than $1 million from the City of Houston, Alaska, and from a Wasilla-based equipment company, and then evading taxes on the embezzled profits.

According to court documents and statements made in court, from 2015 through 2018, Jess Adams was the Treasurer for the City of Houston, where he was entrusted with bookkeeping responsibilities and had administrative access to the city’s accounting records and software. Adams used this access to direct electronic transfers from the city’s bank account to a personal account in his name, which he maintained to hide the embezzled funds. Adams created fictitious entries in the city’s accounting records to disguise these payments as legitimate business expenses.

In October 2018, the City of Houston placed Adams on administrative leave, and he resigned his position in November 2018. A year later, Adams was employed as a bookkeeper by an equipment company, where he exercised control over the company’s accounting records and software. Using this access, Adams directed electronic transfers from the company’s bank account to other personal accounts that Adams opened in his name to hide the embezzled money. To conceal his activity, Adams used fictitious entries in the company’s accounting software to make it appear as though these funds were transferred for the payment of legitimate business expenses.

Adams then laundered the money he embezzled from the equipment company by making several wire transfers from his personal bank account to other accounts, each at a value greater than $10,000.

To further conceal his embezzlement and evade his taxes, Adams – a former seasonal tax return preparer for a national tax advisory company – filed false individual income tax returns for tax years 2016 through 2021. These returns did not disclose the additional income he embezzled.

In addition to his prison sentence, Adams was ordered to serve three years of supervised release and pay over $1.5 million in restitution to the United States, as well as additional restitution to the City of Houston and to the equipment company.

Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney S. Lane Tucker for the District of Alaska made the announcement.

IRS Criminal Investigation investigated the case, with substantial assistance from the Alaska State Troopers.

Trial Attorney Boris Bourget of the Tax Division and Assistant U.S. Attorney Tom Bradley for the District of Alaska prosecuted the case.

Source: United States Department of Justice Criminal Division

The Justice Department today announced that Rite Aid Corporation (Rite Aid) and 10 subsidiaries and affiliates have agreed to settle the government’s allegations under the False Claims Act (FCA) and Controlled Substances Act (CSA) asserted in United States ex rel. White et al. v. Rite Aid Corp., et al., No. 1:21-cv-1239 (N.D. Ohio). Under the settlement, the government will be paid $7.5 million and have an allowed, unsubordinated, general unsecured claim of $401.8 million in Rite Aid’s bankruptcy case that is pending in the District of New Jersey. During the relevant time period, Rite Aid operated one of the country’s largest retail pharmacy chains with over 2,200 retail pharmacies in 17 states.

“Filling unnecessary prescriptions for powerful and addictive opioids, as the government alleged here, not only takes a toll on our communities, but also violates the law,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “As today’s settlement illustrates, the Justice Department is committed to holding pharmacies accountable for their role in the nation’s opioid crisis.”

“Pharmacies and pharmacists have an affirmative legal duty to ensure that the prescriptions they fill are legitimate,” said U.S. Attorney Rebecca C. Lutzko for the Northern District of Ohio. “When they disregard this responsibility and instead ignore red flags indicating that prescriptions for addictive painkillers are invalid, they violate the public’s trust and harm the community they are supposed to serve — all to make a buck. Our settlement with Rite Aid reinforces the Northern District of Ohio’s continued commitment to combatting the opioid crisis. My office and our law enforcement partners will continue to battle this epidemic by ensuring that corporate actors comply with their legal obligations, which help to restrict unwarranted public access to highly addictive medications, and thereby fight to keep vulnerable members of our communities from becoming addicted to opioids.”

The government’s complaint alleges that, from May 2014 through June 2019, Rite Aid knowingly dispensed at least hundreds of thousands of unlawful prescriptions for controlled substances that (1) lacked a legitimate medical purpose and were not issued in the usual course of professional practice and/or (2) were not valid prescriptions, were not for a medically accepted indication or were medically unnecessary. These unlawful prescriptions included, for example, prescriptions for the dangerous, highly diverted combination of drugs known as “the trinity,” prescriptions for excessive quantities of opioids, such as highly addictive oxycodone and fentanyl, and prescriptions issued by prescribers who Rite Aid pharmacists had repeatedly identified internally as suspicious and as writing unlawful, unnecessary prescriptions. The government further alleges that Rite Aid filled these prescriptions despite clear “red flags,” which highly indicated the prescriptions were unlawful and which pharmacists are trained to recognize. Rite Aid also allegedly ignored substantial evidence that its stores were dispensing unlawful prescriptions, including specific concerns raised by its pharmacists, and intentionally deleted internal notes about suspicious prescribers written by Rite Aid pharmacists, such as “writing excessive dose[s] for oxycodone,” and “DO NOT FILL CONTROLS.” By knowingly dispensing unlawful prescriptions for controlled substances, the government alleges that Rite Aid violated the CSA and, where Rite Aid sought reimbursement from federal healthcare programs, also violated the FCA. 

Along with Rite Aid Corporation, the government’s complaint names as defendants the following Rite Aid subsidiaries: Rite Aid Hdqtrs Corp.; Rite Aid of Connecticut Inc.; Rite Aid of Delaware Inc.; Rite Aid of Maryland; Rite Aid of Michigan; Rite Aid of New Hampshire; Rite Aid of New Jersey; Rite Aid of Ohio; Rite Aid of Pennsylvania and Rite Aid of Virginia.

“Pharmacies and pharmacists have a critical responsibility to ensure controlled substances are dispensed lawfully and safely to the public. This includes highly addictive opioids as we continue to see the impact of the opioid crisis,” said Deputy Inspector General Christian J. Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG is entering into a Corporate Integrity Agreement with Rite Aid, which includes a prescription drug claims review to have an Independent Review Organization determine whether prescription drugs are properly prescribed, dispensed, and billed.  HHS-OIG will continue to work with our law enforcement partners to hold providers accountable that put the public at risk.”

“America continues to live through the worst opioid epidemic we have ever seen. Rite Aid contributed to this crisis by ignoring obvious red flags and dispensing hundreds of thousands of unnecessary opioids,” said Administrator Anne Milgram of the Drug Enforcement Administration (DEA). “DEA will continue to do everything in our power to protect the health and safety of Americans and to end the opioid epidemic.”

The civil settlement includes the resolution of claims that certain Rite Aid pharmacies in Washington State violated the CSA by filling prescriptions written by prescribers who lacked proper controlled substance prescribing authority. The settlement also resolves claims brought in 2019 under the qui tam, or whistleblower, provisions of the FCA by Andrew White, Mark Rosenberg and Ann Wegelin, who all previously worked for Rite Aid at various pharmacies. The FCA authorizes private parties to sue on behalf of the United States for false claims and share in any recovery, and permits the United States to take over the lawsuit, as it did here in part. The relators will receive 17% of the government’s FCA recovery in this matter.

In addition to the civil settlement, Rite Aid has entered into agreements with DEA and HHS-OIG to address its obligations going forward. Rite Aid and DEA entered a memorandum of agreement (MOA) designed to increase communication between the company, its retailers and DEA. Employees will receive additional training to help them identify illegitimate prescriptions and minimize the risk of drug diversion. The MOA also requires Rite Aid to create and keep materials relevant to DEA investigations for a minimum of five years. Rite Aid further commits to implementing and managing an anonymous hotline for employees, patients and the public to report suspected illegal dispensing of highly diverted controlled substances as well as suspected violations of the CSA. Rite Aid has also entered into a corporate integrity agreement (CIA) with HHS-OIG. The CIA includes a prescription claims drug review to have an Independent Review Organization to determine whether prescription drugs are properly prescribed, dispensed and billed.

The settlement was approved on June 28 by the bankruptcy court as part of Rite Aid’s plan of reorganization, which is expected to become effective later this summer. The amount the government will recover on its unsecured claim under the settlement will depend on the ultimate amount of assets available to the bankruptcy estate for distribution to unsecured creditors.

The Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of Ohio handled this matter. The DEA Cleveland Division, FBI Cleveland Field Office and HHS-OIG provided substantial assistance in the investigation.

Senior Trial Counsel Christopher Wilson of the Civil Division’s Fraud Section and Assistant U.S. Attorneys Patricia Fitzgerald, Elizabeth Berry and Kathryn Andrachik for the Northern District of Ohio handled the White matter. Trial Attorneys Mary Schmergel, Gregory Werkheiser and Ryan Lamb of the Civil Division’s Corporate/Financial Litigation Section handled the Rite Aid bankruptcy case.

Today’s settlement illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the FCA. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to the HHS at 800-HHS-TIPS (800-447-8477).

The claims asserted against the defendants are allegations only. There has been no determination of liability.

Source: United States Department of Justice Criminal Division

The Justice Department announced today that Rite Aid Corporation and Rite Aid subsidiaries, Elixir Insurance Company, RX Options LLC and RX Solutions LLC, have agreed to resolve allegations that they violated the False Claims Act (FCA) by failing to accurately report drug rebates to the Medicare Program. As part of the settlement, Elixir Insurance and Rite Aid will pay the United States $101 million, and RX Options and RX Solutions will grant the United States an allowed, unsubordinated, general unsecured claim for a total of $20 million in Rite Aid’s bankruptcy case pending in the District of New Jersey. The settlement is based on the companies’ ability to pay and was approved on June 28 by the bankruptcy court as part of Rite Aid’s plan of reorganization, which is expected to become effective later this summer. In addition to operating one of the country’s largest retail pharmacy chains, Rite Aid offered Medicare drug plans and pharmacy benefits manager (PBM) services through Elixir Insurance, RX Options and RX Solutions.  

“Participants in Medicare’s drug program must accurately report price concessions, including drug manufacturer rebates, to ensure that the government receives the benefit of those concessions,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “Today’s settlement reflects the Justice Department’s commitment to hold accountable entities that pursue their own financial interests at the expense of taxpayer programs.”

“Rite Aid and its Elixir subsidiaries lined their corporate pockets with millions of dollars of manufacturer rebates that should have been reported to Medicare,” said U.S. Attorney Rebecca C. Lutzko for the Northern District of Ohio. “Each of those dollars could have been used to benefit Americans with genuine health care needs. Our office will not tolerate deceptive health-insurance practices, and we will vigorously pursue those who violate the FCA.”

Under Medicare Part D, private entities known as Part D Plan Sponsors offer and administer insurance plans that provide prescription drug coverage to enrolled Medicare beneficiaries. Part D Sponsors must submit annual reports to the Centers for Medicare and Medicaid Services (CMS) with information about rebates and other remuneration the Plans received from drug manufacturers in connection with the Part D drugs provided to beneficiaries, which ensures that the government receives the benefit of any price concessions provided by drug manufacturers to purchasers of the drugs covered under the Part D plan. CMS relies on the reports in the annual reconciliation process that determines payments due to the Plans or CMS at the end of the year.

The settlement resolves allegations that, between 2014 and 2020, the defendants improperly reported to CMS portions of rebates received from manufacturers as bona fide service fees, even though manufacturers did not negotiate with the defendants to pay such fees. The United States further alleged that Elixir Insurance knew the retained rebates did not meet the regulatory definition of bona fide services fees.

“Truthful and accurate documentation in the delivery of health care goods or services is crucial to the integrity of federal health care programs,” said Deputy Inspector General for Investigations Christian J. Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “Improper submission of manufacturer drug rebates and fees by Part D Plan Sponsors for pharmaceutical products in order to make more money will not be tolerated. Collaborating with our law enforcement partners, HHS-OIG is committed to preventing and investigating health care fraud in Medicare and other taxpayer-funded health care programs.”

The civil settlement includes the resolution of claims brought in 2021 under the qui tam, or whistleblower, provisions of the False Claims Act by Glenn Rzeszutko, who previously worked for RX Options. The FCA authorizes a private party to sue on behalf of the United States and share in any recovery. The qui tam case is captioned United States ex rel. Rzeszutko v. Rite Aid Corporation et al., No. 5:21-CV-574 (N.D. Ohio). The relator’s share of these proceeds has not yet been determined.

The Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office for the Northern District of Ohio handled this matter, with substantial assistance from HHS-OIG and FBI Cleveland Division.

Trial attorneys Christopher Wilson and Dan Schiffer of the Civil Division’s Fraud Section and Assistant U.S. Attorney Jackson Froliklong for the Northern District of Ohio handled this matter. HHS-OIG and the FBI Cleveland Field Office provided substantial assistance in the investigation. Assistant Director Mary Schmergel and Trial Attorneys Gregory Werkheiser and Ryan Lamb of the Civil Division’s Corporate/Financial Litigation Section are handling the Rite Aid bankruptcy.

Today’s settlements illustrate the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the FCA. Tips and complaints from all sources about potential fraud, waste, abuse and mismanagement can be reported to HHS at 800-HHS-TIPS (800-447-8477).

The claims asserted against defendants are allegations only. There has been no determination of liability.