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 Eatontown representing the whistleblower who initiated this case under the federal False Claims Act.

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.

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.

To maintain the integrity of the MAS program, the GSA requires that the vendors always provide them with information regarding the “best price”. The “best price” can also change during the term of the contract and the vendor is required to advise the GSA of any improved pricing. Without accurate information, the system does not work.

In the recent $75.5 million settlement, VMware and Carahsoft resolved allegations that false statements had been made to the government regarding the “best price”. Simply put, these vendors failed to advise the GSA of more favorable contract pricing given to other customers.

Interestingly, these companies provide products to New Jersey education organizations like NJEDge and the New Jersey School Boards Association (NJSBA). It is not known as to whether or not NJEDge or the NJSBA utilize the MAS program, nor is it known whether or not these defendants provided the “best price” to the New Jersey educational institutions.

The alleged fraud was revealed by an individual familiar with the business practices of these defendants. A former employee, Dane Smith, provided the “inside information” to the United States government. Mr. Smith will share in the recovery as permitted by the provisions of the federal False Claims Act. The federal False Claims Act provides for a recovery to an individual supplying information to the United States government. The individual providing the information, referred to as a “relator”, is entitled to between 15% and 30% of the amount of money recovered by the federal government. The actual amount to be recovered by Mr. Smith has not yet been determined, however, should result in a reward to him of not less than $11 million.

Interestingly, the state of New Jersey instituted a False Claims Act regarding claims against the state of New Jersey in 2008.

If you are aware of a false claim against the state of New Jersey or the federal government, you should contact a qualified New Jersey whistleblower lawyer to discuss your case.

Waterworks attempted to avail itself of an unfair advantage by utilizing subcontractors under the Disadvantaged Business Enterprise program (DBE). The United States Department of Transportation (DOT) and the United States Environmental Protection Agency (EPA) have programs intended to provide opportunities for the socially and economically disadvantaged. As you might expect, the DOT and EPA have promulgated regulations to clearly indicate when the use of a DBE is appropriate. Unfortunately, Waterworks claimed to have conducted business with the now defunct American Indian Builders & Suppliers Inc. (AIB). AIB would collect a small percentage of the subcontract amount as compensation for allowing Waterworks joint use of its name and status as a DBE qualified business. AIB did not work on the project nor did they supply materials to any of these federally funded projects.

The Department of Justice has recently focused on the improper use of these disadvantaged entities by prime contractors as a way to gain an advantage when bidding on contracts. The programs to aid socially or economically disadvantaged individuals will only benefit those groups if the groups are actual participants in the contract and do not operate as a sham. In addition to this “American Indian” entity, legitimate minority and women owned businesses are afforded an opportunity to compete fairly on projects. Fraud in the program upsets the intended purpose and diverts grant funds away from worthy recipients.

The improper utilization of any government program like DBE can be considered fraud and is probably actionable under the False Claims Act. The state of New Jersey has its own False Claims Act which is very similar to the federal act. Individuals who are aware of fraud against the state or federal governments can report the fraud and receive a reward. Under the False Claims Act in New Jersey and under the federal act, the individual reporting the fraud, called a “relator”, is entitled to receive a reward of between 15% and 30% of the amount recovered by the government.

If you believe that someone is improperly utilizing a DBE, whether it be handicapped, minority or woman owned, you can report the information to the state or federal government and you may be entitled to recover under the False Claims Act. If you have information, which is not otherwise public, regarding fraud against the state or federal government, you should contact a qualified attorney specializing in the area of the False Claims Act or whistleblower litigation.

Some New Jersey hospitals are also included in the settlement. Cooper Medical Center will pay $1.2 million, Deborah Hospital will pay $1 million, Valley Hospital will pay $2.2 million and Hackensack Medical Center will pay $5.9 million.

The information and ultimate settlements were brought to light as a result of a complaint filed seven years ago by two separate whistleblowers. Both whistleblowers were Medicare Compliance and Reimbursement Consultants and were represented by an attorney specializing in whistleblower and False Claims Act cases. As a result of bringing the information to the attention of the federal government, the whistleblowers, referred to as “relators”, will share in an award of $38,227,500.

If you are aware of fraud against the state or federal government, you should contact a competent whistleblower attorney to handle your claim

The current media reports do not indicate how the information came to the attention of the Florida Attorney General, however, under the False Claims Act, Medicaid, Medicare and any other fraud against the federal government can be reported. The individual who provides the first, non-public information to the Department of Justice can be entitled to a reward based upon the amount of money recovered by the government. The individual reporting the fraud, called a “relator”, can be entitled to between 15% and 30% of the amount recovered by the federal or state government.

If you believe you know about fraud against the state or federal government, you should contact a qualified False Claims Act or whistleblower attorney.

In addition to there being a change in the amount of the anonymous program, there also seems to be a more aggressive approach toward referring tax cases to the federal government. By way of example, a case a number of years ago would have resulted in an award of approximately 10% of the amount the IRS recovered. The recent cases have resulted in awards to the relators of between 15% and 30% of the amount collected by the Internal Revenue Service.

A “relator” is the person who provides the information, often through a qualified attorney, to the Internal Revenue Service. Typically, the relator is an employee or close competitor with intimate knowledge of the tax fraud.

The Internal Revenue Service is generally only interested in cases which have a tax fraud exceeding $2 million due to their somewhat limited resources in investigating the alleged fraud. Anyone with information about a potential tax fraud should contact a qualified whistleblower attorney.

“For all of these credit balances, we must debit the account to bring it to zero.”

The action that the dentists had their employees undertake would “wipe out” every credit balance in the practice. At the time of the directive from the dental professionals, Allied Dental had 22 locations and tens of thousands of patients. Money owed to the United States of America, the State of New Jersey, insurance companies and individuals was simply deleted; as if it never happened.

In some cases, the “credit” balance was money that an individual patient had overpaid. In other instances, the dental practice had been erroneously paid twice by the Federal government, State government, insurance company or private businesses. Instead of attempting to return the monies which were overpaid to Allied Dental, the dental professionals instead chose to eliminate the credit balances as if they did not exist.

The complaint indicates that some of the credit balances owed to a patient exceeded $1,000.00. The total amount “wiped out” by the dentists was significant.

The complaint was filed in the Federal court under the False Claims Act by a former employee, Ms. Jennifer D’Agostino. Ms. D’Agostino was working in the Toms River office and was one of the employees instructed to “zero out” the accounts. The claim was filed by her attorney and reported to the Federal government under seal while Ms. D’Agostino was still employed. The employee refused to zero out the account and, in fact, told her supervisor in an email that the Federal and State programs, along with the agreements with insurance companies, required Allied Dental to return any overpayment on a patient account. After she tried to do the right thing, she was fired.

The False Claims Act provides a way in which an individual can report fraud against the Federal and State government. If fraud is found, the False Claims Act provides for a penalty of three times the damages and an additional penalty of between $5,500.00 and $11,000.00 for each individual false claim. The person that reports the fraud, referred to as a “relator”, is entitled to receive between 15% – 30% of the Government’s recovery. Lawyers that specialize in this area of law generally take a percentage of the reward paid to the successful relator. In this case, Ms. D’Agostino will receive a 28% relator share in this non-intervened suit. The New Jersey False Claims Act was enacted in 2008.

Dr. Emma, whose spouse has enjoyed some notoriety on the Dr. Oz show, is no longer with the Allied Dental practice and claimed to have left the practice before the alleged action was taken. Dr. Emma was represented by Matthew G. Wapner, Esquire of McCARTER & ENGLISH. All other dentists and the various corporations are represented by Stuart J. Polkowitz, Esquire of BRACH EICHLER.

Michael D. Fitzgerald, a Eatontown, New Jersey attorney who filed the complaint on behalf of the “whistleblower” stated; “It takes a courageous individual to do the “right thing” when faced with being ordered to take an action which they believe is, at best, unfair and, at worst, illegal. The whistleblower was fired by Allied after refusing to “zero out” the accounts. Nothing can make up for the trauma of being fired, nor can these licensed professionals hide from their actions.”

Although the matter was settled in 2015, Ms. D’Agostino was terminated in 2012. “I am pleased that these individuals finally paid for their improper actions. Although the settlement resulted in a payment to me, I will never fully recover from being fired and evicted from my apartment. In spite of it all, I still believe it was the right thing to do,” said Ms. D’Agostino.

“The settlement amount is not particularly large, however, this case defines a new area of whistleblower law in the state of New Jersey”, Fitzgerald went on to say.

The New Jersey Unclaimed Property Act applies to any individual, professional or corporation holding money on behalf of another. It is certain that many similar claims will be filed in New Jersey specifically and throughout the United States generally.

As many know, the Unclaimed Property Act in New Jersey provides for the orderly return of property to its rightful owner. Very often, the “property” is in the form of money from bank accounts or insurance proceeds. Nearly everyone has had an experience of seeing a name they recognize (sometimes their own!) in the newspaper publication done by the Unclaimed Property Office.

Although most know of the publication of the names, very few know of the actual workings of the office. Fewer still are aware of provisions such as N.J.S.A. 46:30B-74(c) which directs the Unclaimed Property Office to deposit 75% of the money received into the “General State Fund” in New Jersey. Most states have a provision providing for transfer to a General State Fund.

This provision is significant as the lawyers representing the state of New Jersey were initially unsure as to whether or not the failure to transmit any unclaimed property to the Unclaimed Property Office constituted a “False Claim”. After reviewing the statutory provision, and the realization that $.75 of every dollar sent to the Unclaimed Property Office actually goes to the General State Fund, the state agreed to negotiate a settlement.

This is the first escheat case in the state of New Jersey under the False Claims Act. In fact, there are very few national escheat cases. One case in Virginia involved the failure to transmit escrow funds from the Naval Federal Credit Union to the state Unclaimed Property Office. Another matter, in the Midwest, involved the nonpayment of cash values on insurance policies to the Unclaimed Property offices throughout the country.

“It is difficult to tell how many claims will be filed as a result of this novel approach, however, as the unclaimed property statute applies to so many entities, including lawyers, it is believed that this will be an interesting and burgeoning arena in the near term”, Fitzgerald said. Lawyers should examine their own trust accounts for monies which should be sent to the state and also consider the federal and state False Claims Act when speaking with prospective clients due to the far reaching applicability.

Mr. Fitzgerald has settled over $10 million of False Claims Act cases in the last year.

The Law Office of Michael D. Fitzgerald is a proud member of the TAF Education Fund.