Category Archives: Whistleblower News

This interview with Reuben Guttman, who practices law with Guttman, Buschner & Brooks PLLC in Washington DC. and who represented three Plaintiff-Relators in United States ex rel. Doghramji v. Community Health Systems Inc., was conducted by John Commins, Senior Editor with HealthLeaders Media. The interview was published online on August 6, 2014.

An attorney representing one of the whistleblowers alleging that Community Health Systems committed fraud says that as a nation, “we have a healthcare delivery system where doctors and individual decision making, to some degree, have been shoved to the side by corporate managers.”

Community Health Systems, Inc. and federal prosecutors have agreed to a $98.1 million payout to settle system-wide fraud allegations levelled by whistleblowers against the Franklin, TN-based for-profit hospital chain.

While they have agreed on a settlement, CHS and federal prosecutors disagree on what prompted 119 hospitals in the nation’s largest acute care hospital chain to allegedly overbill Medicare, Medicaid, and TRICARE from 2005-2010 for inpatient services for patients who may not have needed to be hospitalized.

CHS Chairman and CEO Wayne T. Smith said the hospital chain was struggling “to operate in a complex and everchanging regulatory environment.”

“The question of when a patient should be admitted to a hospital is, and always has been, a matter of medical judgment by the individual physician responsible for a patient’s care,” Smith said in a media release.

“Unfortunately, shifting and often ambiguous standards make it extremely difficult for physicians and hospitals to consistently comply with the regulations. We are committed to doing our best, despite these challenges. Because this is an industry-wide issue, we hope the government will work to devise sound and reasonable rules for the important decision about whether to admit an individual for inpatient care, and we appreciate the opportunity to engage in meaningful dialogue with the government over these incredibly complicated issues.”

A CHS spokesperson amplified Smith’s point by saying that the shifting standards, “such as the two-midnight rule, which has had numerous updates, clarifications, and additional guidance attached to it since it was issued in August 2013… make it difficult for ALL providers to consistently comply with regulations.”

Federal prosecutors said flatly that the fraud allegations stemmed from a “deliberate corporate-driven scheme.”

“Charging the government for higher-cost inpatient services that patients do not need wastes the country’s healthcare resources,” said Assistant Attorney General Stuart F. Delery for the Justice Department’s Civil Division. “In addition, providing physicians with financial incentives to refer patients compromises medical judgment and risks depriving patients of the most appropriate healthcare available.”

Even though the settlement terms don’t include a guilty plea, Daniel R. Levinson, inspector general of the Department of Health and Human Services said that “in an effort to ensure the company’s fraudulent past is not its future, CHS agreed to a rigorous multi-year Corporate Integrity Agreement requiring that the company commit to compliance with the law.”

CHS had already set aside $102 million to cover the settlements and legal bills.

The settlement also resolves several whistle-blower lawsuits levelled by CHS employees in hospitals in several states. The whistleblowers’ share of the settlement has yet to be determined, DOJ said.

Reuben Guttman, representing whistleblower James Doghramji, MD, a former emergency physician at CHS’s Chestnut Hill Hospital in Philadelphia, spoke with HealthLeaders Media about the settlement. The following is an edited transcript.

HLM: CHS CEO Wayne Smith says that the billing irregularities are due to complex and shifting federal requirements. Do you buy that?

RG: I don’t think he has a legitimate point. This is a company that is crying out for additional scrutiny and oversight and this is a poster child for a Congressional investigation. In theory, doctors are supposed to make decisions.

In practice, people like Mr. Smith and companies like CHS have set up a dynamic where individual patient medical necessity is secondary to marketing and money. We are at a point where we have a healthcare delivery system where doctors and individual decision making to some degree have been shoved to the side by corporate managers.

This is a story about a company that was gobbling up suburban hospitals for no medical rationale. It’s not that they can run them better or that they were providing significant expertise. It was just about extracting cash from the Medicare/Medicaid system.

CHS was designing its admissions criteria on a centralized basis. CHS in Nashville was tracking exactly what was going on in all of these hospitals. They knew the economics at a micro level. I don’t think plausible deniability exists here.

HLM: Do you have a sense of the value of the alleged fraud versus what CHS is paying for?

RG: If you actually look the cash flow for this company, this is a very significant amount of money that they have put off. It is probably not significant in relation to the actual cost to the United States government or individual payers or what the government could extract if they tried the case, but it is a number that pushed the edge of the envelop in terms of paying something that is significant but allows the company to go forward.

The most significant thing about these cases is that they make the wrongdoing to some degree transparent as a catalyst perhaps for Congressional oversight. The reality is that unfortunately, many of these settlements are nothing more than the fee for a license to continue to break the law. What is apparent to us is that a lot of large companies are gaming the system and thinking ‘what is the likelihood of getting caught, and if we get caught what is the penalty?’ The penalty becomes part of the game.

We have to have a penalty system that is hard to calculate in advance and that will make it more difficult. But in reality you have to change the healthcare delivery system in the sense that we rely on the integrity of these types of corporations that have put medical decision making secondary to making money.

You can see when a train wreck is about to occur when you look at the debt service for a company. You are not going to create additional sick people. There are only a certain number of sick people. This is a situation that is going to be ripe for fraud.

HLM: Was there a smoking gun for prosecutors or whistleblowers in this case?

RG: In all of these cases, the complexity of the cases, you don’t find smoking guns. It requires you to find the smoke and the pieces to the gun and put it all together. Then, the trick for somebody who is doing lots of fraud cases is to look at the facts that aren’t there, or the rules that don’t exist, or to see what appears to be facially neutral practices are driving impropriety.

For example, if you have an innocuous practice that says when somebody comes into an emergency room and there is a rule that says they should be put on an IV, you can look at that and say that is not a smoking gun, putting someone on an IV.

But wait a second, when you put someone on an IV that means you are going to streamline them into an admissions situation as opposed to giving them bottles of water, maybe they will be OK, and we will send them home. You have to look at facially neutral practices and how they are driving an unlawful result. That is the trick to uncovering fraud. It’s extraordinarily complicated.

You have two things that are going on. One is you have companies engaged in these facially neutral practices that have an unlawful result for the purpose of deceiving regulators. Two, more significantly, it is a way of creating a cult and convincing people internally that they don’t have to worry about it because nobody internally is putting the pieces together. People who are paid well generally don’t want to do it.

This is the simple question you need to ask: What person or entity knowingly exposes somebody to infectious diseases in order to make a buck? That is the cutting question, because the reality is that while hospitals are places to get well they are also places that are dangerous because there are infectious diseases in hospitals. You don’t want to admit somebody unless it is medically necessary.

There are corporate executives who are knowingly and recklessly putting people at risk. That is unconscionable.

HLM: Do you feel this is a fairly widespread practice in the hospital sector?

RG: I wouldn’t be surprised.

A CHS spokesperson reached for comment late Tuesday said “This investigation was not about the quality of care provided or the location of the care that was provided for any patient–or even how long patients were in the hospital. It is about whether the hospital could rely on the physician’s signed orders in the medical chart to establish the patient status as inpatient–and then bill for the exact care that was provided. It is about the “status” of the patient–inpatient or observation–while that patient was in the hospital.

Below is an article by Kate Berry which was published on October 7, 2013 in the American Banker.

The nation’s four largest banks are holding $57 billion of seriously delinquent loans that they’ve been slow to move into foreclosure over concerns that the Federal Housing Administration, the government mortgage insurer, will refuse to cover the losses and hit them with damages, according to industry sources.

The banks — Bank of America (BAC), Citigroup (NYSE:C), JPMorgan Chase (JPM), and Wells Fargo (WFC) — have assured investors in the footnotes of quarterly filings that the loans are government-insured and therefore pose no threat to their bottom lines, even if they end up in foreclosure. What’s more, the banks have used these supposedly iron-clad government guarantees as a pretext for continuing to classify the loans as performing and for holding no reserves against them.

The FHA insures home loans issued by banks and other mortgage lenders to low-income and first-time home buyers. Those buyers pay the FHA insurance premiums to cover potential losses. In the event that an FHA-backed loan goes into foreclosure, the lender has the right to file a claim for reimbursement of losses.

However, the FHA’s guarantee does not apply if lenders are found to have violated underwriting or servicing standards, or to have engaged in misconduct. Banks can also be held liable for treble damages under the False Claims Act if they are found to have “falsely certified” that mortgages met all FHA requirements.

As a result, the banks face hefty losses if the loans go into foreclosure because there is no guarantee that the FHA will cover them, asserts Rebel Cole, a former Federal Reserve Board economist who is now a professor of finance and real estate at DePaul University in Chicago.

In the last year, the Department of Housing and Urban Development, which oversees the FHA, has forced four banks to pay a total of $1.5 billion under the False Claims Act on FHA loans that defaulted. More settlements are expected soon.

“The banks say they are certain of repayment on these distressed assets, but that’s simply not true,” says Cole.

To be sure, even if all $57 billion of loans went into foreclosure, losses to the FHA and banks would likely be substantially less, thanks to recoveries on the properties. The FHA’s overall recovery rate was 42% of the principal value in the second quarter.

Some lenders acknowledge that they will likely end up eating losses on defaulted loans held on their balance sheets and settlements related to past claims. They are also likely to try to avoid the risk of getting hit with damages by forgoing the FHA claims process and absorbing some losses themselves.

“There’s a distinct possibility that they [banks] do not file all claims and just self-insure [absorb losses] on those loans,” says Melissa Klimkiewicz, an attorney at BuckleySandler. “Lenders may err on the side of not filing claims where there is uncertainty because of the potential for HUD action or treble damages.”

For their part, lenders bristle at the claim that they’re intentionally keeping loans out of foreclosure. Even Ed Pinto, a resident fellow at the American Enterprise Institute and a sharp FHA critic, attributes the backlog of delinquent FHA loans to efforts by consumer groups to slow foreclosures, and to the unreasonably long time it takes to complete a foreclosure in states such as New York, New Jersey and Florida, where foreclosures are processed through the courts.

“Servicers are engaged in vigorous, robust loss mitigation efforts and that’s one of the reasons foreclosures are taking longer and so many loans are still on (banks’) books,” says Phillip Schulman, a partner with the Washington office of K&L Gates, who represents several banks currently in negotiations with HUD.

“You can’t file a claim until the house is in foreclosure or has [been the subject of] a short sale. It’s a lengthy process, and foreclosure is the last option we look at,” adds Jerry Dubrowski, a spokesman for B of A.

Moreover, it is not as if the FHA — whose own financial health is in question — is pressuring the banks to file claims. Like any insurer, the FHA wants to avoid paying claims, so it is providing incentives to mortgage servicers when they modify loans, offer a forbearance of past due mortgage payments or provide other alternatives to foreclosure. The FHA’s goal is “to reduce the number of full claims against the insurance fund,” a 2012 Government Accountability Office report on its finances said.

Some bank critics say they have intentionally held off from filing claims in the wake of their scandal involving the ‘robo-signing’ of foreclosure documents. That episode led to $25 billion national settlement between state attorneys general and the nation’s five largest servicers. Critics suggest the banks are now unable to foreclose on FHA loans because they do not have proper documentation, and therefore cannot file claims with the FHA.

“It’s like saying you’ll be reimbursed for expenses when you’ve lost the receipts,” says Reuben Guttman, who specializes in False Claims Act cases against banks at Guttman, Buschner & Brooks PLLC.

Most banks define delinquent FHA loans as those 90 days or more past due but still accruing interest. B of A has $21.4 billion of delinquent FHA loans on its books, while Wells has $19 billion, Citi has $4.2 billion and JPMorgan Chase has $3.3 billion. The banks also have on their books more than $8.6 billion of “nonaccrual” delinquent loans on which the FHA is no longer covering interest. Almost $7 billion of those loans are held by JPMorgan Chase.

DePaul’s Cole says that the numbers are misleading, however.

Bank of America, for example, lists only a fraction of its $23 billion in defaulted FHA loans as nonaccrual. But in a footnote to its second quarter filing with the Securities and Exchange Commission, B of A says the FHA, as the insurer, has stopped paying interest on $17 billion of the defaulted loans. Cole insists those also should be listed as nonaccrual.

Some observers suggest that the loans could sit on the four banks’ balance sheets until they settle existing disputes with the FHA over their underwriting. B of A and Citibank have already negotiated settlements over False Claims Act violations with the FHA or are in the midst of doing so.

The settlements are to resolve claims involving an unknown amount of previously filed FHA claims that could date back a decade or more. After the legal claims involving these mortgages are cleared up, the banks will be able to file new claims for loans still on their balance sheets.

“At some point there is going to be a settlement and it will include the loans held on their balance sheets, and at that point they will be able to file claims,” said one attorney who represents a bank currently in settlement talks.

In all, 10 FHA lenders are currently in negotiations with HUD and the Justice Department, David A. Montoya, HUD’s Inspector General, told legislators last month. The FHA’s servicing review teams have found widespread violations of servicing practices, and the expectation is that the FHA will be reimbursed for claims it has already paid, Montoya said.

“Given the sheer volume of loans involved and high error rates identified in underwriting, settlements and favorable court actions may result in significant recoveries by the government from each of the 10 lenders,” Montoya told a House subcommittee on Sept. 10.

Any recoveries, of course, would help the FHA bolster its own finances. Though the FHA says it has already set aside reserves to cover losses, the agency remains undercapitalized and had to tap the Treasury Department for a bailout last month.

“There’s no question that HUD is stepping up its enforcement efforts and that’s a euphemism for collection efforts,” says Schulman, the K&L Gates attorney.

The FHA has more than $32 billion in reserves, but it faces an estimated $70 billion in future payouts on loans originated just from 2007 through 2009, according to the 2012t from the Government Accountability Office. In all, the FHA has roughly 686,000 seriously delinquent loans, representing $106 billion in total principal balances for all lenders. These distressed assets continue to be a major drag on the housing market, distorting the supply of homes for sale because so many remain stuck in the foreclosure process.

Last year, the U.S. Attorney for the Southern District of New York, the Justice Department, HUD’s general counsel and HUD’s Office of Inspector General settled civil fraud cases with three large banks: Deutsche Bank’s Mortgage IT unit for $202.3 million, CitiMortgage for $158.3 million and Flagstar Bank for $132.8 million. Each of those settlements involved the lender’s admission that they submitted what are called “false annual certifications” to HUD. A spokesman for Citi says because of its past settlement, it has continued to file new claims and expects the FHA to pay for all losses.

In addition, B of A agreed last year to pay roughly $1 billion to resolve allegations of misconduct for loans originated by Countrywide Financial, which it bought in 2008. That settlement helped FHA patch a $688 million budget shortfall.

B of A in particular has dramatically whittled down its backlog of delinquent FHA loans. From the fourth quarter of 2012 to the second quarter of this year, B of A sold off $8 billion in mortgage servicing rights, essentially unloading soured FHA loans to nonbank servicers Nationstar Mortgage (NSM) and Ocwen Financial (OCN). Those servicers now have the authority to file claims with the FHA once loans go through foreclosure.

Of the four lenders, Wells appears to be the most resistant to a settlement.

The bank is locked in a bitter legal dispute with Preet Bharara, the U.S. Attorney for the Southern District of New York, and HUD over allegations of widespread FHA underwriting violations going back a decade.

Wells has claimed it received a broad release from False Claims liability as part of the $25 billion national mortgage settlement, but regulators have disputed that claim in court.

Wells “believes it acted in good faith and in compliance with FHA and HUD rules,” a spokesman said in an email. “We look forward to presenting facts to vigorously defend against this action.”
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This article was written by Lianna Brinded, Business Editor for the International Business Times on September 25, 2013.

One of the world’s most prominent whistleblower attorneys tells IBTimes UK about the differences between US and UK whistleblower protection.

The only way to prevent and root out large scale financial and company scandals is by installing bounty programmes and protection systems that reward those who risk their careers to flag up wrongdoing, says one of the world’s most prominent whistleblower attorneys.

In the US, there are a number programmes, such as ones with the US Internal Revenue Service (IRS) and the Securities Exchange Commission (SEC) coupled with the protection through the Dodd-Frank Act, since 2010.

The programmes allow whistleblowers to not only be rewarded for information, depending on the significance of information and how much it results in recovery for the government or shareholders, but also protects them employer retaliation, such as dismissal or being investigated themselves.

However, the UK lags behind rewarding or protecting whistleblowers.

Reuben Guttman is one of the world’s most prominent whistleblower attorneys and a co-founder of Guttman, Buschner & Brooks PLLC in Washington DC. He has served as counsel in some of the largest recoveries under the False Claims Act and has recovered billions of dollars for the government from fraudulent mortgage assignments and a number of pharmaceutical firms.

In 2012, he represented one of the four main whistleblowers in a case against GSK that returned over $3bn to the government and here he speaks with IBTimes UK exclusively.

Chinese authorities are cracking down on its pharmaceutical sector after officials revealed that four China-based senior executives at British drugmaker GlaxoSmithKline had channelled millions of pounds in bribes through travel agencies and consultancies.

Reuben Guttman is one of the world’s most prominent whistleblower attorneys who practice with Guttman, Buschner & Brooks PLLC in Washington DC. He has served as counsel in some of the largest recoveries under the False Claims Act and has recovered billions of dollars for the government from fraudulent mortgage assignments and a number of pharmaceutical firms.

In 2012, he represented one of the four main whistleblowers in a case against GSK that returned over $3bn to the government and here he speaks with IBTimes UK exclusively.

(Source: International Business Times at http://www.ibtimes.co.uk/articles/508530/20130924/gsk-china-pharmaceutical-scandal-bribery-whistleblower.htm)

See the full interview. . .