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Three FCPA Enforcement Trends We Saw in 2021

The Foreign Corrupt Practice Act, or FCPA, prohibits bribery of foreign officials and physicians to enhance business deals and ensures books and records are properly maintained for full transparency of expenses. The FCPA has an extensive reach that applies to prohibited conduct anywhere in the world.

Following a record-setting 2020, the year 2021 saw a more modest pace of FCPA enforcement, particularly as it relates to corporate actions. Below, we list several key highlights we saw in 2021.

1. Low Corporate Enforcement Figures

From the ongoing COVID-19 pandemic that made it difficult for the DOJ and SEC to investigate outside the US to turnover in SEC and DOJ leadership, 2021 saw the lowest corporate FCPA enforcement figures in a decade. In 2021, the DOJ and SEC brought FCPA enforcement actions against four companies and imposed financial penalties totaling $282 million. For comparison, 12 companies paid a record $6.4 billion to resolve FCPA cases in 2020.

2. Surge in Whistleblower Claims

The SEC whistleblower program awarded more than $500 million in 2021, including two sizeable awards to FCPA whistleblowers. As a result of this incentive, the SEC received more than 12,200 whistleblower tips, which is the largest number of whistleblower tips received in a fiscal year representing a 77% increase from 2020. Approximately 258 of those tips alleged FCPA violations.

3. Renewed Focus On FCPA Enforcement Against Companies And Individuals

New policy initiatives like the Biden administration’s National Security Strategy Memorandum and the United States Strategy for Countering Corruption suggest a renewed focus on anti-corruption. These documents designate the fight against corruption as a core interest of national security. Also, the DOJ introduced new policies for how it will evaluate companies who are seeking “credit for cooperation and remediation in corporate white-collar matters, and with respect to the scrutiny it will apply to companies’ compliance with the terms of deferred and non-prosecution agreements.”

Do you have valuable information that can help bring fraud to light? If so, we encourage you to speak to our experts today. DJO is comprised of a highly experienced team of whistleblower experts, lawyers, and even former whistleblowers, who strive to deliver the highest monetary reward for brave individuals who have valuable information that can expose fraud.

If a whistleblower’s lawsuit is successful, the reward can be between 15% to 30% of the funds recovered. In most cases, the False Claims Act also offers whistleblowers protection against job retaliation.

DJO will be there every step of the way to ensure you are safe and your information is confidential so you will have confidence knowing you’re doing the right thing.

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Exposing Healthcare Fraud: University Pays $22M in Medicare Fraud Case Following Whistleblower Report

Billions of dollars are wasted every year due to scams and corruption involving Medicare fraud. In fact, $5 billion of the $5.6 billion total False Claims Act settlements and judgments of 2021 were related primarily to Medicare and Medicaid fraud.

When an individual or organization commits Medicare fraud, they take significant resources away from necessary health care services putting beneficiaries’ health and welfare at risk. Let’s take a look at a recent Medicare fraud case brought to light by a whistleblower.

University of Miami Pays $22M to Settle False Claims Act Allegations

In 2021, the University of Miami agreed to pay $22 million in fines and penalties after a whistleblower accused the university of Medicare fraud. According to the Department of Justice (DOJ), a former senior executive at the school had provided information claiming the university’s off-campus hospital facilities had engaged in three violations of the False Claims Act.

  1. The University of Miami knowingly engaged in improper billing relating to its hospital facilities. Medicare regulations require hospital facilities to notify beneficiaries when their Medicare program will face higher costs when receiving service. According to court documents cited by the DOJ, the university allegedly converted several of their physicians’ offices to hospital facilities and then sought payment at higher rates without informing Medicare program beneficiaries.
  2. The University of Miami billed federal health care programs for unnecessary lab tests for patients who received kidney transplants at the Miami Transplant Institute–a transplant program operated by the University of Miami and Jackson Memorial Hospital. According to DOJ allegations, every time a kidney transplant patient checked into the Miami Transplant Institute, the University of Miami’s electronic system ordered a standard protocol of tests regardless of whether they were necessary for the particular patient.
  3. The University of Miami allegedly had Jackson Memorial Hospital purchase pre-transplant lab tests from the university at inflated costs.

This case is a prime example of the seriousness of Medicare fraud and how powerful whistleblowers are in enacting change and demanding justice. Full details of the settlement can be found here.

DJO is comprised of a highly experienced team of whistleblower experts, lawyers, and even former whistleblowers, who strive to deliver the highest monetary reward for brave individuals who have valuable information that can bring fraud to light.

If a whistleblower’s lawsuit is successful, the reward can be between 15% to 25% of the funds recovered. The False Claims Act also offers whistleblowers protection against job retaliation.

DJO will be there every step of the way to ensure you are safe and your information is confidential so you will have confidence knowing you’re doing the right thing. If you have valuable information that can help expose fraud, we encourage you to speak to our experts today.

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The Largest SEC Fraud Settlements to Date

The Foreign Corrupt Practices Act (FCPA) was enacted by the U.S. Department of Justice (DOJ) and the Securities Exchange Commission (SEC) to serve a few key anti-bribery and accounting purposes.

The U.S. Securities and Exchange Commission (SEC) enforces the law as it applies to market manipulation. In doing so, the SEC protects consumers when individuals or corporations attempt to commit fraud by taking advantage of or misleading them through different marketing tactics.

The SEC often enforces fair market laws under the Customer Protection Rule, which requires “registered brokers-dealers to safeguard the investment assets of their customers.” The rule exists to protect consumers’ finances in the event the investment firm fails or underperforms.

Fraud occurs when the investment firms fail to accurately portray the health of their investments, thus misleading consumers to believe their funds are in solid financial shape. When investment agencies knowingly misguide their clients, they commit fraud by jeopardizing assets for their own financial gain. Industries where this fraud occurs can include hedge funds, wall street, marketplace lending, investment banking, fintech, valuation, and credit rating agencies.

In 2019, corporate FCPA enforcement set an all-time high with over $2.65 billion in penalties. Additionally, that year, the DOJ and the SEC imposed the two largest FCPA corporate penalties, including the first billion-dollar settlement in FCPA history. The year 2020 saw a record level of $2.78 billion in penalties and fines for FCPA violations. Additionally, there were billions of dollars recovered by the DOJ and SEC in cooperation with other countries for similar violations.

Here are just 3 of the largest settlements or fines issued by the SEC to date.

  • $550 million – Goldman Sachs
    • In 2010, the SEC ordered investment and financial services leader Goldman Sachs & Co. to pay a record $550 million to reform its business practices that had “misled investors in a subprime mortgage product.” In the height of the “Great Recession,” the SEC alleged that Goldman “misstated and omitted key facts” regarding a product they marketed which meant their investors were misguided and made financial decisions that were not in their best interest.
  • $415 million – Merrill Lynch
    • In 2016, an SEC investigation found investment management company Merrill Lynch committed fraud and violating the Customer Protection Rule by “misusing customer cash that rightfully should have been deposited in a reserve account.” Merrill Lynch misued their investors funds to finance their own trading activities. Merrill Lynch admitted their wrongdoing and agreed to pay $415 million to settle the charges.
  • $200 million JPMorgan Chase
    • In 2013, the SEC charged JPMorgan Chase & Co. with “misstating financial results and lacking effective internal controls to detect and prevent its traders from fraudulently overvaluing investments.” JPMorgan did not effectively communicate its investments’ true values and because of that, led their clients to believe their investments were secure. JPMorgan admitted to the fraud and agreed to pay $200 million.

Do you have valuable information that can help bring fraud to light? If so, we encourage you to speak to our experts today. DJO is comprised of a highly experienced team of lawyers, whistleblower experts, and even former whistleblowers, who strive to deliver the highest monetary reward for brave individuals who have valuable information that can expose fraud.

If a whistleblower’s lawsuit is successful, the reward can be between 15% to 30% of the funds recovered. In most cases, the SEC Whistleblower program offers anonymity to any whistleblower that formally presents a case.

DJO will be there every step of the way to ensure you are safe and your information is confidential so you will have confidence knowing you’re doing the right thing.

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Seven of the Most Common Fraud Tactics in the Pharma Industry

Pharmaceutical fraud exists in many ways. Generally speaking, pharma fraud involves a party (or parties) within the pharmaceutical industry who illegally submit false claims to achieve financial gain from unnecessary services or programs. When individuals or organizations commit these crimes, they often force taxpayers to bear the burden of their wrongdoing

Spotting fraud can be complex as many organizations disguise their operations with false hopes that portray good intentions. In this article, we define seven of the most common fraudulent activities in the pharma industry and what to do if you suspect fraud in your organization.

Seven Common Pharma Fraud Tactics

Illegal Kickbacks to Patients and/or Referral Sources

  • One of the most common tactics used in the pharmaceutical industry is illegal kickbacks. Kickbacks are anything of value either directly or indirectly offered to a patient or physician that influences their medical decision to use a certain company or product. This action constitutes fraud because it undermines the ethics of our medical community.

Fraudulent Use of KOLs and Speaker Programs

  • According to IQVIA, Key Opinion Leaders (KOLs) are “physicians with a professional reputation for far-reaching and high-quality expertise. They are on the cutting edge and, as such, their opinions are highly regarded and their knowledge sought-after by their peers in the healthcare industry.” Fraud occurs when pharmaceutical companies compensate these KOLs based upon their own ability to make referrals for a specific drug or service. This tactic creates a false sense of security for the patient as they are led to believe reputable sources have backed the drug or treatment.

Independent Contractors

  • Often many pharmaceutical companies utilize professional medical consultants which are compensated on either a straight commission or a percentage of collections (1099). These financial arrangements depending on how they’re structured may violate the Anti-Kickback Statute. You will see these types of arrangements, not only in the pharmaceutical industry, but in the DME, genetic testing and laboratory services.

Patient Assistance Programs

  • One of the more devious tactics used in pharmaceutical fraud involves patient assistance programs (PAP). These programs are funded by pharmaceutical companies that have a self-serving interest in donating to the PAPs. These programs help pharmaceutical companies raise drug prices on the consumer by alleviating the co-pay responsibility of the patient. As drug prices rise the average patient is not capable of meeting the higher co-pays which triggers their enrollment in one of these PAP programs. Often these programs exist to funnel money through the foundations to pay for its own drugs. When this happens it violates the Anti-Kickback Statute.

Physician Buy-and-Bill Programs

  • According to the National Board of Prior Authorization Specialists, “Buy-and-bill is a process for physician offices to acquire medications that providers can administer in the office.” In order to induce a physician to purchase their drug, pharmaceutical companies will often offer steep discounts or “Free” samples to offset the cost of the drug. This practice may violate the Anti-Kickback Statute.

Best Price Fraud

  • According to the Electronic Code of Federal Regulations, best price refers to “the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity in the United States in any pricing structure (including capitated payments), in the same quarter for which the AMP is computed.” Fraud occurs when the pharmaceutical manufacturer inflates the price reported to the government, which decreases the rebate amount.

Off-label Marketing of Drugs

  • Off-labeling refers to the practice of marketing drugs or treatments for uses other than those indicated by the Food and Drug Administration (FDA). This tactic constitutes fraud because consumers are led to believe that researchers have thoroughly tested the drugs they are taking to treat their specific condition.

Whistleblower law firms like DJO want to put an end to pharmaceutical fraud tactics that hurt consumers. DJO is comprised of a highly experienced team of whistleblower experts, lawyers, and even former whistleblowers, who strive to deliver the highest monetary reward for brave individuals who have valuable information that can bring fraud to light.

If a whistleblower’s lawsuit is successful, the reward can be between 15% to 25% of the funds recovered. The False Claims Act also offers whistleblowers protection against job retaliation.

DJO will be there every step of the way to ensure you are safe and your information is confidential so you will have confidence knowing you’re doing the right thing. If you have valuable information that can help expose fraud, we encourage you to speak to our experts today.

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Speak Out: How You Can Play a Role in Eliminating Pharmaceutical Fraud

As much as we try to protect consumers, unfortunately, pharmaceutical fraud continues to affect millions of individuals every year. Pharma companies, doctors, and drug representatives can misuse their positions. Areas of concern include illegal kickbacks, off-labeling, and even fraudulent genetic testing intended to scam seniors into agreeing to unnecessary medical procedures. The players in these schemes reap the benefits of the misused insurance funds and use the profits to strengthen their illegal operations to target more vulnerable populations.

The best way to battle fraud is to expose where it is occurring and the individuals perpetrating the offenses. But the decision to blow the whistle is never easy. It requires careful determination and the right legal team to enact positive change. But where do you begin? If you suspect pharma fraud is occurring, here is a helpful step-by-step guide to reporting the activity.

Step 1: How to Spot Pharma Fraud

Pharma fraudsters work so quickly and frequently that many of us may experience it or become victims of it without even knowing. Some telltale signs of pharma fraud in your organization can be: doctors or pharmacists receiving compensation for utilizing certain specialty providers; marketing drugs or treatments for uses other than those indicated by the Food and Drug Administration (FDA), and pushing patients into assistance programs funded by self-serving pharmaceutical companies.

Fraudulent activity can also exist if your organization instructs employees to make unexpected phone calls and emails to ask consumers for sensitive or personal information. It’s important to remember that if you’re ever unsure if something constitutes fraud, it never hurts to reach out to us. You can have confidence and peace of mind knowing your information is confidential.

Step 2: Document Everything

If you suspect pharma fraud or have seen signs that indicate fraudulent activity, the next step is to gather information. The information you provide will help your legal team build a stronger case. Here are just a few items to consider when documenting data and information:

  • Names of important players: doctors, pharmaceutical representatives, lab facilities
  • Names of drugs or treatments being off-labeled, marketed, abused, or misused
  • Any websites, phone numbers, or cell phone data associated with the fraudulent activity
  • Copies of documents used to record and solicit information
  • Knowledge or evidence of false medicare claims
  • Nature of any kickbacks exchanged: how were the parties compensated
  • Knowledge of lead generation/targeting practices
  • Failure of medical facilities to uphold patient care

The signs of pharma fraud can be varied and tailored to fit specific drugs, treatments, or illegal goals. You can explore more examples of allegations and how to report fraud on our website. It’s essential to gather information carefully.

Step 3: Who to Contact

With the information you collected, reach out for help. Search for available resources and partners to best expose the fraud. If you have coworkers who also suspect or have witnessed the alleged fraud, be sure to include them in the discussion. Whistleblower law firms like DJO want to make sure you feel safe as we partner together to expose and eliminate pharmaceutical fraud.

Whistleblowing is a heroic action that can stop pharma fraud in its tracks. Whether your knowledge of fraudulent activity is minimal or heavily exposed, DJO will be there every step of the way to ensure you are safe and your information is confidential. You will have confidence knowing you’re doing the right thing. Plus, if your tip leads to a settlement, you can be eligible to receive a substantial reward for your information. If you’re ready to take the next step, contact us today.

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The Dark Side of the Pharmaceutical Industry: A Look at Some of the Biggest Fraud Settlements to Date

While the pharmaceutical industry creates and administers life-changing medications that can keep us healthy, most of us may never see the dark side of the industry. A side that can impact our lives and the lives of our loved ones profoundly.

Many of us blindly trust our medical professionals to be caring, ethical beings that exist to champion our personal and community health. But when big pharma gives illegal kickbacks to physicians who falsely prescribe certain drugs or treatments, it erodes our trust in the medical system.

Big pharma fraud exists in various ways. Prescribers receiving remunerations for ordering medications off-label, offering free co-pay assistance programs that run astray of Federal Guidelines, and failing to report adverse events all constitute fraud. Take a look at these five very large pharma fraud settlements and how organizations like DJO Whistleblower Law Group are fighting to bring fraud to light.

  1. $3 billion: GlaxoSmithKline, 2012. In the largest settlement in health care fraud history, according to the Department of Justice, GlaxoSmithKline pled guilty to fraud allegations in 2012. GlaxoSmithKline agreed to pay $3 billion to resolve its liability in unlawfully promoting prescription drugs, its failure to report safety data, and its civil liability for alleged false price reporting practices.
  2. $51.25 million: Novartis, 2020. According to the Department of Justice Novartis Pharmaceuticals Corporation agreed to pay $51.25 million to resolve allegations that it violated the False Claims Act by illegally paying the Medicare co-pays for its own drugs.
  3. $2.3 billion: Pfizer, 2009. Pfizer and its subsidiaries Pharmacia & Upjohn Company Inc. agreed to pay $2.3 billion to resolve criminal and civil liability arising from the illegal promotion of certain pharmaceutical products, according to the Department of Justice.
  4. $2.2 billion: Johnson & Johnson, 2013. In a report from the Department of Justice, Johnson & Johnson and its subsidiaries agreed to pay $2.2 billion to resolve criminal and civil investigations. Violations included off-label marketing and kickbacks to doctors.
  5. $1.5 billion: Abbott Laboratories, 2012. The global health care company Abbott Laboratories Inc. pled guilty to off-label marketing and agreed to pay $1.5 billion. According to the Department of Justice, Abbott also maintained a specialized task force to target elderly dementia patients in nursing homes illegally.

These are just a few of the countless settlements that have occurred and continue to occur as new scams arise every day. All of these cases have one thing in common: targeting our vulnerable populations at taxpayers’ expense. When corruption finds its way into the pharmaceutical industry, it can be easy for these multi-billion dollar health care companies to take advantage of average citizens.

The dark side of the pharmaceutical industry has immense impacts on our society. Consumers, health care systems, and government entities suffer the consequences of illegal kickbacks that lead to diminished patient care, mistrust in the health care system, and misappropriation of publicly funded healthcare.

Our goal at DJO is to expose and report pharmaceutical fraud wherever and whenever possible. We work with individuals to gain information, build a case, and fight for taxpayers’ justice. In doing so, we can protect the vulnerable and make the world a safer place.

If you suspect pharma fraud in your organization, please contact us. DJO is comprised of a highly experienced team of whistleblower experts, lawyers, and even former whistleblowers, who strive to deliver the highest monetary reward for brave individuals who have valuable information that can expose fraud. If a whistleblower’s lawsuit is successful, the reward can be between 15% to 25% of the funds recovered. The False Claims Act also offers whistleblowers protection against job retaliation. Do you have valuable information that can help bring fraud to light? Speak to our experts today.

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DJO Law Group Team Takes Aim at Roswell Settlement in Light of False Claims Allegations

Two members of the DJO Whistleblower Law Group, Managing Partner, Daniel Ocasio and Christopher Piacentile, CFE, played key roles in the settlement by Georgia psychotherapy services to resolve false claims allegations.

A Roswell-based psychotherapy services provider, Carenow Services, LLC (along with its CEO) has agreed to resolve allegations of violating the False Claims Act. This was completed by billing Medicare and Medicaid for psychotherapy sessions at nursing homes that were either incorrectly documented, medically unnecessary, or billed at higher rates, which is a process known as ‘upcoding.’ The civil settlement was reached by Assistant U.S. Attorney Armen Adzhemyan, the civil Elder Justice Coordinator, and Georgia Assistant Attorney General Sara Vann.

The major counts of this fraudulent activity can be summarized as follows:

  • Between 2012 and 2018, Carenow billed Medicare and Medicaid for psychotherapy sessions at nursing homes/facilities that did not have any medical necessity.
  • Where the sessions were needed medically, Carenow upcoded these services and billed Medicare and Medicaid at higher rates.

Full details of the settlement can be found here.

This case is a prime example of how organizations can take advantage of existing programs like Medicare and Medicaid and use it to their financial benefit. These two members of the DJO Whistleblower Law Group played a key role in this case. Managing partner, Daniel Ocasio, worked tirelessly as part of the litigation team and Director of Investigations, Christopher Piacentile, was the originating and lead investigator. As stated by Chris himself, “Early on, it was quite evident that the fraud here was egregious when we discovered that the company was submitting bills for psychotherapy sessions for deceased patients. This provider would treat the chart, and not actually see or visit the patient before submitting their bill.” This settlement showcased the dedication and expertise that these two individuals bring to the DJO Whistleblower Law Group.

Daniel Ocasio, Christopher Piacentile, and the rest of the team would like to thank the U.S. Attorney’s Office for the Northern District of Georgia, the Georgia Medicaid Fraud Control Unit, and Health and Human Services—Office of the Inspector General, and the Federal Bureau of Investigations for their swift and complete closure of this case. Whistleblowers tend to receive between 15%-25% of the settlement once it is complete. Coming forward as a whistleblower in general is not an easy task, but it is an important one that can make a difference.

If you find yourself in a position where you witness fraudulent activity, reach out to our team here. We will provide a supportive, confidential environment to speak freely, and assist in holding organizations accountable.

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The DJO Law Group Takes Part in Important Downey Settlement Regarding Fraudulent Billing

The Dynamic Duo is at it again! Managing Partner, Daniel Ocasio, and Christopher Piacentile, CFE, two members of the DJO Whistleblower Law Group and the originators of uncovering this industry-wide fraud, have struck again. Fresh off the $40 million Apria settlement, this is now the second identical respiratory fraud settlement they have managed.

A Downey-based provider, SuperCare Health, Inc. has agreed to settle allegations that it took advantage of public health care programs through billing for ventilator services that weren’t medically reasonable or necessary. The whistleblower in this case, a respiratory therapist who worked for SuperCare, will receive substantial compensation for his part in exposing the corrupt practices enacted by the company. The main basis of the claim focuses on fraudulent billing practices.

The major counts of this criminal activity can be summarized as follows:

  • This settlement agreement was based out of two states: California and Nevada, where non-invasive ventilators (or NIVs) were provided by SuperCare and allegedly billed to public health programs when these NIVs were no longer needed or necessary. 
  • SuperCare then submitted, or caused others to submit, false claims to Medicare and Medicaid between May 2013 and October 2019 as a result.

Full details of the settlement can be found here.

This case is a prime example of how powerful whistleblowers are in enacting change and demanding justice. These two members of the DJO Whistleblower Law Group played an important role in this case. Managing partner, Daniel Ocasio, worked tirelessly as part of the litigation team, and Director of Investigations, Christopher Piacentile, was the originating and lead investigator. This settlement showcased the dedication and expertise that these two individuals bring to the DJO Whistleblower Law Group.

Daniel Ocasio, Christopher Piacentile, and the rest of the team would like to thank the brave individual who came forward to do the right thing and demand justice. Whistleblowers tend to receive between 15%-25% of the settlement once it is complete. Coming forward as a whistleblower is not an easy task, but it is an important one that can make a difference.

If you find yourself in a position where you witness fraudulent activity, reach out to our team here. We will provide a supportive, confidential environment to speak freely, and assist in holding organizations accountable.

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Reporting Fraud: HIPAA What You Should Know!

If you find yourself in a position to blow the whistle on fraud in your organization, there are a lot of questions and grey areas that come up. At the beginning stages of building your case, you’ll have to gather a lot of evidence to prove an instance of fraud, but this is not so simple for healthcare workers.

A challenge for potential whistleblowers is understanding what an individual can take from their employer in order to prove their violation of the False Claims Act or compliance regulation, while navigating privacy laws like HIPAA.

The importance of understanding HIPAA in whistleblowing

Potential whistleblowers shouldn’t let HIPAA deter them from coming forward with their cases. There are exceptions designed to permit vital whistleblower activities:

HIPAA Whistleblower Safe Harbor – Protects whistleblowers to disclose HIPAA-protected material to their attorneys and the government in the instance that the whistleblower believes in good faith that their employer has provided unlawful or dangerous care. To clarify, whistleblowers can disclose PHI to evaluate potential claims and to submit required information for the False Claims Act.

De-identification Safe Harbor – Whistleblowers can comply with HIPAA by removing identifying information (names, birthdates, treatment dates, geographical information, etc.) from evidential documentation. PHI must be completely removed from the document, not just covered, to be protected by the de-identification safe harbor.

HIPAA Whistleblower Retaliation Protection – HIPAA-protected entities are forbidden from threatening, intimidating, harassing, discriminating against, or taking any other retaliation against whistleblowers.

As an example, let’s look at the case of United States v. Safeway, Inc. from 2106. In this case of pharmacy overcharging, the whistleblower provided 18 instances of false claims. While the defendant claimed these claims contained information that violated HIPAA, the court ruled that since only initials were used to name patients, the claim was protected by the de-identification safe harbor. However, even if full names were used in discussion with the whistleblower’s attorney, it was protected under the whistleblower safe harbor.

Reporting fraud that involves HIPAA-protected information

While there are measures in place for protecting whistleblowers in HIPAA-protected organizations, it’s in your best interest to have a whistleblower expert guide you through the process.

If you have witnessed wrongdoing in any healthcare or pharmaceutical setting, the best first step would be to reach out to the team at the DJO Whistleblower Law Group to set up a confidential consultation and determine the best approach for your unique situation. We can help guide you through the complex process, make sure you are protected, and potentially get you the reward you deserve for bravely stepping forward.

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Misleading Investors Leads to Serious Consequences: How Former Executives Can Still Be Held Accountable

Working for an investment firm, you want people to take their hard-earned money and just throw it away, right? Of course not.

But that’s essentially what’s happening when companies mislead their investors. Getting investments under false pretenses is unfair and fraudulent. Companies that participate in this kind of fraud need to be held accountable for their actions. Employees like you can play a crucial role in exposing this kind of fraud and protecting innocent investors from unnecessarily losing their money with the help of whistleblower programs.

Executives who spearhead fraud, or willingly let it happen around them, should bear most of the responsibilities for their companies’ wrong-doings. There’s a false misconception that once an executive is no longer with a company, they can be exonerated from wrong-doings that took place during that time.

Former executives can — and should — still be held accountable for their actions. In two very recent cases, that’s exactly what happened. Let’s take a closer look at those two cases.

In September 2018, the SEC charged LendingClub Asset Management LLC and its former president Renaud Laplanche, along with parent company LendingClub Corporation’s former CFO Carrie Dolan, with improper use of investment fund money. There were two main complaints against LCA and Laplanche:

  • Breach of fiduciary duty by using funds managed by LCA to benefit its parent company rather than the fund.
  • Improper adjustments of monthly returns for funds to improve investor report numbers.

In both of these instances, Laplanche and LCA were misleading investors and not acting in their best interest. They failed to present a transparent, straightforward report of performance, so investors were denied their right to make informed investment decisions. As a result, the three were ordered to pay more than $4.2 million in combined penalties.

Another major instance of misleading investors came to light in April 2019. From July 2015 to May 2017, Prosper Funding LLC reported overstated annualized net returns to more than 30,000 investors via emails and website information. Many investors were misled by those inflated numbers and made additional investments under false pretenses. The order also states that Prosper failed to correct their error despite being aware of the miscalculation of the net returns. As a result, Prosper paid a $3 million penalty.

What these cases both have in common is that former executives purposefully misled investors. With inaccurate information, many investors made the decision to make investments that they may not have made if they had the correct information. This is a serious case of fraud, and even executives who are no longer at the company need to be held accountable.

Unfortunately, fraud involving misleading investors continues to happen today. It’s important for potential whistleblowers to know that it’s never too late to report financial fraud or wrongdoing, even if the person responsible is no longer part of the company at fault. While it may seem intimidating to report an executive at your company, it’s important for keeping investors protected while holding organizations (and the individuals in charge) accountable for their actions.

Anti-retaliation laws exist for this reason; so brave employees like you can come forward to honestly report instances of fraud without fear. Since it’s a complex process, it’s best to do so with the guidance of whistleblower experts, like the team at the DJO Whistleblower Law Group.