Tag: insurance fraud

Bristol-Myers Squibb Agrees To Pay $30 million To Settle Whistleblower Case Brought Under The California Insurance Fraud Prevention Act

Bristol-Myers Squibb whistleblower
Intimidation of whistleblower concept and whistle blower stress symbol representing the pressure experienced for exposing corruption with shadows of people who do not follw the rules as a red whistle shaped as a human head.

In 1993, the California Legislature enacted the Insurance Frauds Prevention Act (“IFPA”) in a unique effort to combat rampant insurance fraud that was driving up the cost of insurance premiums for citizens throughout the state. In particular, California lawmakers sought to deter fraudulent activity related to automotive insurance, workers’ compensation, and healthcare claims.

With regard to the latter, the IFPA expressly recognizes that “[h]ealth insurance fraud is a particular problem for health insurance policyholders. Although there are no precise figures, it is believed that fraudulent activities account for billions of dollars annually in added health care costs nationally. Health care fraud causes losses in premium dollars and increases health care costs unnecessarily.”

One of the specific fraudulent practices the IFPA is designed to prevent is the payment of unlawful kickbacks to doctors for prescribing certain medicines.

This month, after nearly a decade of litigation, Bristol-Myers Squibb agreed to pay $30 million to settle an IFPA lawsuit that was filed in 2007 by three former Bristol-Myers employees. The whistleblowers alleged that Bristol-Myers Squibb violated the IFPA by employing and using sales representatives for the purpose of defrauding private commercial health insurers by using kickbacks to procure patients or clients. The kickbacks were designed to increase physician prescriptions of several drugs produced by Bristol-Myers Squibb including Pravachol, used to lower cholesterol. Enticements included:

  • Box suites at sporting events where physicians were provided tickets, food, drinks, and parking.
  • Enrollment in a Lakers basketball camp for doctors and their children.
  • Pre-paid golf outings at luxurious golf courses.
  • Tickets for physicians and their families to see Broadway plays in California cities.
  • Monetary incentives given to doctors responsible for prescription-drug decisions for formularies.
  • Lavish dinners, resort hotel trips, and concert tickets, given to doctors who were large-volume prescribers, to induce more prescriptions in the future.

In addition to the $30 million payment, the settlement agreement with the California Insurance Commissioner Dave Jones requires Bristol-Myers Squibb to affirm its commitment to abiding by California laws regulating its sales representatives’ interactions with doctors, including compliance with pertinent provisions of the IFPA.

The Bristol-Meyers settlement is a prime example of how regular citizens can use the IFPA to hold wrongdoers accountable for fraudulent acts that harm the public. The IFPA provides for civil penalties of $5,000 and $10,000 per insurance claim that is made as a result of fraud (so, here, every prescription doctors wrote as a result of the kickback scheme that was then submitted for payment by an insurer), plus an additional assessment of up to three times the amount of each claim for compensation.  In addition, the IFPA vests the court with authority to grant additional relief as needed to protect the public interest. This additional relief can take the form of an injunction, which prohibits future fraudulent conduct—and can change industry practices.

How the IFPA works

Codified at section 1871 of the California Insurance Code, the California Insurance Fraud Prevention Act (“IFPA”) allows members of the public to bring whistleblower lawsuits in the name of the State against anyone who submits a fraudulent insurance claim to a California insurance provider. Some of the most common types of fraud prohibited by the IFPA include:

  • Providing kickbacks to doctors to prescribe certain medications.
  • Billing for healthcare services that were not provided.
  • Submitting multiple claims for a single health service.
  • Knowingly causing an auto accident for the purpose of submitting false insurance claims.
  • Underreporting the number of employees to avoid paying proper workers’ compensation insurance.
  • Providing kickbacks to insurance agents for sending business to a particular automotive repair business.

Once an IFPA violation has been identified, the complaint is filed under seal in state court and served on the local district attorney and the California insurance commissioner. The district attorney and insurance commissioner then have 60 days (or longer) to decide whether or not to intervene in the case. If either the district attorney or the commissioner decides to intervene, government attorneys may take a leading role in the prosecution, or they may allow the relator (the technical term for the whistleblower or other private citizen who initiates the lawsuit) to take the lead with the government in a supporting role.

In cases where government attorneys intervene to assist with the prosecution of the case, the relator is entitled to collect 30-40% of any recovery from the defendant, whether that recovery is achieved through settlement or a favorable judgment. For purposes of determining the relator’s share, the “total recovery” is the amount remaining after the government and the relator have been reimbursed for reasonable attorneys’ fees, costs and expenses incurred during the case.

If the government does not intervene, the relator may proceed with the case with her own counsel. If she chooses to proceed without the government’s help, she stands to recover 40-50% of any eventual recovery. Whether the government intervenes or not, the exact percentage of the relator’s recovery will depend upon “the extent to which the person substantially contributed to the prosecution of the action.” Moreover, if the court determines that the relator’s case is based primarily on information that was already publicly available, such as news articles or public hearings, the relator’s share of the recovery is reduced to a maximum of 10% of the recovery.

In addition to steep penalties for fraudulent acts and generous payments to the relator in successful cases, the IFPA has specific provisions aimed at protecting whistleblowers from retaliation for reporting fraudulent practices. The Act states that employees who suffer retaliation as a result of their involvement in reporting insurance fraud are entitled to complete relief, which includes reinstatement in a position with seniority equal to what the employee would have had absent the retaliation, plus twice the amount of back pay the employee is due, with interest. In addition, employees who are discriminated against in violation of the statute are entitled to attorneys’ fees and reasonable litigation costs.

ARTICLE BY Kristen L. Sagafi of Tycko & Zavareei LLP

© 2016 by Tycko & Zavareei LLP

Best of the Worst in Insurance Fraud

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The second most costly white collar crime in America behind tax evasion, insurance fraud costs an estimated $80 billion annually. Questionable claims rose 26.7% across the United States between 2010 and 2012, according to Mercury Insurance Company, whose Special Investigation Unit (SIU) of 50 investigators nationwide examines questionable claims. The team completed 1,476 investigations in California alone, exposing more than $24 million in attempted fraud, the company said.

insurance fraud

“It’s amazing the things people will do to try and cheat the system, but they don’t know we’ve seen it all,” said Dan Bales, national director of special investigations for Mercury, which established one of the country’s first SIU’s in 1978. “Our SIU goal is to stay several steps ahead of these criminals and continue to uncover fraud, which can contribute to as much as 30% of customers’ premiums.”

Below are Mercury’s Top 3 “Best of the Worst Claims,” in 2013, highlighting some of the methods used to try and beat the system.

Claim #3: Bicycle Down

The claimant alleged he was struck as his bicycle passed behind a Mercury-insured vehicle that was backing up in a parking lot. He called the police, filed a report claiming injury and property damage, and was then transported by ambulance to a medical center to treat his alleged injuries.

The real story was quite different, however, as this criminal didn’t know the entire incident was caught on video. The video clearly showed the claimant intentionally slapping the back of the insured vehicle with his hand and then guiding his bicycle to the ground to make it look like he’d been struck by the car.

The claimant retained an attorney to pursue an injury claim, which was denied by Mercury following the police report that included the security camera video taken at the scene. The claimant was ultimately arrested, convicted and sentenced to three months in jail with three years’ probation, and also had to pay a fine, restitution and his medical bills.

Claim #2: Wrong Way Driver

The insured stopped at an intersection in front of a repair van. Suddenly, the two vehicles collided in what appeared to be a rear-end collision, which necessitated police being called to gather statements.

The insured driver and passenger claimed the van driver had rear-ended the insured’s vehicle and both were allegedly injured. However, the van driver’s adamant contention that he hadn’t caused the accident led the investigating officer to seek surveillance video, which he found at a nearby gas station. Sure enough, the footage revealed that instead of proceeding through the intersection as expected, the insured driver threw her vehicle into reverse, slamming into the front of the van.

The insured driver and her passenger were subsequently charged with insurance fraud and conspiracy, and the driver was also charged with assault with a deadly weapon … her car. And yes, the claim was denied.

Claim #1: A Not-So-Merry Christmas

Looking to make some quick Christmas cash, the insured and two cohorts staged an accident and filed medical payment claims through Mercury, which were identified as questionable and assigned to the SIU for investigation.

A detailed claims history was compiled for the three individuals, who were then interviewed by SIU investigators. What the investigators found was that each claimant’s story was different, so they began to look deeper. That’s when they uncovered some very compelling evidence that suggested this accident was staged.

The SIU team discovered the insured’s prior claim history showed a loss at the same location with the same facts provided. A confession quickly followed about his latest claim, as well as a description of all the fraud he’d committed on each of his previous claims. All three claimants were convicted and given probation, community service and ordered to pay more than $26,000 in restitution to Mercury Insurance.

Suspicious activity can be reported to the National Insurance Crime Bureau.