DOJ Probes Credit Suisse Israel Office for Tax Violations

September 8th, 2016

The Justice Department has recently notified Credit Suisse that it is investigating the bank to determine whether employees in the bank’s Israel office helped dual Israeli and U.S. citizens conceal their U.S. status to evade American taxes. The bank is reportedly conducting its own internal investigation as a result of the DOJ investigation and has put five employees from their Israel desk on leave. The newly implemented U.S. Foreign Account Tax Compliance Act requires banks to automatically notify the IRS of information about clients who are identified as American.

The new probe comes roughly two years after Credit Suisse pleaded guilty in the U.S. to conspiring to help American clients evade taxes. The Justice Department’s examination is reportedly focused on the period leading up to Credit Suisse’s 2014 guilty plea and the period following it.

The U.S. has been cracking down on Swiss banks for harboring untaxed American assets for several years. The Justice Department recently completed a self-reporting program for dozens of Swiss banks that disclosed undeclared U.S. money on their books and paid related fines in exchange for agreements that the banks wouldn’t be criminally prosecuted.Other Swiss banks that, like Credit Suisse, came under Justice Department investigation for aiding U.S. tax evasion, were unable to join the program because they were already under criminal probes. A handful of Swiss banks remains under investigation.

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Whistleblower Protections Added to the Law

May 18th, 2016

Whistleblowers have been increasingly subjected to counterclaims by employers for reporting violations to law enforcement authorities. “The increase in counterclaims has had a chilling effect on whistleblowers reporting fraud” stated Brian McCafferty, a principle at Kenney McCafferty. “Aggressive defendants have increasingly used counterclaims to intimidate potential whistleblowers into silence” added Mr. McCafferty.

Last week potential whistleblowers received some much needed good news in the form of increased protections against such retaliatory counterclaims when the  “Defend Trade Secrets Act” was signed into law by President Obama. The new law specifies that, if a whistleblower discloses a “trade secret” in confidence to a government official or an attorney solely for the purpose of reporting or investigating a suspected violation of law, the whistleblower will not be held liable under any federal or state trade secret law. The law further specifies that, if a trade secret is disclosed as part of a lawsuit filed under seal, such as in a qui tam whistleblower complaint, the individual will not be held responsible and further provides that such documents also may be used in anti-retaliation lawsuits provided the documents are filed under seal and not disclosed except pursuant to court order.

“This was a much needed amendment to the existing law that will allow well intentioned whistleblowers to proceed without fear of reprisals through overaggressive counterclaims”, stated Mr. McCafferty. “It has taken away a significant weapon that corporate wrongdoers have been using to intimidate potential whistleblowers” Mr. McCafferty added.


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PBM’s And Specialty Pharmacies Come Under Federal Investigation

May 12th, 2016

Federal prosecutors are investigating drugmakers’ contracts with companies that manage prescription benefits in the U.S. The U.S. Attorney’s Office for the Southern District of New York has sent demands for information to at least three drug companies: Johnson & Johnson, Merck & Co. and Endo International PLC in connection with a False Claims Act investigation.

The civil investigative demands seek information about the companies’ contracts with pharmacy-benefit managers, or PBMs, which administer drug benefits for employers and health insurers. The PBMs operate as bulk buyers who in theory earn some profit and pass on most of the savings to the patients and their insurers. PBMS are considered to be an important force in the adoption of generic drugs, thus providing patients with high-quality medications at a lower price.

J&J said in an SEC filing that it received a civil investigative demand in March, seeking information about contractual relationships between its Janssen Pharmaceuticals unit and PBMs. J&J said the demand was issued in connection with an investigation under the False Claims Act.

Merck said in an SEC filing that it received a civil investigative demand for information about its “contracts with, services from and payments to pharmacy-benefit managers” since 2006, in connection with the products Maxalt and Levitra. Maxalt is a treatment for migraines and Levitra treats erectile dysfunction.

Endo said in an SEC filing that it received a demand for documents and information about contracts with PBMs for the migraine drug Frova.

“PBMs operate as a middleman in the drug dispensing chain and one of the government’s concerns is that pharmaceutical companies may be improperly influencing PBMs to push more expensive brand-name drugs that are no better than than their generic counterparts thus substantially increasing pharmaceutical company profits and substantially increasing costs to patients and the federal government” said Tavy Deming, a Kenney McCafferty whistleblower lawyer. “In essence these are kickback investigations in which the government is looking to see if the PBMs are getting improperly compensated for giving preference to certain drugs. Hundreds of millions of dollars are at issue” added Deming.

It is common for drug companies to agree to pay rebates or offer other forms of discounts to PBMs in exchange for PBMs agreeing to pay for their members’ use of certain drugs. Federal investigators are now scrutinizing these relationships. In November, Merck said the U.S. Attorney for the Eastern District of Pennsylvania sent it a request for information about its pricing and contracting with PBMs and Medicare drug-benefit plans for the asthma drug Dulera.

Last year, AstraZeneca PLC agreed to pay $7.9 million to resolve Justice Department allegations that it provided price concessions on drugs including Prilosec to Medco Health Solutions, a PBM, in exchange for Medco providing favorable coverage for AstraZeneca’s heartburn drug Nexium, in violation of a federal anti-kickback statute.

Though specific PBMs have not been identified, Express Scripts Holding Co. and CVS Health Corp. are among the largest PBMs.

Federal investigators also have probed drug company relationships with specialty pharmacies, another healthcare middleman. Specialty pharmacies often dispense drugs that are complicated to handle and expensive.

In November, Novartis agreed to pay $390 million to settle Justice Department allegations that it provided discounts and rebates to specialty pharmacies to induce them to recommend that doctors prescribe certain Novartis drugs.

Both Valeant and Horizon have said that they have received subpoenas from the U.S. Attorney’s Office for the Southern District of New York investigating the companies relationship to specialty pharmacies and the companies’ financial support to patients, drug distribution, and pricing decisions. Valeant cut ties with its specialty pharmacy Philidor in October 2015.







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Menlo Worldwide Services Inc. Pays the U.S. $10 Million to Resolve False Claims Act Allegations

May 10th, 2016

Menlo Worldwide Services Inc. , and its subcontractor Estes Forwarding Worldwide, were charged with violations of the False Claims Act for billing the federal government the cost of moving military freight by air when it was actually shipped by ground. To resolve allegations Menlo paid the United States $10 million and Estes  paid $3 million.

Menlo Worldwide Services Inc. has paid the United States $10 million, and Estes Forwarding Worldwide, on behalf of itself and its parent Estes Express Lines, has paid $3 million.

The charges were initially filed in 2013 by two whistleblowers under the qui tam provisions of the False Claims Act. The complaint alleges that two years into the investigation one of the whistleblowers, Marcelo Cuellar, was fired from Estes when the company discovered that Mr. Cuellar was cooperating in the government’s investigation. Mr. Cuellar is continuing his claim against Estes for wrongful termination.

The case was brought by the U.S. Attorney’s Office for the Eastern District of California with the assistance of the United States Transportation Command, the Defense Criminal Investigative Service, the Defense Contract Audit Agency, and the U.S. Army Criminal Investigation Command.

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Jury Finds Former Immunosyn Corp. CEO Liable For Misstatements

May 3rd, 2016

A federal jury in Chicago has found that former Immunosyn’s CEO Stephen Ferrone defrauded Immunosyn’s investors with misleading statements in the company’s filings and press releases and his own speeches and interviews.  Following the verdict the Sec issued a statement  providing  that “we will continue to hold executives accountable when their companies provide misleading information and fail to give investors a full and honest picture of what’s happening with their products.”

The SEC had alleged that Ferrone signed and certified public filings that misled investors about the regulatory status of its sole product called SF-1019, a drug derived from goat blood that was intended to treat a variety of ailments.  The SEC complaint alleged that Ferrone’s company had misrepresented that human clinical trials were ready to commence and omitted that the Food and Drug Administration had issued full clinical holds on the regulatory approval applications.

The jury delivered a verdict finding: (1) Ferrone’s statements in multiple annual reports, quarterly reports, current reports, press releases, speeches, and interviews fraudulently misled investors; and (2) Ferrone signed and filed false certifications to several Immunosyn annual and quarterly reports.



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KBR IS Cooperating with U.S. Justice Department Unaoil Investigation

May 2nd, 2016

Engineering and construction firm KBR said Friday it is cooperating with a U.S. Justice Department investigation of Monaco-based engineering company Unaoil S.A.M.

Unaoil’s offices were recently raided by Monaco authorities and other media reports have said several nations including the U.S., U.K. and Australia are investigating the company.

KBR, which was referenced in some of the alleged internal documents, said in a securities filing Friday the company had been contacted by authorities and it is cooperating: “It has also been reported that the U.S. DOJ is conducting an investigation of Unaoil related to the information reported in these news articles. The DOJ has contacted the Company in connection with that investigation and the Company is cooperating with its requests for information.”

KBR pleaded guilty to Foreign Corrupt Practices Act charges in 2009 related to the Bonny Island natural gas development in Nigeria.


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Panama Papers To Become Searchable Data Base

April 28th, 2016

On Wednesday,  the International Consortium of Investigative Journalists (ICIJ) said l that on May 9 it would “publish what will likely be the largest-ever release of information about secret offshore companies and the people behind them, based on data from the Panama Papers investigation”.”The ICIJ further stated that the searchable database will include information about more than 200,000 companies, trusts, foundations, and funds incorporated in 21 tax havens, from Hong Kong to Nevada in the United States.”

Over 11 million documents held by the Panama-based law firm Mossack Fonseca have been leaked to the German newspaper Suddeutsche Zeitung as part of the Panama Papers scandal. The paper then shared the documents with the ICIJ, which has examined over 28,000 of those documents.

The United States Attorneys Office in the Southern District of New York has announced its intention to open an investigation based upon the Panama Papers. To date there have been 200 US citizens identified in the Panama Papers leak.

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Pfizer agrees to pay $784.6 million for hiding discounts from Medicaid

April 28th, 2016

Pfizer Inc. and its Wyeth unit have agreed to pay $784.6 million to resolve allegations that Wyeth overcharged the government by hiding the discounts it was giving hospitals.The settlement alleges that Wyeth failed to provide the goverment Medicaid program the same discounts on certain drugs that it gave to hospitals. Wyeth provided “deep discounts” on two types of the drug protonix, a reflux drug, to hospitals that it did not extend to Medicaid. As a result, Wyeth avoided paying hundreds of millions of dollars in rebates to Medicaid from 2001 to 2006.

Medicaid requires pharmaceutical companies to give discounts on drugs that are related to the best prices they give other purchasers. Drugmakers have in the past been accused of hiding or manipulating those prices to avoid or decrease the discounts they give to the program.

The case was prosecuted by the United States Attorney’s Office in Boston, Massachusetts. The settlement resolves two cases filed by whistleblowers  under the False Claims Act, which allows citizens to sue on behalf of the government and share in any recovery. The whistleblower cases were originally filed in 2002 and 2003 respectively and are  captioned U.S. ex rel. LaCorte v. Wyeth, 02-cv-581, U.S. District Court, Eastern District of Louisana and U.S. ex rel. Kieff v. Wyeth, 03-cv-12366, U.S. District Court, District of Massachusetts.

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Panama Papers: US launches criminal inquiry into tax avoidance claims

April 26th, 2016

In a letter to the International Consortium of Investigative Journalists (ICIJ), U.S. Attorney Preet Bharara wrote that his office had “opened a criminal investigation regarding matters to which the Panama Papers are relevant,” and he asked to speak with someone who had worked on the project. Whether Bharara’s office is interested in a particular case, or whether it simply wants to assess the Panama Papers broadly, is unclear.

Bharara, who as US attorney general for the southern district of New York has led several investigations into criminal wrongdoing in the financial sector, is already investigating several of the more than 200 US citizens named in the papers.

Among them is Wall Street financier Benjamin Wey, who has been charged with securities fraud, wire fraud, conspiracy and money laundering. Wey is alleged to have used family members to help him obtain large blocks of stock in companies through so-called “reverse merger” transactions between Chinese companies and US shell companies. He made tens of millions of dollars of illegal profit by manipulating the companies’ stock prices, according to the indictment.

The leaders of the World Bank and the International Monetary Fund have warned that the industrial scale of international tax avoidance revealed by the Panama Papers represents a “great concern” for the global economy and is having a “tremendously negative effect on our mission to end poverty”.

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Senate Finance Committee Passes New Tax Whistleblower Provisons

April 21st, 2016

On Wednesday the Senate Finance Committee passed legislation strengthening the tax whistleblower provisions.

The legislation provides in pertinent part as follows:

“To improve IRS communication with whistleblowers, the proposal would amend section 6103 of the Internal Revenue Code to: (1) specifically allow the IRS to exchange information with whistleblowers where doing so would be helpful to an investigation; (2) require the Secretary to notify the whistleblower as to the status of their claim at two significant points in the review process: (i) when the claim has been referred to an audit or examination; and (ii) at the point where the taxpayer makes a payment to settle the tax liability, but before the refund statute expires. The Secretary would have the authority, but not be required, to provide status updates at other points in the review process. To ensure taxpayer information is protected, whistleblowers receiving information under either (1) or (2) would be subject to criminal penalties for unauthorized disclosure of taxpayer information.
The proposal would also explicitly protect individuals who file claims under section 7623 of the Code. These protections would be consistent with those currently available under the False Claims Act and may expose employers to substantial damages for punishing individuals whose conduct is protected, for example through reinstatement, back pay plus interest, and compensation for other special damages including litigation costs and reasonable attorneys’ fees.”

Sen. Chuck Grassley, R-Iowa, said the committee had approved several of his provisions, including better IRS treatment of tax fraud whistleblowers. The IRS needs to put out the welcome mat for tax fraud whistleblowers, not treat them like skunks at a picnic,” Grassley said. “With congressional oversight, the IRS has done a better job of whistleblower treatment than before but it still needs to communicate more with whistleblowers. These individuals are less likely to come forward if they know they might be in the dark about their case for years at a time. Also, employer retaliation of whistleblowers is a barrier. The provisions approved today will help with these problems. Separately, right now, taxpayers are often in the dark when IRS employees improperly access or distribute their confidential information. The fix approved today requires the IRS to notify a taxpayer when an IRS employee is disciplined for improper access. That’s a step in the right direction for respecting taxpayer rights.

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