When Civil Cases Turn Criminal: Trust Administrator Charged With Grand Theft, Perjury and Forgery In Ventura County California

We see numerous cases where there are allegations of wrongdoing in civil litigation.  However, a recent probate case turned criminal. 

On February 13, 2012, the Ventura County District Attorney's Office arrested Geoffrey Charles Sjostrom (DOB 09-25-1954), of Simi Valley, and charged him with nine felony charges, including grand theft, perjury, forgery, and the aggravated white collar crime enhancement. His bail was initially set at $200,000.

The criminal complaint alleges that Mr. Sjostrom was a friend of Francis J. Copland, who died in 2005. Before Mr. Copland died, he prepared a trust and a will, naming Mr. Sjostrom to administer both. In his estate documents, Mr. Copland left all of his property to family members. After Mr. Copland's death, it is alleged that Mr. Sjostrom failed to probate Mr. Copland's will and failed to properly account for Mr. Copland's trust property.

The probate court removed Mr. Sjostrom as trustee and ordered him to account for Mr. Copland's property. At that point, Mr. Sjostrom allegedly filed a sworn declaration claiming Mr. Copland had exhausted his bank accounts when he died. A successor trustee was appointed and discovered this information was false. 

The successor trustee found that Mr. Copland had money in various accounts when he died and that then trustee Mr. Sjostrom methodically took more than $250,000 from those accounts by means of check and ATM withdrawals. If convicted of all charges Sjostrom faces up to 11 years in state prison.

Attorney Commentary: Thus, it is critical to remember that basic criminal law can come in play in civil cases -- especially where there are allegations of misappropriation of funds or pleadings filed under the penalty of perjury. If at certain points in civil or probate litigation there is criminal exposure, it may be time to seek consultation from a criminal attorney and determine when it is time to exercise one's Fifth Amendment rights or attempt to resolve the litigation in order to minimize criminal exposure.

Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary 30-minute consultation.

Any questions or comments  should be directed to Tracy Green, a very experienced criminal defense attorney and civil attorney who understands and is adept at the interplay between the two at tgreen@greenassoc.com.

The firm focuses its practice on the representation of businesses and licensed professionals, individuals and businesses in civil, administrative and criminal proceedings. Their website is: http://www.greenassoc.com/

California Court of Appeal Allows Dentist To Sue Writers Of Negative Yelp Review For Libel

A common question we receive from our professional clients such as doctors and health care providers is what they can do when there is a negative review online -- whether it be Google, Yelp or other websites.  

Often common sense applies, contacting the patient or customer, offering to address the issue or solve the problem, posting a response on the website outlining those attempts, and other tactics that will not alienate the readers of these sites.


Suing the Internet host is not an option under the facts of most cases since the federal communications Decency Act immunizes Yelp and other Internet sites from libel lawsuits stemming from user comments. 

A recent case in California upheld dentist Yvonne Wong's right to sue the man who posted a negative review on Yelp for libel and his wife.  The Court held in Wong v. Jing that the lower court properly dismissed claims for intentional and negligent infliction of emotional distress filed by Dr. Wong.

Dr. Wong alleged that she properly advised the couple, prior to filling their son’s cavity in 2006, that she would use a silver amalgam filling containing mercury, and that she examined the child again in 2008 and found more cavities. But after consulting another dentist, she alleged, the couple published “slanderous complaints” on Yelp.com and other websites, false claiming that she did not tell them about the mercury, misdiagnosed the son’s case, and improperly used a general anesthetic. 

Dr. Wong alleged the couple knew those claims were false. The Yelp review, a copy of which was attached to the complaint, suggesting that Wong should be avoided “like a disease;” that she worked “really fast” and caused the son to be “light headed for several hours;” that the new dentist discovered seven cavities; that Wong used laughing gas, “which was the cause of my son’s dizziness” and “harms a kid’s nerve system” and that she used “silver amalgams” containing a trace of mercury. 

As for Dr. Wong's defamation claim, the Court held that the dentist showed a prima facie case based on her sworn statements that she disclosed that the amalgam contained mercury, that she properly diagnosed the case, and that she did not use a general anesthetic or otherwise engage in unprofessional conduct, all contrary to Jing’s assertions. 

With respect to the emotional distress claims, however, the Court of Appeal upheld their dismissal. The Opinion stated that Jing’s statements, he said, fall short of the “high bar” that California sets on such claims, and could not have caused Dr. Wong to suffer “severe, lasting, or enduring” mental harm. 

Attorney Notes:  What happens now to this case? It gets sent back to the Santa Clara Superior Court and discovery and litigation proceeds. Litigation is one tool that a professional or business owner can use with respect to reviews that rise to the level of libel. However, filing a lawsuit and going through the extensive motion and appeal process which happened in this case can be costly.

We have guided clients through this process since licensed professionals need to act cautiously since disputes with patients or clients can lead to Board complaints. Anything that is written or spoken to a client or patient needs to be viewed through that lens. An analysis of the cost benefit analysis is also helpful. The Internet has turned everyone into a potential instant critic.

We refer some of our clients to "reputation management" consultants who understand the best way to drive negative reviews and encourage our clients to deal intelligently with social media and the Internet. The funds are often best spent there and on marketing rather than on litigation against reviewers. It is very frustrating especially when some of the "reviews" are false by competitors. 

Posted by Tracy Green, Esq. Please email Ms. Green at tgreen@greenassoc.com or call her at 213-233-2260 to schedule a complimentary 30-minute consultation or to discuss this post.  

The firm focuses its practice on the representation of licensed professionals (including dentists), individuals and businesses in civil, business, administrative and criminal proceedings. Our website is: http://www.greenassoc.com/

California Court of Appeal Revives Suit Over Medical Group’s Internal Fight - Were Physicians Improperly Forced Out And Levied An Illegal Assessment?

A recent Court of Appeal decision (Dec. 2009) illustrates what happens when a group of doctors allege they were improperly forced out of their medical group. In such cases, early legal advice is essential since the corporate rules on who has standing to sue the corporation are complicated.

It is important for each shareholder to understand how to position themselves in the event of a legal battle. Some medical corporations are fun like fiefdoms with minority shareholders being deprived of their rights and earnings.

The case is Haro v. Ibarra, B213499. Although this is a technical legal discussion, it will assist shareholders in understanding how shareholder battles play out in the court system.

The plaintiffs in the case were physicians Carlos Haro, Carlos Meza, Marcos Lemor, Antonio Alarcon, Miguel Rodriguez and Jose Delgado. They claimed they were improperly forced out of their medical group and that an assessment of nearly $58,000 per share was illegal because it was not levied at a properly noticed meeting and because it was not levied on all shareholders.

The defendants include Fernando Ibarra, Alfonso Barragan, Manuel Figueroa, Maria Christina Hernandez and Omar Perez—all officers, directors and/or shareholders of AHP—as well as Alpha Medical Management, LLC, which manages AHP, and Medical Management Consultants LLC, which is the parent company of Alpha and is owned by Ibarra and Barragan.

Unfair Dealing Alleged

The plaintiffs allege that they collectively owned nearly 30 percent of AHP’s stock, that they had objected to what they believe was unfair dealing by Barragan and Ibarra—who owned one-third of AHP’s shares—and that Barragan and Ibarra had schemed to oust them from the corporation. To that end, they say, the pair declared Alarcon’s shares to be forfeited—without cause—and levied the assessment, warning the plaintiffs that they would be forced to sell their shares if they did not comply.

The stated purpose of the assessment, according to the pleading, was to fund the purchase of a medical practice in Mexico, which the plaintiffs alleged to be “a radical departure from the normal business of AHP.” They characterized the assessment as a violation of the corporation’s articles and bylaws, and as imprudent and fraudulent, and claimed that material information about the proposed acquisition was being withheld.

They also alleged derivative causes of action, charging that Ibarra and Barragan had damaged AHP through their control of its management company, and raised personal claims for conversion of their shares and for diminution of the value of the shares through manipulation of earnings and expenses.

Los Angeles Superior Court Judge Maureen Duffy-Lewis sustained demurrers to all causes of action, reasoning that since they no longer owned shares, the plaintiffs could not plead derivative claims, and that the remaining claims were barred by Corporations Code Section 423(m).

Statutory Language

The statute provides that “[n]o action shall be maintained to recover shares sold for delinquent assessments, upon the ground of irregularity in the assessment, irregularity or defect of the notice of sale, or defect or irregularity in the sale, unless the party seeking to maintain the action first pays or tenders to the corporation, or the party holding the shares sold, the sum for which the shares were sold, together with all subsequent assessments which may have been paid thereon and interest on such sums from the time they were paid.”

Justice Victoria G. Chaney, writing for the Court of Appeal, said that with respect to the personal causes of action, the plaintiffs adequately pled an exception to the statute by alleging that the assessment was void. Justice Chaney was very well respected when she was a trial court judge in Los Angeles County Superior Court and her opinions are very well drafted and reasoned. Apart from being a legal scholar she is also pragmatic and understands the real world.

Justice Chaney cited Herbert Kraft Co. Bank v. Bank of Orland (1901) 133 Cal. 64 and Cheney v. Canfield (1910) 158 Cal. 342 is the leading authorities to be addressed. Both of these are old cases.

In Kraft, the California Supreme Court held that Section 423(m)’s predecessor did not apply to a claim that the plaintiff’s stock in a bank was forfeited when he failed to pay an assessment that was not levied on any other stock. The justices reasoned that if the allegation was correct, the assessment was void, and thus the plaintiff did not have to pay it as a prerequisite to bringing the action.

Justice Chaney, similarly, declined to apply the statute to a claim that an assessment had been levied at a board meeting at which a quorum was not present.

Justice Chaney declined to limit Kraft to the situation in which forfeited shares are sold to the directors who caused the shares to be forfeited. That argument, she said, was based on an out-of-context reading of the case.

Derivative Causes

With respect to the derivative causes of action, Justice Chaney also concluded that it was error to sustain the demurrers. While the usual rule is that the plaintiff must own the shares continuously from the time the cause of action arises to the time it is adjudicated, there are equitable exceptions, she said, concluding:

“Appellants have alleged equitable considerations that warrant an exception to the continuous ownership requirement, such as the allegations in the [second amended complaint] that other shareholders were not required to pay the assessment and yet did not have their shares forfeited.”

Posted by Tracy Green. Should you have any questions regarding your own situation or this post, you can email Tracy at tgreen@greenassoc.com. Green & Associates in Los Angeles, California focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. Tracy Green is a well known health care attorney. She has been a physician attorney in hundreds of legal matters involving physician business disputes that are not malpractice related. The firm website is: http://www.greenassoc.com/

California Hospital Pays $2.4 Million To Settle Qui Tam Lawsuit Alleging Unlawful Arrangements Between Hospital And Referring Physicians

On July 27, 2009, the United States Attorney's Office Central District of California, issued Press Release No. 09-087, announcing that Tulare Local Healthcare District, Tulare District Healthcare System and Tulare District Hospital (collectively, “Tulare Healthcare”) have agreed to pay more than $2.4 million to settle allegations that they submitted claims to the Medicare system as part of a scheme to illegally reimburse doctors who referred patients to Tulare Healthcare.

The settlement stemmed from an investigation by the Department of Health and Human Services, Office of Inspector General and the United States Attorney’s Office. Tulare Healthcare agreed to pay the settlement without admitting any wrongdoing. The alleged acts in the lawsuit occurred under prior Tulare Healthcare management, and the current management cooperated fully with the government’s investigation. The settlement, was announced when the United States Attorney’s Office learned that United States District Judge Christina Snyder had unsealed a “whistleblower” lawsuit filed last year by Maria Lucy Reimche, Tulare Healthcare’s former chief financial officer.

Reimche’s lawsuit alleged that Tulare Healthcare made prohibited remuneration to physicians who referred Medicare patients to Tulare Healthcare. The doctors who allegedly received prohibited remuneration from 2001 through 2007:

(1) were given rental arrangements at below-market rates,

(2) were able to purchase commercial real estate lots at below-market value, and

(3) had debts forgiven.

Reimche's lawsuit alleges that when Tulare Healthcare made claims to Medicare for reimbursement for services provided to the patients that had been referred, it violated the federal False Claims Act, as well as the federal Anti-Kickback Statute and an anti-referral law known as “the Stark law.”

The Anti-Kickback Statute prohibits anyone from offering, paying, soliciting or receiving anything of value to generate referrals for items or services payable by any federal health care program. The Stark law provides that, subject to certain exceptions, a physician may not refer patients for specified Medicare-covered health services to a hospital or other entity with which the physician or an immediate family member has a financial relationship. The law also prohibits hospitals from billing for any services provided as a result of a prohibited referral.

The Press Release can be read at: http://www.usdoj.gov/usao/cac/pressroom/pr2009/087.html

Attorney Commentary

Given the budgetary crises in Medicare and Medi-Cal and the emphasis on health care reform, we can expect to see an increase in scrutiny of hospital-physician business relationships. During tough economic times, enforcement actions serve not only to weed out those practitioners who intend to bilk the government, but also as a revenue source.

For physicians, it is important for you not to rely solely on the hospital's administrators (or other health care clinics) to assess the legality of these arrangements. We have had clients who said "well, if the hospital is proposing the idea it must be legal!" Hospitals face financial pressures too to build relationships and fill beds. Certainly, they may seek to comply with the law but in health care what was accepted one year ago or five years ago -- may be reviewed differently now.

Why is this important? If the government (or a whistleblower former employee) can prove that you have violated the Stark or Anti-Kickback statute, every claim you submit related to those referral relationships or arrangements is a "false" claim and must return 100% of the amount paid even if it was medically necessary. Look at the last page of your Medicare application where you specificially have signed that you understand this concept.

As this case illustrates, kickbacks do not always take the form of cash payments. Even something as seemingly innocuous as a discount on rent can be interpreted as a kickback. Given the current climate, it is a good idea for the practitioner wishing to avoid problems with Medicare and Medi-Cal to have their contracts reviewed by an attorney specializing in health care law.

Further, the practitioner would be wise to have an attorney visit the premises and observe the operations, talk to the office manager, observe the patient flow and understand your business relationships. Not only must practitioners ensure that their written contracts pass muster, they must also ensure that actual day-to-day business practices comply with the law. We would much rather prevent problems rather than assist a client defending a whistleblower lawsuit or health care fraud investigation.

For the physicians who entered into these arrangements, they are at significant risk of losing their Medicare provider numbers and having exclusions or negative reporting to the national database based on a qui tam lawsuit. There can be further fall-out from the state as well. These business relationships which do not comply with the law are never worth the risks in the long-term. Having objective legal advise by an attorney who represents you and thinks of your long-term career and practice is important.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings. They have a specialty in representing licensed health care providers. Their website is: http://www.greenassoc.com/

California State Courts Will Be Closed 3rd Wednesday Of Every Month

Although attorneys will be aware of this rule, anyone else who needs to go to any state court for any reason -- whether to pay a traffic ticket, file court papers or obtain copies of documents -- should be aware that on July 29, 2009, the California Judicial Council, which oversees the state's courts, voted unanimously at a meeting in San Francisco to close the courts the third Wednesday of every month from September through July.

The closure will be treated as a holiday and litigants will receive an extra day toward meeting legal deadlines.

The move is expected to save the court system $84 million in a year in which it faced a $414 million deficit. Several trial courts, including the state's largest in Los Angeles, had already begun closing courts during regular business hours as state and local governments struggle to pay their bills in the face of historic budget deficits.

The unprecedented move, which includes shuttering the California Supreme Court along with every appellate and trial court in the state, is one of the first tangible affects of lawmakers' new deal to close a $24 billion budget deficit. In addition, the Judicial Council increased the fees many litigants have to pay when appearing in court.

Any questions or comments should be directed to: tgreen@greenassoc.com. The firm's website is: http://www.greenassoc.com/

Property Tax Reassessment Companies And Owners Charged With Criminal And Civil Cases

On May 13, 2009, criminal charges were filed by the Los Angeles County District Attorney’s Office (Consumer Protection Division) against Sean McConville, the operator of a private company that offered to “assist” homeowners with filing property tax reassessment forms for fees. McConville's company is Property Tax Reassessment. The prosecution alleges that McConville operated about a dozen such operations which are under investigation by local and state officials. Bail is set at $70,000.

McConville was charged in Los Angeles County Superior Court Case No. BA 356365 with one felony count of attempted grand theft of personal property and 32 misdemeanor counts of violating the state’s Business and Professions code by false advertising and business solicitation with a misleading governmental term or symbol.

This is not the only case for McConville. Two weeks ago, the Ventura District Attorney's Office charged Sean McConville with 20 felony counts for criminal conduct stemming from his property tax reassessment operations. The California Attorney General's Office also filed a civil lawsuit in San Diego County Superior Court against Sean McConville and his brother Michael McConville and their businesses, "Property Tax Reassessment" and "Property Tax Adjustment Services." The lawsuit seeks and injunction and and at least $2.5 million in civil penalties, and contends that these companies:

■ Made and continue to make untrue and misleading statements with the intent to induce consumers to purchase products and services in violation of Business and Professions Code Section 17500 and 17537.9;

■ Distributed solicitations implying a government connection, approval or endorsement in violation of Business and Professions Code Section 17533.6;

■ Distributed solicitations that appear to be billing statements in violation of California Civil Code Section 1716; and

■ Engaged in unfair competition in violation of Business and Professions Code Section 17200.

The lawsuit alleges that these companies targeted tens of thousands of Californians looking to lower their property taxes with mailers that read like government billing statements, featured official-looking logos and demanded hundreds of dollars in payments for reassessment and reassessment appeal services. The statements warned homeowners that if payments were not received by the "due date" they faced late fees or would have their file marked "non-responsive" or "ineligible for future tax reassessments."

The lawsuit contends that neither company adequately informed consumers that they were not a governmental entity, the solicitations were not a bill, purchase of the services was not required and services were available free of charge from county assessors. It is also alleged that few, if any, of the property tax assessment services homeowners were billed for in 2008 were completed.

Attorney Comment: While we are in the midst of an economic and real estate housing crisis, the government is being aggressive against any businesses that appear to take advantage of any homeowners. Any business in this area must be vigilant about being in compliance with the law. The government contends that the services offered by these companies are offered for free by the Los Angeles County Assessor's Office. In this case, two counties and the state attorney general's office have all charged the companies in criminal and civil cases. It is unusual for three different jurisdictions to pursue charges and cases simultaneously.

Like most fraud cases, the government tends to act where there is deception to the consumer. Where there is misleading content, mailers that appear to be from governmental agencies, there is a greater likelihood that criminal charges will be filed.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals, individuals and businesses in civil, business, administrative and criminal proceedings.

United States Reaches $1 Million Civil Settlement With Tucson Hospital After DEA Investigation Of Missing Controlled Substances

The DEA is pursuing hospitals and how they store and keep records regarding controlled substances. We expect to see more cases against hospitals since they are able to pay large fines to the government.

On March 27, 2009, the United States reached a settlement with Kino Hospital in Tucson stemming from an audit and an investigation conducted after several doses of controlled substances were discovered missing from the hospital in early 2004.

As part of the settlement, commencing in fiscal year 2009/2010, Kino Hospital committed to fund $1,000,000 over the course of the next five years to establish a three-prong drug abuse prevention initiative that will benefit the Tucson area community.

The investigation leading to the settlement was conducted by the Drug Enforcement Administration and the U.S. Attorney's Office, District of Arizona, Tucson.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings, with a specialty in health care providers.

Negative Online Reviews: What Legally Can Your Business Can Do About Them?

The other day my dog was injured and I looked up my veterinarian's address on Google and came across a slew of online reviews about its office on Yelp. The comments mainly fell into the two categories of either love 'em or hate 'em. I read the negative comments (dirty floors, letting dogs run loose near cats, etc.) while also looking at those that were positive about the treatment for their "fur babies" (their word, not mine). Some of the negative comments were years old when the practice was run by a different veterinarian. If I did not have prior positive experience, I don't know that I would have gone there in light of these comments.

With the Internet, everyone is a potential critic -- and an anonymous one at that. For professionals and many businesses, the criticism focuses on service rather than skills or the product or service provided. For example, one anonymous comment on the website RateMDs.com was unsparing: "Very unhelpful, arrogant," it said of a doctor. "Did not listen and cut me off, seemed much too happy to have power (and abuse it!) over suffering people."

In our practice, we have received calls from doctors and other professionals (or their publicists) about what to do about negative online reviews. In today’s world of instant Internet publishing, any professional or business can become the victim of an online attack from any disgruntled client/patient or competitor. Because of the nature of online search, negative reviews, blog posts, and comments can quickly tarnish a reputation when potential customers find harsh criticisms when conducting a search for your or your company’s name on Google or the Internet.

There are ways to understand and counter these type of posts:

#1 Understand the law before you take action or hire an attorney to take action. Your ability to sue the Internet service provider is limited by the Communications Act of 1996 which states that Internet service providers cannot be sued for any allegedly defamatory statements. Next review the comment and determine objectively whether it is opinion or fact. The law on defamation, libel, and slander makes clear that truth is a defense. Thus, statements that can be refuted by the public record—like court judgments or licensing board actions—are in one category. Opinions are in a different category and give the writer much more leeway under the First Amendment.

#2 Determine If You Are Going To Accept The Online World Or Seek To Opt Out By Having Clients Or Patients Agree Not To Post Information On The Internet.
Some professionals are having patients and clients sign agreements not to post any information on the Internet as a condition of being a patient or client. For some practices, this may be a solution especially if the professional decides they do not want an online presence outside their own website. Most patients and clients will sign such agreements without hesitation. However, the Internet is here to stay along with the ability of patients to post comments. Proving a patient posted a comment could be very difficult to prove. If adopted, this is only one way to control the issue.

#3 Ask Internet Publishers to Remove Defamatory Information Or Vicious Attacks You or your attorney can contact the Internet publisher in writing and demonstrate that the review has false facts, is unfounded or blatantly slanderous attacks and ask them to remove them. This can be successful. However, many content publishers will not remove material once it has been published unless it is proven to be defamatory or outrageous. Once you have attempted to remove as much of the negative commentary as possible, instead of spending your money on legal fees attempting to sue the Internet publisher, the best plan is to have an Internet marketing plan to push the negative comments and links as far back in the search engine results as possible so they do not land on page 1 or 2.

#4 Monitor Your Online Presence

A key component in any Internet marketing or reputation management campaign is to continuously monitor what others are saying about you online. When and if negative information is published about your or your company, you’ll want to be aware of it quickly in order to take action. The simplest way to do this is to set up a Google Alert for your name and your company name, as well as any other key terms associated with your line of business.

#5 Think Carefully Before You Respond Online Or In Any Other Manner

Unlike a private conversation, online comments will be recorded and leave an online record for years to come. If you read a negative comment about you or your business, gather the facts and have an objective party review your response. We have advised clients in some cases to send an email to the reviewer to offer to straighten out the issue, hear their complaints and this has gotten some to revise or update their comment online. At that point, in the client's response we can state truthfully that the person was contacted to satisfy them and then factually state our client's position. If the response is not handled properly, it can create even more negative publicity.

#6 Be In Control Of Your Internet Presence

Ask your satisfied clients or patients to post reviews on the sites at issue. Have a website or blog or other positive content to dilute the negative information and push it further back in the search engine results. Most people only search the first page of search results.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings.  Some businesses and professionals have had issues with online reviews and postings and we have assisted them during this process.

Physical Therapy Company Settles Federal Qui Tam Lawsuit And Pays Over $200,000

On April 13, 2009, after a settlement was reached, the government moved to dismiss a qui tam, or “whistleblower,” lawsuit with Interstate Rehabilitation LLC, a Glendale physical therapy company that contracts with Southern California Hospitals to operate hospital therapy departments and its owner/operators James Pietsch, Sandra Pietsch and Beth Celo. Interstate Rehabilitation and the other defendants agreed to pay the settlement of $233,345 to the government without admitting any wrongdoing to settle allegations in a “whistleblower” lawsuit that they caused the submission of false claims to Medicare.

The background of the case is as follows. A lawsuit was filed against Interstate Rehabilitation under the qui tam, or whistleblower, provisions of the False Claims Act in 2002. The complaint alleged that the company improperly billed Medicare for services that were supposed to be provided by licensed physical therapists, when in fact the services were not.

The lawsuit was filed by former Interstate Rehabilitation employees Janine Gostel and Sonia Sarmiento, who will split 16 percent of the settlement.

According to the lawsuit, from mid-1998 through the end of 2002, Interstate Rehabilitation violated Medicare rules by using clerical employees and other non-professional staff to provide physical therapy services without the presence of a licensed physical therapist. The services were allegedly provided to patients at skilled nursing facilities at area hospitals, which caused the facilities to submit false claims for payment to Medicare.

The affected facilities included California Hospital Medical Center, Community Hospital of Gardena, East Los Angeles Doctors Hospital, Memorial Hospital of Gardena, VitalCare Skilled Nursing Facility, Bay Harbor East Hospital, Bay Harbor West Hospital, Santa Teresita Hospital, Hemet Valley Medical Center, St. Vincent Medical Center, and Doheny Villa Skilled Nursing Facility.

On April 3, United States District Judge Stephen V. Wilson unsealed the whistleblower case. On April 13, 2009, the government moved to dismiss the lawsuit pursuant to the settlement.

Attorney Comments: Small to medium-sized providers often are concerned about potential criminal investigations without thinking about the potential for qui tam cases. There are both federal and state qui tam statutes. For these providers, prevention is an essential element of any False Claims Act strategy. Companies and individuals that regularly submit billings, invoices or reimbursement requests to the government should have a top-notch compliance program to try to avoid the submission of a potentially false claim.

A company that is the target of a False Claims Act investigation should examine its compliance program to see if it needs updating, particularly if there is a white collar investigation and/or a suspension and debarment proceeding. A state-of-the-art compliance program, or an upgrade to an existing program, may go a long way to persuade the government not to take drastic measures, such as indicting the company or its owners/operators or debarring it from receiving future government contracts.

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of individuals, businesses and licensed professionals in civil, business, administrative and criminal proceedings, with a specialty in health care providers and defense of qui tam cases.

Surrogacy Firm Accused Of Civil Fraud And Customer Complaints

The March 26, 2009 edition of the Los Angeles Times has an article about a Beverly Hills-based surrogacy and egg-donor agency, B Coming, that has been sued civilly by Health Net and a Spanish couple and has received complaints by customers and surrogates. See article:

http://www.latimes.com/news/printedition/california/la-me-surrogate26-2009mar26,0,1168273.story

Due to laws in foreign countries, many potential parents are coming to California due to the more relaxed laws allowing surrogacy. The potential for disputes abound in this area especially where parents are paying high fees, surrogates are involved and the parties are vulnerable.

Contractors State License Board: Settlement With Home Repair Companies

On March 12, 2009, the California State Attorney General's Office and the Contractors State License Board (CSLB) reached a final agreement with SRVS Charge Inc. and its affiliated companies which were providing home repair work in California to approximately 6,000 customers a year. The State alleged that the home repair work was substandard and the fees were exhorbitant. The settlement follows a lawsuit that was filed.

The CSLB and Attorney General's settlement was with :

- SRVS Charge Inc. and its affiliates,
- Principal owner, Sarkis Terabelian, 43, of Burbank;
- General manager, Zohrab "Rob" Mkhitarian, 40, of Burbank; and
- Associates Marine Metspakyan, 33, Avetik Avo Gyandzhyan, 38, Lilit Lusparyan, 28, Alisa Oganyan, 35, Estine Akopyan, 28, and Vardui Terabelian, 45.

The defendants operated various service and repair companies that employed electricians, plumbers, and heating and air-conditioning technicians in Southern California, the San Francisco Bay Area, and the Sacramento region. The State in its lawsuit contended that SRVS Charge Inc.'s improper business activities were as follows:

- The company placed millions of dollars in telephone directory advertising, including many full-page ads. The ads, which listed different company names, claimed a 100% satisfaction guarantee and senior discounts. When customers called the numbers listed in any of the ads, they would be directed to a central call center.

- Many times repairmen would be dispatched from a different company than the customer called.

- Often, these workers had not undergone the criminal background check required of all contractors and Home Improvement Salespeople licensed by the Contractors State License Board since January 1, 2005.

- Customers were charged high prices for emergency home service and repair, often unrelated to the actual home repair work. Much of the work was poorly done or never completed.

- If a customer refused to pay, the company would file a lien against the home to force payment.

Because the company used multiple business names, it was difficult, if not impossible, for customers to seek recourse for incompetent workmanship, incomplete work, or any other issue that arose on their project. Customers were often denied refunds, despite the existence of the "100% satisfaction guarantee" promised in the ads.

Over several years, the Attorney General and the CSLB shut down affiliates of SRVS Charge, Inc. But instead of closing the business, the defendants continued to run their company under a labyrinth of business names and fraudulent contractor license numbers that were interchangeable. When CSLB either revoked a license or received an excessive number of complaints, the company would establish a new corporate identity and business would continue without interruption.

As part of its investigation, CSLB conducted undercover stings against service technicians suspected of using these fraudulent licenses and referred instances of the illegal activity to the San Diego, Los Angeles, Santa Clara, and Sacramento County district attorney's offices. In one instance, the San Diego District Attorney's Office found that a service technician had also committed burglary and theft and is now being prosecuted for his crimes.

The settlement provides for the following.

- A permanent injunction against the defendants' prior illegal activities. This includes:
o CSLB monitoring of the defendants' operations for one year;
o Mandatory registration of all company service technicians with CSLB. This requires technicians to undergo a criminal background check;
o Capping the number of business licenses that the defendants can use to a maximum of five;
o Preventing the defendants from charging exorbitant fees or fees that have nothing to do with the actual work that is performed;
o Fully disclosing to CSLB the names of the directors, officers, and employees of their company; and
o Mandatory customer complaint tracking with proper complaint investigation and reasonable efforts to resolve them.
o Prohibiting the defendants from engaging in false advertising.

The companies will pay $3 million in penalties and restitution to be distributed as follows:
o $1.3 million to be used for consumer restitution;
o $450,000 to be assessed in penalties for state Business and Professions Code violations; and
o The remainder to be used to reimburse CSLB for investigative costs, legal costs, and costs of monitoring future compliance with the judgment.

If the terms of the settlement are violated, the defendants could face jail time.

The following companies are affiliated with the defendants and are included in the settlement:

- American Electric (CSLB #834398)
- American Home Repairs, Inc. (CSLB #834206)
- 59 Minute Service (CSLB #837697)
- Cal Repair Services, Inc., dba Pick Red Plumbing (CSLB #797241)
- Answering Resources, Inc., dba Thrifty Electric (CSLB #723375)
- Orbell Enterprises, Inc., dba Plumbing One (CSLB #713006)
- USA Services, Inc. (CSLB #775863)
- Love My Home, Inc. (CSLB #811361)
- Electric Avenue, formerly A Plus Electric Company (CSLB #569322)
- American Electric 911 Fast Inc. (CSLB #826916)
- Pro Electric Co. (CSLB #670171)
- RG Electric (CSLB #516892)
- Pacific West Heating & Air Conditioning (CSLB #604150)

See the complaint: http://ag.ca.gov/cms_attachments/press/pdfs/n1706_complaint_for_civil_penalties_and_injunctive_relief.pdf
See the settlement agreements:
http://ag.ca.gov/cms_attachments/press/pdfs/n1706_settlement_1.pdf

http://ag.ca.gov/cms_attachments/press/pdfs/n1706_settlement_2.pdf

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates and focuses their practice on the representation of licensed professionals and businesses in civil, business, administrative and criminal proceedings.

State of California Intervenes In Qui Tam Lawsuit Against 7 Laboratories

In a civil qui tam lawsuit pending in San Mateo County against seven laboratories, the State of California Attorney General's Office has intervened. A qui tam complaint contains allegations, have not been proven and are currently being defended by the laboratories including one of our clients:

The laboratories are:

(1) Quest Diagnostics, Inc., based in Madison, NJ; its affiliate Specialty Laboratories, Inc., based in Valencia, CA; and 4 other Quest affiliates;

(2) Health Line Clinical Laboratories, Inc., now known as Taurus West, Inc., based in Burbank, CA;

(3) Westcliff Medical Laboratories, Inc., based in Santa Ana, CA;

(4) Physicians Immunodiagnostic Laboratory, Inc., based in Burbank, CA;

(5) Whitefield Medical Laboratory, Inc., based in Pomona, CA;

(6) Seacliff Diagnostics Medical Group, based in Monterey Park, CA; and

(7) Laboratory Corporation of America, based in Burlington, NC.

A copy of the complaint can be found at: http://ag.ca.gov/cms_attachments/press/pdfs/n1705_complaint_asfiled.pdf

The State Attorney General's Office also issued a press release that seemed somewhat sensational and reflects the issues facing Medi-Cal providers in these difficult budgetary and political times. The press release can be found at:

http://ag.ca.gov/newsalerts/release.ph%20p?id=1705

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates. They represent health care providers in the defense of qui tam lawsuits. 

DEA: Los Angeles Attorney Comments On Physician’s DEA Settlement For Improper Recordkeeping For Controlled Substances

On March 4, 2009, the U.S. Attorney’s Office reached a civil settlement with Warren L. Moody III, M.D., an internist practicing in Phoenix. The United States contended that between June 2006 and April 2007, Dr. Moody ordered almost 3000 dosage units of Suboxone (buprenorphine) , an opiod pain relief medication. Suboxone is a prescription medication specifically designed to ease detox from opiates like heroin, OxyContin, Vicodin and Percocet.

According to the settlement agreement, Dr. Moody ordered the medication without proper documentation, failed to maintain accurate inventory records for the receipt and dispensation of the Suboxone, and failed to maintain physical security of the controlled substances, in violation of the Controlled Substances Act. Dr. Moody agreed to pay $80,000 in penalties to settle the matter. The investigation leading to the settlement was conducted by the Diversion Investigation Unit of the Drug Enforcement Administration. See

http://www.usdoj.gov/usao/az/press_releases/2009/2009-074(Moody).pdf

Commentary: The DEA has gotten quite aggressive in conducting periodic site inspections of its registrants which are authorized under 21 U.S.C. 822(f). This case is somewhat different in that it was not about the usual prescription medications but a narcotic that is used to treat those addicted to OxyContin, Vicodin and Percocet. Dr. Moody appears to have been a physician who was providing addicted patients Suboxone treatment in an outpatient setting. Suboxone is used as part of a complete treatment plan that can include behavioral therapy, support groups, and individual counseling.

As a review, here is a brief summary of the recordkeeping rules. A registered practitioner is not required to keep records of controlled substances that are prescribed in the lawful course of professional practice, unless such substances are prescribed in the course of maintenance or detoxification treatment. Thus, most practitioners will not be required to keep these records separately from the patient file. If your practice is involved in pain management or detox treatment, a compliance plan and periodic review are necessary to ensure your office is complying with the rules and regulations.

A registered practitioner is required to keep records of controlled substances that are dispensed to the patient, other than by prescribing or administering, in the lawful course of professional practice. In such cases, each practitioner must maintain inventories and records of controlled substances listed in schedule II separately from all other records maintained by the registrant. This must be done by retrievable by individual registrant. Likewise, inventories and records of controlled substances in schedules III, IV, and V must be maintained separately or in such a form that they are readily retrievable from the ordinary business records of the practitioner. All records related to controlled substances must be maintained and be available for inspection for a minimum of two years.

The fines and penalties can be significant if you do not comply with these rules. If there is an inspection seek legal counsel to assist in the audit and if you receive a letter requesting a response to proposed administrative action or assessing fines. The fines and administrative action can be negotiated with the U.S. Attorney's Office. 

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California. They focus their practice on the representation of licensed professionals and businesses in civil, administrative and criminal proceedings, with a specialty in health care providers. 

Medicare Fraud - Los Angeles Attorney Commentary On Cardiologist's Settlement Of False Claims Case

On March 3, 2009, the Department of Justice announced that a Kansas cardiologist, Joseph P. Galichia, M.D., and his practice group, Galichia Medical Group P.A., have agreed to pay the United States $1.3 million to settle claims that they violated the False Claims Act between 2001 and 2006, by submitting false claims to Medicare.

The government contends that claims were submitted for services not provided, and in other instances, claims were submitted without proper documentation. This was the second false claims case for this cardiologist. In May 2000, Galichia and Galichia Medical Group agreed to pay more than $1.5 million to settle a previous False Claims Act matter. In that case, the government contended that between 1993 and 1998, Galichia billed Medicare for a higher level of services than provided (up-coding), billed twice for the same services, and billed for services not provided. The settlement agreement says it is neither an admission of liability by Galichia and the medical group nor a concession by the government that its claims aren't well-founded.

As part of the $1.3 million settlement, Galichia and Galichia Medical Group have entered into an Integrity Agreement with the U.S. Department of Health and Human Services, Office of Inspector General (OIG). The Integrity Agreement contains measures to ensure compliance with Medicare regulations and policies in the future.

Commentary: The press release issued by the Justice Department presents a one-sided view of the facts and portrayed the conduct at issue as fraud.
http://www.usdoj.gov/opa/pr/2009/March/09-civ-184.html

For a more balanced view of the facts (including links to the settlement agreement and integrity agreement), the Wichita Eagle's March 4, 2009 article is helpful. Attorney Gary Ayers, who represents Galichia and Galichia Medical Group, was quoted in the article as saying they signed the settlement agreement rather than going to trial. As lawyers in this field know, settlement is quite common since the expense and risk of going to trial is significant. Ayers said the government had no proof that services weren't provided and said the documentation was a matter of interpretation. "We don't think it's fair," he said, but "a lot of times it's easier to settle and go on."

In the article, Ayers was also quoted as saying audits over the years since then found "a very, very low error rate, meaning our documentation was great" until government auditors used a new interpretation of the documentation guidelines. The new interpretation, he said, required certain portions of the records to be in a doctor's own hand, rather than dictated by the doctor and written by a nurse. "It's that simple," he said. "It's another example of Medicare changing its interpretation of the rules." Ayers said documentation was in patients' records; the only question, he said, was "could Dr. Galichia use the nurse as a scribe?"

The agreement says that the federal Centers for Medicare and Medicaid suspended payments to Galichia and the medical group. As of March 31, 2008, the suspended amount was $3.1 million, it says. It says $1.3 million of the suspended payments will be kept by the government as part of the settlement agreement. Within 30 days of the agreement, it says, the government will end the suspension and release the balance of the funds to Galichia and Galichia Medical Group.

See a copy of the settlement agreement:
http://media.kansas.com/smedia/2009/03/03/18/Galichia_settlement_agreement.source.prod_affiliate.80.pdf
See a copy of the Integrity Agreement:

http://media.kansas.com/smedia/2009/03/03/18/Galichia_Integrity_Agreement.source.prod_affiliate.80.pdf

Any questions or comments should be directed to: tgreen@greenassoc.com. Tracy Green is a principal at Green and Associates in Los Angeles, California They focus their practice on the representation of individuals, licensed professionals and businesses in civil, administrative, and criminal proceedings, with a specialty in health care providers.