Remarks of Eric H. Holder, Jr.

Deputy Attorney General

Announcement of Criminal Pleas and Civil Settlements

United States v. Fresenius (National Medical Care)

Boston, Massachusetts

January 19, 2000

Thank you. I am pleased to be here with my colleagues in law enforcement to announce the settlement of the largest health care fraud case in our nation's history. Today, the largest provider of dialysis services in the United States has agreed to pay $486 million in criminal fines and in civil penalties to resolve allegations that the company engaged in a wide-ranging conspiracy to defraud Medicare and other federal health care programs. National Medical Care, now also known as Fresenius Medical Care, North America, has agreed to pay $101 million, the largest criminal fine, and $385 million, the largest civil recovery, in a health care fraud case to resolve allegations that the company submitted false claims for laboratory tests and conspired to pay illegal kickbacks. So you understand recovery here is well over two times loss to the government.

I would first like to thank the law enforcement agencies and Department of Justice components whose vigilance and dedication led to this record recovery. Here with me are Mark Pearlstein, Assistant United States Attorney in Boston; David Ogden, Assistant Attorney General for the Department's Civil Division; and June Gibbs Brown, Inspector General of the Department of Health and Human Services. I also want to recognize Barry Mawn, the Special Agent in Charge of the Federal Bureau of Investigation, for the FBI's tremendous investigative effort on this case. A truly remarkable team effort.

Today's landmark recovery comes as one more example of success in our fight against health care fraud -- a fight that has been a priority for the Administration and Justice Department since 1993. Through the dedicated efforts of the Justice Department and our federal and state law enforcement partners, we have made tremendous strides in rooting out health care fraud and abuse:

Today's settlement should serve as a message to other health care providers that law enforcement is committed to detecting and eliminating fraud and will use a variety of tools, both criminal and civil, to protect Medicare and other taxpayer-funded health care programs from fraud and abuse.

One such tool is criminal prosecution. Today, the United States filed criminal charges against three divisions of National Medical Care, which is headquartered in Lexington, Massachusetts and is the largest provider of dialysis services in the United States. The Medicare program and other federal and state health care programs pay for dialysis services to patients with end stage renal disease, a life-threatening condition that inhibits the operation of the patient's kidneys and affects many people in the United States.

The three divisions: LifeChem, Medical Products and Homecare, have agreed to plead guilty to various criminal charges. LifeChem has agreed to plead guilty to conspiracy to submit false claims for certain lab tests; Medical Products will plead guilty to conspiring to offer and pay kickbacks to induce dialysis facilities to order laboratory blood testing services from LifeChem to be paid by Medicare; and Homecare has agreed to plead guilty to obstructing government agencies in the administration of various health care and health insurance programs including Medicare.

National Medical Care will pay a total of $101 million in criminal fines -- $51.8 million for the LifeChem and Medical Products' criminal conduct, and $49.3 million in criminal penalties for the Homecare conduct. Each of these fines exceeds the largest prior health care criminal penalty paid before.

Also on the criminal side, two high-level executives already have pleaded guilty to felony crimes, and three other executives currently are under indictment. Criminal prosecutions against individuals are especially important both in terms of our commitment to hold persons accountable for health care fraud and to serve as a deterrent to others who have responsibility for federal health care dollars.

In addition, the divisions of National Medical Care that plead guilty will be excluded permanently from participation in the Medicare program under an agreement subject to court acceptance.

On the civil side, National Medical Care has agreed to pay approximately $385 million to resolve claims under the False Claims Act, under which the Department can seek damages and penalties against providers who knew that false or fraudulent claims were submitted to Medicare or other federal health programs.

From this civil recovery, private relators or whistleblowers will receive approximately $65.9 million under provisions of the False Claims Act that allow individuals to file suits on behalf of the United States. The successful pursuit of other cases under the False Claims Act and through the cooperation of whistleblowers has resulted in more than $2.9 billion in recoveries.

In addition, under today's civil settlement, the company and its divisions have agreed to comply with rigorous corporate integrity requirements, including mandatory audits and reporting to the government. These requirements should prevent further abuses of the Medicare program.

Today's record settlement would not have been possible without the powerful qui tam - or whistleblower - provisions in the False Claims Act. Under these provisions, individuals with knowledge of fraud against the government may file suits on behalf of the United States against wrongdoers. In turn, the whistleblowers are entitled to a portion of any recovery. In today's landmark case, whistleblowers will receive approximately $65 million - the largest payment ever in a False Claims Act case. This payment is entirely appropriate given the essential role the whistleblowers played in the $486 million recovery we announce today. I would like to thank Sen. Grassley, Cong. Berman, and others for their efforts in strengthening the False Claims Act in 1986. Those amendments have made the False Claims Act our most powerful and effective tool in rooting out and punishing fraud in government programs.

Again, today's record recovery represents an exceptional degree of teamwork among many agencies, including the Boston U.S. Attorney's office, which also handled the now-second largest criminal fine in history in a previous case that also involved illegal conduct by a clinical laboratory. I commend the numerous individuals involved in this investigation for their tireless dedication to combating health care fraud and reiterate our pledge to hold accountable any company, any individual who attempts to defraud the citizens of the United States.

Thank you.