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Deputy Attorney General James M. Cole Speaks on a Press Conference Call Regarding the Campaign to Cut Waste


Washington, DC
United States

Thank you, Deputy Secretary Wolin. And Secretary Sebelius, I want to thank you for your tremendous partnership in the fight against health care fraud.

As I just told the Vice President and the rest of the cabinet, this past fiscal year, with the help of law enforcement partners like HHS, the Department of Justice recovered over $5.6 billion in criminal and civil fraud proceeds on behalf of the American people.

That amount is more than has ever been recovered in a single year in the history of the Department of Justice. And it is more than double the amount that was recovered in 2008, the year before this Administration took office.

These recoveries far exceed the cost of the agents and prosecutors who secured them. For every dollar Congress has provided for health care enforcement over the past three years, we have recovered nearly seven.

The fraud recoveries that make up that $5.6 billion run the gamut – from healthcare fraud to grant fraud, from mortgage fraud to procurement fraud.

But at the end of the day, each of these cases had the same victim – the American taxpayer. Let me give you just a few examples.

We recovered $900 million from eight drug companies, including Abbott Labs, B. Braun Medical, and Roxane Labs, who engaged in a scheme to report false and inflated prices for numerous drugs such as erythromycin, dextrose solutions, and sodium chloride solutions. By inflating the prices, these eight manufacturers caused fraudulent claims to be submitted to federal health care programs like Medicare and, as a result, the government paid hundreds of millions of dollars in excess claims.

W e also recovered significant amounts in procurement fraud cases. In November 2010, the Department obtained a $15 million settlement from Samir Itani and his Texas-based company, American Grocers. Itani and his company bought expired, or soon to be expired, food at deep discounts. After the food was shipped to his warehouse, he had workers change the dates on the labels to make the food appear fresh. Itani then sold the food at a hefty markup to the military to supply American combat troops serving in Iraq and elsewhere. In addition to the $15 million settlement, Itani was criminally prosecuted and sentenced to 24 months in prison.

Between fiscal years 2008 and 2011, the Department has doubled fraud recoveries in twenty-one states, as well as the District of Columbia and the Virgin Islands. States all across the country from Alaska to Georgia and Mississippi to Minnesota.

Let’s focus on Minnesota for a moment. In Minnesota alone from 2008 to 2011, we have seen an increase in civil and criminal fraud recoveries -- from $14 million to almost $270 million. That’s an increase of 1820%.

As one example, in St. Paul, Minnesota, thanks to the work of the Department litigating divisions and the U.S. Attorney’s Office, CVS Pharmacy paid $17.5 million to resolve allegations that they submitted inflated prescription claims to the government by billing the Medicaid programs in ten states, including Alabama, California, Florida, Indiana, Massachusetts, Michigan, Minnesota, New Hampshire, Nevada and Rhode Island.

I mentioned earlier that, in each case, the victim of the fraud was the American taxpayer. But in some cases, the danger and damage caused by these fraudsters goes beyond the loss of federal dollars.

In communities across the country law enforcement officers put their lives on the line every day to keep us all safe.

When we heard allegations that companies and their executives were involved in the manufacture and sale of defective bulletproof vests and these vests were purchased by federal, state, local and tribal law enforcement agencies with federal funds, we took action. These vests contained ballistic pads made from a material called Zylon.  Several law enforcement officers were seriously injured while wearing Zylon vests that did not perform as expected.  To date, the Department’s multi-year effort, which is ongoing, has been able to recover more than $61 million in settlements with ten different companies.

While our focus here today is on the fraud dollars that we’ve recovered this past fiscal year, I want to assure you we’re not just working to get back taxpayer dollars. Where appropriate, we’re also seeking prison sentences.

For example, just last week, Judith Negron, one of the owners of American Therapeutic Corporation, a mental health care corporation in Miami, was sentenced in a fraud scheme that resulted in the submission of more than $200 million in fraudulent claims to Medicare. The judge gave her 35 years in prison. She and others were billing Medicare for unnecessary and illegitimate treatments to patients, many of whom were recruited through bribes and kickbacks. Two of her co-owners have been sentenced as well – one to 35 years and the other to 50 years – for their roles in the scheme.

So, as you can see, our message could not be clearer – we will aggressively investigate and prosecute those who seek to defraud the American people. Those who commit fraud will be held to account. And the America taxpayer will continue to see a high rate of return on its investment in the Department of the Justice.

Additional information regarding today’s announcement is available here.

Updated September 17, 2014