U.S. District Court Orders $4.5 Million Civil Judgment Against Lexington Woman And Her Medical Device Companies For Committing Grant Fraud
For Immediate Release
U.S. Attorney's Office, Eastern District of Kentucky
LEXINGTON – The U.S. District Court has entered a civil judgment of $4,506,267 in favor of the United States and against a Lexington woman, and the medical device companies she owns, holding them liable for making false statements that allowed them to receive millions of dollars in federal grants from the National Institutes of Health (NIH).
This civil judgment, announced today by the U.S. Attorney’s Office, is part of a settlement agreement resolving False Claims Act allegations that Vesta Blue, 70, and her companies, LifeTechniques, Inc. and Care Team Solutions LLC, defrauded NIH of millions of dollars over the course of eight years.
“Ms. Brue defrauded the government in two ways, each of which cost taxpayers,” said United States Attorney Kerry B. Harvey. “By including false statements in grant applications, her companies received grants to which they were not entitled, thereby depriving qualified small businesses of those funds. Ms. Brue then diverted the funds – which should have been used to develop new healthcare technologies – to support herself and her businesses. Her scheme to defraud undermined the integrity of the grant process. Our office will continue to vigorously pursue fraud against the government, and will work to ensure that companies and their leaders who receive taxpayer dollars are truthful and accurate in their dealings with federal agencies like NIH.”
According to the settlement agreement, NIH awarded Brue and her companies five Small Business Innovation Research grants, worth millions of dollars, to support the development of electronic pillboxes customized for specific patient populations, including HIV and pediatric patients.
In the settlement agreement, Brue and her companies acknowledge that they made false statements on the grant applications about their personnel, facilities, and accounting systems.
Brue and the companies also acknowledge that they falsely stated on grant reports that they had spent the grant funds for purposes of the grants and in compliance with grant regulations. In fact, Brue spent the grant money on personal expenses, such as plastic surgery, jewelry, home renovations, and massages, among other expenses. She also used grant money on business expenses not allowed under the grant regulations, such as costs associated with marketing and promoting her businesses. The false statements made in the grant applications and in the grant reports constitute violations of the False Claims Act.
According to the government’s complaint, Brue also falsified entries in her companies’ accounting ledgers in order to conceal from NIH auditors that the federal funds had been misspent.
Under the terms of the settlement agreement, Brue will have one year to sell her real properties and will pay 80 percent of the net sale proceeds to the government. For a period of four years, Brue will also pay 70 percent of the net profit of her businesses to the government. These payments will be applied to satisfy the civil judgment entered by the U.S. District Court.
In a related criminal case, Ms. Brue pleaded guilty to making a false claim to the United States in connection with grants awarded by NIH to her partner’s company, Telehealth Holdings, LLC. On March 30, 2016, U.S. District Judge Danny C. Reeves sentenced Brue to seven months in prison, and an additional seven months on home detention. Brue was also ordered to pay $222,037 in restitution to NIH.
“In a prime example of audacious greed, Ms. Brue accepted sizeable federal grants meant to fund the development of medical devices but instead diverted these taxpayer funds to pay for her personal and company expenses,” said Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services Office of Inspector General. “The sentence and judgment announced today prove that our agency, along with our law enforcement partners, will not tolerate such behavior and will protect the interests of taxpayers and those served by such federal grants.”
The investigation was conducted by the United States Attorney’s Office for the Eastern District of Kentucky, the Federal Bureau of Investigation, the U.S. Department of Health and Human Services, Office of Inspector General, and the Internal Revenue Service, Criminal Investigation Division. Assistant U.S. Attorneys Christine Corndorf and Kate K. Smith represented the United States.
Updated July 13, 2016