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dog Supreme Court of Illinois holds that use of a drug-detection dog violated Fourth Amendment in People v. Burns.

On January 10, 1013 at 3:20 am, the police along with a drug-detection dog went into defendant’s apartment building.  This officer and his dog got into the building when a tenant let in a fellow officer, who was undercover.  The drug dog alerted to defendant’s apartment door and a search warrant was obtained.  The apartment was searched, drugs were found, and defendant was charged.

The Illinois Supreme Court first looked at the United States Supreme Court case of Florida v. Jardines, in which the police took a drug dog to the front porch of the defendant’s home and sniffed the door.  The Supreme Court of the United States found that this was a search for Fourth Amendment purposes. The US Supreme Court went on to state that the areas surrounding and associated with the home are considered part of the home.

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Chicago – In United States v. Pu, 2016 U.S. App. LEXIS 3224 (7th Circuit February 24, 2016), the court addressed the district court’s loss calculation and restitution order.  Pu who worked for two companies, one of which was the Citadel in Chicago, a hedge fund, was indicted for and pleaded guilty to unlawful possession of a trade secret from Company A and unlawful transmission of a trade secret that belonged to the Citadel.  The district court found that Pu intended to cause a loss of approximately $12 million, and was ordered to pay restitution of $750,000.  He was sentenced to 36 months in prison. The $12 million intended loss calculation increased his sentencing guidelines calculation by a whopping twenty-level increase, even though there was no actual loss.  While the restitution order was based on a letter supplied to the court by the Citadel that included costs associated with an internal forensic analysis and an internal investigation.

The information that Pu was accused of stealing was used to conduct stock trades.  However, Pu use of the data resulted in him losing about $40,000.

For purposes of the sentencing guidelines, the loss is the monetary harm that was intended from the offense, or if the court cannot determine the amount of loss it may use the gain that resulted from the offense.  In the case of a trade secret, like in this case, the loss amount could be the cost of developing the information or the reduced value of the information as a result of the offense. However, the sentencing guidelines do not require any loss calculation greater than zero and the court called a loss amount “bonus punishment points.”

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A federal judge in Illinois yesterday approved a settlement agreement between Stericycle (NSDQ:SRCL) and the plaintiff in a  whistleblower lawsuit accusing the medical waste disposal company of overbilling federal and state governments to the tune of some $13.6 million. Jennifer Perez, a government customer relations specialist at YY-based Stericycle from 2004 until March 2008, filed a qui tam lawsuit in 2008 alleging […]

Source: Stericycle agrees to $29m settlement in False Claims Act case – MassDevice

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chrysler-pacifica-1532832Chicago – Federal District Court Judge Robert M. Dow, Jr., rejected Chrysler’s attempt to get a False Claims Act, qui tam, lawsuit alleging that Chrysler defrauded the United States by wrongfully denying powertrain warranty coverage on government owned vehicles dismissed.

The lawsuit was filed on behalf of the United States by the relator in federal court in Chicago under the qui tam provisions of the False Claims Act in 2012.  The relator, or qui tam plaintiff/whistleblower, is represented by Michael Rosenblat, of Michael C. Rosenblat, P.C., Northbrook, Illinois and Ken Goldstein of Krislov & Associates, Ltd. Chicago, Illinois.

The judge found that the complaint adequately alleged that Chrysler made false statements that powertrain warranty coverage on certain vehicles had expired when in truth the warranties were still valid.  This caused the government to pay for repairs that should have been covered under the warranty.

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The Supreme Court agreed to hear a case involving Universal Health Services who is accused of violating the False Claims Act.  The Court agreed to decide whether an implied certification theory is viable cause of action under the FCA. The Seventh Circuit Court of Appeal, which reviews district court cases including those out of the Northern District of Illinois, which includes Chicago, has found that a theory of implied certification is not a viable theory under the False Claims Act, even though other circuits such as the First Circuit have permitted such theories.  The Supreme Court also agreed to decide, if an implied certification theory is viable, if claim can be false if the defendant failed to comply with a rule or regulation even if that rule or regulation does not state that compliance with it is a condition of payment.

The Seventh Circuit in United States v. Sanford-Brown found that an implied certification theory cannot be pursued under the False Claims Act since those types of claims are best left up to the agency to enforce.  While the First Circuit, which heard the case against Universal Health Services, United States, ex rel. Escobar et al. v. Universal Health Services, Inc.,  permits cases based on an implied certification theory to proceed.

According to Universal Health Services’ Petition of Writ of Certiorari to the Supreme Court, the jurisdictions that have recognized the theory of implied certification differ on whether compliance with the rule has to be a condition of payment of whether the rule can be a condition of payment even it does not expressly state that payment will not be made unless there is compliance with the rule.

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medication-1329267The False Claims Act 31 U.S.C. 3729 imposes treble damages and civil penalties for submitting false or fraudulent claims to the government. The FCA statute states that the defendant is subject to a penalty of between $5,000 and $10,000 for each false claim submitted.  This amount is, according to the FCA, adjusted pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990, which increased the civil penalties to $5,500 and $11,000.  Earlier this month, the Bipartisan Budget Act of 2015 was passed which will again raise federal civil penalties, and penalties under the False Claims Act.

Although the penalties may increase into the $15,000 range, few False Claims Act cases are settled which include a designated portion of the settlement amount to penalties.  Most False Claims Act cases that do settle and the majority do not go to trial, will settle for around double damages.  Only after a trial is a defendant likely to be subject to the increase penalties.

The Bipartisan Budget Act of 2015 is copied below.

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medication-1329267According to the Wall Street Journal, once again the Department of Justice is investigation drug companies for lying about the price of their drugs to the Medicaid program, a federal and state funded health care program for the poor.  The United States Attorney’s Office for the Eastern District of Pennsylvania and the United States Department of Justice are now requesting information from Eli Lilly and Company, and Valeant Pharmaceuticals International, Inc.  Valeant has also been in the news recently after it was questioned over its drug pricing and accounting practices concerning its relationship with a specialty pharmacy Warner Chilchot that distributed its drugs.  (See blog post US Charges Pharma President.)

Pharmaceutical companies pay a rebate to the Medicaid program based on the average wholesale price of the drug known as AWP.  The average wholesale price is supposed to be the average price that a wholesaler pays for the drug from the manufacturer.  However this has been an area that has seen extensive litigation under the False Claims Act with many suits resulting in substantial payments to the government.  Pharmaceutical companies are required to pay rebates between 17.1 % and 23.1% of the average price on most drugs, or they are required to rebate the between the difference between the average price and the best price that the drug is sold to private, non-government, customers.

The Department of Justice is conducting an investigation into the pricing of the Protonix, a heartburn medication sold by Pfizer, the pricing of Humalog, a type of insulin, and Cialis, sold by Lilly.  Valeant also received a letter from the DOJ that it is being investigated for violations of the False Claims Act, concerning conduct of Biovail Pharmaceutical’s, the company that acquired Valeant in 2010.  The False Claims Act creates liability for submitting false claims to the government.  Fraudulent manipulation of the AWP creates liability under a fraudulent claim theory or based upon a violation of the Anti-Kickback statute.  If found liable a company can be subject to treble damages and $5,500 to $11,000 for each false claim submitted.

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The Department of Justice wasted no time in showing that its new policy of going after individuals, not just companies, engaged in fraudulent conduct was for real.  (See, Blog post DOJ to Focus on Individual Accountability for Corporate Fraud.) Late last week, October 29, 2015, the government charged the former president of a subsidiary of Warner Chilcott PLC, a pharmaceutical division, with conspiracy to violate the Anti-Kickback Statute.  This is an important step in holding individuals accountable for the conduct of business units for which they are responsible.

For too long, companies could engage in fraudulent conduct only to pay a hefty fine, with the individuals responsible for the fraud suffering little or no consequences and often reaping the benefits of their unlawful conduct with increased pay and bonuses.  If a company faced a significant fine, or debarment from a government program, which impacted the company’s earnings, the only people likely to suffer were its shareholders.  Investor Bill Ackman said that drug companies get sanctioned all the time, but that does not mean that they are bad investments.  According to Ackman, the $390 million Novartis settlement was just the cost of doing business.   (See, Bloomberg.)

Engaging in fraud should never be a conscious business decision.  Holding individuals responsible will hopefully, deter this type of conduct.

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DOJ to Focus on Individual Accountability for Corporate Fraud

The U.S. Department of Justice announces that holding individuals accountable for corporate fraud is a top priority. In a seven-page memorandum, released September 9, 2015, Deputy Attorney General Sally Quillian Yates, announced new guidelines focusing on individual accountability for corporate misdeeds.

The Memorandum states that focusing on individuals is one of the most effective ways to deter corporate wrongdoing. Holding individuals accountable will deter further wrongdoing and encourage a corporation to change its culture and behavior, it will also further promote the public’s confidence in the justice system. Continue reading

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Chicago – As most of us know by now, eyewitness identifications are notoriously bad. Mistaken identifications by eyewitnesses account for the vast majority, roughly 85%, of wrongful convictions, according to some reports. Eyewitness misidentification is considered the single greatest cause of wrongful convictions. The State of Illinois alone has in fact released 21 individuals erroneously convicted and sentenced to death since 1993.

As the United States Supreme Court has long recognized, “[T]he vagaries of eyewitness identification are well known; the annals of criminal law are rife with instances of mistaken identification. Mr. Justice Frankfurter once said: ‘What is the worth of identification testimony even when uncontradicted? The identification of strangers is proverbially untrustworthy. The hazards of such testimony are established by a formidable number of instances in the records of English and American trials.” United States v. Wade.

Well Illinois is moving in the right direction to improve eyewitness identifications. Illinois’ new lineup procedure statute, 725 ILCS 5/107A-2, encourages many practices, unless not practical, thereby giving the police a way out if not followed. Continue reading