On Presidents’ Day, the Court of Appeals for the Fifth Circuit reminded us that Lincoln’s Law still packs quite the punch.  In a decision issued on Monday, the Fifth Circuit affirmed summary judgment for the United States against BestCare Laboratory Services, L.L.C. (“BestCare”) and its CEO in the amount of $30,571,635, representing $10,190.545 of loss trebled pursuant to the False Claims Act’s hefty damages multiplier.

The case involved a Houston, Texas-area lab owner’s straightforward scheme to defraud Medicare: it sought and obtained round-trip driving mileage reimbursement for the one-way shipment of samples via airplane with no technician onboard.

The Fifth Circuit did not mince words in describing “BestCare’s indisputable violation of the statute” which “makes this an open-and-shut case.”  Relevant Medicare reimbursement rules permit labs to charge travel and transportation fees only for travel necessary to collect specimens from certain home-bound and institutional patients. The rules also require that transport costs be prorated for multiple specimens collected in a single trip.  But, as the Fifth Circuit explained, “[r]eimbursements are not allowed for the mere transportation of samples that have already been collected, even if a technician is traveling.  They are certainly not allowed when samples are shipped with no technician traveling.  And no reasonable person could possibly think that round-trip mileage reimbursements are permissible for the one-way shipment of samples, when no technician is traveling.”  (emphasis in original).

BestCare CEO Karim Maghareh’s attempt to escape individual liability fared no better.  He argued that the Government had not met the Texas-law standard for piercing the corporate veil—an argument the Fifth Circuit said was “plainly wrong” because the FCA “allows Maghareh to be held personally liable.”  Maghareh also argued that he was not personally responsible for his billing manager’s practices, but the Court rejected that argument, finding that Maghareh not only signed the submissions to Medicare but also directed his billing manager’s practices.  Finally, Maghareh argued he did not personally benefit from the fraud.  This, the Fifth Circuit held, “would not matter even if it were true” as the United States need not establish that the defendant benefited from the fraud, only that he knowingly participated in it.

The BestCare case also illustrates a growing trend of competitor-initiated qui tam actions under the FCA.  In this case, a competitor of BestCare became suspicious of its success.  After hiring a former BestCare employee and learning of BestCare’s fraudulent practices, the competitor filed a qui tam action which led to the $30.5 million judgment.  Whether motivated by a desire to level the playing field, the righteousness of their cause, or the potential of a 15-30% bounty, competitor-initiated qui tams are on the rise.

Rosie Dawn Griffin is a senior associate in the firm’s Litigation and Government Investigations practice group and has years of experience working on False Claims Act matters.  She can be reached at rgriffin@feldesmantucker.com or (202) 466-8960 if you have any questions.