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February 23, 2011

Federal and State Prosecutors Announce Major Healthcare Fraud Recovery

The United States Attorney for the Southern District of New York and the New York State Attorney General recently reached a major settlement in a whistleblower case brought pursuant to the federal False Claims Act (the "FCA"), 31 U.S.C. §§ 3729-3732, and the New York False Claims Act ("NYFCA"), N.Y. State Finance Law §§ 187-194, against Young Adult Institute, Inc. ("YAI"), the state's largest provider of residential services for the developmentally disabled. YAI agreed to pay $18 million in damages for defrauding the New York Medicaid program. YAI also agreed to drastically change its cost reporting practices to comply with New York law. This settlement reflects an aggressive effort by state and federal authorities to prosecute cases of health care fraud.

In a related development, Attorney General Eric T. Schneiderman announced that New York State has established a "Taxpayer Protection Unit" formed "to target corrupt contractors, pension con-artists, and large-scale tax cheats who rip-off New York State government and its taxpayers." The unit will consist of an aggressive team of prosecutors, investigators, and auditors who will have access to federal funds and additional money generated from ever-larger fraud recoveries.

Like its federal counterpart, the NYFCA permits whistleblowers to recover 15 to 25 percent of the total damages recovered from government fraud. Although there has been much publicity about the amendments to the FCA under the Fraud Enforcement and Recovery Act of 2009 and the Patient Protection and Affordable Care Act, and how they impact health care providers, the Attorney General's increasing use of the NYFCA is an important development for any company doing business with government agencies in the state. False claims litigation figures to be a major focus in New York for the foreseeable future.

Hiscock & Barclay's Health Care & Human Services Practice Area has substantial experience representing individuals and companies involved in FCA and NYFCA matters. Please contact Gabriel M. Nugent (315-425-2836), or any member of the Practice Area, should you have any questions regarding the issues raised in this Alert.

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