Public Company Accounting Oversight Board chair Erica Williams said Thursday the PCAOB is working on updated auditing standards and stricter enforcement and audit firm inspections, a day after Securities and Exchange Commission chair Gary Gensler urged the PCAOB to act faster on new standards.
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Sarbanes-Oxley legacy
Williams also discussed the impact of Sarbanes-Oxley on the audit profession after scandals in the early 2000s involving companies like Enron, leading to the establishment of the PCAOB. “Led by Senator Paul Sarbanes, a Democrat from Maryland, and Representative Michael Oxley, a Republican from Ohio, both parties came together to craft legislation that passed nearly unanimously with strong, bipartisan support,” she said. “And 20 years ago this week, President George W. Bush signed into law the Sarbanes-Oxley Act of 2002. Among other things, the law we refer to today as SOX established the Public Company Accounting Oversight Board, or the PCAOB. For the first time, investors would have an independent audit watchdog putting their interests first.”
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Even some plaintiff attorneys who have sued auditing firms agree that Sarbanes-Oxley has helped, but they still see room for improvement in audit regulation.
“I largely think Sarbanes-Oxley has been a really effective piece of legislation and regulatory reform, which is an odd thing to say these days, but it came at a time when government was working a little bit more effectively,” said Laura Posner, a partner at the law firm Cohen Millstein in New York, who recently won a $35 million settlement in a class action she led against KPMG, where the plaintiffs alleged that KPMG perpetuated a massive fraud by signing off on Miller Energy’s $480 million valuation of its Alaskan oil reserve assets. “But I think it was a necessary reform at a time when the markets were really roiled by what happened with Enron, WorldCom, Adelphi and Global Crossing. We had a lot of major scandals that really rocked investor confidence in the markets, and I think Sarbanes-Oxley went a long way toward bringing back investor confidence in the markets.”
She cited the establishment of the PCAOB as an important factor. “It was conceptually really important that there was an actual cop on the beat, theoretically, and that there would be some independent oversight for the accounting industry,” Posner told Accounting Today in an interview. “That was important, although the PCAOB has not been without its own scandals, particularly most recently. Although it’s correlation, not causation, we’ve seen a significant reduction in the number of restatements that come out of public companies, but also the size of those restatements. We’re not seeing these mega earth-shattering restatements like we did during that era, and I think that has been largely very beneficial, both for corporations but more importantly for the investors in those corporations.”
- Class action closed, except for attorneys’ fee allocation
- Class co-lead counsel ordered to mediation
KPMG LLP’s $35 million settlement to resolve a 2016 securities lawsuit claiming its audit failures allowed Miller Energy Resources to misrepresent the value of key Alaskan oil and gas assets won a federal court’s final approval.
The U.S. Department of Justice filed a civil complaint in federal court against Fresenius Vascular Care Inc. alleging that the company billed Medicare and other health plans for more than 1,000 unnecessary procedures in their access centers.
“…For the [Fresenius Vascular Access Centers (FVACs)] located in New York from about January 1, 2012, through June 30, 2018, at least 1,288 out of a total of 2,303 angioplasty procedures among 60 patients (55.92%) were medically unnecessary,” the 54-page, five-count complaint alleges.
The U.S. Attorney for the Eastern District of New York and the U.S. Department of Health and Human Services, Office of Inspector General’s Office of Investigations, which filed the complaint, alleges that Fresenius Vascular Care, a subsidiary of Fresenius Medical Care North America, performed and billed for procedures such as fistulograms and angioplasties to Medicare, Medicaid, Federal Health Benefits Program and TRICARE despite internal documents and a Fresenius-led study showing completing the procedures had little clinical benefit.
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Whistleblower Suit
The government filed its complaint after two nephrologists filed a whistleblower lawsuit against Fresenius Vascular Care alleging that the company was billing for unnecessary procedures.
“In their complaint, the whistleblowers allege that the defendants have engaged in a fraudulent scheme to receive government payments for unnecessary surgical procedures and testing,” Cohen Milstein Sellers & Toll PLLC, a law firm representing John Pepe, MD, and Richard Sherman, MD, said in a press release. “The complaint alleges that for many years, once a nephrologist has initially referred a patient with evidence of a clinically significant stenosis to a [Fresenius Vascular Care] facility, and the patient’s vascular access has been treated there, [Fresenius Vascular Care] then continues scheduling periodic follow-up visits every 2 to 4 months indefinitely. … These procedures are performed without evidence of problems in administering dialysis and without a referral by the patient’s nephrologist. Thus, the defendants have no reasonable basis for performing these medically unnecessary procedures and they are not reimbursable by the government health care programs. Nevertheless, defendants have submitted, or caused to be submitted, these fraudulent claims for payment and the government has, in good faith, paid them.”
- New York state formally filed a False Claims Act case against dialysis company Fresenius on Tuesday, joining a major whistleblower lawsuit against the provider.
- The suit brought by the Eastern District of New York alleges Fresenius and a subsidiary illegally nabbed hundreds of millions of dollars from the government by performing potentially thousands of medically unnecessary and invasive vascular procedures on late-stage kidney disease patients.
- In June, the Department of Justice joined the lawsuit, which was originally filed in 2014 in New York against Fresenius and its business unit, Azura Vascular Care. Eighteen other states besides New York are included in the lawsuit and could potentially join the case, though a majority have declined to intervene so far.
Dive Insight:
End-stage renal disease patients typically need surgically-created access to their vascular systems to allow adequate hemodialysis to take place. Dialysis units monitor that access and can potentially refer a patient to a vascular access facility for surgery in the event there’s a narrowing in one or more of the vessels used during hemodialysis.
The complaint alleges that for years, Azura — after being referred and treating patients with evidence of narrowing vessels — continued scheduling followup visits every two to four months indefinitely for those patients. During those followups, Azura providers allegedly performed improper angiograms, or X-rays using chemical dye, on patients, along with invasive surgical procedures called angioplasties, without evidence such procedures were necessary and without a referral from a nephrologist.
Fresenius and Azura then submitted claims to programs including Medicare and Medicaid. Medicare covers ESRD treatment for patients regardless of age, spending more than $50 billion annually on the disease.
“I saw firsthand how Fresenius put patients in harm’s way to support their bottom line. The practice of conducting medically unnecessary procedures, especially on such chronically ill patients as those with end stage renal disease, is unethical, unlawful and should be stopped,” said John Pepe, a physician at Richmond University Medical Center and Staten Island University Hospital, in a statement provided to Healthcare Dive.
Pepe is one of the two practicing nephrologists who served as whistleblowers in the case. The other is Richard Sherman, a Rutgers University medical professor and medical director of dialysis at the Robert Wood Johnson University Hospital.
New Jersey, Florida and Georgia are still deciding whether to join the case. Cohen Milstein Sellers & Toll, the legal firm representing the whistleblowers, told Healthcare Dive it’s hopeful that states which have yet to decide to join the case may do so as the litigation proceeds.
The False Claims Act suit alleges that the defendants billed federal programs including Medicare and Medicaid for the cost of procedures, some of which were “risky and often unnecessary.”
The U.S. Attorney’s Office for the Eastern District of New York on Tuesday intervened in a lawsuit against Fresenius Vascular Care, which has been accused of performing unnecessary medical procedures on dialysis patients at outpatient facilities in New York.
The False Claims Act suit alleges that the defendants billed federal programs including Medicare and Medicaid for the cost of the procedures, which were described in the intervenors’ complaint as “uncomfortable, time-consuming interventions … unjustified by clinical and other information amassed by patients’ treating physicians and dialysis clinics.”
The “risky and often unnecessary” procedures included fistulagrams, in which a dye was injected into the patient’s blood vessel to visualize the port and surrounding blood vessels, and angioplasties, in which wires and balloons were inserted into narrowed blood vessels to restore blood flow, according to the complaint.
The complaint also alleged that the defendants falsified medical records to inflate the percentage of blockages within the patients’ veins, improperly justifying the procedures.
Many of the patients, who suffered from end-stage renal disease, were “elderly, disadvantaged members of minority groups” already facing multiple comorbidities, according to the complaint.
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Jeanne Markey, co-chair of Cohen Milstein’s whistleblower and False Claims Act practice, released a statement regarding the intervention.
“When health care providers take advantage of patients’ trust, the government and taxpayers, all in the name of profit, they should be held accountable,” Markey said. “We are grateful to the U.S. Attorney for stepping in to lead this nationwide effort.”
- Peace Corps employee John Peterson was paid $258,000 while on leave and under investigation after killing a woman in a 2019 hit and run in Tanzania, records show.
- The Peace Corps paid the family of the woman Peterson killed just $13,000, despite a federal law that allows the agency to settle such claims for up to $20,000.
- The crash happened after Peterson had been drinking at a bar and picked up a sex worker, according to the Peace Corps. Peterson never faced charges in Tanzania or the United States.
John Peterson sat in a Tanzanian police station in August 2019, capping off a chaotic driving spree that left a mother of three dead on the streets of Dar es Salaam. But before he could be criminally charged, Peterson’s employer — the United States government — whisked him back to America and put him on leave while he was under investigation.
Records obtained by USA TODAY show U.S. taxpayers paid Peterson, a Peace Corps employee, more than $258,000 over the next year and a half. That included nearly $20,000 in unused vacation time and a $1,500 “special act or service award” paid about a week after his return to America, records show. When he finally resigned in February 2021, after the agency revoked his security clearance, Peterson’s final paycheck had just $602 in deductions related to the fatal incident, including the cost to tow the Toyota RAV4 he wrecked.
Meanwhile, the agency paid the family of the woman Peterson killed about $13,000, records show, despite a federal law that allows the Peace Corps to settle such claims for up to $20,000.
The Peace Corps paid more to the Tanzanian law firm it hired to negotiate the settlements with the deceased woman’s family and two other women Peterson injured, according to an invoice from the firm. The records do not indicate that Peterson’s victims had their own legal counsel during the settlement talks, which concluded about six months after the crash. In exchange for the payouts, the victims agreed to not make any legal claims against the agency or Peterson.
The financial records, obtained by USA TODAY through Freedom of Information Act requests, illustrate the broad protections afforded to federal workers involved in even the most egregious behaviors. Far less consideration was given to those Peterson harmed, including a grieving and impoverished family, despite the agency’s aspirational mission of spreading “world peace and friendship.”
Agnieszka Fryszman, a lawyer who specializes in international human rights cases, reviewed the settlements for USA TODAY and raised concerns over the apparent lack of legal representation for Peterson’s victims. She said she was particularly troubled because the woman Peterson killed, Rabia Issa, had two underage children who did not appear to have been appointed guardians to represent their interests, which almost certainly would have been the case if the incident occurred in the United States.
“They give up all their rights for this relatively low award,” Fryszman said. “And there’s some value to speed and quick recovery. But if people don’t really understand what their rights are and what they might be entitled to in order to protect their interests — and protect the interests of kids who are very young and might need support for a pretty long time — it just doesn’t seem fair.”
Read USA Today’s “Your Tax Dollars Paid a Peace Corps Worker $258,000 — After He Killed a Woman.” (Subscription required.)
The federal government lodged a False Claims Act complaint in Brooklyn federal court Tuesday accusing a Fresenius Medical Care Holdings subsidiary of performing unnecessary vascular procedures on dialysis patients to boost revenues.
The U.S. Attorney’s Office for the Eastern District of New York filed a civil complaint in intervention to take the helm of an eight-year-old whistleblower suit alleging fraud at Azura Vascular Care, a chain of outpatient surgery centers owned by dialysis giant Fresenius.
According to the complaint, doctors often refer patients with end-stage kidney disease to vascular centers like Azura for surgeries to clear up vein blockages that can impair dialysis. These procedures include fistulograms, or special x-rays taken by inserting a catheter into the blood vessels, and angioplasties, which expand the vessels via an inflated balloon catheter.
The government alleged that between 2012 and 2018, Azura schemed to increase revenues by scheduling routine follow-up procedures for patients at its nine New York facilities without additional physician referrals.
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“When health care providers take advantage of patients’ trust, the government and taxpayers, all in the name of profit, they should be held accountable,” said Jeanne Markey of Cohen Milstein Sellers & Toll PLLC, counsel to the doctors. “We are grateful to the U.S. Attorney for stepping in to lead this nationwide effort.”
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The whistleblowers are represented by Jeanne A. Markey, Gary L. Azorsky and Raymond M. Sarola of Cohen Milstein Sellers & Toll PLLC and Vincent F. Pitta of Pitta LLP.
The argument in response to a Tampa lawsuit by three former members is one the church has used before.
The Church of Scientology, faced with new allegations of human trafficking, is mounting a legal defense it has successfully used before.
Its lawyers are arguing this week in Tampa federal court that former Scientologists who level accusations must bring their cases before an internal arbitration panel of loyal church members — not to the U.S. court system.
The lawyers, in a series of motions filed late Tuesday, argue that plaintiffs Valeska Paris, 44, and husband and wife Gawain Baxter, 40, and Laura Baxter, 37, signed contracts when they were in the church’s Sea Org workforce that waived civil recourse and compelled them to settle any future disputes within the church.
The three allege in a federal lawsuit filed in April that they were trafficked into Scientology as children and forced to work through adulthood for little or no pay.
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In a statement to the Tampa Bay Times, attorneys Neil Glazer and Ted Leopold, co-counsel for Paris and the Baxters, said their clients are “entitled to have their day in court.”
A Maryland federal judge gave the final stamp of approval to a $7 million settlement between T. Rowe Price and a group of retirees who claimed the company mismanaged their retirement savings, after the judge had asked them to limit the scope of the pact.
U.S. District Judge James K. Bredar in an order on Wednesday approved the settlement after the parties made alterations based on earlier suggestions of the court. The judge had requested the changes to the settlement terms that he said had extended beyond the proposed class’s allegations.
The parties had modified a section of the claim release that uses “or” instead of “including” at the judge’s request, because he said it would more clearly delineate the outer limits of the settlement. The class had first asked Judge Bredar in April to approve the final settlement.
The class of more than 18,000 T. Rowe Price retirement plan participants had claimed in their February 2017 lawsuit that the asset management company cost its workers $123 million by loading up its retirement plan with more expensive in-house investments, violating the Employee Retirement Income Security Act.
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The class is represented by Douglas J. McNamara, Mary J. Bortscheller, Michelle C. Yau and Scott Michael Lempert of Cohen Milstein Sellers & Toll PLLC and James Brian McTigue and James A. Moore of McTigue Law LLP.
- Pension funds allege “group boycott” of startup platforms in stock loan market
- Manhattan federal judge in 2018 declined to dismiss case
- Credit Suisse in February first to settle, for $81 million
A Manhattan federal judge on Thursday recommended the certification of a class of investors who have alleged Goldman Sachs Group Inc, JPMorgan Chase & Co and other large banks conspired to curb competition in the U.S. stock loan market.
U.S. Magistrate Judge Sarah Cave said the plaintiffs, several pension funds including Iowa Public Employees’ Retirement System and Los Angeles County Employees Retirement Association, met certain legal requirements to proceed as a class in antitrust litigation that began in 2017 over the nearly $2 trillion stock lending market.
U.S. District Judge Katherine Polk Failla will weigh the report before ruling on whether a class will be certified.
Cave recommended the appointment of U.S. law firms Cohen Milstein Sellers & Toll and Quinn Emanuel Urquhart & Sullivan to serve as co-lead counsel for the plaintiffs. The defendant banks can file objections to Cave’s report with Failla within 14 days.
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Class attorneys Michael Eisenkraft of Cohen Milstein and Daniel Brockett at Quinn Emanuel said in a statement on Friday “we’re pleased with Judge Cave’s ruling on class certification and look forward to continued litigation against the banks to maximize recoveries for the benefit of class members.”