Timeline of DOJ’s lawsuits against private equity

The cases U.S. et al. v. Fortress Investment Group et al. / 13-cv-00314 MO

Former managers of a retirement property accused its private equity owner of knowingly submitting false claims to the U.S. Veterans Affairs Department by helping qualify veterans or their surviving spouses for aid and attendance benefits they weren’t eligible for. Defendants Holiday Acquisition Corp. and Fortress Investment Group denied allegations but agreed to settle with DOJ for $11.5 million.

U.S. ex rel. Medrano and Lopez v. Diabetic Care Rx d/b/a Patient Care America, et al. / 15-cv-62617

Private equity firm Riordan, Lewis & Haden invested in compounding pharmacy Patient Care America in 2012. In 2013, RLH allegedly initiated the pharmacy’s entry into the pain cream market. Reimbursement for the creams ranged from $1,000 to $8,000 per prescription. The scheme allegedly relied on marketing firms to refer Tricare patients for the creams regardless of need. Defendants settled with DOJ for $21.4 million.

U.S. and the Commonwealth of Massachusetts ex rel. Martino-Fleming v. South Bay Mental Health Center; Community Intervention Services; H.I.G. Growth Partners; H.I.G. Capital; Peter J. Scanlon; and Kevin P. Sheehan / 15-CV-13065-PBS

A former South Bay Mental Health Center employee alleged the provider used unlicensed, unqualified clinicians. Private equity firm H.I.G. Capital bought South Bay through an affiliate in 2012.

A judge determined H.I.G. was aware of the regulatory violations but did not fix them. H.I.G., its affiliates and two executives reached a $25 million settlement with Massachusetts’ Attorney General. The U.S. DOJ declined to intervene in the case, but still received $10 million from the settlement.

U.S. ex rel. Johnson et al. v. Therakos et al. / 12-cv-1454

Former employees of drug and device maker Therakos alleged the company, a Johnson & Johnson subsidiary, promoted a product approved by the Food and Drug Administration for adults with a rare condition called T-cell lymphoma for off-label uses in kids, which is illegal. In early 2013, J&J sold Therakos to private equity firm The Gores Group, which allegedly failed to stop the fraud. The defendants settled with DOJ for $11.5 million, including $1.5 million from Gores.

Six qui tam lawsuits, including U.S. ex rel. Mandalapu et al. v. Alliance Family of Companies et al. / 4:17-cv-00740

Whistleblowers accused Alliance Family of Companies of submitting false claims resulting from kickbacks or for work not performed. Defendants reached a $15.3 million settlement with DOJ, of which $1.8 million came from Ancor Holdings, a private equity firm found to have overseen the kickback scheme through its management agreement with Alliance.

The timeline 9/9/2015:

Yates memo released outlining the Justice Department’s commitment to holding individuals accountable for wrongdoing.

4/29/2016

DOJ intervenes in U.S. et al. v. Fortress et al. It’s one of the first known examples of DOJ including a private equity firm as a defendant in a False Claims Act lawsuit against a healthcare company.

5/5/2016

DOJ reaches $8.9 million settlement with Fortress Investment Group & Holiday Acquisition Corp.

12/15/2017

DOJ intervenes in part and declines to intervene in part in Medrano v. Diabetic Care Rx case.

1/9/2018

Massachusetts Attorney General intervenes in Martino-Fleming v. South Bay Mental Health Center et al.

9/18/2019

DOJ reaches $21.4 million settlement with private equity firm Riordan, Lewis & Haden and other defendants in Medrano v. Diabetic Care Rx case.

11/19/2020

DOJ intervenes in Johnson v. Therakos case.

11/19/2020

DOJ reaches $11.5 million settlement with private equity firm The Gores Group and Johnson & Johnson subsidiary Medical Device Business Services in Johnson et al. v. Therakos. Of the $11.5 million, Gores agreed to pay $1.5 million.

7/21/2021

DOJ reaches $15.3 million settlement to resolve kickback and false billing allegations with Alliance of Family Companies. Of that, private investment firm Ancor Holdings will pay about $1.8 million.

10/14/2021

Massachusetts attorney general reaches $25 million settlement with private equity firm H.I.G. Capital, H.I.G. Growth Partners and two executives for their role in Martino-Fleming v. South Bay Mental Health Center et al.