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The San Francisco Chronicle recently reported that two men, former employees of Diagnostic Laboratories and Radiology, acted as whistleblowers in reporting that the company had defrauded local and state governments’ Medicare and Medi-Cal programs for millions of dollars worth of fees for services and lab tests.

The company is one of the West Coast’s largest suppliers of lab tests and x-ray services to nursing homes.  Diagnostic engaged in fraud by billing Medicare and Medi-Cal programs at standard rates while giving deep discounts to nursing homes, sometimes as much as eighty percent.  In exchange for participation, the nursing homes agreed to give Diagnostic business in the form of other Medicare and Medi-Cal service referrals.

Those discounts are required by law and the agreements between the government programs and the providers, to be passed along to the programs, rather than profited from, by the company.

The two employees, Jeffrey Hauser and Jon Willem Pasqua, worked in Diagnostic’s sales office.  The two noticed the illegal practice and brought it to the attention of their supervisors.  They were ignored and so were forced to alert state and federal officials.  The government agencies launched an investigation which led to the firing of Jeffrey and Jon. Typically, whistle blowers report their claims to the government agency responsible for the conduct of the industry involved and always to the US Department of Justice. In many cases, where the defendant corporation is publicly traded, a complaint to the Securities and Exchange Commission reporting a violation of the Dodd-Frank whistle blower provisions (routinely involving false certifications by senior corporate officers), is involved.

The pair filed suit in Federal Court shortly thereafter, in February of 2010.  After a long court case which led to a hearing whereat the Federal Judge refused to dismiss the case, setting it for trial, Diagnostic agreed to a settlement with the government agencies, Jeffrey and Jon, and their attorneys.

The settlement took the form of a $19.4 million dollar payment.  That payment will be paid out in part to each of the plaintiff parties, with $12.95 million going to the Federal Government, $4.55 million going to the State, and $1.9 million going to the attorneys.  The two employees, under federal whistleblower laws will be entitled to at least twenty percent of the federal and state settlements, which could amount to approximately $3.5 million dollars.

A spokesperson for the pair said that “Jeff and Jon put their livelihoods and reputations on the line to return money to taxpayers.”  The Federal and California State Governments have been particularly keen to track down instances of healthcare fraud in recent years, this case being one example.

If you have knowledge of any types of healthcare fraud being perpetrated by your employer and are worried about reporting, either to your supervisor or to related government agencies, contact Stephen Danz & Associates and let us help guide you through that difficult situation.

Stephen Danz is a California statewide law firm that’s dedicated to representing employees in disputes against their employers.  Stephen Danz & Associates based in Los Angeles, California, protects clients all over the State from retaliation, discrimination, and harassment involving dismissal, demotion, or denial of accommodation based on age, race, sex, religion, color, sexual orientation, marital status, association, physical or mental disability, or other legally protected classifications.  Additionally, we represent employees if they have not been paid the proper wages including overtime or minimum wage, or given the proper meal breaks.  If you believe that you are the victim of discrimination or retaliation because you are a whistleblower, contact our Los Angeles office to set up your free consultation to discuss this matter with our lawyers.  We take cases on a contingency basis and collect no attorney fees unless we win your case.