Wednesday, April 08, 2015

On The Money Post Part 1

Zombie Appropriations Roll in New York

It’s a good thing for a nonprofit to successfully advocate for government funding, but what happens when the money comes after it’s gone out of business? Is this a kind of “zombie appropriation”?
The Albany Times-Union reports that the controversial nonprofit ACORN, closed down for almost five years, received an appropriation of $24,000 from the New York state legislature in this year’s budget.

The paper says that critics, like the good-government group Citizens Union, call this “Spending in the Shadows”—“a largely unchecked system that allows lawmakers to insert pork-barrel spending into the budget.”

ACORN—Association of Community Organizations for Reform Now—closed its state affiliates and field offices in 2010 amidst intense scrutiny stemming from an undercover video shot by conservative activists. Because of that controversy, state senate Republicans fought to have the distribution of ACORN’s earmarked grants stopped. Congress cut its funding, and the group filed for Chapter 7 bankruptcy.

ACORN doesn’t exist in New York and no longer appears on the Internal Revenue Service’s list of tax-exempt organizations. And after a scandal broke in 2009, N.Y. lawmakers have not been allowed to insert new earmarks into the state budget. But somehow, millions in appropriations authorize the spending that was approved in prior budgets but has not yet been spent. According to Citizens Union, that now amounts to $87 million.

Most of the group’s past grants came from Democratic Assembly members from New York City for initiatives such as helping low-income people do their taxes. While the paper says it is unclear how they got into this year’s budget, critics say the grants should be vetoed by Governor Andrew Cuomo, whose office says it never requested the funds.

ACORN was granted the same amount in the 2014–2015 budget, but the money was apparently never spent. Some observers say it may be a placeholder for something else, to keep the funding intact. The nonprofit was later reconstituted as New York Communities for Change.—Larry Kaplan

Former AIDS Healthcare Foundation Managers File Whistleblower Act Claims Against Nation's Largest HIV/AIDS Medical Company for Patient Referral Kickback Scheme

Three former managers of AIDS Healthcare Foundation, Inc. (AHF) have filed Federal and Florida State Whistleblower Act claims against the nation's largest supplier of HIV/AIDS medical care for illegal patient referral kickbacks. AHF is charged with defrauding Federal healthcare programs such as Medicare, Medicaid and Health and Human Services HIV/AIDS grant programs of at least $20 million a year in false claims since 2010. Cohen Milstein Sellers & Toll PLLC represents the plaintiffs.
Filed in U.S. District Court for the Southern District of Florida on April 3 under the Federal False Claims Act and Florida False Claims Act, the complaint is based on the personal knowledge and documentation of Whistleblowers Jack Carrel of Louisiana, Mauricio Ferrer of Florida, and Shawn Loftis of New York. All held management positions at AHF prior to their jobs being terminated– despite having federal protection under the False Claims Act – after they notified their supervisors about the company's unlawful practices.

According to the complaint, AHF conducted an organization-wide criminal effort across at least 12 states, including Florida, that boosted funding from federal healthcare programs by generating HIV/AIDS referrals to the company's various service centers. AHF did this by unlawfully paying referral incentives to employees and patients in violation of the anti-kickback statute.

"AIDS Healthcare Foundation's fraudulent conduct is made even worse by the fact that these funds were entrusted to this healthcare company for the purpose of assisting a vulnerable patient population consisting of individuals living with HIV/AIDS, of whom more than 1.1 million reside in the United States," said lead counsel Theodore Leopold of Cohen Milstein Sellers & Toll PLLC, whose firm along with Salpeter Gitkin, LLP, and Kaiser Law Firm, PLLC, represents the three plaintiffs.

The complaint alleges that in 2010 AHF began to generate consumer demand for its programs by implementing a system of illegal incentive payments that rewarded patients for self-referrals to AHF services and rewarded employees for referring patients to AHF's testing, clinical, pharmacy and insurance services centers. This practice began in California, AHF's headquarters, and then spread to other states, including Florida, where AHF has a substantial presence. In addition to Florida and California, AHF operates in Georgia, Louisiana, Maryland, Mississippi, New York, Ohio, South Carolina, Texas, Nevada, and Washington, D.C.

According to the complaint, this "'Linkage' – or the referral of HIV-positive patients into AHF's constellation of services – was AHF's 'holy grail' and the key to its business model." As part of this, a bonus compensation of up to $100 was paid to an employee who "linked a patient" with positive test result to AHF "linkage" coordinators for referral clinical services. Moreover, the complaint states that at the company's 2013 Leadership Summit, "AHF President Michael Weinstein personally advocated for 1) increased testing to raise HIV 'positivity' rates; 2) improved "linkage" of patients to and retention in AHF medical care; and 3) the payment of financial incentives to patients for the purpose of inducing self-referrals to AHF medical care. He specifically directed staff to raise the patient financial incentive to $50 immediately and to implement the incentive program nationally throughout the AHF organization."

The plaintiffs, or relators, in the case were all aware of this business model. Jack Carrel, Director of Public Health, AHF Southern Bureau, from Aug. 9, 2012 to Aug. 1, 2013, was responsible for program implementation, coordination and evaluation of the prevention division, as well as for providing guidance to program staff about budget management, and community and administrative tasks. Mauricio Ferrer, a Senior Program Manager, AHF Southern Bureau, from May 17, 2011 to Aug. 2012, was responsible for supervising the daily functions and administrative operations of the prevention and testing programs in Florida. Shawn Loftis, Grants Manager, AHF Southern Bureau, from Jan. 2, 2013 to Aug. 16, 2013, was responsible for day-to-day fiscal management of sponsored projects.

"The resulting illegal referrals produced thousands of 'false and fraudulent' claims under the Federal False Claims Act and Florida False Claims Act and caused tens of millions of dollars in payments by federal health care programs. Furthermore, AHF violated numerous other False Claims Act provisions by its malicious retaliation against relators Jack Carrel, Mauricio Ferrer and Shawn Loftis, including violating their civil rights through unlawful termination of employment. We plan to hold AHF accountable for all these violations," said James P. Gitkin of Salpeter Gitkin, LLP.

The False Claims Act is a federal law that imposes a liability on persons and companies who attempt to defraud government programs. Typically, this activity comes to light and a lawsuit is initiated through whistleblowers who are allowed to file actions against these parties on behalf of the government. Those filing under the Act stand to receive a portion of any recovered damages. The Florida False Claims Act is modeled after the Federal False Claims Act.

In addition to Leopold and Gitkin, the relators are represented by Diana L. Martin and Leslie M. Kroeger, of Cohen Milstein Sellers & Toll PLLC, Palm Beach Gardens, Fla., office; and Geoffrey R. Kaiser, Esq., of Kaiser Law Firm, PLLC, in New York.

For more information about United States of America and the State of Florida ex rel. Jack Carrel, Mauricio Ferrer and Shawn Loftis v. AIDS Healthcare Foundation, Inc., visit

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