The following story is excerpted from my book May I Approach the Bench?
ACT I: The New Client
Raytel Executive Convicted Of Fraud
September 26, 2002. An executive at a Windsor-based pace-maker monitoring and maintenance company was convicted Wednesday in federal court of fraud and other charges. Prosecutors said John Canova, 46, of East Meadow, N.Y., did not comply with federal pacemaker monitoring guidelines while he was the vice president of operations for Raytel Cardiac Services. They said Canova failed to perform a routine process that checks the equipment for failure. Prosecutors also said he told workers to alter records before a federal audit.
“Are you the lawyer with the website that does False Claims?”
“Yes, I am.”
“I’m pretty sure a pacemaker testing company that I used to work for was involved in Medicare fraud. Do you handle this kind of case?”
“Yes. What’s the name of the company?
“Raytel Cardiac Services in Windsor.”
“What did they do wrong?”
“Every patient with a pacemaker has an apparatus with a phone connection to Raytel that is supposed to test the pacemaker and whether it’s functioning properly. Periodically, a cardiologist or heart specialist orders the patients to connect with my company in order to do the test. When the patient makes the call to us, he has a device that he attaches to his phone and to his pacemaker, and we can see on our screens how the testing is going.”
“Where’s the fraud?”
“Well, all the workers – the technicians at Raytel – were told to shorten the process, so that where the testing was supposed to take ninety seconds, we were told to eliminate the last thirty seconds. The company does a hundred thousand tests a year that it charges the government through Medicare at forty-five dollars per test, and every one of these bills was fraudulent.”
“Did you tell them this was wrong?”
“Yes. I told my boss that I wasn’t going to do this anymore and I was let go.”
“How long ago did all this happen?”
“About a year ago.”
“Why are you calling me now?”
“My friends who still work at Raytel told me there were rumors that something was up, that something was coming to a head between the company and the government. I think it’s all because of the letters I sent to Health and Human Services.”
UNITED STATES of AMERICA v. John CANOVA
United States Court of Appeals, Second Circuit.
Raytel performed transtelephonic pacemaker testing for Medicare patients.Transtelephonic monitoring allows a technician at a remote location to test the operation of a pacemaker by having a patient use a portable device to transmit telephonic signals that can then be converted into a conventional electrocardiogram (“ECG”) report for review by a supervising cardiologist. For Medicare to cover the expense of its transtelephonic testing, Raytel was obliged to comply with the Medicare Coverage Issues Manual, which required that a pacemaker be monitored in three functioning modes for thirty seconds each, with the results recorded on strips of magnetic tape (the “30-30-30 test”). At the first step of the “30-30-30 test,” a technician records on a magnetic strip the pacemaker’s operation for thirty seconds in a freerunning or “demand mode,” during which the pacemaker supplies an electric charge to the heart only when it senses that the organ is falling behind the programmed heart rate. At the second step, a technician records a strip of the pacemaker’s operation for thirty seconds in a “magnetic mode,” during which the patient uses a magnet to close a switch inside the pacemaker, causing the device to fire an electric charge to the heart at regular intervals regardless of the patient’s pulse. This exercise typically reveals whether the pacemaker’s battery needs to be replaced and whether the heart is properly responding to the charge firing. At the third step, a technician records a strip of the pacemaker’s operation for a final thirty seconds in the “demand-aftermagnet mode,” during which the magnet is removed and the pacemaker is allowed to return to free-running functioning. This segment of the test permits a technician to verify that a pacemaker’s internal switch has reopened and that the patient has suffered no ill effects from the constant firing of the pacemaker during the magnetic-mode phase of the test. Because a cardiologist would typically need to review only representative segments of the first two phases of the test, a technician would generally attach only strip excerpts to the report submitted to the doctor, providing the full test results upon specific request. This led Raytel technicians to depart from Medicare specifications and to record only an abbreviated strip – or no strip at all – of the last test phase. Sometime in 1999, a notice was posted at the Connecticut facility instructing technicians that they were not required to run any strip for the third thirty-second phase – the demand-after- magnet phase of pacemaker testing; they could simply listen to the transmitted signal to satisfy themselves that the pacemaker had returned to its free-running functions.
“Did you report the fraud to the government?”
“Yes. I wrote two letters to the fraud hotline at Health and Human Services.”
“Do you have a copy of the letters?”
“Did you send them certified mail?”
“Well, at least the government has your name.”
“No, I didn’t sign my name. I just wanted to let them know that this was going on. And after I sent the first letter, a group of federal agents came in and began to ask everyone a lot of questions. After they left, I wrote another letter and thanked them for coming, but I told them they had looked in the wrong places for some of the evidence. About two months ago, they came back and seized a whole bunch of documents. This was when I got fired. A few weeks ago, my buddies at Raytel told me something was up with the government, so I called Health and Human Services, identified myself as the man who had sent the letters, and now they want to meet with me in the United States Attorney’s office next Monday.”
“Can you come in to my office tomorrow?”
Sal came in the following day, on Tuesday the week before the meeting was scheduled, and he brought with him all the information he had, along with email messages and memos from his boss. We then began to work on the complaint. My plan was to file it in the United States District Court in Hartford before Sal’s Monday meeting. But after working all day Wednesday, Thursday and half a day on Friday, I wasn’t done with the complaint, and even working the whole weekend, I knew I wouldn’t be finished in time to file the complaint before Sal’s meeting on Monday morning. So I telephoned him.
“Sal, can you call the U.S. Attorney’s office and ask them to reschedule the meeting for next Wednesday?”
“OK.” A half hour later he called and confirmed that the meeting had been rescheduled for 10:00 am on Wednesday.
“One other thing,” I said. “I’m going to go with you.”
“Great,” Sal said.
I was able to complete drafting the complaint over the weekend.
1. This is an action to recover damages and civil penalties from Raytel Medical Corp. and Raytel Cardiac Services, Inc. for making false statements to the United States Department of Health and Human Services and for submitting false claims regarding services beginning in 1994 to the present. The defendant Raytel Cardiac Services, Inc. (“RCS”) and its parent corporation, Raytel Medical Corporation (“Raytel”), are involved in the testing of pacemakers in heart patients throughout the United States. The Raytel defendants engaged in a massive scheme to submit false and fraudulent claims for payment to the United States Government under Medicare and Medicaid.
2. These defendants certified to the United States Government over a six year period that they were following the stringent HCFA rules in the testing of pacemakers. They weren’t.
3. The defendants established a quota system, where the thrust was not patient care and attention to detail in the transtelephonic testing of pacemakers as advertised, but rather economy of time and bonus accumulation for meeting quotas in completing patients.
4. The defendants tolerated an atmosphere of corruption, where employees schemed to steal from the Government by falsifying testing, when no pacemaker testing had occurred.
5. The defendants conspired to maximize what could be claimed from the Government, even in the manner in which they kept patients on the books for long periods of time, rather than eliminating the patient on the date the elimination occurred.
6. The defendants played the game of swapping files with the New York RCS branch in order to maximize Medicare claims based on geographic disparities in reimbursement.
7. The Relator Salvatore Morello’s job responsibilities as a RCS Technician included the administration of testing and monitoring of pacemakers for heart patients, which pacemakers had been implanted by heart specialists who referred the testing of these pacemakers to Raytel and RCS.
8. Medicare required, and still requires, that the monitoring of the pacemakers take place in a minimum time of ninety seconds, and a minimum of thirty seconds for each of the three phases of the monitoring.
9. The defendant Raytel Cardiac Services, Inc. established quotas for its technicians, so that each of the 28 to 30 technicians who worked on the Relator Salvatore Morello’s shift had quotas from anywhere between thirty-five and forty-five pacemaker monitoring tests per day. The RCS technicians, including the Relator Salvatore Morello, were instructed that they didn’t have to follow the thirty second guidelines.
10. On the first phase, the demand phase, the technicians were told “Just do it a couple of seconds.” If the pacemaker technician at RCS had one capture – one beat, one pacemaker spike – the technician was instructed to end that phase of the test and send it through as complete.
11.The final 30 second segment – the thirty-second demand after magnet part of the test – the DAM – at one point was eliminated completely by Raytel Cardiac Services, Inc.
12. Virtually all the testing and monitoring of pacemakers was done in this manner.
13. When Salvatore Morello first went to work for RCS, there weren’t any quotas. The technicians were doing twenty, twenty-four, twenty-six completed calls a day. But over the years, RCS just kept increasing the numbers. The 30-30-30 rule became basically obsolete and forgotten. Rather than patient care, the technician’s job was all about numbers.
On Monday morning, I went to the United States District Court and filed the complaint, had the face sheet date stamped, and then I went to Kinko’s and made five copies of the twenty one page complaint and the fifteen page relator’s statement.
ACT II: The Meeting
On Wednesday morning we passed through the metal detectors and took the elevator up to the U.S. Attorney’s office in Hartford. We were led into a conference room. Against the wall, there were dozens of cardboard boxes with covers and holes in the sides for handles that were stacked halfway up to the ceiling. I silently hoped these were the same documents seized when the search warrant was executed. Soon four men appeared and introduced themselves – two from the U.S. Attorney’s office and the other two from Health and Human Services and the Medicare Fraud Unit in Boston.
The lead U.S. Attorney asked, “What’s your role in this matter, John?”
“I’m Sal’s attorney in the False Claims case.”
They looked at each other. “There’s a False Claims Action in this matter?”
“Yes. Would you like a copy of the Complaint and Relator’s Statement?”
Keep in mind that I had only had the case a week, and aside from the complaint, all I had on paper were a few pages of penciled notes on legal pads. Nothing else. To create the impression that I had been involved in the case over a substantially longer time period and that I’d already put a great deal of work into the case (apparently much more than a week’s worth), I had stuffed two accordion file folders with hundreds of pages of useless papers. Now, to retrieve the complaints, I reached down to the floor for my bulging accordion file folder, and with exaggerated effort, I lifted it to the table and dropped it with a thud. (Have I mentioned the value of a certain bandit quality to being a trial lawyer?) I reached inside and passed out copies of the complaint I had filed on Monday to the four government representatives.
Here I should jump ahead and mention that, at intervals throughout the meeting, one or another of the government officials would excuse himself from the table and, with the complaint in his hand, leave the room. He would then return to rejoin us ten or fifteen minutes later. Initially, however, all of them were together reading the complaint:
14. RCS was being paid by Medicare on a per test basis. RCS received ninety dollars per test, and forty-five to fifty dollars of each test was paid by Medicare.
15. Every day the supervisors stressed quotas and numbers, and they kept on increasing the quotas – the more tests the technicians did, the more the company got paid, and the bigger the bonuses the supervisor got.
16. The technicians were being hounded twenty four hours a day, seven days a week about quotas and numbers. RCS was doing eight hundred to one thousand tests per day, five days a week, and approximately twenty thousand tests per month.
17. Employee/technicians of RCS monitoring the pacemaker tests were given incentive bonuses – cash incentives, time off, movie tickets – all of which were based on the number of patients with pacemakers that were contacted.
18. The technicians were told to get at least one capture beat, especially if the patient was a tough one, and then stop with the last 30 seconds. Time meant money to them. If the technician got one capture, the technicians were told to just let the patient go.
19. The technicians doing the testing were rewarded on the number of calls they made. If they performed forty-five to fifty calls before lunch, they were rewarded by being given the rest of the day off. RCS paid for movie tickets, paid for lunch, gave the employees vouchers for restaurants, and gave them ash payments. There were pizza parties and Chinese food. RCS posted memoranda stating that the first technician to do the most tests would receive fifty to one hundred dollars. It reached a point where technicians were stealing calls from other technicians – it was called “call-jacking.” The technicians would actually look on another technician’s desk and see a slip and steal the patient’s call, just to get the numbers and the bonuses.
20. Thousands of tests were completed without magnets, and this involved the second 30 second phase of the testing, not the third. The technicians created comments to excuse cutting the 90 seconds short, and one of the favorites was “unable to obtain magnet reading due to patient difficulties.” This comment was continuously used while the technician brought the next patient up on the screen.
21. These tests were performed with the daily quotas in mind rather than the care of the patient in mind, and life and death decisions were based on these results.
22. In January 2000, the Relator Salvatore Morello notified the Medicare Fraud Unit of the substandard patient-care practices that he had observed.
23. In February 2000, the employees in the Windsor office were told, “If you have any complaints, don’t go outside official channels. If anybody has information relating to the procedures within the company, it is better to go to someone in the company, in house, to deal with it, not somewhere else.”
The lead U.S. Attorney went first. “We’ve spoken with your client before by phone. We’re trying to establish if he was the original source of the information acted on by the government. I hope you don’t mind if we ask him a few questions.”
“Not at all.”
“Now, Sal, in your complaint, you mentioned notifying the government. When did you mail the two letters you say you sent?”
“The first was around a year ago, I think in January.”
“Do you remember how long these letters were?”
“Yes. The first letter was three pages long; the second one was shorter, a page and a half. In the first letter I described what had happened at the place where I work, how my supervisor told me not to bother with the follow-up test and all that.”
THE APPEAL, CONT’D
UNITED STATES of AMERICA v. John CANOVA
During the times relevant to this case, Medicare’s Connecticut carrier, United Health Care Insurance Company (“United HealthCare”), had received an anonymous complaint suggesting that Raytel was not in compliance with Medicare’s specifications for transtelephonic pacemaker monitoring.
“Did you say anything in your letter to the government about what you were told to say if anyone raised questions or complained about how the transtelephonic devices were working?”
“Yes. I put in the letter that if anyone reported to us the problems that they were having with importing the test, we were told to tell them that it was probably because there was a fire detector and sprinkler system in the room with a bad battery or something that was interfering with the transmission.”
“Do you remember what page of your letter this comment was on?”
“Yes. As I recall, it was on the second page.” With this, Sal did something completely unexpected. He pointed across the table at the several sheets of paper that were sitting on the table before the U.S. Attorney who’d asked him the question: “You can see it right there,” he said, pointing. “It’s right there in my letter that you have in front of you.”
A bit embarrassed, the AUSA hurriedly scooped up the sheets of paper and returned them to a file folder in front of him. Then he asked, “When did you send the other letter?”
“About two months later.”
“Do you remember what you said in the second letter?”
“Yes. I thanked them for getting RCS to finally follow the rules, and I also told them of some of the things they’d missed when they came. I also sent the same letter to approximately seventy-five doctors whose names and addresses I got from the patients’ files at RCS, advising them of the faulty monitoring and testing that had been taking place at RCS. After my second letter to Medicare, I think it was the Office of the Inspector General that came in on June 23, 2000 and seized the files and records.”
Looking again at all those boxes stacked against the wall, I thought of the thousands of strip excerpts in the reports that were submitted to the doctors along with the abbreviated strips, or no strips at all, of the last thirty-second portion of the test phrase. And I wondered if this was what was contained all those boxes.
“Now, we realize that you didn’t sign your name to either of these letters. Can you tell us anything else about the letters that would lead us to believe that you were the one who sent them?”
“The letters were anonymous,” Sal said. “I didn’t keep a copy of the letter and I didn’t sign either letter with my name or my signature.”
“We know. You already told us that.” The four men looked as though they were expecting more.
“But I made up a name that I put at the end of both letters.”
“Oh, you did?”
“What did you sign?”
“I signed both letters, ‘Your Inside Guardian Angel.’ ”
“Hmm,” this came from the Assistant U.S. Attorney, who plainly was attempting to maintain a poker face.
“Well, Sal, thank you for coming in, and thank you, Mr. Murphy,” he said, pushing back his chair and standing, then reaching out to shake hands. We’ll be in touch.”
ACT III: THE RESOLUTION
On Friday, two days after our meeting (and twelve days after I first became involved with the case), I received a telephone call from the Assistant United States Attorney.
“Mr. Murphy. You probably didn’t realize this, but on Monday morning next week, we were prepared to go into court and get a guilty plea from Raytel, along with a fine in the amount of $11.2 million dollars. With the False Claims complaint that you just filed, we are going to have to ask for a continuance until the False Claims case is resolved.”
“Is this the reason you called?”
“Not the only reason. We have reason to believe that your client, Mr. Morello, might actually be the original source of the government’s investigation. I am calling to find out what you are looking for?”
“What do you mean?”
“How much do you think Mr. Morello deserves for his role as the whistleblower.”
“What do you have in mind?”
“The government was thinking in the range of four-to-five hundred thousand dollars.”
“I’ll talk to him, but at first blush, it doesn’t seem quite adequate.”
“As you know, the False Claims Act requires a distribution to the Relator of fifteen- to twenty-five per cent of the proceeds. Doing some quick math, it looks to me like five hundred thousand falls a bit short of fifteen per cent of $11.5 million.”
“What do you have in mind?”
“Can I contact you early next week?”
I telephoned Sal: “I just got off the phone with the U.S. Attorney.”
“One of the guys we met Wednesday?”
“Yes. Are you sitting down?”
“Hold on a second.” Sal chuckled, but then I realized he was taking me literally. “Yes, I am now.”
“The man said it’s quite possible that you might be the original source. ‘Quite possible’ and ‘might be’ – those were the words he used. He was trying to sound skeptical, but I think you’ve convinced him. ‘The government,’ he said, ‘is prepared to offer Mr. Morello between four and five hundred thousand dollars.’”
“Mister, you must have the wrong number. Is this my lawyer I’m talking to?”
“Sal, I’m serious.”
“This is incredible. When do I get it?”
“Sal, here’s why I asked if you were sitting down. I’m going to call him on Monday and I’m going to tell him it’s not enough.”
“He knows you’re the original source. Do you know what the original source is supposed to get? Between fifteen and twenty-five percent. According to my arithmetic, he’s a million short.”
“Really? Well, if you say so. Let’s go for it.”
Office of the Inspector General Investigation
United States Securities and Exchange Commission
Washington D.C. 20549
Commission File Number: 0-27186
RAYTEL MEDICAL CORPORATION
From June 2000 through June 2001, Raytel was the subject of a grand jury investigation conducted under the direction of the United States Attorney for the District of Connecticut and the Office of the Inspector General of the Department of Health and Human Services (OIG). The investigation involved certain business practices of the transtelephonic cardiac pacemaker monitoring business conducted by Raytel Cardiac Services, Inc., a wholly-owned subsidiary of the Company (RCS), at its facilities in Windsor, Connecticut and New York, New York.
In June 2001, RCS pled guilty in U.S. District Court in Hartford, Connecticut to a charge of obstructing a criminal investigation. In October 2001, RCS entered into an agreement with the government. Under the criminal and civil settlements, RCS agreed to pay a total of $11,500,000 to the government over a five year period, with interest of 7% per annum on the unpaid balance, to resolve the criminal and civil allegations relating to the practices of RCS’s Connecticut and New York transtelephonic monitoring operations which were the subject of the investigation. Raytel guaranteed RCS’s payment obligations under the settlement agreement. As of December 31, 2001, $1,500,000 had been paid to the government, and the next payment of $2,000,000 is due in June 2002.
Sal’s share, before attorney’s fees, was $1.65 million, gross. He bought his father a gas station and convenience store and helped him retire and move to Florida.
As for me: The MacArthur Foundation names approximately twenty-three fellows every year – the so-called “Genius Awards.” In a phone call from the Foundation, the recipient learns that he’ll receive over five hundred thousand dollars in “no strings attached” support over the next five years. These unrestricted fellowships were established to recognize talented individuals who have shown extraordinary originality and dedication in their creative pursuits and a marked capacity for self direction. For the next five years, I considered myself, almost, if not quite, a MacArthur Foundation Genius.