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A whistleblower, Kipp Fesenmaier, brought the original lawsuit under the qui tam provisions of the False Claims Act. ( image)

Ophthalmic supply company faces $43M judgment over kickbacks

A federal jury recently found that Precision Lens caused the submission of 64,575 false claims to Medicare between 2006 and 2015. While the jury returned a verdict in favor of the United States for more than $43 million dollars, total damages may surpass $800 million.

Precision Lens is a leading distributor of ophthalmic supplies. The company was founded in 1991 by two ophthalmic sales executives including current Precision Lens President Paul Ehlen. For over 30 years, the Bloomington business has supplied a variety of products relating to vision. Some of those products are used in eye surgeries.

However, the jury found eye surgeons were enticed to use Precision Lens’ ophthalmic supplies and equipment in cataract-related surgeries and other procedures covered by Medicare. That enticement came in the form of kickbacks. Precision Lens allegedly maintained a slush fund for the kickback scheme. Funds were used to finance multiple physician trips.

The United States showed that Precision Lens and Ehlen provided physicians with all sorts of kickbacks, including high-end vacations such as hunting, fishing, skiing, golfing, sporting, and entertainment. Some physicians went to Broadway shows in New York, others to the College Football National Championship Game in Miami, and still others to the Masters golf tournament in Augusta, Georgia.

A whistleblower, Kipp Fesenmaier, brought the original lawsuit under the qui tam provisions of the False Claims Act (FCA). In February 2018, U.S. Attorney Gregory Brooker announced that the United States filed a complaint-in-intervention against Precision Lens and Ehlen. Because Fesenmaier was permitted as a private party to bring suit on behalf of the government under the FCA, Fesenmaier will receive part of the award, anywhere between 15% and 25% of the proceeds.

Both defendants were found liable under the FCA, and the jury awarded $43,694,641 in single damages. Under the FCA, however, those damages could be tripled to around $130 million. Every false claim during 2006-2015 could trigger penalties of between $5,500 and $11,000. That amount would total between $355 million and $710 million. The total damages and penalties could be between $485 million and $840 million. Attorney’s fees are also recoverable.

Halunen Law assisted Minnesota on this case. Nathaniel Smith, attorney at Halunen Law, states that “jury verdicts in the False Claims Act space are rare.” This is because of the risk of several financial penalties, as in this case. Typically, they are settled out of court or before the verdict.

“Through the False Claims Act and the Anti-Kickback Statute, the Legislature has mandated that health care provided to Medicare beneficiaries is solely determined by the best interest of patients, and untainted by kickbacks,” Smith states. “The jury’s verdict is important because it recovers taxpayer dollars that stemmed from the kickbacks and deters those operating in the health care industry from offering or receiving kickbacks. It also shows the importance of whistleblowers in bringing fraudulent conduct to light.”

“The jury’s verdict protects the integrity of the Medicare system for patients and those healthcare providers who operate fairly and legally,” said Assistant U.S. Attorney Chad Blumenfield. “Companies may not use expensive trips and other items of value to persuade physicians to use their products, and physicians may not accept that remuneration. We thank the jury for its service throughout this lengthy trial.”

Minnesota Lawyer reached out to counsel for Precision Lens but received no reply.

“The False Claims Act itself envisions a close public-private partnership between the Department of Justice and whistleblowers and their counsel,” Smith said. “This case shows that the public-private partnership the FCA embodies is effective in achieving significant results. Government and private counsel in this case worked as a team throughout the litigation and trial. This tremendous teamwork, and the hard work of the jury, lead to this significant result.”

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