Federal Jury finds Defendants Guilty of Submitting False Claims to Medicare under Civil False Claims Act
Jury verdict results in recovery of more than $10.85 million to the Medicare program
Gulfport, Miss. – Following a nine week trial, a federal jury in Gulfport returned a guilty verdict yesterday against Ted and Julie Cain of Ocean Springs, Ted Cain’s companies, Stone County Hospital (Wiggins) and Corporate Management, Inc. (Gulfport), and Tommy Kuluz, Chief Financial Officer of Corporate Management, Inc. for violating the Civil False Claims Act, announced U.S. Attorney Mike Hurst and Derrick Jackson, Special Agent in Charge of the Office of Inspector General for the U.S. Department of Health and Human Services.
“This verdict is a victory for the American taxpayer and all the beneficiaries of Medicare and other government programs,” said U.S. Attorney Mike Hurst. “This was one of the most egregious cases of Medicare fraud we have litigated in the State of Mississippi, and I am grateful to our prosecutors and DOJ attorneys and investigators for tenaciously pursuing and holding these fraud takers accountable. We will remain vigilant in protecting American taxpayer dollars and rooting out waste, fraud and abuse throughout government.”
The Government’s complaint and evidence at trial established that these defendants used Stone County Hospital, formerly a 25-bed critical access hospital and Medicare provider, to defraud Medicare of more than $10.85 million through fraudulent annual Medicare cost reports for the years 2004 through 2015. The majority of the damages sustained by the Government resulted from Ted Cain’s multi-million dollar compensation, billed to Medicare through Stone County Hospital and Corporate Management, Inc. For years, Corporate Management, Inc. passed on the vast majority of Ted Cain’s multi-million dollar compensation to Stone County Hospital, which Medicare reimbursed for costs at 101% from 2004 through April 1, 2013, and 99% from April 1, 2013 through 2015 under special reimbursement principles for critical access hospitals that help rural, underserved areas. For the cost reporting years 2004 to 2015, Corporate Management, Inc., through Ted Cain and Tommy Kuluz, assisted by Julie Cain, requested more than $17.69 million in compensation for Ted Cain despite no evidence that Ted Cain did any work for Stone County Hospital that qualified for Medicare reimbursement and that his compensation was unreasonable. In total, Medicare reimbursed Stone County Hospital nearly $11.8 million for Ted Cain’s compensation. The jury awarded the Government nearly $9.62 million in damages for Ted Cain’s fraudulent compensation.
Ted Cain’s wife, Julie Cain, who Ted Cain placed in the position of Administrator for Stone County Hospital from 2003 to 2012, also fraudulently received more than $704,454 in compensation reimbursed by Medicare. The evidence at trial showed that Julie Cain rarely worked at Stone County Hospital, while others ran the hospital, and Julie Cain’s compensation was unreasonable. After Julie Cain resigned as the Administrator of Stone County Hospital, she immediately started receiving compensation from Corporate Management, Inc. for alleged consulting work and director’s fees. Neither Julie Cain nor any other defendant could identify any consulting work she did for Stone County Hospital. Medicare reimbursed $149,510 in Julie Cain’s fraudulently obtained compensation for consulting and director’s fees. The jury awarded the Government a total of $853,964 in fraudulent compensation paid for Julie Cain.
Moreover, an audit conducted by the Mississippi Division of Medicaid found that for 2012 and 2013, Corporate Management, Inc., self-disallowed home office costs on its Medicaid home office statement but charged those costs on its Medicare home office statement, despite that Medicare and Medicaid follow the same reimbursement rules. Chief Financial Officer Tommy Kuluz could provide no explanation for this discrepancy, and despite the fact that he knew about the discrepancies at least by 2016 when Medicaid conducted an audit, defendants made no effort to repay Medicare for the over-allocation to Stone County Hospital. Because of this fraud, Medicare reimbursed Stone County Hospital more than $381,866 in fraudulent costs that it should not have.
The jury made a number of findings in its verdict, resulting in recovery of more than $10.85 million to the Medicare program. Damages are trebled under the False Claims Act. The Court also imposes a statutory penalty of $5,500 to $11,000 for each false claim for cost report years 2004 to 2014 and $11,181 to $22,363 for the 2015 cost report. Accordingly, the total amount of defendants’ civil liability will be determined by the Court, using the findings in the jury’s verdict.
The jury’s verdict resolves a lawsuit that was filed by James Aldridge under the qui tam or “whistleblower” provisions of the False Claims Act, which permit private individuals to sue on behalf of the government for false claims and to share in any recovery. The Government investigated and intervened in the lawsuit and prosecuted the case. The case is captioned United States ex rel. Aldridge v. Corporate Management, Inc., et al., Case No. 1:16cv369-HTW-LRA (S.D. Miss.). The United States appreciates the relator’s interest in program integrity and his assistance with this successful outcome. The United States also appreciates the assistance of the Mississippi Division of Medicaid and Manuel Pilgrim, who heads its audit program. The Department of Health and Human Services Office of Inspector General also provided assistance in the case.
The case was prosecuted by Assistant U.S. Attorney Angela Givens Williams and Attorneys Tom Morris and Elspeth A. England with the Civil Fraud Section of the Commercial Litigation Branch of the U.S. Department of Justice in Washington, D.C.