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SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is entered into between the State
of California, acting through its Department of Justice, Office of the Attorney
General, Bureau of Medi-Cal Fraud ("AG"), the California Department of Health
Services ("DHS") (collectively, "California"), Xxxxxx XxXxxxxx ("Relator"), and
Physicians Clinical Laboratory, Inc. ("PCL"), its subsidiaries, business
entities, and affiliates as delineated in Exhibit "A" hereto which is expressly
incorporated by reference, herein (hereafter collectively referred to as "the
Parties"), through their authorized representatives. It is expressly understood
by all parties that this Agreement is subject to approval by the U.S. Bankruptcy
Court for the Central District of California, Case No. SV96-23185 GM.
The AG is acting on behalf of the State of California pursuant to the
California Civil False Claims Act and on behalf of the People of the State of
California under authority of California Government Code section 12528(a). The
DHS is acting as the Medi-Cal agency responsible for the determination of
restitution and the exclusion of parties from participation in the Medi-Cal
program.
RECITALS
As a preamble to this Agreement, the Parties acknowledge:
1. PCL is an independent clinical laboratory, incorporated in the State of
Delaware. PCL and the subsidiaries, business entities, and affiliates are
identified by name and provider number, where applicable, in the attached
Exhibit A, and are collectively described as PCL in this agreement. On November
8, 1996, PCL and certain of its affiliates filed voluntary petitions for relief
under chapter 11 of the Bankruptcy Code, 11 U.S.C. xx.xx. 101-1330 ( the
"Bankruptcy Code"), in the United States Bankruptcy Court for Central District
of California (the "Bankruptcy Court"). PCL's Chapter 11 case will be
hereinafter referred to as the "Chapter 11 Case." By order entered April 23,
1997, the Bankruptcy Court confirmed the Second Amended Plan of Reorganization
of Physicians Clinical Laboratories, Inc. and Its Affiliated Debtors (the
"Plan") pursuant to ss.1129 of the Bankruptcy Code.
2. The United States alleges that PCL has submitted or caused to be
submitted false and fraudulent claims for payment to the Medicare program
("Medicare"), Title XVIII of the Social Security Act, 42 U.S.C. xx.xx.
1395-1395ddd, the MediCal Program, Title XIX of the Social Security Act, and the
Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS"), 10
U.S.C. xx.xx. 1071-1106 and other federally funded health programs, for clinical
laboratory services during the period from January 1, 1992, to July 18, 1997.
Relator filed an action under the qui tam provisions of the False Claims Act, 31
U.S.C. xx.xx. 3729-33 ("FCA"), alleging that PCL violated the FCA for certain
actions set forth in the Complaint filed in the District Court for the Eastern
District of California, in United States ex rel. Xxxxxx XxXxxxxx v. Physicians
Clinical Laboratory, et al., CIV-S97-I005GEBGGH (the "Civil Action").
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3. PCL and the United States and Relator have reached an agreement for the
settlement of any claims that the United States and Relator may have in the
Civil Action. The AG, DHS, Relator and PCL also have reached this agreement to
settle any claims that California may have in the Civil Action described in
paragraph 2.
4. PCL denies the allegations in the Civil Action. However, in order to
avoid the uncertainty and expense of litigation, the Parties hereby reach a full
and final settlement of all issues and disputes between them based upon the
conduct described in paragraph 2 of this Agreement.
TERMS AND CONDITIONS
In accordance with the mutual covenants and agreements herein, and with
full authority to enter into this Agreement and to be bound thereby, the Parties
agree as follows:
5. In settlement of any claims and causes of action that the State of
California AG and DHS has or may have against PCL, as described in paragraph 2
of this Agreement, PCL agrees to pay to the California AG, Bureau of Medi-Cal
Fraud the amount of $100,000.00 ("Settlement Amount"). PCL will pay the
Settlement Amount to California within eleven (11) days of the Effective Date
(as defined in paragraph 19).
6. PCL will satisfy the obligations set forth in paragraph 4 by electronic
funds transfer to the Office of the Attorney General, Bureau of Medi-Cal Fraud.
7. Subject to the exceptions in paragraph 8 and in consideration of PCL's
obligations under this Agreement, the California AG and DHS, on behalf of
itself, its officers and agents, hereby releases PCL (as defined in this
Agreement by reference to those entities listed at Exhibit A, hereof) and J.
Xxxxxx Xxxxxxxxxx, from any civil or administrative monetary claim or cause of
action that DHS California has or may have, and from any action seeking
exclusion from the MediCal program with regard to the provision of and
reimbursement for laboratory services under the Medical program.
The California AG hereby releases PCL (as defined in this Agreement by
reference to those entities listed at Exhibit A, hereof) and J. Xxxxxx
Xxxxxxxxxx from any criminal liability, for the conduct described in paragraph
2.
Neither the California AG nor DHS agrees to waive any claims, actions,
demands, or causes of action it may have against PCL for conduct other than that
described in paragraph 2 above. This Agreement is intended to be for the benefit
of the Parties and J. Xxxxxx Xxxxxxxxxx only, and by this instrument neither the
California AG nor DHS waives, compromises or releases any claims or causes of
action against any other person or entity except as provided herein.
8. Specifically reserved and excluded from the scope and terms of this
Agreement are any and all:
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(1) criminal liability that may arise from the conduct
described in paragraph 2, and any related administrative
action for mandatory exclusion from the MediCal program except
for the release of PCL and J. Xxxxxx Xxxxxxxxxx;
(2) liability to California (or any agencies thereof) for any
conduct other than that described in paragraph 2;
(3) claims against any officers and employees of PCL except J.
Xxxxxx Xxxxxxxxxx;
(4) claims related to obligations created by this Agreement;
and
(5) any claims for defective or deficient services.
9. PCL has entered into a Corporate Integrity Agreement with the United
States Department of Health and Human Services, Office of the Inspector General
("HHS/OIG"). On the Effective Date, PCL will commence its obligations under the
Corporate Integrity Agreement, a copy of which is attached hereto as Exhibit B.
PCL agrees that the obligations to report and the agreement to access granted to
the HHS/OIG as delineated in the Corporate Integrity Agreement apply equally to
DHS..
10. PCL has provided sworn financial disclosure statements and other
financial information to the Bankruptcy Court during the Chapter 11 Case, and
financial information to the Office of Legal Services, and California has relied
on the representations therein in reaching this Agreement. PCL warrants that the
financial information provided to California is thorough, accurate, and
complete. PCL further warrants that it does not own any assets which have not
been disclosed to the United States Bankruptcy Court.
11. All costs (as defined in the Federal Acquisition Regulations ("FAR")
31.205-47 and as defined in Titles XVIII and XIX of the Social Security Act, 42
U.S.C. ss. 1395, et seq. and ss. 1396, et seq. and the regulations promulgated
thereunder) incurred by or on behalf of PCL, and its present or former officers,
directors, employees, shareholders, and agents, in connection with 1) the
matters covered by this Agreement, 2) the federal government's audit and
investigation of the matters covered by this Agreement, 3) PCL's investigation,
defense, and the obligations undertaken pursuant to the Corporate Integrity
Agreement incorporated by reference herein, 4) the negotiation of this
Agreement, and 5) the payments made to California pursuant to this Agreement
shall be unallowable costs for government contracting purposes and for Medicare
and Medicaid purposes. These amounts will be separately accounted for by PCL,
and PCL will not charge such costs directly or indirectly to any contracts with
California, or to any cost report submitted to the Medicare or Medicaid program
or any other government health insurance program. Any sums owed by PCL to DHS
for payments made to PCL by MediCal for costs that
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are unallowable (as defined in this paragraph) shall be paid by PCL to the
Department of Health Services at its direction.
12. PCL agrees to cooperate fully and truthfully with California's
investigation of individuals and entities not specifically released in this
Agreement, for the acts described in paragraph 2. Upon reasonable notice, PCL
will make reasonable efforts to facilitate access to, and encourage the
cooperation of, its directors, officers, and employees for interviews and
testimony, consistent with the rights and privileges of such individuals. PCL
will furnish to California, upon reasonable request, all documents and records
in its possession, custody or control relating to the acts described in
paragraph 2. PCL agrees to waive any applicable attorney-client or work product
privilege that may apply to such documents and not to assert any such privilege
in response to a request for documents under this paragraph.
13. PCL may receive to payment under the MediCal program for clinical
laboratory services rendered, including payment for which the requests may need
to be resubmitted to the Medi-Cal program in the normal course of business, when
billed in accordance with applicable Medi-Cal laws.
14. This Settlement Agreement constitutes the entire agreement between the
Parties. This Agreement may not be altered except by written consent of the
Parties. No other additional promises, conditions or agreements have been
entered into other than those stated in this Agreement.
15. Except as provided for herein, each party to this Agreement will bear
its own costs incurred in this matter, including the preparation and performance
of this Agreement.
16. PCL represents that the Agreement is entered into with knowledge of
the events described herein and upon the advice of counsel. PCL further
represents that this Agreement is freely and voluntarily entered into without
any degree of duress or compulsion whatsoever, in order to avoid litigation.
17. The undersigned PCL signatory represents and warrants that he or she
is fully authorized and empowered to execute this Agreement. The undersigned
California signatories represent that they are signing this Agreement in their
official capacity and that they are fully empowered and authorized to execute
this Agreement.
18. The Parties have executed identical copies of this Agreement, each of
which will be deemed an original.
19. The provisions of this Agreement will be binding upon the Parties and
their heirs, successors, assigns and transferees.
20. This Settlement Agreement is subject to the approval of the Bankruptcy
Court. PCL agrees that it will take all reasonable steps necessary to obtain
such approval as soon as
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reasonably practicable upon execution of the Settlement Agreement. The
Settlement Agreement shall be effective as of the date on which the Bankruptcy
Court order approving the Settlement Agreement becomes a final, non-appealable
order (the "Effective Date").
IN WITNESS WHEREOF, the parties hereto affix their signatures.
FOR THE CALIFORNIA DEPARTMENT OF HEALTH SERVICES
DATED:________________ _____________________
J. Xxxxxxx Xxxxxx
Deputy Director, Medical Care Services
State of California
Department of Health Services
FOR THE CALIFORNIA Department of Justice
DATED: _________________ ______________________
Xxxxxx Xxxxxxxxx,
Director, MediCal Fraud Unit
State of California
Department of Justice
FOR THE RELATOR
DATED: _________________ ______________________
Xxxxxx XxXxxxxx
Relator
_______________________
X. Xxxxxx Cutter
Attorney at Law
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FOR PCL
DATED:__________________ ______________________________________________
J. Xxxxxx Xxxxxxxxxx
Chief Operating Officer
Physicians Clinical Laboratory, Inc.
0000 X Xxxxxx, Xxxxx 000X
Xxxxxxxxxx, Xxxxxxxxxx 00000
DATED:__________________ ______________________________________________
Xxxxxxx X. Xxxx
Xxxxx Day Xxxxxx and Xxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Counsel for PCL
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------------------ COMPARISON OF HEADERS ------------------
-HEADER 1-
DRAFT - SUBJECT TO INTERNAL GOVERNMENT REVIEW AND APPROVAL
- SUBJECT TO PCL BOARD AND BANKRUPTCY COURT APPROVAL
------------------ COMPARISON OF FOOTERS ------------------
-FOOTER 1-
LAMAIN01 Doc: 195111_1.wpd
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---------------------- REVISION LIST ----------------------
The bracketed numbers refer to the Page and Paragraph for the start of the
paragraph in both the old and the new documents.
[1:1 1:1] Changed"20" to "23"
[1:3 1:3] Changed "California ("California")," to "California,"
[1:3 1:3] Changed "Services and" to "Services ("DHS") and"
[1:6 1:6] Changed "Delaware. On" to "Delaware. ... agreement. On"
[1:7 1:7] Changed "and California ... settlement of any" to "and DHS also
... settle any"
[1:7 1:7] Changed "that California ... the Civil" to "that DHS may ... the
Civil"
[2:3 2:3] Changed "that California has" to "that DHS has"
[2:3 2:3] Changed "to California $100,000.00" to "to DHS $100,000.00"
[2:3 2:3] Changed "to California within" to "to DHS within"
[2:5 2:5] Changed "Agreement, California," to "Agreement, DHS,"
[2:5 2:5] Changed "officers, ... departments," to "officers and agents, "
[2:5 2:6] Changed "and any outside" to "and the outside"
[2:5 2:6] Changed "time," to "time [the ... B, hereof],"
[2:5 2:6] Changed "program." to "program with ... Medical program."
[2:7 2:8] Changed "outside directors " to "Outside Directors "
[2:7 2:8] Changed "instrument ... or release" to "instrument ... or
releases"
[3:4 3:5] Changed "Agreement." to "Agreement, ... Exhibit B."
[3:6 3:7] Changed "Government's " to "federal government's "
[3:6 3:7] Changed "to California for" to "to DHS for"
[3:7 3:8] Changed "2. PCL" to "2. [If criminal ... included.] PCL"
[4:4 5:4] Add Para "J. Xxxxxxx Xxxxxx ... Medical Care Services"
[4:4 5:6] Del Para "Title"
[4:7 5:8] Add Paras "FOR THE CALIFORNIA ... Department of Justice"
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