Exhibit 10.2
SETTLEMENT AGREEMENT PARTIES
This Settlement Agreement ("Agreement") is entered by and between
the United States of America, acting through its Department of
Justice and the United States Attorney's Offices for the Districts
of New Jersey and Massachusetts; and on behalf of the Office of
Inspector General of the United States Department of Health and
Human Services ("HHS-OIG"), the Office of Inspector General of
the United States Railroad Retirement Board ("RRB-OIG"), the
Office of the Civilian Health and Medical Program of the Uniformed
Services ("Office of CHAMPUS") through the General Counsel, Office
of CHAMPUS, a field activity of the Office of the Secretary of Defense,
the United States Department of Defense, the Federal Employees Health
Benefits Program, administered by the United States Office of Personnel
Management ("OPM-OIG"), through the United States Attorney's Office for
the District of Columbia; and the Medicaid programs administered by
the states of California and Georgia (hereinafter collectively referred
to as "the Government"); Corning Inc. ("Corning"), f/k/a MetPath Inc.
("MetPath"), MetWest Inc. ("MetWest"), and Unilab Corporation ("Unilab")
(hereinafter collectively referred to as "Defendants"); and Xxxxx Xxxxx
and C. Xxxx Xxxxxx (hereinafter referred to as "Relators").
Collectively, all of the above will be referred to as "the Parties."
PREAMBLE
A. WHEREAS, at all relevant times, Defendants owned and/or operated
clinical blood testing laboratories in California; Denver, Colorado;
Wallingford, Connecticut; Deerfield Beach, Florida; Detroit, Michigan;
St. Louis, Missouri; and Atlanta, Georgia;
B. WHEREAS, on or about January 27, 1995, Relators Xxxxx Xxxxx and
C. Xxxx Xxxxxx filed a qui tam action in the United States District
Court for the Northern District of California, which was subsequently
transferred to the United States District Court for the District of
New Jersey, entitled United States and State of California ex rel.
Spear and Xxxxxx v. MetPath, Inc., Corning Inc., and Unilab Corp.,
Civil Action No. 95-2379 (WGB) ("the Civil Action"), alleging that
Defendants violated the False Claims Act, 31 U.S.C.
Sections 3729-3733, and the California False Claims Act, Cal. Gov't
Code Section 12650 et seq.;
C. WHEREAS, Defendants submitted or caused to be submitted claims
for payment to the Medicare program, Title XVIII of the Social
Security Act, 42 U.S.C. Section 1395 et seq. and administered by
the United States Department of Health and Human Services;
D. WHEREAS, Defendants submitted or caused to be submitted claims
for payment to the Railroad Retirement Medicare program, Railroad
Retirement Act of 1974, 45 U.S.C. Section 231 et seq., which is
administered by the United States Railroad Retirement Board ("RRB");
E. WHEREAS, Defendants submitted or caused to be submitted claims
for payment to the Civilian Health and Medical Program for the
Uniformed Services ("CHAMPUS"), 10 U.S.C. Sections 1071-1106, which
is administered by the United States Department of Defense through
its component agency, the Office of CHAMPUS ("OCHAMPUS");
F. WHEREAS, Defendants submitted or caused to be submitted claims
for payment to the Federal Employees Health Benefits Program, which
is administered by the Office of Personnel Management ("OPM"),
pursuant to 5 U.S.C. Section 8901 et seq.;
G. WHEREAS, Defendants submitted or caused to be submitted claims
for payment to the Medicaid programs of the states of California and
Georgia (the "Participating States");
H. WHEREAS, the Government contends that Defendants violated federal
statutes and/or common law doctrines and state statutes as identified
in Paragraphs 2, 6 and 7 below, by submitting claims to the Medicare
Program, the RRB Medicare Program, the CHAMPUS Program, the Federal
Employees Health Benefits Program, and the California and Georgia
Medicaid Programs for payment for hemogram indices (designated by
Current Procedural Terminology ("CPT") Codes 85029 and 85030) in
conjunction with claims for Complete Blood Counts (CPT Codes 85025)
starting in 1989 through the date of execution of this Agreement,
at the California; Wallingford, Connecticut; Denver, Colorado;
Deerfield Beach, Florida; St. Louis, Missouri; and Detroit,
Michigan laboratories; and for payment for hemogram indices
in conjunction with claims for Reticulocyte Counts (CPT Code 85045)
from October 1, 1993 to October 1, 1995 at the Atlanta, Georgia
laboratory;
I. WHEREAS, the Government contends that the practices described
in Preamble Paragraph H above resulted in the submission of false
claims actionable under the False Claims Act, 31 U.S.C. Section 3729
et seq., to the Medicare Program, the Railroad Retirement Medicare
Program, the CHAMPUS Program, the Federal Employees Health Benefits
Program, and the California and Georgia Medicaid Programs which
enabled Defendants to improperly collect federal Medicare payments,
RRB Medicare program payments, CHAMPUS payments, Federal Employees
Health Benefits Program payments, and Medicaid Program payments from
California and Georgia;
J. WHEREAS, the Parties mutually desire to reach a full and final
compromise of all civil claims the Government has or may have against
Defendants based on the conduct alleged in Preamble Paragraphs H and
I and in the Civil Action, and further wish to avoid the delay,
expense, inconvenience and uncertainty of protracted litigation of
these claims;
TERMS AND CONDITIONS
NOW, THEREFORE, in reliance on the representations contained herein
and in consideration of the mutual promises, covenants, and obligations
in this Agreement, and for good and valuable consideration, receipt of
which is hereby acknowledged, the Parties hereby agree as follows:
1. Defendants agree to pay to the United States and the Participating
States the sum of eleven million dollars ($11,000,000) (the "Settlement
Amount") and this sum shall constitute a debt immediately due and owing
to the United States and the Participating States on the execution of
this Agreement. This debt is to be discharged upon the following
terms and conditions:
(a) Pursuant to the instructions provided by the Department of Justice,
Defendant Corning shall electronically transfer six million eight
hundred fifty thousand one hundred eight dollars ($6,850,108) and
Defendant Unilab shall electronically transfer five hundred twenty
eight thousand five hundred ninety-seven dollars ($528,597) on
October 1, 1996;
(b) Pursuant to instructions provided, Defendant Unilab shall make
payment of one hundred sixty two thousand forty-two dollars ($162,046)
to the state of California, and Defendant Corning shall make payment of
thirty four thousand nine hundred eighty nine dollars ($34,989) to
the state of Georgia, on October 1, 1996;
(c) Defendant Unilab shall electronically transfer to the United States
Attorney's Office for the District of New Jersey an additional six
hundred fifty thousand dollars ($650,000) on or before the close of
business on March 1, 1997;
(d) Defendant Unilab shall electronically transfer to the United States
Attorney's Office for the District of New Jersey an additional six
hundred fifty thousand dollars ($650,000) on or before the close of
business on September 1, 1997;
(e) Defendant Unilab shall electronically transfer to the United
States Attorney's Office for the District of New Jersey an additional
six hundred fifty thousand dollars ($650,000) on or before the close
of business on March 1, 1998;
(f) Defendant Unilab shall electronically transfer to the United States
Attorney's Office for the District of New Jersey an additional six
hundred fifty thousand dollars ($650,000) on or before the close of
business on September 1, 1998;
(g) Defendant Unilab shall electronically transfer to the United
States Attorney's Office for the District of New Jersey an additional
five hundred thousand dollars ($500,000) on or before the close of
business on March 1, 1999; and
(h) Defendant Unilab shall electronically transfer to the United States
Attorney's Office for the District of New Jersey an additional three
hundred twenty four thousand two hundred sixty dollars ($324,260) on
or before the close of business on September 1, 1999;
(i) The balance of the debt described in Paragraphs 1(c) through (h)
above shall, in addition, bear interest at the United States' six month
Treasury Xxxx coupon-equivalent rate published in the Wall Street Journal
as of the date most immediately prior to the date of this Settlement
Agreement. Interest on the amount of the principal payment (compounded
semi-annually) shall be paid concurrently on the date each respective
principal payment is due.
(j) A five business day grace period will be allowed for payments due
under Paragraph 1(c) through (h). However, all late payments are subject
to an additional interest charge of 6% per annum during the five business
day grace period, compounded daily commencing on the date payment is due.
Failure by Unilab to pay any installment provided for in Paragraph 1(c)
through (h) within the five business day grace period shall constitute
an Event of Default. If Unilab does not cure such Event of Default by
paying the total amount due, with interest, the United States may,
at its option, declare this Agreement with respect to Unilab to be
in default, and the full remaining unpaid balance shall become
immediately due and payable, and shall bear interest at the rate
of 18% per annum compounded daily from the date of Unilab's failure
to cure the Event of Default. If, following an Event of Default,
the United States is required to take legal action to collect any
amounts due under this Agreement, Unilab will pay to the United States
all reasonable costs of collection and enforcement of this Agreement,
including attorneys fees and expenses.
(k) In the Event of a Default by Unilab, the United States may, upon
ten business days notice to Unilab, at its option, exclude Unilab from
participation in any federally-funded health care program until such
time as Unilab has fully cured the default. Unilab agrees not to contest
such exclusion either administratively or in any state or federal court,
except based upon lack of notice, cure of the default, or court
proceedings which may delay or prevent the payment of the funds required
under this Agreement.
(l) As authorized by 42 U.S.C. Sections 1320a-7a(f), in the Event of
Default or if Unilab declares bankruptcy, the United States may, at
any time and at its option, satisfy any part of the remaining unpaid
balance by offset of any monies payable to Unilab by any department,
agency, or agent of the United States. The United States shall notify
the Relators, through counsel, if it takes such action. Unilab agrees
not to contest or oppose any motion by the United States seeking relief
from or modification of the automatic stay of 11 U.S.C. Section 362(a)
nor to seek relief under 11 U.S.C. Section 105 to enjoin or restrain
the United States from recovering monies owed by Unilab to the
United States arising out of this Agreement or through any offset.
(m) Nothing in this Agreement shall preclude Unilab from prepaying any
payments due under this Agreement.
(n) In the event of bankruptcy by Defendant Unilab, the United States
shall have a liquidated claim in the amount of four million one hundred
fourteen thousand nine hundred three dollars ($4,114,903), plus any
accrued interest, less any payments already made to the United States.
Should Defendant Unilab file for bankruptcy protection, Unilab will
not oppose any motion by the United States that any debt, as enumerated
in this Settlement Agreement, remaining to be paid to the United States
is nondischargeable pursuant to 11 U.S.C. Section 523 as being a debt
for money or property obtained by false representation or actual fraud.
2. Subject only to the conditions specified in Paragraph 3 below, on
receipt of the payment described in Paragraph 1(a) above, the United
States, on behalf of itself, its officers, agents, agencies, and
departments, will release and will be deemed to have released Defendants,
their parents, affiliates, divisions, trustees, subsidiaries, successors
and assigns, and their present or former directors, officers, employees
and shareholders from any civil or administrative monetary claims
(including recoupment claims) that the United States has or may have
under the False Claims Act, 31 U.S.C. Section 3729 et seq. (as amended);
the Program Fraud Civil Remedies Act, 31 U.S.C. Section 3801 et seq.; the
Civil Monetary Penalties Law, 42 U.S.C. Section 1320a-7a;
Titles XVIII and XIX of the Social Security Act, 42 U.S.C. Section 1395
et seq., and 42 U.S.C. Section 1395 et seq.; the FEHBP
Debarment provision, 5 U.S.C. Section 8902a; or common law for the
conduct described in Paragraphs H and I of the Preamble at the
laboratories identified in Paragraph A of the Preamble with respect
to claims submitted or caused to be submitted to the Medicare Program,
the Railroad Retirement Medicare Program, the CHAMPUS Program, the
Federal Employees Health Benefits Program, and to the
Medicaid Programs of California and Georgia.
3. Notwithstanding any other provision in this Agreement, the United
States specifically does not release Defendants or any other entity
or individual under this Agreement from (a) any potential criminal
liability arising from the subject matter of this Agreement;
(b) any potential criminal, civil or administrative claims arising
under Title 26 U.S. Code (Internal Revenue Code); (c) any potential
liability to the United States (or any agencies thereof) for: any
conduct other than that identified in Preamble Paragraphs H and I at
any laboratory identified in Preamble Paragraph A; any conduct at any
laboratory not identified in Paragraph A, including any laboratory
owned or operated, in whole or part, by Corning Life Sciences Inc.,
Damon Clinical Laboratories, Inc., Xxxxxxx Institute, and Metpath Inc.;
and any conduct at any laboratory formerly owned by Damon Clinical
Laboratories, except for the conduct identified in Preamble Paragraphs
H and I at the Corning Atlanta laboratory for the period from
October 1, 1993 to October 1, 1995; (d) any claims against any
individual who is criminally indicted or convicted, or who enters
into a criminal plea agreement, if the facts underlying the indictment,
conviction, or plea are related to the conduct alleged in Preamble
Paragraph H and I; (e) any obligations created by this Agreement;
and (f) any claims for defective or deficient services, including any
claims relating to the quality of testing services by Defendants.
4. The Office of Inspector General of HHS agrees to release and
refrain from instituting, directing, or maintaining any administrative
claim or any action seeking exclusion from the Medicare program or
State health care programs (as defined in 42 U.S.C. Section 1320a-7(h))
against Defendants, their parents, affiliates, divisions, subsidiaries,
its predecessors, successors, assigns, transferees or any of their
present or former directors, officers, employees, or agents under
42 U.S.C. Section 1320-7a (Civil Monetary Penalties Law); 31 U.S.C.
Sections 3801-3812 (Program Fraud Civil Remedies Act); or 42 U.S.C.
Section 1320a-7(b) (permissive exclusion) for the conduct described
in Preamble Paragraphs H and I at the laboratories identified in
Preamble Paragraph A.
5. In conjunction with the Department of Health and Human Services,
Defendants hereby agree that they will revise and develop their
corporate compliance program as may be necessary.
6. On receipt of the payment described in Paragraph 1(b), the State
of California, on behalf of itself, its officers, agents, agencies
and departments, will release and will be deemed to have released
Defendants, their parents, affiliates, divisions, trustees,
subsidiaries, successors and assigns, and their present or former
directors, officers, employees and shareholders from any civil or
administrative monetary claims (including recoupment claims) that
the State of California has or may have under the federal False Claims
Act, 31 U.S.C. Section 3729 et seq. (as amended); the California False
Claims Act, Cal. Govt. Code Section 12650 et seq.; and California
Business and Professions Code Section 17200 et seq. which prohibits
acts of unfair competition; or common law for the conduct described
in Preamble Paragraphs H and I at the laboratories identified in
Preamble Paragraph A with respect to claims submitted or caused to
be submitted to the Medicaid (Medi-Cal) Program of California.
7. On receipt of the payment described in Paragraph 1(b), the State
of Georgia, on behalf of itself, its officers, agents, agencies and
departments, will release and will be deemed to have released Defendants,
their parents, affiliates, divisions, trustees, subsidiaries, successors
and assigns, and their present or former directors, officers, employees
and shareholders from any civil or administrative monetary claims
(including recoupment claims) that the State of Georgia has or may
have under the federal False Claims Act, 31 U.S.C. Section 3729
et seq. (as amended); O.C.G.A. Sections 49-4-146.1(b) and (d); or
common law for the conduct described in Preamble Paragraphs H and I
at the laboratories identified in Preamble Paragraph A. with
respect to claims submitted or caused to be submitted to the
Medicaid Program of Georgia.
8. The Relators agree that the settlement of claims in this case
is fair, adequate, and reasonable under all the circumstances,
pursuant to 31 U.S.C. Section 3730(c)(2)(B). The United States agrees
to pay Relators (a) $28,596 on behalf of the State of California as
the Relators' share of the proceeds recovered pursuant to the
California False Claims Act, Cal. Gov't Code Section 12650 et seq.,
and (b) fifteen per cent (15%) of all sums in excess of $28,596 paid
to the United States pursuant to Paragraphs 1(a), 1(c) through 1(j), 1(l)
through 1(n), within a reasonable time after receipt by the United
States of such payment. On receipt of the relators' share payment made
pursuant to Xxxxxxxxx 0(x), Xxxxxxxx, for themselves, their heirs,
successors, and assigns, will release and will be deemed to have released
and forever discharged the United States from any claims arising from
or relating to the filing of the Civil Action, or, pursuant to
31 U.S.C. Section 3730(d)(1), for a share of the proceeds of the settlement
of claims under this Agreement, with the exception of those claims
expressly reserved in Paragraph 9; amounts recovered by the United
States from those defendants specifically named in the Civil Action
through any federally-funded program other than those enumerated in
Preamble Paragraphs H and I for the conduct alleged in the Civil
Action; and any obligations created by this Agreement which
Relators have the right to enforce. On the United Stats' receipt of
payment made pursuant to Xxxxxxxxx 0(x), Xxxxxxxx, for themselves,
their heirs, successors and assigns, will release and will be
deemed to have released Defendants from any claims Relators have
or may have that arise under or relate to any of the allegations in
the Civil Action and/or the facts or conduct described in Preamble
Paragraphs H and I.
9. Notwithstanding Paragraph 8, the Relators reserve whatever
rights and claims they may have against Corning with respect to
reasonable expenses, including reasonable attorneys fees and costs,
incurred with the Civil Action and with respect to liabilities arising
from conduct at laboratories formerly owned by Damon Clinical
Laboratories with respect to the conduct described in Preamble
Paragraphs H and I, not including the Corning Atlanta laboratory
for its conduct after its acquisition by Corning. Whatever rights or
claims the Relators may have with respect to any Corning laboratory
formerly owned by Damon Clinical Laboratories (not including the
Corning Atlanta laboratory after its acquisition) pursuant to
United States and State of California ex rel. Spear and Xxxxxx
v. MetPath, Inc. et al. are not affected by this Agreement.
10. This Agreement does not resolve or in any manner affect any
claims that United States has or may have against the Relators arising
under Title 26, U.S. Code (Internal Revenue Code), or any claims
arising under this Agreement.
11. After this Agreement is executed, the Parties will notify the
Court that all Parties have stipulated that the Defendants MetPath,
MetWest, and Unilab be dismissed with prejudice as to the United States,
the State of California and the Relators, and shall request that the
remainder of the Civil Action, including any pending unresolved issues
between Relators and Defendants, remain under seal and be transferred
to the District of Massachusetts.
12. For government contracting purposes and for Medicare, Railroad
Retirement Medicare, CHAMPUS, and state Medicaid program purposes,
Defendants agree to treat as unallowable all costs (as defined in
the Federal Acquisition Regulations ("FAR") Section 31.205.47(a))
incurred by or on behalf of Defendants and/or their current or former
officers, directors, agents, employees, shareholders, parents,
subsidiaries, divisions, predecessors and successors in connection
with (a) the matters covered by this Agreement; (b) the Government's
audit and investigation of the matters covered by this Agreement;
(c) Defendants' investigation, defense, and corrective actions;
(d) the negotiation and performance of this Agreement; and (e) the
payments made to the United States provided for in this Agreement.
These amounts shall be separately estimated and accounted for by
Defendants, and Defendants will not charge such costs directly or
indirectly to any contracts with the United States, or to any cost
report submitted to the Medicare, Railroad Retirement Medicare,
CHAMPUS, or state Medicaid Programs.
13. Nothing in this Agreement constitutes an agreement by the United
States concerning the characterization of the amounts paid hereunder
for purposes of any proceeding under Title 26 of the Internal
Revenue Code.
14. Defendants hereby agree that they will waive and will not assert
any defense which may be based in whole or in part on the Double
Jeopardy or Excessive Fine Clauses of the Constitution or the holding
or principles set forth in United States x. Xxxxxx, 000 X.X. 000 (1989),
in any criminal prosecution based on the conduct alleged in
Preamble Paragraph H.
15. The Parties agree that this Agreement does not constitute an
admission by any person or entity, and shall not be construed as an
admission by any person or entity, with respect to any issue of
law or fact.
16. This Agreement shall be binding upon the Parties, their
successors, assigns, and heirs.
17. The undersigned signatories for the Defendants represent and
warrant that they are fully empowered and authorized by their Board of
Directors to execute this Agreement. The undersigned United States
signatories represent that they are signing this Agreement in their
official capacity.
18. This Agreement shall become final and binding only upon signing
by each respective party hereto.
19. This Agreement may not be changed, altered or modified, except
in writing signed by all parties.
20. This Agreement may be executed in counterparts, each of which
shall constitute an original and all of which shall constitute one
and the same Agreement.
21. This Agreement is effective on the date signed by the last
signatory.
UNITED STATES OF AMERICA
XXXXX X. XXXXXXXX
United States Attorney
District of New Jersey
By: ___________________ Dated:
XXXXX X. XXXXX
Assistant United States Attorney
XXXXXX X. XXXXX
United States Attorney
District of Massachusetts
By: ___________________ Dated:
XXXXX X. XXXXXXX
Assistant United States Attorney
XXXX X. XXXXXX
United States Attorney
District for the District of Columbia
By: ___________________ Dated:
XXXX X. XXXXXXXX
Assistant United States Attorney
By: ___________________ Dated:
XXXXXXXX X. XXXXXXXX
Civil Division
United States Department of Justice
By: ____________________ Dated:
XXXXX XXXXXX
Assistant Inspector General
Office of Litigation Coordination
Office of the Inspector General
U.S. Department of Health and Human Services
By: _____________________ Dated:
XXXXXX X. XXXXXX
General Counsel
Office of CHAMPUS
By: _____________________ Dated:
XXXXXXXX X. XXXXX
Assistant Director for Insurance Programs
U.S. Office of Personnel Management
By: _____________________ Dated:
XXXXX X. XXXXX
Assistant U.S. Attorney
On behalf of California
Medicaid programs, and the Railroad
Retirement Board
THE STATE OF GEORGIA
By:_______________________
XXXXXXX X. XXXXXX
Attorney General
The State of Georgia and the
Georgia Medicaid Plan
CORNING CLINICAL LABORATORIES INC.
By: _______________________ Dated:
XXXXXXX X. XXXXXX
Vice-President
Corning Clinical Laboratories Inc.
UNILAB CORPORATION
By: _______________________ Dated:
XXXX X. XXXX
Vice-President
Unilab Corporation
THE RELATORS
By: ________________________ Dated:
XXXXX XXXXX
By: ________________________ Dated:
C. XXXX XXXXXX
