Prison contractors pays $2.75 million in alleged kickback scheme

by Ben Vernia | August 22nd, 2017

On June 5, the Department of Justice announced that Texas-based Medical Solutions, Inc., and its former president had agreed to pay $2.75 million to settle civil allegations that the company had paid a kickback in the form of a consulting arrangement to a Bureau of Prisons employee. According to DOJ’s press release:

North Texas Contractor and Executive Agree to Pay United States $2.475 Million to Resolve False Claims Act and Anti-kickback Act Allegations

Mansfield, Texas-based Integrated Medical Solutions Inc. (IMS), along with the company’s former President Jerry Heftler, have agreed to pay the United States $2.475 million to settle allegations that they violated the False Claims Act and Anti-Kickback Act in connection with federal contracts IMS obtained from the U.S. Bureau of Prisons (BOP), the Justice Department announced today.

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The settlement announced today resolves allegations that IMS engaged Cary Hudson, who was then employed by BOP as a business administrator, to serve as a paid consultant to assist IMS in obtaining contracts with BOP to serve as a third-party administrator responsible for developing managed healthcare networks that provide medical care to federal inmates. Specifically, the Government alleged that IMS paid Hudson in order to obtain favorable treatment during the contracting process, which included Hudson’s provision of certain confidential, non-public information that gave IMS an unfair competitive advantage in the bidding process.  After IMS obtained the contracts with BOP, the Government alleged that Hudson thereafter improperly assisted IMS in its performance of the contracts while simultaneously serving as a BOP financial administrator.

In October 2014, Hudson pleaded guilty to a felony violation of submitting a false document to an agency of the United States in which he failed to disclose payments he received from IMS as part of his annual obligation as a federal government employee to report any potential conflicts of interests.

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The case apparently arose from a government investigation, and not from a qui tam complaint.

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