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Los Angeles Team Prevails in $600 Million State Qui Tam Action under the California Insurance Frauds Prevention Act

October 8, 2019

A Los Angeles team comprising partners Dean Rocco (lead trial counsel) and Scott Tropio (second chair); of counsel Daniel Hurwitz (third chair); and Senior Counsel Pat Kelly, partner Herb Kunowski, and of counsel Craig Hunter, obtained a defense judgment in Los Angeles County Superior Court in favor of clients SRCC Associates, LLC; JNL Management, LLC; and Jon Lasko (SRCC) on all counts. This qui tam “whistleblower” case under the California Insurance Fraud Prevention Act brought by a former employee in which the State of California through its Department of Insurance had intervened, alleged that SRCC knowingly operated an unlicensed medical detox facility and engaged in a fraudulent kickback scheme with a referral source. Notably, the State's demands were in excess of $600 million, and at trial after the claims had been significantly reduced through law and motion, the State still demanded in excess of $250 million in fines and penalties. The State unsuccessfully sought to impose its interpretation of California healthcare laws as applied to medical detox facilities, making it more difficult for hospitals to provide these increasingly needed services to surrounding communities. The State also unsuccessfully sought to impose its interpretation of what amounts to illegal "capping and steering" under California law. Specifically, the State sought to punish medical referrals without payments of money that are associated with traditional "kickback" schemes, arguing that it was unlawful for one medical professional to refer a patient to another medical professional simply with the understanding that the receiving professional would return the patient or otherwise send them to a predesignated facility, which is a practice common among medical professionals.  

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