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New disclosures show how whistleblower spurred Hertel & Brown investigation

Posted on by L. Dreeye
New disclosures show how whistleblower spurred Hertel & Brown investigation

A former employee has filed a federal lawsuit over Hertel & Brown’s billing practices, prompting the FBI to probe the physical therapy firm, according to recent filings and statements at recent pretrial hearings.

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  • The FBI’s investigation into Hertel & Brown Physical & Aquatic Therapy began following a whistleblower claim that it overcharged insurers, according to allegations raised at pretrial hearings.
  • The complaint, sealed qui tam, alleges that Hertel & Brown billed licensed physical therapists for services that were actually performed by unlicensed assistants—the same allegation in the criminal case.
  • Defense attorneys argue that the informant’s potential financial gain makes the allegations implausible, while the U.S. Attorney’s Office argues that the allegations were corroborated by the FBI

The Hertel & Brown billing fraud case is the largest white collar prosecution in Erie history.

But the case arose in civil court, with a lawsuit.

Recent documents filed in the case against 21 defendants, as well as testimony at a recent preliminary hearing, show that the FBI began investigating Hertel & Brown Physical & Aquatic Therapy after a whistleblower filed a lawsuit against its former employer in U.S. District Court in September 2020.

The FBI and the U.S. Attorney’s Office in Erie used the lawsuit, known as a qui tam action, to launch a criminal investigation into the allegations made in the complaint, according to court records and testimony.

The FBI investigation began in November 2020, shortly after the informant filed a qui tam lawsuit on Sept. 21, 2020, according to a search warrant and other court records in the case.

The FBI interviewed the informant, a woman identified in the search warrant only as “CW1” (Confidential Witness No. 1), to obtain additional information about Hertel and Brown; its owners Aaron W. Hertel and Michael R. Brown; and others. Agents used information from CW1 and others in probable cause affidavits for search warrants.

“In November 2020,” according to the affidavit, “the FBI in Erie began a health care fraud investigation into HB, Aaron Hertel, Michael Brown, and others employed by HB after CW1 made allegations that HB “Aaron Hertel and Michael Brown engaged in a pattern of filing false claims for payment to the United States related to the practice of HB Physical Therapy.”

The FBI said it interviewed other confidential witnesses who corroborated CW1’s allegations. According to the affidavit, the witnesses included a man who worked at Hertel & Brown when the man was interviewed by the FBI.

On February 23, 2021, the FBI searched Hertel & Brown’s offices and obtained warrants for emails and text messages. On November 9, 2021, a federal grand jury indicted Hertel & Brown as a business, Aaron Hertel and Michael Brown as individuals, and 18 employees on charges of conspiracy and fraud.

All defendants have pleaded not guilty and are free on $10,000 unsecured bonds. Judge Susan Paradise Baxter set a trial date for February in U.S. District Court in Erie.

The transfer of the claim led to the initiation of a criminal case

The whistleblower lawsuit and the criminal case are based on the same underlying charge. Hertel & Brown and others are accused of overcharging Medicare, Medicaid and private insurers by tens of millions of dollars by billing them as if licensed physical therapists performed treatments when they were performed by unlicensed assistants or technicians.

The qui tam lawsuit was sealed and remains secret from the public, but not from federal law enforcement. Federal law requires that qui tam claims be filed under seal to allow time for the U.S. Attorney’s Office in a given jurisdiction to investigate the civil claims and decide whether the federal government wants to join the plaintiff in their prosecution. A qui tam lawsuit can also lead to a criminal investigation.

After a whistleblower filed a qui tam lawsuit in the Hertel & Brown case, “this case was referred for criminal investigation and that was the decision made,” said Assistant U.S. Attorney Christian Trabold, who is prosecuting the Hertel & Brown case. The trial will be held Nov. 8, according to a newly filed transcript.

Whistleblower could recover millions if lawsuit is successful

The qui tam action may still continue as the criminal case progresses. If Hertel & Brown loses the civil trial, the whistleblower will be entitled to recover up to 30% of the award or damages.

Under the federal False Claims Act, this award or payment can be up to three times the amount of money the government can prove was misappropriated as a result of fraud.

In the criminal case, U.S. prosecutors allege Hertel & Brown defrauded insurers out of $22 million over 14 years, starting shortly after opening a physical therapy business in 2007. subject to reimbursement there will be interest of US$66 million.

Defense and US Attorney argue over whistleblower’s credibility

Lawyers for Hertel & Brown and other defendants are citing the informant’s role in the criminal investigation in an effort to have evidence thrown out. Defense requests for dismissal led to a hearing on Nov. 8 and another on Nov. 7 before Baxter. She has not yet ruled on the motion to dismiss.

The defense argues that the whistleblower’s potential financial windfall in the qui tam action is one reason her allegations are not credible and that the FBI should not have relied on her to obtain search warrants as part of the investigation.

The whistleblower was “not an impartial citizen reporting an alleged error, but a plaintiff with a financial motivation to persuade the government to believe it,” Hertel & Brown attorneys Aaron Hertel and Michael Brown of Pittsburgh said in a pre-filed statement. hearings November 7-8.

In response, Attorney Trabold stated that the FBI obtained evidence consistent with CW1’s allegations from other confidential witnesses and through review of Hertel & Brown accounts and other documents.

“The search warrant affidavit is replete with corroboration of CW1 as well as independent evidence of probable cause,” Trabold said in a brief also filed ahead of the Nov. 7-8 hearing. “Even if it is accepted that CW1 was biased and financially motivated in his accusations, CW1’s veracity was nonetheless tested repeatedly by investigators.”

Contact [email protected] or 814-870-1813. Follow him on X @ETNpalattella.