Category: Daily News

Elizabeth Holmes raised hundreds of millions of dollars from investors on the promise that her California Silicon Valley based medical-testing startup Theranos Inc. would change medicine with a single drop of blood. Now securities regulators called her a fraud and forced her to give up the company she built.

Holmes began to rise to national attention in 2013 when she claimed that Theranos had developed a medical technology that could do what seemed impossible: Its secret machines could run thousands of medical tests using the blood from a tiny finger-prick, and do so quickly and cheaply.

High-profile board members joined as well — including the diplomat Henry Kissinger, James Mattis — now the Trump administration’s Secretary of Defense, and David Boies, the lawyer who tried to stop revelations about film producer Harvey Weinstein’s sexual harassment.

Holmes had claimed her machines could process 90 percent of the tests performed by standard lab equipment. Those statements won the company an agreement with a national pharmacy chain in 2010 even though the technology was not yet “commercially ready,” according to the SEC. Theranos publicly announced a partnership with the drugstore chain Walgreens, which later sued Theranos. The companies eventually settled.

The Securities and Exchange Commission charged Theranos Inc., its founder and CEO Elizabeth Holmes, and its former President Ramesh “Sunny” Balwani with raising more than $700 million from investors through an elaborate, years-long fraud in which they exaggerated or made false statements about the company’s technology, business, and financial performance.

The complaints allege that Theranos, Holmes, and Balwani made numerous false and misleading statements in investor presentations, product demonstrations, and media articles by which they deceived investors into believing that its key product – a portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry.

In truth, according to the SEC’s complaint, Theranos’ proprietary analyzer could complete only a small number of tests, and the company conducted the vast majority of patient tests on modified and industry-standard commercial analyzers manufactured by others.

The complaints further charge that Theranos, Holmes, and Balwani claimed that Theranos’ products were deployed by the U.S. Department of Defense on the battlefield in Afghanistan and on medevac helicopters and that the company would generate more than $100 million in revenue in 2014. In truth, Theranos’ technology was never deployed by the U.S. Department of Defense and generated a little more than $100,000 in revenue from operations in 2014.

Theranos and Holmes have agreed to resolve the charges against them. Importantly, in addition to a penalty, Holmes has agreed to give up majority voting control over the company, as well as to a reduction of her equity which, combined with shares she previously returned, materially reduces her equity stake.

“The Theranos story is an important lesson for Silicon Valley,” said Jina Choi, Director of the SEC’s San Francisco Regional Office. “Innovators who seek to revolutionize and disrupt an industry must tell investors the truth about what their technology can do today, not just what they hope it might do someday.”

The co-owner of a Los Angeles drug and alcohol treatment facility pleaded guilty to 46 felony counts related to a $175 million fraudulent health care billing scheme.

Deputy District Attorney Shaun Gipson of the Healthcare Fraud Division said that Los Angeles County Superior Court Judge Charlaine Olmedo immediately sentenced Kirsten Wallace (dob 4/3/73) to 11 years in state prison,.

Wallace entered an open plea to five counts of insurance fraud, seven counts of grand theft of personal property, six counts of identity theft and 28 counts of money laundering. The open plea means a sentence was not negotiated with the District Attorney’s Office. A restitution hearing is scheduled for April 17 in Department 105 of the Foltz Criminal Justice Center.

Wallace and Christopher Bathum (dob 9/22/61), who together owned Community Recovery of Los Angeles, were charged in the billing scheme in November 2016. The company operated treatment centers in Southern California and Colorado.

Gipson said the two defendants allegedly obtained multiple health care insurance policies for their clients by using their personal identifying information and falsified the clients’ circumstances to obtain the policies. The patients were unaware that policies had been issued in their name, the prosecutor said.

Bathum and Wallace also are accused of billing former clients after their treatment ended while those clients were still working at Community Recovery and no longer receiving treatment. Between June 2012 and December 2015, Bathum and Wallace allegedly fraudulently billed an estimated $175 million, Gipson said.

In most instances, bills were sent for services allegedly never provided. About $44 million was paid out by five insurance companies, the prosecutor said.

Bathum is charged with the same 46 counts as Wallace had faced. His next scheduled court appearance is a pretrial conference also April 17 in Department 105.

Bathum faces up to 45 years and four months in state prison if convicted as charged.

Last month in a separate case, Bathum was convicted of sexually assaulting seven women who were patients at his treatment center. A sentencing setting hearing in that case is scheduled April 17 in Department 105. The defendant faces a maximum possible sentence of about 65 years in state prison and lifetime sex offender registration.

Case BA451664 was investigated by the California Department of Insurance and the District Attorney’s Office’s Bureau of Investigation.

Opioids remain the most common type of prescription drug used to treat California injured workers with lost-time injuries, but sustained efforts to curb their use are paying off as new data show that in the past decade they fell from about a third of indemnity claim prescriptions to less than a quarter, while there was a concurrent increase in anti-inflammatories and anticonvulsants which are often used as opioid alternatives.

A new study by researchers at the California Workers’ Compensation Institute (CWCI), based on data from 12.5 million prescriptions dispensed to California injured workers from 2007 to June 2017, measures changes in the prescription and payment distributions among major therapeutic drug groups used in indemnity claims, then takes an in-depth look at the trends in the volume, cost, potency and types of opioids used.

The authors found that although opioids remained the top drug group prescribed to workers with lost-time injuries, over the span of the study their share of indemnity claim prescriptions declined from a record 32.1% in 2008 and 2009 to 23.2% in 2017, while their share of the prescription payments fell from 30.5% to 18.6%.

As in prior research, the new data show the decline in opioid use accelerated in 2012, which tracks with tighter scrutiny by utilization review and independent medical review programs; restrictions by payors, pharmacy benefit managers, and medical provider networks; and increased physician and public awareness of opioid risks.

The 2017 data show that while opioid use has dwindled, both anti-inflammatories and anticonvulsants now account for increased shares of indemnity claim prescriptions, while dermatological drugs had the biggest increase in payments, more than doubling from 6.9% of the 2008 drug spend to 16.1% of the 2017 payments, largely due to the growing prevalence of high-cost dermatological creams.

As for the opioids, the study found they have become less prevalent in the early stages lost-time claims, which bodes well for the future as historically the percentage of claims involving opioids shows little change beyond one year post injury. The study also shows that the total number of morphine equivalents (MMEs) dispensed per opioid user at different levels of claim development has declined sharply since accident year 2012, though looking at the development data on claims from each accident year show that when opioids have been used to treat chronic pain, the average strength per opioid prescription has continued to increase over time, often doubling between 3 months and 60 months post injury, underscoring the importance of weaning injured workers off of these drugs.

In addition to the prevalence, payment and potency trends, the study also examines brand vs. generic opioid drug trends, as well as changes in the prescription and payment distributions for the most common opioids, based on drug ingredient.

CWCI has published its study in a Research Update report, “California Workers’ Comp Prescription Drug Distributions & Opioid Trends.“

A former Ventura hospital worker was ordered to pay more than $26,000 in restitution and sentenced to 60 days in jail for workers’ compensation insurance fraud.

Michelle Cordero, 50, formerly of Ventura but now living in Nocona, Texas, pleaded guilty to one felony count of insurance fraud in January, according to court records. She was also sentenced to five years of supervised probation.

Prosecutors said Cordero filed a workers’ compensation claim in July 2015 for a right shoulder injury she said happened while moving a shelf while working at Community Memorial Hospital. In her report, Cordero also denied having prior shoulder injuries and went to only one doctor.

A subsequent investigation revealed that not only had she been seeing multiple doctors, but also that she had reported that she had just injured her right shoulder while moving boxes at her residence.

Cordero, a phlebotomist, filed a second claim alleging that she had contracted meningitis from a patient at Community Memorial Hospital. Under oath, she denied she had been in contact with anyone who had meningitis.

An investigation would later reveal that her live-in boyfriend had recently been sick with meningitis and that she intentionally concealed the information from the insurer.

As part of her sentence, Cordero must pay $26,089.76 in restitution to Sedgewick Claims Management Services Inc.,

This case was the result of an investigation by the California Department oflnsurance’s Valencia Fraud Division and the District Attorney’s Workers’ Compensation Insurance Fraud Unit.

Priority Business Services, a staffing agency, provides industrial staffing to hundreds of companies in a variety of industries, including distribution, light manufacturing, food service, maintenance, and clerical positions. Priority has approximately 3,500 employees placed in jobs on any given week, with a database of approximately 360,000 employees.

Rene Bolanos began work for Priority in mid-2013. He suffered an injury in January 2014 while working for one of Priority’s customers.  He was released to work with restrictions, which Priority initially accommodated by assigning him to the staffing office.

However, Bolanos asserted that in February 2014, he was diagnosed with a hernia. Priority refused to place him back in the staffing office, informed him that it could no longer accommodate him with his restrictions, and removed him from work. Bolanos further alleged that he was released to work with no restrictions, in November 2014, but Priority never gave him another job. Moreover, Priority told him in December 2014 that he would have to reapply to be returned to work. Bolanos did so in February 2015, but Priority then told him he “did not qualify to go back to work.”

Bolanos sued and asserted the following causes of action: (1) disability discrimination in violation of FEHA; (2) retaliation in violation of FEHA; (3) retaliation in violation of the California Family Rights Act (CFRA) (§ 12945.2 et seq.); (4) failure to prevent discrimination and retaliation in violation of FEHA; (5) failure to provide reasonable accommodation in violation of FEHA; (6) failure to engage in a good faith interactive process in violation of FEHA; (7) declaratory judgment; and (8) wrongful termination in violation of public policy. He sought economic damages, damages for emotional distress, and punitive damages, in total estimated to exceed $1,000,000. Bolanos separately filed a statement of damages seeking $5,000,000 in punitive damages.

The jury found in favor of Bolanos on his fifth cause of action for failure to provide reasonable accommodation and his sixth cause of action for failure to engage in an interactive process. The jury awarded Bolanos damages totaling $39,966.84, split evenly between past economic and non-economic loss. The jury found Bolanos was not entitled to punitive damages.The court granted Priority’s request to offset the judgment by $8,500, the amount paid to Bolanos in worker’s compensation benefits. The court found that Bolanos was the prevailing party and awarded attorney fees in the amount of $231,470.50.

Priority appealed, but the Court of Appeal affirmed in the unpublished case of Bolanos v. Priority Business Services.

Under FEHA it is an unlawful employment practice for an employer ‘to fail to make reasonable accommodation for the known physical or mental disability of an applicant or employee. It is the employee’s burden to initiate the process, no magic words are necessary, and the obligation arises once the employer becomes aware of the need to consider an accommodation. Once the interactive process is initiated, the employer’s obligation to engage in the process in good faith is continuous, and extends beyond the first attempt at accommodation and continues when the employee asks for a different accommodation or where the employer is aware that the initial accommodation is failing and further accommodation is needed.