On December 12, 2002, a federal court judge unsealed a civil complaint against Medical World Communications of Jamesburg, New Jersey; company chairman, president and chief executive officer John J. Hennessy; and Media/Communications Partners of Boston, 70% owner of Medical World and other defendants . The lawsuit was originally filed under seal under the whistle blower provisions of the False Claims Act by Peter F. Sprague, who was Medical World’s chief operating officer from 1996 to 1999. These whistleblower provisions permit private citizens to bring suit on behalf of the United States and share in any recovery obtained by the government .
The complaint alleged violations of the federal False Claims Act and seeks triple the amount of the company’s more than $2 million in fraud proceeds. The government also sought penalties of between $5,000 and $10,000 for each one of “hundreds of false records and/or statements [used] to conceal, avoid or decrease their obligation to pay money to the Postal Service,” according to Assistant U.S. Attorney Michael A. Chagares, chief of the U.S. Attorney’s Office Civil Division in Newark.
Postal regulations state that if fewer than half of persons receiving a mailed periodical requested the periodical, the periodical does not qualifies for a reduced postage rate . The complaint alleged that the defendants knowingly misstated the rate of requesters on numerous publications from about 1994 until 2000, inflating the numbers reported to over 50%, to avoid paying higher postage rates. The complaint stated that, among other things, Sprague observed an employee forging signatures on request cards and that misrepresentations continued despite Sprague’s repeated efforts to enlist his superiors to stop them .
The periodicals involved in the alleged scheme included Chiropractic Products, Physical Therapy Products, Plastic Surgery Products, Podiatric Products, Orthodontic Products, Compendium of Continuing Education in Dentistry, Cardiology Review, Resident and Staff Physician, Family Practice Recertification, Surgical Rounds, and Clinical Lab Products.
In 2003, the case was settled with an agreement under which the defendants admitted no liability but agreed to pay $3.7 million .
- Jamesburg trade magazine publisher sued by government for defrauding Postal Service. USDOJ news release, Dec 12, 2002.
- Slade SR. Health care fraud: How far does the False Claims Act reach? Quackwatch, Aug 22, 2000.
- Amended complaint. United States of America ex. rel., Peter Sprague v. Medical World Communications et al. Civil Action No. 99-5571, Dec 5, 2002.
- Jamesburg trade magazine publisher pays $3.7 million to settle allegations of defrauding Postal Service. USDPJ news release, July 2, 2003.
This article was revised on March 27, 2009.