Wednesday, June 5, 2013

Cuccinelli blames IRS incompetence/politics for not turning over forfeiture money

AG Ken Cuccinelli attacks IRS for holding forfeiture money.

AG Ken Cuccinelli attacks IRS for holding forfeiture money.

UPDATE 6:05 p.m.: This afternoon, the U.S. Treasury Department alerted Attorney General Ken Cuccinelli that it would release $115 million due to Virginia for his office’s role as the lead investigator in a 2012 Abbott Laboratories Medicaid fraud settlement.

The attorney general’s office received a letter from Treasury’s Executive Office for Asset Forfeiture (TEOAF) that a decision had been made on the disbursement.  Subsequent phone calls with TEOAF confirmed the $115 million figure.

“I am grateful to Treasury’s Executive Office for Asset Forfeiture for agreeing to work with us to get this money to Virginia law enforcement,” said Cuccinelli.  “We have been planning for more than a year to use this money for equipment and training to benefit law enforcement and communities throughout Virginia.

“This money is coming to Virginia because of the hard work and dedicated service of the staff of the Virginia Medicaid Fraud Control Unit.  I want to thank them for their distinguished service to the people of the commonwealth,” he said.


11:40 a.m.: In a press conference in Richmond this morning Attorney General Ken Cuccinelli raked the IRS over the coals for not being forthcoming with $125 million of Virginia’s share of a $198.5 million asset  forfeiture that was part of the $1.5 billion plea agreement reached with Abbott Laboratories in May 2012 (see the May 2012 news release). 

Abbott had illegally marketed the prescription drug Depakote for non-approved uses.  Abbott paid the full amount of the forfeiture to the U.S. Treasury Department in October 2012, yet Treasury has refused to release the money owed to  – Federal officials have refused to release approximately $125 million that is owed to Virginia from a 2012 Medicaid fraud case Attorney General Ken Cuccinelli’s office investigated. 

There is a dispute over the amount. Rather than $125 million the federal government offered $30 million less at $95 million. In the past “these number have never been disputed,” said Cuccinelli.

“Now the hold-up is the IRS, which, according to the Treasury Department, refuses to complete its paperwork so the money can be properly distributed.   The exact amount of the forfeiture was known since September 2011 and finalized in a May 2012 plea agreement.  It doesn’t take a year to complete the paperwork. It is ONLY ONE PAGE FRONT AND BACK CLICK HERE TO SEE THE FORM.

“For months, we thought this was just incompetence by the IRS, but with its refusal to properly fill out fairly simple paperwork for an entire year, we are left to wonder if this involves more deliberate motives.  Virginians need to know that for eight months the administration has been withholding money that is supposed to be used to protect first responders’ lives.  To date, Virginia has not received $125 million, or $95 million, or even $1 of these funds.”

“All we’re asking [Treasury] to do is to follow your own guidelines,” said Cuccinelli. “They refuse to follow their own rules – they wrote the rules and they are not following them.”

We been pressing through the process for many months he said. “[The IRS] has called their own motive into question. The IRS’s failure to perform here is in a league of its own. We follow their rules it would be nice if they followed their rules,” said Cuccinelli.

“Certainly last week when you had the Jewish nonprofits that were operating on the other side of the green line/settlement line which was contrary to the administrations preferred policy over there. They were getting extra attention from the IRS. They were on the other side of the policy issue. That goes beyond just the tea party singling out. Needless to say I’ve been on the other side of some issues from this administration and if that is going to cause them to direct IRS attention in ones direction than we’d be in the same category as those Jewish nonprofits.”

“The level of incompetence or malevolence … here is so astoundingly high that it does become hard to believe that even a federal agency like the IRS is capable of that level of incompetence,” said Cuccinelli.

Virginia Democrats responded saying, “There’s no question Virginians should get every dollar that’s coming to them from any delinquent payer. However it is surprising that Cuccinelli hasn’t been more successful in getting taxpayers’ money out of the IRS, considering all the free time his refusal to pursue a case over Star Scientific’s $1.7 million tax bill must have left him.”

The Virginia case led to the second largest Medicaid fraud settlement in U.S. history at the time.  Federal officials have said that the IRS has refused to properly fill out post-case paperwork for almost a year, which is holding up the disbursement intended for Virginia law enforcement.

Cuccinelli’s office earned the money by being lead investigator in the fraud case. Although the money was the office’s to keep, Cuccinelli has been making plans for more than a year to use the majority of the proceeds for grants to local police and sheriffs’ departments to buy needed equipment such as bulletproof vests, tactical vehicles, and police cars.  He has also requested that $20 million be set aside to create a perpetual fund for continuing training for Virginia’s local prosecutors.

“During the eight months the Treasury Department has been withholding the money, they have been depriving Virginia law enforcement of tools to make their jobs safer,” said Cuccinelli.  “The interest alone on Virginia’s share of the money in those eight months would have totaled more than a half million dollars.  That interest could have purchased more than 1000 bulletproof vests for police officers and sheriffs’ deputies.” 

The attorney general’s office submitted an accounting of more than 38,000 man-hours it worked on the Abbott case – the most of any agency involved, and a number the federal government has not disputed.  Despite repeated requests, the federal authorities have not revealed precisely how many hours federal agencies spent on the investigation.  However, based on what is known about the time other agencies spent on the case, it is estimated that Virginia’s Medicaid Fraud Control Unit performed at least 80 percent of the investigative work (resulting in the estimated $125 million calculation).

Cuccinelli detailed the back-and-forth between his office and the federal government.  “In August 2012, I was informed by the U.S. Attorney’s Office for the Western District of Virginia of a plan to allocate $95 million of the $198.5 asset forfeiture to Virginia.  They said it was the most any state had ever earned in a case and that Virginia should be satisfied with such a large amount of money.  However, our analysis of the Treasury guidelines indicated Virginia should receive approximately $125 million, $30 million more than the federal proposal.  The smaller Virginia share meant the federal government had not followed its own rules regarding the division of dollars and instead decided to change the rules in its own favor when it was time to distribute the money,” said Cuccinelli.

“Later, Treasury officials told us they wouldn’t even turn over the $95 million because of the sequester.  This is despite the fact that it’s not federal money, but money that a private defendant paid to settle a case – money which was to be turned over shortly thereafter to our office and the other agencies involved in the investigation.

“While the federal government has kept nearly $575 million in fines and asset forfeiture from the case for itself, it makes excuses and refuses to turn over the $125 million Virginia Is due.The only reason the federal government has this money is because of a multi-year, 26-state investigation initiated and led by Virginia’s Medicaid Fraud Control Unit.

“My office has had a positive, long-standing working relationship with our federal partners to fight gang crimes, human trafficking, and financial crimes.  We want to continue that positive relationship, which is why we have been extremely patient in this matter.  However, our responsibility to the safety of the people of Virginia requires that we be patient no longer,” said Cuccinelli.

Cuccinelli is making this matter public to put pressure on the federal government to turn over the money immediately. 

Proposed uses for the money

In anticipation of receiving this money, more than a year ago Cuccinelli’s deputies began to quietly talk with some local law enforcement officials to assess their needs.  From those discussions, the attorney general developed several proposals, including (this is a partial list):

  • making crisis intervention training available to police departments, sheriffs’ departments, correctional workers, fire/EMS workers, and other first responders, so they have the tools to respond to situations involving individuals struggling with mental illness;
  • grants for local law enforcement agencies across Virginia to purchase a wide variety of needed equipment such as bullet proof vests, vehicles, firearms, bicycles, winter weather gear, nonlethal engagement devices, radio systems, and computer equipment;
  • funding specifically for fighting elder abuse and neglect, gang and gun crime reduction programs, providing healthy alternatives to gangs for kids, programs to prevent domestic violence and sexual assault, and creating a human trafficking task force;
  • ongoing training for law enforcement to help them investigate and interdict human trafficking and gang offenses;
  • funding for investigation of  DNA evidence in court case files and police investigative files to identify perpetrators in unsolved cases or to exonerate those who may have been wrongfully convicted;
  • continuing education and training required of Virginia’s local prosecutors; and
  • specialized equipment for the Office of the Attorney General’s computer crimes section so it can more effectively investigate and prosecute Internet predators and crimes involving the creation and distribution of child pornography.


Virginia’s Medicaid Fraud Control Unit (MFCU), part of the Virginia Office of the Attorney General, initiated and led an investigation of Abbott Laboratories regarding off-label use of the prescription drug Depakote.

Although neither the whistleblowers nor the defendant in this case were located in Virginia, the whistleblowers came to Virginia because the MFCU has a national reputation for successfully investigating major national cases, such as the Purdue Parma Oxycontin case, the Octagon case, and others.

Following Virginia MFCU’s initial investigation, the unit contacted the U.S. Attorney’s Office for the Western District of Virginia because of their history of working together on such cases.  They then began a joint investigation.

MFCU investigators were assigned to the investigation full-time and spent more than four years and 38,523 man-hours on the investigation, traveling to 26 states to conduct interviews and sifting through more than one million records looking for evidence.

The investigation uncovered that Abbott illegally marketed Depakote for non-approved uses, including as an alternative to antipsychotics to treat dementia patients in nursing homes, and for schizophrenia.  The investigation also revealed that Abbott paid rebates to health care professionals and long-term care pharmacies for increasing their off-label use of Depakote.

In September 2011, Abbott agreed to the settlement that was ultimately submitted to the court in May 2012.  The IRS and the federal government have known for nearly two years the amount of asset forfeiture they would be dividing up when the final court order was entered in October 2012.

Posted By Valerie Garner

Categories: Election 2013, Elections, Politics, State Politics

Tags: , , , ,


No Comments

Comments are not moderated. Notify any abuse at put ABUSE in the subject and the offensive post.

Leave a Reply