August 28, 2008

Rotech pays $2M to settle fraud charges

HOUSTON, Aug. 26 /PRNewswire-USNewswire/ — Rotech Healthcare, Inc. (OTC BB: ROHI.OB) has paid $2 million to settle civil charges that it engaged in false or fraudulent conduct in billing Medicare for durable medical equipment, according to Berg & Androphy, which represented a former executive who filed whistleblower claims against the company.

The settlement resolves claims filed in April 2004 by former Rotech executive Sheila Bell-Messier, of Texarkana, Texas, who alleged that the company suppressed disclosure of billing issues in Texas, Colorado, and Louisiana in order to avoid additional penalties related to a previous civil settlement. In 2002, while in bankruptcy, Rotech settled federal civil claims related to billing issues related to its Montana, Kentucky, Florida, and Georgia operations.

According to allegations in Ms. Bell-Messier’s unsealed qui tam action in the U.S. District Court for the Eastern District of Texas, when Ms. Bell-Messier noticed that billing records were not in compliance with her understanding of federal directives, she “shut down the billing.” Despite requests to restart the billing, Ms. Bell-Messier refused, and according to the federal complaint, said she “was not going to Medicare prison for Rotech.” Ms. Bell-Messier, whose company had been purchased by Rotech in 1995, stayed on with the company and had overseen operations in 12 states.

The legal team for Ms. Bell-Messier included Joel Androphy and Sarah Frazier of the Houston office of the law firm of Berg & Androphy (lead attorneys); Darren Anderson of the Anderson Law Firm in Texarkana, Texas; and John Higgins and Matt Vaughn of Porter & Hedges in Houston.

Of the total settlement, $2 million will go to the federal government, with Ms. Bell-Messier receiving 27 percent or $540,000. Rotech also has agreed to pay legal fees of $1.2 million to Ms. Bell-Messier’s legal team. The federal government did not intervene in the case. In settling Ms. Bell-Messier’s claims, Rotech denied any wrongdoing.

The negotiated settlement amount was a reflection of Rotech’s stock price of 34 cents per share at the time of settlement, down from $21 in early 2004 when Ms. Bell-Messier filed suit, according to Mr. Androphy.

The case is “United States of America ex rel. Sheila Bell-Messier, v. Rotech Healthcare, Inc., et al.,” in the U.S. District Court for the Eastern District of Texas, Texarkana Division (Civil Action No. 5:04CV0075).

Attorney Contacts: Joel Androphy and Sarah Frazier, Berg & Androphy, 713-529-5622, www.bafirm.com.

Media Contact: Erin Powers, Powers MediaWorks LLC, for Berg & Androphy, 281-703-6000 or 281-362-1411.