Damages MS Coast businessman Ted Cain owes for Medicare fraud slashed by appeals court
The government’s “inexcusable” delay in taking over a civil case against Ted Cain reduces by more than half the $32.6 million he must pay for Medicare fraud, the 5th U.S. Circuit Court of Appeals has ruled.
Cain and others responsible for varying amounts of the total — including wife Julie Cain and the former Stone County Hospital in Wiggins — appealed a jury’s Medicare fraud verdict against them after a nine-week trial in early 2020.
The trial followed a legal claim for Medicare fraud first filed in 2007 by a whistleblower who worked at the hospital.
The government decided to take over the case under the whistleblower law, called the False Claims Act, but waited too long, a three-judge panel of the 5th Circuit ruled. As a result, the government can’t collect on the earliest fraudulent Medicare billings, from 2004 to September 2009.
The original damages from 2004-2015 amounted to $10,855,382 that the Cains collected but were not entitled to. Those damages are tripled under the whistleblower law, meaning Ted Cain was responsible for paying the government a total of $32.6 million. A percentage of the money goes to the whistleblower who discovers and reports the fraud.
The shorter time frame under which the government can now collect damages reduces the fraud to $4,590,495, for about $14 million in total damages when tripled.
The decision was a win for the Cains and hospital, who pointed out the government waited eight years, until 2015, to intervene. But the appellate judges agreed that the fraud verdict itself should stand.
“We agree that the Government’s incessant delay in intervening is inexcusable . . . , “ the judges’ recent opinion said.
Cains have second case pending
Whistleblower law requires that the cases be filed under seal for at least 60 days to give the U.S. Justice Department time to decide whether to intervene. In this case, the U.S. Attorney’s Office for the Southern District of Mississippi, working with Justice Department lawyers in Washington, asked 18 times that the seal remain while the government decided whether to take the case.
The appellate opinion described the government’s behavior as “dawdling.”
In 2010, the government asked that the seal be partially lifted, letting the Cains know they were under investigation. At first, the Cains cooperated, turning over thousands of pages of records and making employees available for interviews. Their cooperation ended in October 2011, the appeals court decision notes.
When the government’s complaint was finally filed in 2015, it added elements the whistleblower, James Aldridge, had not included in his original lawsuit, including the exorbitant salaries the Cains paid themselves to helm the hospital, even though testimony showed that Ted Cain did little work for the money.
“The Government showed that Ted received compensation ten to sixteen times the national average for critical access hospital executives,” the appellate decision said. “ . . . Similarly, the Government presented evidence that Julie’s salary, as the prior hospital administrator, was at times double that of the incumbent administrator.”
Based on this evidence, the judges concluded, the Cains had falsely filed claims for reimbursement with Medicare.
The case has not ended because the government more recently accused the Cains of attempting to hide their assets to avoid paying the damages. A trial is set for the court term beginning Sept. 4, 2024 before U.S. District Judge Henry T. Wingate, who also presided over the civil fraud case.
