DOJ Clamps Down on Fraud: Evolutions Flooring & Seoul Medical Group Face Settlements

Key Takeaways:

• Evolutions Flooring Settlement: The company will pay $8.1 million to resolve allegations of evading customs duties on imported wood flooring from China.
• Seoul Medical Group Settlement: The group will pay $62 million for submitting false diagnoses to increase Medicare Advantage payments.
• Whistleblower Role: Both cases were initiated through whistleblower lawsuits, highlighting the importance of those who expose fraud.

Deep Dive

This week, the Department of Justice (DOJ) announced two settlements involving False Claims Act (FCA) violations. Evolutions Flooring, a California-based importer, and Seoul Medical Group, a healthcare provider, will pay a combined total of over $70 million to resolve allegations of fraudulent activity. These settlements highlight the DOJ's ongoing efforts to enforce compliance and hold companies accountable for misrepresentations made to the U.S. government.

For starters, Evolutions Flooring, based in South San Francisco, will pay $8.1 million to resolve allegations that it evaded customs duties on imports of multilayered wood flooring from China. The DOJ claims that the company, under the direction of owners Mengya Lin and Jin Qian, submitted false information to U.S. Customs and Border Protection (CBP) regarding the origin and manufacturers of the flooring between September 2019 and July 2022.

Customs duties—such as antidumping, countervailing, and Section 301 duties—are meant to ensure fair trade and protect U.S. manufacturers from foreign competition that doesn’t play by the same rules. Evolutions allegedly violated these duties by providing inaccurate information to CBP.

Acting Assistant Attorney General Yaakov M. Roth emphasized the importance of these duties, stating, “The department will pursue those who seek an unfair advantage in U.S. markets, including by evading the duties owed on goods imported into this country from China.”

The case also highlights the role of whistleblowers. Urban Global LLC, the company that filed the lawsuit under the False Claims Act, will receive a portion of the settlement, approximately $1.2 million. Whistleblowers play a critical role in identifying fraud and ensuring accountability.

Seoul Medical Group to Pay $62 Million Over False Medicare Claims

In another case, Seoul Medical Group, a healthcare provider based in California, has agreed to pay $62 million to settle allegations of submitting false diagnoses in order to increase payments under the Medicare Advantage program. From 2015 to 2021, the company, led by Dr. Min Young Cha, allegedly submitted false diagnoses for two spinal conditions—spinal enthesopathy and sacroiliitis—for patients who did not actually have these conditions.

The goal of these false diagnoses was to increase the "risk scores" of Medicare beneficiaries, which would, in turn, result in higher payments from the Centers for Medicare and Medicaid Services (CMS). Seoul Medical Group is accused of working with Renaissance Imaging Medical Associates to create radiology reports that appeared to justify these inaccurate diagnoses.

Acting Assistant Attorney General Roth commented on the case, noting, “Medicare Advantage is a vital program for our seniors, and the government expects healthcare providers who participate in the program to provide truthful and accurate information.”

The settlement includes payments from Seoul Medical Group, its subsidiary Advanced Medical Management Inc., and Dr. Cha personally. Renaissance Imaging Medical Associates will also pay $2.35 million for its role in the scheme.

This case was also brought to light through the False Claims Act’s whistleblower provisions. Paul Pew, the former Vice President and CFO of Advanced Medical Management, filed the lawsuit. The qui tam provisions allow whistleblowers to receive a portion of the recovery, though Pew's share has not yet been determined.

A Clear Message on Accountability

These settlements send a clear message about the DOJ’s commitment to holding companies accountable for fraudulent actions, whether in international trade or healthcare. With millions of dollars at stake and whistleblowers playing an important role, the DOJ continues to prioritize the integrity of U.S. commerce and government programs.

Both cases also emphasize the importance of transparency and honesty. Whether dealing with customs duties or healthcare billing, accurate information is essential, and businesses are expected to play by the rules. Misleading the government for financial gain can lead to significant penalties, as seen in these cases.

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