Faces Possible $6 Million in Back Postage and Treble Damages, Plus Punitive Damages Related to Fraud
TRENTON, N.J. - On Dec. 5, 2002, the U.S. government filed a lawsuit against Chiropractic Products publisher Medical World Communications in U.S. District Court in New Jersey. The lawsuit accuses Medical World of fraud, filing false claims, conspiracy, breach of contract and unjust enrichment.
The civil complaint alleges that Chiropractic Products' publisher defrauded the United States by failing to pay more than $2 million in postage for mailing its magazines, U.S. Attorney Christopher J. Christie announced.
The complaint alleges violations of the False Claims Act, and seeks triple the amount of the company's more than $2 million in fraud proceeds. The government also seeks 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. Mr. Chagares is handling the case.
The next step in the proceeding will be civil discovery, followed by an eventual jury trial, unless the case is settled with the government.
The lawsuit was originally filed under seal under the "whistle-blower" provisions of the False Claims Act by Peter F. Sprague, a former chief operating officer of Medical World. Whistle-blower provisions permit private citizens to bring suit on behalf of the United States and share in any recovery obtained by the government.
The complaint states that if more than 50 percent of individuals who receive a mailed periodical requested the periodical, the periodical qualifies for a reduced postage rate.
The complaint alleges that the defendants knowingly misstated the rate of requesters on numerous publications, including Chiropractic Products, from approximately 1994 to 2000, inflating the numbers reported above 50 percent to avoid paying higher postage rates.
The complaint further alleges that the fraud scheme continued despite Sprague's attempts to enlist his superiors to stop the deception.
In addition to Chiropractic Products, the alleged postage fraud scheme affected numerous other periodicals, including Physical Therapy Products; Plastic Surgery Products; Cardiology Review; Resident and Staff Physician; Family Practice Re-certification; Surgical Rounds; Podiatric Products; Orthodontic Products; Compendium of Continuing Education in Dentistry; and Clinical Lab Products.
