Medical Publisher Pays $3.7M to Settle Postal Fraud Charge

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Medical World Communications, a Jamesburg, NJ, medical magazine publisher, agreed July 2 to a $3.7 million settlement against charges that it saved about $2 million in mailing costs for its periodicals due to falsified information.


The settlement ends a civil complaint unsealed last December by U.S. District Judge Garrett E. Brown Jr. against Medical World; company chairman and president/CEO John J. Hennessy; Media/Communications Partners of Boston, a 70 percent owner of Medical World; and other defendants.


The complaint alleged violations of the False Claims Act, which permits recovery of triple the amount of the damages to the government plus penalties, according to Assistant U.S. Attorney Michael A. Chagares, chief of the U.S. Attorney's Office Civil Division.


The lawsuit was filed under the whistle-blower provisions of the False Claims Act by Peter F. Sprague, a former chief operating officer of Medical World. These provisions permit private citizens to bring suit on behalf of the United States and share in any recovery obtained by the government.


Sprague began working at Medical World in November 1996 and claimed he was improperly fired in March 1999 after refusing to participate in the fraud, according to reports.


The complaint alleged that the defendants knowingly misstated the rate of requesters on numerous publications from about 1994 until 2000 to get a lower postage rate. The complaint further alleges that the scheme continued despite Sprague's attempts to get superiors to stop the fraud.


Under the False Claims Act, Sprague could be entitled to as much as 25 percent of the settlement.


The settlement also requires Medical World to comply with a Corporate Integrity Agreement. Provisions include creation of a compliance committee and code of conduct, adoption of procedures to ensure compliance, preparation of audits to be shared with the government and prompt notification of the government of any statutory or regulatory violations.


Medical World denied any wrongdoing.


Inspectors with the U.S. Postal Inspection Service investigated the case.


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