Former Rotech employee alleges VA scam

Sunday, May 4, 2003

May 5, 2003

ORLANDO, Fla. - A former Rotech employee is suing Rotech Healthcare for at least $180,000, alleging corporate officials used company money and employees to set up independent HMEs to bid on VA contracts intended for small businesses.

That’s the latest news to reveal itself in the wake of last weeks FBI raid on numerous Rotech locations.

Former Rotech Regional Manager Mike Rogers filed his suit in the United States District Court Eastern District of Texas Texarkana Division last October but it is just now getting underway, said Kurt Truelove, Rogers’ attorney.

Rogers alleges he lost $180,000 setting up a small HME business in July 2001 for Rotech, which company officials assured him “was legal and approved by Rotech,” according to court documents.

Rotech officials did not return calls for this story.

In his lawsuit, Rogers alleges the following: Officers and other high level employees would use money and capital provided by Rotech, and from small businesses that were owned by and operated by Rotech personnel. Rotech called these small businesses “set asides.” With numerous set asides that were owned and operated by Rotech officers and employees, Rotech was able to submit bids for government contracts and show which small business would do the required subcontracting. The small business used were the set asides.

Rogers had to leave his job to set up RO2AM Respiratory Services, LLC, but Rotech officials promised to give him is old job back if RO2AM’s bid to garner VA business failed, the documents state.

In the end, Rotech never landed the VA contract, and then abandoned Rogers and left him holding $180,000 in debt related to the failed RO2AM, according to court documents.

Rogers is suing Rotech for fraud, claiming Rotech officials lied when they told him the VA contract was a near certainty and that he’d get his job back if the venture failed, said Rogers’ attorney, Kurt Truelove.

Rogers suit aside, the FBI’s raid on Rotech spells very bad news for the national, say industry sources.

In a worse-case scenario - a sort of two-strikes-you’re-out - Rotech could be excluded from the Medicare program if the FBI’s most recent investigation turns up damaging evidence the provider did something wrong, said one healthcare attorney.

Additionally, there’s probably no shortage of disgruntled employees and ex-employees willing to cooperate with investigators. That’s because CEO Phil Carter initiated his turnaround plan by laying off an estimated 500 to 750 employees in January.

Rotech had to pay the federal government $17 million a year ago for allegedly improperly billing Medicare.