Aerospace and Defense Contractor Resolves False Claims Act Allegations for $1.5 Million

Aerospace and Defense Contractor Resolves False Claims Act Allegations for $1.5 Million

On January 5, the US Department of Justice (DOJ) announced that Teledyne RISI Inc., also known as Teledyne Electronic Safety Products, agreed to pay $1.5 million to resolve allegations that it violated the False Claims Act (FCA).

The settlement resolves allegations that Teledyne knowingly submitted false claims to the US Navy by supplying aircraft ejection seat components to the military that did not conform with Navy-approved specifications. The non-conforming components were allegedly obtained from a third-party broker, and affected units were delivered between November 2011 and June 2012 and installed in various military aircraft.

In reaching the settlement, the government credited Teledyne for its cooperation under § 4-4.112 of the Justice Manual, including that the company:

• Identified individuals involved and facilitated witness interviews.

• Preserved, collected, and disclosed relevant documents and information.

• Disclosed facts from its independent investigation.

• Agreed to toll applicable statutes of limitation during the investigation.

• Provided updates on its own internal investigation.

The DOJ’s press release can be found here.

Health Care Software Company CEO Sentenced to 15 Years for $1 Billion Fraud Conspiracy

On December 19, Gary Cox, former CEO of Power Mobility Doctor Rx, LLC (DMERx), was sentenced to 15 years in prison and ordered to pay over $452 million in restitution for orchestrating a billion-dollar scheme to defraud Medicare and other federal health care programs.

According to the government, Cox and his co-conspirators used misleading advertising and offshore call centers to obtain Medicare beneficiary information and arrange medically unnecessary orthotic braces, pain creams, and other items. Through DMERx, an internet-based platform, Cox and his co-conspirators allegedly generated fraudulent doctors’ orders that falsely indicated that a doctor had examined and treated the Medicare beneficiaries. In reality, according to the government, telemedicine companies paid doctors to sign the orders without proper examinations or medical necessity, often after only brief calls or no contact with the beneficiary at all.

The government alleged that Cox facilitated illegal kickbacks between telemedicine companies, DME suppliers, pharmacies, and marketers, and concealed the scheme with sham contracts and by removing language that might trigger Medicare audits. The scheme allegedly resulted in more than $1 billion in claims and over $360 million paid by Medicare and other insurers.

Cox was convicted of conspiracy to commit health care fraud and wire fraud, three counts of health care fraud, conspiracy to pay and receive kickbacks, and conspiracy to defraud the United States and make false statements.

The DOJ’s press release can be found here.

Six Individuals Charged in Alleged $41 Million Insider Trading Scheme

On December 19, federal prosecutors charged six individuals — Muhammad Saad Shoukat, Muhammad Arham Shoukat, Muhammad Shahwaiz Shoukat, Daniyal Khan, Izunna Okonkwo, and Gyunho Justin Kim — for their alleged roles in a multi‑year securities fraud operation involving insider trading and market manipulation across the health care and biopharmaceutical sectors.

A criminal complaint, naming Saad, Arham, Shahwaiz, Khan, and Okonkwo, was unsealed, and Kim was charged by separate complaint. The charged conduct arises from three overlapping alleged schemes.

1. The insider trading scheme.

2. The Olema manipulation scheme.

3. The Opiant manipulation scheme.

All of which occurred at various points between June 2020 and February 2024.

The Insider Trading Scheme

According to the government, Kim worked at an investment bank involved in mergers and acquisitions of public health care and biopharmaceutical companies. While there, Kim allegedly obtained material non‑public information (MNPI) about at least nine pending transactions and unlawfully tipped Saad Shoukat. Saad Shoukat traded on the MNPI directly and through others, and he tipped Arham Shoukat, Shahwaiz Shoukat, Khan, and Okonkwo, who also traded and profited. In total, the group is alleged to have received $41 million in illicit profits from the alleged scheme.

The Olema Manipulation Scheme

Saad Shoukat, Arham Shoukat, and others, allegedly manipulated the stock of Olema Pharmaceuticals, which was developing the breast cancer drug treatment called OP‑1250. Beginning in the spring of 2021, they allegedly bought Olema shares and encouraged others to do the same, and, after buying substantial stock, allegedly accessed confidential efficacy data showing OP‑1250 performed worse than Saad Shoukat and Arham Shoukat had hoped. They allegedly falsified that data and publicly disseminated it to appear as if it came from Olema, inflating the drug’s apparent efficacy. This temporarily increased Olema’s stock price and enabled them to profit and avoid losses by selling into the price rise.

The Opiant Manipulation Scheme

In this third scheme involving Opiant Pharmaceuticals, which was developing an opioid overdose treatment, the Shoukat brothers and others allegedly purchased Opiant stock based on MNPI from Kim that Opiant was the target of a potential acquisition. In response to news that the potential acquisition had stalled, the Shoukat brothers and others allegedly used a fake Opiant website and email addresses to publish a sham press release announcing a nonexistent merger. The press release increased Opiant’s stock approximately 29%, after which the Shoukat brothers and others allegedly sold shares for profit and caused losses to victim investors.

The defendants face a range of charges, including conspiracies to commit securities fraud, insider trading, wire fraud, and market manipulation.

The DOJ’s press release can be found here.

The criminal complaint is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.