Telehealth Holdings: Device Research and a Trip to the Races

The Telehealth Holdings NIH grant complaint alleged that the medical-device company and its owner obtained research funding through false applications, spent grant money on personal and disallowed business expenses, and hid the spending in false accounting records. The National Institutes of Health funded the device work: a sleep apnea monitoring system and electronic pillboxes. The alleged expenses included restaurant meals, personal credit-card interest, and a trip to Keeneland Racecourse. Taxpayers paid for device research, while the government alleged that the company charged them for personal spending. For someone who worked on the applications or kept the books, the case turns on the distance between the funded research and the reported expenses.

The Justice Department announced the civil complaint on July 29, 2016 against the Lexington, Kentucky company and its owner. The government brought the case under the False Claims Act.

What the NIH Grant Complaint Alleged

The government said Telehealth Holdings received three federal grants worth more than $600,000 for device development. The electronic pillboxes were to be customized for particular patient populations, including cancer patients.

The alleged falsehoods began with the applications. The government said Telehealth and its owner misrepresented the company’s personnel, facilities, and accounting systems.

The allegations then followed the funds. Grant reports said the money had been spent for the grants’ purposes and in compliance with the rules. The government alleged that personal expenses had gone through those accounts instead. It also alleged that Telehealth charged the grants for marketing and promoting its products, business expenses that the grant rules did not allow.

The complaint also alleged that Telehealth and its owner spent over $100,000 of grant funds on foreign goods and services despite grant rules requiring American goods and workers.

The Alleged Cover Story in the Ledgers

The government alleged that Telehealth falsified accounting entries and created false invoices to hide the misspending. That allegation gives the books an active role in the scheme: they allegedly supplied a false explanation for where the grant money went.

The Journal of Forensic and Investigative Accounting makes the case for inside knowledge in its 2020 paper on healthcare fraud:

In a grant case like this one, an invoice can look like support for project spending while concealing what the purchase was actually for. The person who knows the expense can explain the gap between the paperwork and the work.

For an accounting employee, the knowledge that matters is what an invoice actually covered. For someone on the development team, it is which personnel or facilities the application described and which were available for the project. Our whistleblower experts connect those accounts with the grant representations and the money they supported.

What the Criminal Guilty Pleas Showed

In their guilty pleas, Telehealth’s owner and the person who certified its grant spending admitted to false claims connected with National Institutes of Health grants, according to the Justice Department’s February 10, 2016 announcement.

The criminal case concerned a certification that Telehealth had incurred $222,037 in expenses relating to two device-development grants. The person certifying those expenses falsely stated that the funds had been spent according to the grant rules. The admission puts a person behind the spending report: someone speaking for the company certified how public money had been used.

Electronic Pillboxes and Another Grant Case

The person who certified Telehealth’s grant expenses also owned LifeTechniques and Care Team Solutions, whose own grant case is covered on the LifeTechniques page.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

You Know What the Grant Actually Paid For

If you know why the grant application, the project work, and the accounts tell different stories, speak to one of our Whistleblower Experts about the spending you saw. We build your strongest grant-fraud whistleblower case around that inside knowledge, bring in medical-device grant-fraud whistleblower lawyers, and stay beside you throughout the case.