Lawyers: Drug trust is target of fraud
They contend that thousands of bogus claims have been filed. The $3.75 billion fund benefits hurt diet-drug users.
Philadelphia Inquirer

January 25, 2004A $3.75 billion trust formed in 1999 to benefit injured diet-drug users has been targeted in a massive fraud, according to its lawyers.
In an unusual legal battle unfolding in U.S. District Court in Philadelphia, the trust contends that thousands of bogus heart-damage claims have been filed by lawyers working hand-in-hand with cardiologists around the country.
About 8,300 claims of severe heart damage were expected from dieters who used the weight-loss drugs Pondimin (an ingredient in a drug cocktail called fen-phen) and Redux in the 1990s.

But more than eight times that number - 71,000 claims - have been filed with the Philadelphia-based AHP Settlement Trust created by American Home Products, now Wyeth, the drug manufacturer, to pay claims.
Peter L. Zimroth, an attorney for Wyeth, declared in a court filing late last year that the claims process had been "hijacked by lawyers stamping out tens of thousands of baseless claims" and operating on a scale "beyond anything that could have been imagined."

About 2,700 claims - at an average of $400,000 - have been paid so far. At that rate, the trust is facing far more claims than it can pay.
Pondimin and Redux were pulled off the market in 1997 after some users developed heart-valve damage.

Research studies later showed that the number of serious injuries among six million users were comparatively few. But Wyeth, of Madison, N.J., was besieged by claims. The company agreed to a nationwide class-action settlement in 1999.

Plaintiffs' lawyers now contend that Wyeth vastly underestimated the extent of heart damage caused by its drugs and that scientific data projecting only 8,300 serious injuries was wrong.

Wyeth counters that it did not underestimate injuries, but rather underestimated how much fraud might occur with the creation of a $3.75 billion settlement fund.

Much of the suspected fraud involves echocardiogram tests required to support claims of severe heart-valve damage.

Zimroth argues in legal pleadings that, after the 1999 settlement, plaintiffs lawyers recruited clients through advertising, set up medical testing "mills" to conduct echocardiograms en masse, and then paid cardiologists millions of dollars to fill out claim forms listing exaggerated injuries.

As far back as November 2002, U.S. District Judge Harvey Bartle 3d, who is presiding over the settlement, voiced doubt that the heavy flow of claims - which then had not peaked - could be legitimate. Bartle ordered a medical audit of every claim.

But the auditing process has proceeded slowly as lawyers for Wyeth and the trust have questioned increasing numbers of claims.

After the deadline for filing claims passed in May, the trust set up a "claims integrity program" and hired Richard L. Scheff, a former federal prosecutor, to ferret out fraud.

Scheff, a partner at Montgomery, McCracken, Walker & Rhoads L.L.P., said in an interview that about 20 lawyers at the law firm were working with him on investigations into the conduct of lawyers, doctors and echocardiogram testing services.

"The trust has to ensure, as part of its fiduciary obligations, that it is paying legitimate claims," Scheff said. "We want to deter bogus claims. We want to recover money that shouldn't have been paid in the first place. We want claims that aren't valid to be withdrawn."

More than a dozen cardiologists, 14 echocardiogram services, and a core group of lawyers who filed large blocs of claims are under scrutiny.
Some plaintiffs' lawyers affected by the investigation have been sharply critical.

"I think it's a complete witch-hunt," declared George Fleming, a Houston lawyer who said he represented 10,000 diet-drug clients. "The fact of the matter is they got a lot of claims. Get used to it. Quit trying to dream up a grand fraud scheme involving all the cardiologists and lawyers in the country."

Fleming and two New York law firms - Hariton & D'Angelo L.L.P., and Napoli, Kaiser, Bern & Associates L.L.P. - have asked Bartle to discharge the trust's board for foot-dragging on claims payments.

Andrew A. Chirls, counsel for the trust, responded in court papers that those three firms helped create the problem by submitting "vast numbers of medically unreasonable and/or incomplete claims."

In a spate of actions late last year, Scheff sued two cardiologists - one of whom he accused of racketeering - and sought to suspend all claims linked to EchoMotion, a North Carolina medical testing firm that performed 75,000 echocardiograms on diet-drug users.

Scheff contended that tests done by EchoMotion were not supervised by cardiologists - in violation of a trust requirement.

The racketeering suit accused Linda J. Crouse, a Kansas City, Mo., cardiologist, of running an echocardiogram "assembly line" that produced 2,500 heart-damage claims - many allegedly exaggerated.

Crouse's lawyer, Abraham C. Reich, filed a response denouncing the allegations as "the legal equivalent of a nuclear strike - without a scintilla of evidence." Reich has moved for dismissal.

Last week, Scheff set his sights on Dallas lawyer Kip A. Petroff, one of the most active diet-drug lawyers in the country. Scheff asked Bartle to suspend all Petroff claims - estimated at 7,000 - filed with the trust.

Scheff contended that Petroff ran his own echocardiogram service, performing thousands of tests - unsupervised - on diet-drug clients.
Petroff, who was not directly accused of any wrongdoing in Scheff's action, did not respond to requests for comment last week.

Scheff has not, as yet, sued any diet-drug lawyer.

"We want to be sure before we take action that we take the right action," he said. "We are looking at every possible angle on this and naturally that would include lawyers."

Some plaintiffs' lawyers have contacted him, Scheff said, to suggest they might withdraw some claims - perhaps lots of claims.
"There has been a fair amount of inquiry about that," he said. "What the scale of that is going to be I have no idea."

Contact staff writer L. Stuart Ditzen at 215-854-2431 or sditzen@phillynews.com.