CINCINNATI - Cincinnati companies are having a rough week with federal regulators, who are calling out corporate misdeeds in a trio of unrelated actions.
A cell phone subsidiary of the Kroger Co. faces a penalty of $8.8 million after the Federal Communications Commission accused i-Wireless LLC of violating federal rules on Lifeline phones. The agency claims i-Wireless improperly billed the government for 1,684 duplicate phone lines through an FCC program that provides cell phones to low-income subscribers.
The company has 30 days to challenge the allegations, which authorities said amounted to $24,358 in over-billing for ineligible subscribers in eight states, including Ohio.
The Newport-based company, which the FCC said is co-owned by Kroger and Genie Global Inc., says it takes the allegation “very seriously” and will respond to the FCC allegations “at the appropriate time.”
Fifth Third Bancorp has reassigned its chief financial officer as part of settlement agreement that will end an investigation by the Securities and Exchange Commission. Daniel Poston was replaced as CFO by the bank’s former Treasurer, Tayfun Tuzun on Oct. 31, the company announced late Tuesday.
The change is part of a settlement to an SEC probe related to accounting irregularities in 2008.
The bank has previously disclosed that the SEC challenged its classification of commercial loans, arguing it should have recognized loans as impaired and recognized losses for those loans earlier than it did. Fifth Third informed shareholders in August that it set aside $12 million as a reserve for litigation costs. The bank said Tuesday that it doesn’t think additional reserves will be needed for the proposed SEC settlement. Both the bank and its former CFO expect to pay a civil penalty to resolve the case but neither will admit or deny factual allegations made by the SEC. Poston faces “a one-year ban from practicing before the SEC,” which is why he left the CFO job for a new position as the bank’s chief strategy and administrative officer, reporting to CEO Kevin Kabat.
Fifth Third spokesman Larry Magneson said the bank looks forward to ending three years of scrutiny by the SEC.
"We are comfortable that no restatement of earnings will be necessary," he said. "It doesn't have a material financial impact on the bank itself, on our capital and it certain doesn't impact our ability to serve our customers."
Omnicare Inc. was prominently mentioned in the Justice Department’s announcement of a $2.2 billion settlement with Johnson & Johnson, over allegations that it improperly promoted the use of the antipsychotic drug, Risperdal, to nursing home patients with dementia. It’s the third-largest pharmaceutical settlement in U.S. history. The government alleged the company “paid millions of dollars in kickbacks to Omnicare Inc., the nation’s largest pharmacy specializing in dispensing drugs to nursing home patients.”
Omnicare paid $98 million to resolve the kickbacks case in 2009. But its behavior was called out again in a Justice Department press release:
“In a complaint filed in the District of Massachusetts in January 2010, the United States alleged that J&J paid millions of dollars in kickbacks to Omnicare under the guise of market share rebate payments, data-purchase agreements, ‘grants’ and ‘educational funding.’ These kickbacks were intended to induce Omnicare and its hundreds of consultant pharmacists to engage in ‘active intervention programs’ to promote the use of Risperdal and other J&J drugs in nursing homes. Omnicare’s consultant pharmacists regularly reviewed nursing home patients’ medical charts and made recommendations to physicians on what drugs should be prescribed for those patients. Although consultant pharmacists purported to provide “independent” recommendations based on their clinical judgment, J&J viewed the pharmacists as an “extension of [J&J’s] sales force.”
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