BOSTON, Oct. 23 /PRNewswire/ -- A Boston jury has found that Unum (NYSE: UNM), the nation's largest disability provider, defrauded the United States by forcing its customers to submit false claims for disability benefits to the Social Security Administration (SSA), when Unum knew that they were not eligible for government benefits.
By engaging in this fraudulent conduct, Unum imposed substantial burdens on an already overwhelmed Social Security program and caused the taxpayers of the United States to spend money to process and deny these false claims.
The jury reached its verdict late yesterday. The case was brought on behalf of the government by a whistleblower, Patrick Loughren, under the federal False Claims Act. Unum is based in Portland, Maine, and Chattanooga, Tennessee.
"Unum's conduct in threatening people to apply for Social Security under penalty of losing a significant portion of their private disability benefits is wrong," said Loughren. "After five years of intense litigation during which Unum refused to admit it was defrauding the United States, I am gratified that a Boston jury has called them to account."
As part of its scheme, Unum compelled people seeking disability benefits from Unum to apply for Social Security disability benefits even though its customers often told Unum they were not eligible. Social Security has much stricter criteria for disability benefits than private insurers like Unum. In an attempt to enrich itself, Unum told thousands of claimants that it would cut their private disability benefits in half -- or more -- if they did not comply with Unum's directive that they must apply for Social Security disability benefits.
Unum admitted during the trial that it had caused many of its customers to apply for Social Security disability over the ten years covered by this case. Unum had nearly 500,000 long-term disability claimants over this period. The full extent and magnitude of Unum's conduct will be addressed in future hearings.
Before the trial started, the federal judge ordered that the case proceed in stages in light of the scope of the case. As a test case, the judge submitted five people's disability benefits claims to the jury. After a four-week trial, the jury found that Unum had defrauded the United States with respect to two of those cases, was unable to decide a third, and found insufficient evidence with respect to two others.
By its verdict, the jury rejected Unum's primary contention that it was entitled to force people to apply for Social Security disability benefits based on SSA's open-door policy, which encourages individuals to apply for Social Security Disability benefits if they choose to do so. The jury found that Unum had violated the False Claims Act, confirming the Court's earlier ruling that "an open door to claimants who are unsure they are eligible does not exonerate an insurer that knowingly causes ineligible insureds to apply."
The jury also rejected Unum's claim that it made people file frivolous Social Security claims because employers who bought group disability benefits from Unum wanted Unum to impose that requirement on their employees.
Loughren filed this "qui tam" (whistleblower) lawsuit in 2003. The False Claim Act allows private individuals to sue companies that are defrauding the government and to recover funds on the government's behalf.
As a result of this lawsuit and a New York Times story that looked into this practice, Senator Charles Grassley (R-Iowa) sent a letter to Unum and eight other private disability insurers asking for detailed information about the very practices that have now been found to be unlawful.
Lead counsel for the whistleblower is Phillips & Cohen LLP, the largest and most successful law firm that specializes in representing whistleblowers in qui tam lawsuits. As a result of cases brought by Phillips & Cohen, the U.S. Treasury has recovered nearly $3 billion. For more information about the False Claims Act and qui tam lawsuits, see www.phillipsandcohen.com.
SOURCE Phillips & Cohen LLP
CONTACT: Colette Matzzie of Phillips & Cohen LLP, +1-202-833-4567