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One Year Later: The Yates Memo, False Claims Act and Director & Executive Liability

On September 19 and 27, 2016, the US Department of Justice announced two False Claims Act settlements that required corporate executives to make substantial monetary payments to resolve their liability. In the first, announced on September 19, North American Health Care Inc. (NAHC) and two individuals—its chairman of the board and a senior vice president of reimbursement—agreed to settle potential False Claims Act liability for a total of $30 million. The second settlement involves the former CEO of Tuomey Healthcare, who, a year after the $72.4 million corporate FCA resolution and two years after his departure from Tuomey as CEO, is now settling his own liability for $1 million, has been required to release any indemnification claims he may have had against the company, and has agreed to a four-year period of exclusion from participating in federal health care programs. Coinciding with the Tuomey CEO settlement announcement, Bill Baer, Principal Deputy Associate Attorney General of the US Department of Justice (DOJ), gave a speech in Chicago discussing company cooperation and “individual accountability” in the context of federal civil enforcement. This new guidance, as well as the two settlements, come a little over a year after DOJ Deputy Attorney General, Sally Yates, issued what is now known as the “Yates Memo,” which sets forth guidance to be used by DOJ civil and criminal attorneys “in any investigation of corporate misconduct” in order to “hold to account the individuals responsible for illegal corporate conduct.” Since then, corporate resolutions like these have been watched for telltale signs of whether the Yates Memo is really changing the way federal enforcement does business. Given the timing of the speech and the settlements, and the high level of the officers involved, that change may be here.

Read the full article here.




DOJ Continues to Beat the Executive Drum in Recent Speeches

In the annual speeches at New York University Law School, Assistant Attorney General Leslie R. Caldwell specifically addressed the Department of Justice’s (DOJ) continued interest in examining corporate executives allegedly responsible for corporate misconduct.  Ms. Caldwell discussed this issue in the context of shaping corporate culture through deterrence and explained DOJ’s expectations of companies that want to obtain credit from DOJ for cooperation.

At the New York University Law School’s Program on Corporate Compliance and Enforcement on April 17, 2015, Ms. Caldwell said that “true cooperation,” even in the context of making a voluntary criminal disclosure, “requires identifying the individuals actually responsible for the misconduct—be they executives or others—and the provision of all available facts relating to that misconduct.”

At the New York University Center on the Administration of Criminal Law’s Seventh Annual Conference on Regulatory Offenses and Criminal Law on April 14, 2015, Ms. Caldwell also focused on the application of the few criminal statutes that impose strict liability on certain conduct, such as the Food, Drug and Cosmetic Act, that may be used for both corporations and executives.  She discussed how the criminal section evaluates cases in parallel with the civil section and with the regulating agency to determine whether to pursue the case, and if so, what remedy to pursue, whether criminal prosecution, financial penalties, restitution, asset forfeiture or federal program exclusion or debarment.

These speeches continue to show the government’s interest in examining individual executive liability during investigations under the various statutory and regulatory authorities available, and also are consistent with other DOJ remarks during the past year placing emphasis on conducting parallel criminal and civil investigations.  General counsel should stay on top of these developments and discuss them with senior executives (as well as audit and compliance committees), both to enhance awareness of risks and as an opportunity to provide examples of individual conduct that should materially lessen exposure to individual liability.

For a more in-depth review of these issues, please read the article by Tony Maida and Michael Peregrine published in Law360, Health Care Executive Liability Exposure Post-Sacred Heart.”




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