individual accountability

In September 2015, Deputy Attorney General Sally Yates issued the Yates memo on individual accountability in the context of corporate investigations. It is no understatement to say that this memo created a near-cottage industry of articles and panels on the memo’s impact on government investigations and officer/director liability.

After the change in administration, a favorite parlor game of the defense bar was wagering on the memo’s survival. And after Deputy Attorney General Rod Rosenstein revealed, in September and October 2017, that the Yates memo was under active reconsideration, discussions turned serious about whether the memo would be preserved, diluted or outright reversed and whether the distinctions between criminal and civil False Claims Act matters would receive needed nuance.

Click here to read the full article as published in Law360.

On December 21, the US Department of Justice (DOJ) obtained more than $3.7 billion in settlements and judgments from civil cases involving fraud and false claims against the government in the fiscal year ending Sept. 30, 2017. Recoveries since 1986, when Congress substantially amended the civil False Claims Act (FCA), now total more than $56 billion.

Of the $3.7 billion in settlements and judgments, $2.4 billion involved the health care industry, including drug companies, hospitals, pharmacies, laboratories and physicians. This is the eighth consecutive year that the department’s civil health care fraud settlements and judgments have exceeded $2 billion. In addition to health care, the False Claims Act serves as the government’s primary avenue to civilly pursue government funds and property under other government programs and contracts, such as defense and national security, food safety and inspection, federally insured loans and mortgages, highway funds, small business contracts, agricultural subsidies, disaster assistance and import tariffs. Continue Reading Justice Department Recovers More Than $3.7 Billion from FCA Cases in Fiscal Year 2017

The law is uncertain. One example of this uncertainty is how the “Yates memo” is to be applied in civil cases — in particular, what constitutes “cooperation” and how cooperation may benefit a company under investigation for False Claims Act violations. On September 29, 2016, DOJ attempted (for a second time) to address the lack of clarity surrounding cooperation in civil matters. While DOJ provided some more detail on what it viewed as “full cooperation,” and indicated that “new guidance” had been issued within DOJ on cooperation in civil enforcement matters, it still failed to give concrete guidance on how such cooperation may benefit a company in a FCA or other civil resolution. In essence, DOJ is saying “Trust Us” to companies considering the potential benefits of cooperation.

Read the full article here.

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.

On June 9, 2016, Acting Associate Attorney General Bill Baer delivered a speech regarding the impact of the Yates Memorandum’s focus on individual accountability and corporate cooperation at the American Bar Association’s 11th National Institute on Civil False Claims Act and Qui Tam Enforcement.  The focus of the speech was on the interplay between the Yates Memorandum and investigations and litigation under the False Claims Act (FCA), underscoring the fact that the US Department of Justice’s (DOJ’s) focus on individuals is not limited to the criminal context. Continue Reading Acting Associate Attorney General Remarks on Yates Memorandum and False Claims Act

Last week, the Department of Justice (DOJ) announced charges against a former hospital CFO, two orthopedic surgeons, a chiropractor, and a health care marketer for their alleged roles in a series of fraudulent referral and billing schemes.  According to the DOJ, these referral schemes paid illegal kickbacks to physicians for spinal surgery referrals and caused “nearly $600 million in fraudulent billings over an eight-year period.”  These charges underscore the federal government’s recent emphasis on greater individual accountability for fraudulent healthcare schemes and the potential for those involved to face significant liability.

According to a statement from the U.S. Attorney’s Office, the schemes generally involved paying tens of millions of dollars in kickbacks for referrals to two California hospitals, Pacific Hospital in Long Beach and Tri-City Regional Medical Center in Hawaiian Gardens, for spinal surgeries.  Those hospitals then billed those surgeries to California’s workers’ compensation system, the U.S. Department of Labor, and workers’ compensation insurers.  The schemes implicated dozens of surgeons, orthopedic specialists, chiropractors, marketers, and other medical professionals.

These charges are the latest development in an ongoing coordinated government investigation dubbed “Operation Spinal Cap.”   The investigation is specifically focused on providers and other individuals who may have been involved in these spinal surgery-related schemes.

In early 2014, the ex-CEO of Pacific Hospital was indicted and pleaded guilty to paying illegal kickbacks and federal conspiracy charges.  He was also the subject of a qui tam suit and a suit by the County of Los Angeles on state false claims grounds.  According to those cases, the CEO used a network of shell corporations, physician-owned distributorships, and sham contracts to facilitate the referral and billing schemes.

Notably, not all improper kickback payments are clear-cut cash transactions.  The schemes described above are alleged to have used multiple vehicles for providing and concealing kickback payments. For example, the U.S. Attorney’s Office statement described several “bogus contracts” deployed as part of the Pacific Hospital referral scheme.  These included agreements where physicians were paid for a “right to purchase” their medical practices, but the option was never exercised; operations-based agreements that compensated physicians at rates above fair market value; agreements for consulting or directorship work that was never performed; and even lease agreements that paid doctors for space that was never or rarely used.  Corporations should be mindful of these improper arrangements when structuring their compliance programs and evaluating their financial relationships with physicians.

Pacific Hospital’s former CFO, whose case was unsealed last Tuesday, was allegedly responsible for, among other things, tracking the referrals from and payments to physicians.  He pleaded guilty to participating in a conspiracy that engaged in paying kickbacks in connection with a federal healthcare program and in mail fraud, among other charges.  The charges brought against the individuals are varied.  For example, one orthopedic surgeon was charged with filing a false tax return; his plea agreement admits he did not report his kickback payments as income on his taxes.  Additionally, a health care marketer who admitted to recruiting doctors to make referrals pled guilty to conspiring to commit mail fraud.

While the crimes charged vary, they are consistent with the federal government’s recent enhanced focus on individual actors and their roles in health care fraud schemes.  The government’s focus on individuals was notably described in Deputy Attorney General Sally Quillian Yates’ recent memo, which focused on themes of cooperation and individual accountability for involvement in corporate crimes (see our former pieces on the Yates memo here and here.

A copy of the DOJ’s Press Release on these charges can be found here.