With the first year of the Biden administration entering the fall, the white-collar defense bar association, corporations, and business executives still eagerly await authoritative policy guidance from the Department of Justice on how it will address corporate enforcement under the Prosecutor’s Office. General Merrick Garland.
So far, the Justice Department has not issued any major policy memoranda, but much of the department’s senior leadership, including the deputy attorney general and the head of the Criminal Division, has approved the Senate confirmation process, and there are likely to be hints of the department’s compliance priorities and initiatives will follow soon.
Below are several key compliance issues that we believe the new DOJ leadership is likely to emphasize to advance the administration’s compliance policies.
Rules for cooperation credit under the Monaco memorandum
2015 from the department Memorandum on individual responsibility for corporate irregularities, issued by former Deputy Attorney General Sally Yates, significantly increased the requirements that companies must meet to secure cooperative credit.
The Yates Memo directed that corporations “must provide the Department with all relevant facts about individuals involved in corporate misconduct” to qualify for any cooperative credit. Subsequent policy guidance from the Trump administration’s Deputy Attorney General Rod Rosenstein relaxed this all-or-nothing approach, giving federal prosecutors greater discretion and allowing companies the opportunity to obtain partial credit if they “significantly assisted in the government investigation “and identified the individuals who were” substantially involved in or responsible for the criminal conduct. ”
It remains to be seen whether Deputy Attorney General Lisa Monaco will return to a more restrictive approach to granting cooperative credit in a policy memorandum bearing her name, but in related areas, such as the 2020 Guidance on Effective Corporate Compliance Programs, federal prosecutors are setting increasingly demanding standards on businesses.
However, at least in the context of the application of the False Claims Act, there may be reason for optimism. the recent announcement of an FCA resolution between the DOJ’s Business Litigation Branch and an Ohio healthcare system allegedly involved only a single damage multiplier, a favorable outcome given the department’s ability to seek tripled damages under statute.
The case may be a harbinger of future deals for companies that reveal themselves and offer strong cooperation that satisfies the requirements set out in the Department guidance on FCA matters.
Greater application focus on private equity
The DOJ and other federal regulators and enforcement agencies, such as FinCEN and the SEC, for example, have noted that private equity firms and their portfolio companies will come under increased scrutiny, particularly when the firm invests in a company in an industry. highly regulated, such as the healthcare industry, and is aware of or actively participates in the misconduct of a portfolio company.
Until recently, the DOJ had rarely intervened in FCA actions against private equity companies. This changed in 2018 when the department filed an intervention complaint against compounding pharmacy Patient Care America (PCA) and its private equity owner, Riordan, Lewis & Haden Inc. (RLH), in United States ex rel. Medrano v. Diabetic Care Rx LLC d / b / a Patient Care America. On Medrano, the DOJ alleged that the PCA paid bribes to three marketing companies for TRICARE recipients to receive medically unnecessary prescriptions.
In another FCA case involving private equity, the department adopted an aggressive theory of FCA liability that targeted private equity investors who had not assumed active managerial roles in the conduct of the portfolio company.
The confluence of the expansion of private capital in the health sector and the imminent wave of the Covid-19 related app means that the prioritization of private equity firms as FCA defendants will only intensify. The Justice Department is expected to double down on its position that by making investments in portfolio companies, private equity firms are expected to know that companies are subject to certain fraud and abuse laws and to act accordingly.
Continuous Execution Activity in Healthcare
After two years dominated by a global pandemic, the Department of Justice has focused heavily on criminal and civil law enforcement in the healthcare industry. In fiscal year 2020, the Department of Justice opened more than 1,000 new criminal investigations into healthcare fraud, in addition to nearly 1,100 new civil healthcare fraud investigations.
New criminal investigations represented an increase of almost 10% from 2019, while the number of civil investigations remained stable. In total, prosecutors filed charges in 412 cases against nearly 700 defendants, many of which are attributable to investigations launched by one of the DOJ’s nationwide health care fraud strike forces.
In addition to the criminal actions, the federal government recovered more than $ 2.2 billion from FCA cases during fiscal year 2020. Health care cases accounted for an unusually high 83% of total recoveries. In the first half of 2021, FCA resolutions in the health care and life sciences industries have already exceeded $ 200 million, and based on recent trends, these matters accounted for the largest share of recoveries. general of any industry.
The DOJ has identified several key health care areas as ongoing priorities, including fraud and opioid abuse, use of Covid-19 relief funds, elder abuse in long-term care facilities, fraud related to telehealth, misuse of electronic medical records and cybersecurity related to payment claims. Many of these priorities stem from the fraud identified during or as a result of the Covid-19 pandemic.
The government has also distributed an unprecedented amount of pandemic relief funds in the past year – the CARES Act, the Paycheck Protection Program, and other Covid-19-related stimulus programs have injected more than $ 5. trillions in the US economy to help individuals and businesses. negatively affected by the pandemic.
In this context, DOJ has diverted significant resources to prioritize the investigation and prosecution of criminal conduct related to the pandemic. Additionally, the pandemic exposed existing fraud in the healthcare industry and further expanded healthcare to the technology sector.
The compliance targets stated by the DOJ, combined with the recent allegations, suggest that the DOJ is likely to continue to prioritize health care fraud prosecutions and investigations for years to come.
This column does not necessarily reflect the opinion of the Office of National Affairs, Inc. or its owners.
David rybicki he served as an assistant deputy attorney general in the Department of Justice, Criminal Division, from 2017 to 2020. He previously served as a counselor to the attorney general and as an assistant federal attorney in Washington, DC. He is a partner in the K&L Gates White Collar, Compliance and Investigation Practice Group.
Robert J. Higdon Jr. He served as a federal prosecutor for nearly 30 years in North Carolina and in the Public Integrity Section of the Department of Justice. From 2017 to 2021 he was United States Attorney for the Eastern District of North Carolina. He is a partner in the K&L Gates White Collar, Compliance and Investigation Practice Group.
Nancy Iheanacho He is an associate of the White Collar Investigations, Compliance and Practice Group. His global practice focuses on government investigations and enforcement actions, internal investigations, white collar advocacy, and Congressional investigations.