As the first year of the Biden administration approaches in the fall, the white-collar advocacy bar, businesses and corporate executives still anxiously await the Justice Department’s authoritative policy guidance on how where he will discuss corporate law enforcement under the direction of Attorney 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 Head of the Criminal Division, has authorized the process of confirmation from the Senate, and it is likely that indications of the ministry’s enforcement priorities and initiatives will be forthcoming.
Below are several key enforcement issues we believe the new DOJ leadership will likely focus on administration enforcement policies.
Standards for cooperation credit under Monaco Memo
The ministry’s 2015 memorandum on individual responsibility for corporate wrongdoing, released by former Deputy Attorney General Sally Yates, significantly tightened the requirements businesses must meet to obtain co-op credit.
Yates’ memo demanded that companies “must provide the department with all relevant facts about those involved in a company’s misconduct” in order to be eligible for cooperation credit. Subsequent policy directives from the Trump administration’s Deputy Attorney General Rod Rosenstein relaxed this all-or-nothing approach, giving federal prosecutors greater discretion and allowing companies to get partial credit if they “helped. significantly the government investigation “and identified 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 cooperation credits in a political memorandum bearing her name, but in related areas, such as the 2020 guidelines on compliance programs. As an efficient business, federal prosecutors are holding companies to ever higher standards.
However, at least in the context of the application of the False Claims Act, there may be grounds for optimism. The recent announcement of an FCA resolution between the Department of Justice’s commercial litigation division and an Ohio healthcare system would have involved only one damages multiplier, a favorable outcome given the department’s ability to seek treble damages under the law.
The case may be the harbinger of future settlements for companies that disclose themselves and offer strong cooperation that meets the requirements set out in the department’s guidelines on FCA matters.
Increased focus on private equity law enforcement
The DOJ and other federal regulators and enforcement agencies, such as FinCEN and the SEC, for example, have signaled that private equity firms and their holding companies will be subject to increased scrutiny, particularly when the business invests in a business in a highly regulated industry, such as the healthcare industry, and is aware of or is taking an active role in the misconduct of a portfolio company.
Until recently, the DOJ had rarely intervened in FCA’s actions against private equity firms. That 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. In Medrano, the DOJ alleged that the PCA paid bribes to three marketing companies to target TRICARE recipients for medically unnecessary prescriptions.
In another FCA case involving private equity, the department adopted an aggressive FCA liability theory that targeted private equity investors who had not assumed active management roles in the running of the company in wallet.
The confluence of private equity expansion in the healthcare sector and the impending wave of law enforcement related to Covid-19 means that prioritizing private equity firms as FCA defendants will not do that intensify. Expect the DOJ to double its stance that when investing in holding companies, private equity firms should be aware that companies are subject to certain fraud and abuse laws and act accordingly.
Continuous application activity in healthcare
After two years dominated by a global pandemic, the DOJ has focused heavily on criminal and civil law enforcement in the healthcare sector. 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 civilian investigations into healthcare fraud. health.
New criminal investigations have represented an increase of almost 10% since 2019, while the number of civil investigations has remained stable. In total, prosecutors have laid charges in 412 cases against nearly 700 defendants, many of which are attributable to investigations initiated by one of DOJ’s nationwide healthcare fraud enforcement forces.
In addition to criminal actions, the federal government recovered over $ 2.2 billion from FCA cases in fiscal 2020. Health care cases accounted for an unusually high 83% of total recoveries. . In the first half of 2021, FCA resolutions in the healthcare and life sciences sectors have already exceeded $ 200 million and, in line with recent trends, these issues accounted for the largest share of overall recoveries of all sectors.
The DOJ has identified several key areas of healthcare as ongoing priorities, including opioid fraud and abuse, the use of Covid-19 relief funds, elder abuse in long-term care facilities duration, telehealth fraud, electronic health record misuse and cybersecurity. payment requests. Many of these priorities stem from frauds identified during or resulting from the Covid-19 pandemic.
The government has also distributed an unprecedented amount of pandemic relief funds over the past year: the CARES Act, the Paycheck Protection Program and other Covid-19-related stimulus programs have injected more than $ 5,000 billion in the US economy to help individuals and businesses affected by the pandemic.
In this context, the DOJ has diverted significant resources to prioritize the investigation and prosecution of criminal behavior related to the pandemic. Additionally, the pandemic exposed existing fraud in the healthcare industry and extended healthcare to the tech industry.
The DOJ’s stated enforcement goals, combined with recent indictments, suggest that the DOJ is likely to continue to prioritize the prosecution and investigation of healthcare fraud in the years to come.
This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owners.
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David rybicki served as Assistant Assistant Attorney General in the Department of Justice, Criminal Division, from 2017-2020. Previously, he served as Advisor to the Attorney General and Assistant United States Attorney in Washington, DC. He is a partner of the K&L Gates White Collar Investigation, Enforcement and Practice Group.
Robert J. Higdon Jr. served as a federal prosecutor for almost 30 years in North Carolina and in the public integrity section of the Department of Justice. From 2017 to 2021, he served as United States Attorney for the Eastern District of North Carolina. He is a partner in the K&L Gates Investigation, Enforcement and White Collar Practice Group.
Nancy Iheanacho is a partner in the Investigations, Law Enforcement and White Collar Practice Group. His global practice focuses on government investigations and enforcement actions, internal investigations, white collar advocacy, and congressional investigations.