White Collar + Fraud + Investigations + Compliance

Last week, the Department of Justice announced that DePuy Synthes, Inc. (“DePuy”), a subsidiary of Johnson & Johnson, agreed to pay $9.75 Million to resolve allegations that it violated the False Claims Act by paying kickbacks to an orthopedic surgeon based in Massachusetts to induce his use of DePuy products.

Two times a year, the Office of Information and Regulatory Affairs issues a unified agenda showing planned rulemaking activity from various federal regulators. The most recent Unified Agenda of Regulatory and Deregulatory Actions was published on January 5, 2023 and provides a look ahead to what various agencies, including the Consumer Financial Protection Bureau (“CFPB”), will be working on in the coming months.

Topics: CFPB

On Tuesday, the Federal Reserve, FDIC and the Office of the Comptroller of the Currency (the “OCC”) issued a Joint Statement on Crypto-Asset Risks to Banking Organizations.  This Statement should signal to banking institutions that crypto-assets are about to receive a lot more attention from prudential regulators.  In particular, these institutions should likely expect more targeted reviews related to cryptocurrency assets and how they impact the safety and soundness of those institutions.

Today, the CFPB announced that it ordered Wells Fargo to pay $3.7 Billion related to allegations of widespread mismanagement of auto loans, mortgages and deposit accounts.  Whispers about this penalty broke in the news weeks ago, but the CFPB’s order involving the penalty and redress amounts was publicly announced today. 

Wells Fargo seems to be in the hot seat again with regulators. Repeated regulatory action like this in any industry should signal that there is a lack of an effective comprehensive compliance program. The key word here is effective. Every financial institution has a written compliance program. But, this should serve as a cautionary tale about identifying consistent themes about the effectiveness of one's processes and procedures.

These are interesting developments in the CFPB rulemaking space. The proposed rule will undoubtedly have serious implications on financial institutions. Banks will need to consider how to further safeguard the information shared and how to ensure the accuracy of that data. This rule will expose banks and other financial institutions to a fair amount of risk and it will be interesting to see how these institutions negate and navigate that risk.

Topics: CFPB

On Tuesday, the Department of Justice announced that Texas doctor, Daniel Canchola, pled guilty to conspiracy to commit wire fraud related to his role in signing orders for durable medical equipment and genetic testing resulting in more than $54 million false and fraudulent claims to Medicare. The DOJ alleged that Canchola received approximately $30 in exchange for each signed doctor’s order authorizing DME and cancer genetic tests that were not legitimately prescribed, not needed or not used. Notably, Canchola only received $466,000 in kickbacks, but the amount submitted to Medicare in connection with the fraudulent claims was over $54 million.

Musings of a Former DOJ Trial Attorney: Let’s talk bank exam privilege. As most practitioners in this space are aware, documents and communications relating to the supervisory role of bank regulators are protected under bank exam privilege. It’s also commonly understood that the privilege itself is owned by the bank regulator, not the financial institution. How does that play out in the real life of an AUSA or DOJ Trial Attorney investigating the financial institution or issues involving the financial institution? Well, oftentimes, financial institutions will redact communications with the bank regulator and internal documents and communications involving that exam. What financial institutions don’t anticipate is that the bank regulator may waive the privilege related to specific exams. In other words, if the bank regulator grants that waiver, and to the extent that no other privilege applies, those previously protected documents and communications lose that protection. 

Recently, the DOJ announced that Biogen agreed to pay $900 Million to settle a declined qui tam case. Relator and former Biogen employee, Michael Bawduniak, alleged that Biogen paid kickbacks to physicians in the form of speaker honoraria, speaker training fees, consulting fees and meals, to induce them to prescribe certain drugs in violation of the Anti-Kickback Statute. 

Last Thursday, Deputy Attorney General Lisa Monaco made remarks regarding corporate criminal enforcement.  Deputy Attorney General Monaco set forth five key priorities: (i) individual accountability; (ii) consideration of previous misconduct; (iii) self-disclosures by companies accused of misconduct; (iv) compliance monitors; and (v) compensation/incentive plans that encourage a healthy corporate culture and avoid risky behavior.  In my view, this is not a substantial departure from the Department’s current practice.  Deputy Attorney General Monaco’s articulation of these priorities, however, codifies practices that were already occurring in both Civil and Criminal matters. 

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