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White Collar + Fraud + Investigations + Compliance

  • Posts by Denise M. Barnes
    Posts by Denise M. Barnes

    Denise Barnes is a former U.S. Department of Justice (“DOJ”) Trial Attorney who focuses her practice on compliance, white collar and regulatory investigations, and complex commercial litigation.  She represents clients in ...

On Saturday, the DOJ announced a settlement with Cigna Group (“Cigna”), where Cigna agreed to pay $172 Million to resolve allegations that it violated the False Claims Act (“FCA”) by submitting and failing to withdraw inaccurate diagnosis codes for its Medicare Advantage Plan enrollees in order to increase reimbursements from Medicare.

On Monday, the DOJ announced a settlement with Verizon Business Network Services LLC (“Verizon”), where Verizon agreed to pay $4.1 M to settle allegations that it failed to completely satisfy certain cybersecurity controls in connection with an information technology service provided to federal agencies. The settlement resolves allegations that Verizon’s Managed Trusted Internet Protocol Service (“MTIPS”), which was designed to provide federal agencies with secure connections to the public internet and other networks, did not completely satisfy three required cybersecurity controls related to its General Services Administration (“GSA”) contracts from 2017 through 2021.

Yesterday, the Department of Justice announced a settlement with Martin’s Point Health Care Inc. (“Martin’s Point”) where Martin’s Point agreed to pay $22,485,000 to resolve allegations that it violated the False Claims Act by submitting inaccurate diagnosis codes for its Medicare Advantage Plan enrollees in order to increase reimbursements from Medicare.

On July 26, 2023, the U.S. Department of Justice, National Security Division (“DOJ NSD”), the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”), and the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) issued the second-ever Tri-Seal Compliance Note (the “Note”). This Note discusses Voluntary Self-Disclosure of Potential Violations and discusses each agency’s aligned expectations for companies that discover potential violations of any administrative or criminal violations of sanctions and export controls, including expectations for prompt disclosure and remediation of such violations. The agencies collectively stress the important role that private sector businesses play in identifying threats from malicious actors and foreign adversaries seeking to subvert the U.S. financial system or access sensitive U.S. technologies or goods.

On Friday, the DOJ announced that Booz Allen Hamilton Holding Corporation (“Booz Allen”) agreed to pay the United States $377,453,150 to resolve allegations that it violated the False Claims Act by improperly billing commercial and international costs to its government contracts. Notably, the settlement resolves allegations that for ten years, from 2011 to 2021, Booz Allen improperly charged indirect costs to its government contracts and subcontracts that should have been billed to commercial and international contracts under cost accounting standards. 

On Friday, July 14th, the DOJ announced its settlement with NextGen Healthcare (“NextGen”), an electronic health record technology vendor. NextGen agreed to pay $31 million to resolve allegations that it violated the False Claims Act by misrepresenting the capabilities of certain versions of its software and, separately, providing unlawful remuneration to its users to induce them to recommend NextGen’s software.

On Monday, the DOJ announced its settlement with L3 Technologies, Inc., Communication Systems West (“L3 Tech”), a manufacturer of communications for military systems.  L3 Tech paid $21.8 Million to resolve allegations that it violated the False Claims Act (“FCA”) by knowingly submitting false claims to the Department of Defense by double counting materials.  DOJ alleged that from 2008 through 2011, L3 Tech submitted dozens of contract proposals that double-charged the Government for low-cost common stock items like nuts and bolts.  Notably, this resolution includes a few interesting points.

Yesterday, the Department of Justice announced a settlement between Genotox Laboratories (“Genotox”) and the Department of Justice involving allegations that Genotox paid volume based commissions to third party marketers in violation of the Anti-Kickback Statute (“AKS”) and submitted claims to the federal health care programs for unnecessary drug tests.

This week, the U.S. Department of Justice (“DOJ”) announced the implementation of a Voluntary Self-Disclosure Policy (the “VSD Policy”).  The DOJ declared that U.S. Attorney’s Offices throughout the nation will offer benefits to companies that voluntarily and timely disclose misconduct.  Effective immediately, the VSD Policy details the parameters and criteria for voluntary self-disclosure of misconduct.  Under the VSD Policy, a company is considered to have made a voluntary self-disclosure if it is aware of misconduct prior to being publicly reported and timely discloses all relevant facts to a U.S. Attorney’s Office.  A company that meets this criteria and remediates the criminal conduct will experience significant benefits including the U.S. Attorney’s Office not seeking a guilty plea or imposing a criminal penalty. 

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.

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. 

Yesterday, the Department of Justice announced that Akorn Operating Company, a pharmaceutical company, (“Akorn”) agreed to pay $7.9 Million to resolve allegations that it caused certain submissions of false claims to Medicare Part D in violation of the False Claims Act (“FCA”). 

This settlement is notable because it relates to disclosure in the settlement context.  Based on the information provided in the press release, it appears that Akorn admitted to certain facts in cooperation with the FCA investigation and, as a result, the Department considered that cooperation in determining the settlement amount and resolution of the allegations.

Today, the DOJ announced a settlement with Philips RS North America LLC, formerly known as Respironics Inc., related to allegations of that it paid illegal kickbacks to durable medical equipment (“DME”) suppliers. Notably, the DOJ alleges that Respironics Inc. (“Respironics”) gave DME suppliers data related to prescribing physicians to assist the suppliers in marketing to physicians. The federal Anti-Kickback Statute (“AKS”) prohibits a person or entity from knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or reward the purchase of any item that may be reimbursed under the federal healthcare programs.  Here, DOJ alleges that Respironics caused certain DME suppliers to submit false claims for medical equipment that were false because of its inducements to the DME suppliers in the form of free data.

Musings of former DOJ trial attorney: Let's talk about whistleblower programs. Does your company have a robust complaint and whistleblower program? If you have a client-facing escalated complaints department, are your complaints imaged and searchable? Is there a way to aggregate your company's or bank's complaints so you can determine if there is a larger issue afoot? Are your risk groups mining complaint and whistleblower information to determine if there is heightened exposure in certain areas?

Another day, another kickback testing settlement: Last week, the DOJ announced a settlement between the United States and two clinical laboratories located in Mississippi and Texas (and their owners). Under the Settlement, the labs and their individual owners agreed to pay $5.7 Million to resolve kickback allegations. The DOJ alleges that the labs entered into sham agreements with marketers to provide various services at an hourly rate, when, in reality, the labs paid the marketers a percentage of revenue, including Medicare reimbursement, in return for the samples.  Most practitioners in this space know that kickbacks can show up in a number of different forms. But, often liability/exposure turns on the intended purpose of the underlying agreements. What is the spirit of the agreement in question? At times, companies want to rely on papered agreements, when, in fact, those sham agreements often serve as evidence of remuneration.

Last week, the DOJ announced a settlement between Aerojet Rocketdyne Inc. (“Aerojet”) and, relator, Brian Markus, related to allegations that Aerojet violated the False Claims Act (“FCA”) by misrepresenting its compliance with cybersecurity requirements in certain federal government contracts. There a few interesting things to note here. 

First, despite the Government’s clear interest in this area evidenced by the Department’s Civil Cyber-Fraud Initiative, the DOJ declined to intervene in the matter.  Second, the parties settled this matter only after the Court declined to dismiss this case at the Summary Judgment stage. Notably, it appears that Aerojet disclosed its noncompliance to the Government. The Court considered this fact, but also noted that “these disclosures hold less weight when they are incomplete.” Memorandum and Order Re: Cross-Motions For Summary Judgement, U.S. ex rel. Markus v. Aerojet Rocketdyne Holdings, Inc., No. 2:15-cv-02245 (E.D. Cal.), at 11. As such, the Court held that there was a “[a] genuine dispute of material fact . . . as to the sufficiency of the disclosures about the 2013 breaches and information gathered in audits done by outside firms.”  See id. at 14. 

Now that the dust has settled, it's unsurprising that these more complicated Paycheck Protection Program ("PPP") fraud schemes are beginning to surface. Here, the DOJ criminally charged eight defendants related to fraudulently obtained PPP loans, Economic Injury Disaster loans ("EIDL"), and Small Business Administration ("SBA") loans. These allegations would obviously implicate False Claims Act and FIRREA violations as well given the inherent overlap. And, I have no doubt that as DOJ continues to uncover and investigate pandemic-related loan schemes (and whistleblowers continue to come forward) we will see more civil penalties and resolutions involving this type of conduct.

Today, the CFPB published an advisory opinion noting its interpretation of Section 808(1) of the Fair Debt Collection Practices Act (the "FDCPA") as it relates to pay-to-pay fees charged by debt collectors. In short, CFPB opined that the FDCPA prohibits debt collectors from collecting pay-to-pay or “convenience” fees when those fees are not expressly authorized by the agreement creating the debt or expressly authorized by law. This opinion further underscores the CFPB's focus on add-on fees and the real-life impact that these fees have on American consumers.

Topics: CFPB

The Department of Justice continues to demonstrate its commitment to holding both testing facilities and hospitals accountable for kickback schemes involving laboratory testing.  In the alleged kickback scheme referenced in the link below, DOJ alleges that the relevant hospitals paid a portion of their laboratory profits to recruiters who then paid a portion of the profits to the physicians. DOJ’s complaint sets forth allegations against the laboratory executives and employees, hospitals and, now, the physicians involved. This suit demonstrates DOJ's commitment to targeting individual corporate bad actors when the evidence supports those allegations. 

The information that companies provide to the Government when entering into agreements and maintaining those contractual relationships, matters. Contracting officers rely upon that information in determining whether to contract with your company. You can avoid False Claims Act and other liability by creating a culture of transparency both within your company and with Government partners.

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