Commercial Litigation Update

On September 23, 2024, Principal Deputy Assistant Attorney General Nicole M. Argentieri announced updates to the U.S. Department of Justice’s (“DOJ”) guidance relative to its Principles of Federal Prosecution of Business Organizations through the Evaluation of Corporate Compliance Programs (“ECCP”). The ECCP is “meant to assist prosecutors in making informed decisions as to whether, and to what extent, the corporation’s compliance program was effective at the time of [an offense under investigation], and is effective at the time of a charging decision or resolution, for purposes of determining the appropriate (1) form of any resolution or prosecution; (2) monetary penalty, if any; and (3) compliance obligations contained in any corporate criminal resolution (e.g., monitorship or reporting obligations)” with DOJ.

The ECCP was updated last year with new policies relating to a corporation’s access to and retention of employee electronic communications as well as a company’s compensation structure for executives and employees. This year’s updates focus on three new policies regarding evaluations of:

1. How companies are assessing and managing risk related to the use of new technology such as artificial intelligence (“AI”);
2. Companies’ “speak up” cultures; and
3. Compliance programs’ appropriate access to data, including to assess their own effectiveness.

Since the pandemic, COVID-19-related fraud has been a consistent target of the Department of Justice. The creation of the DOJ’s COVID-19 Enforcement Task Force in May 2021 marked the start of DOJ’s commitment to combatting COVID-19-related fraud. Since then, according to the Task Force’s 2024 Report, published in April of this year, the Task Force has charged over 3,500 defendants with federal crimes related to Covid-19 fraud, recovered more than $1.4 billion in stolen funds and reached over 400 civil settlements and judgments.

Most of these matters involved unemployment insurance (“UI”) benefits fraud, Paycheck Protection Program fraud (“PPP”), and Economic Injury Disaster Loan (“EIDL”) fraud , but other types of CARES Act fraud and health care fraud related to the COVID-19 pandemic were also charged. The quantum of fraud losses associated with these cases was reported to be over $2.1 billion.

Most recently, on August 8, 2024, the DOJ issued  a press release announcing that West Coast Dental Administrative Services LLC, operating a network of dental offices in Southern California, along with its founders and former owners, agreed to pay $6.3 million to resolve allegations that they knowingly violated the False Claims Act (“FCA”) in connection with seven improper loans that the company and its affiliated dental offices received under the PPP. Additionally, an unrelated real estate holdings company owned by one of the founders agreed to pay an additional $35,149.82 to resolve its potential liability under the FCA in connection with a separate PPP loan.

On June 27, 2024, the U.S. Department of Justice (“DOJ”) and the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), along with other federal and state law enforcement partners, announced the annual National Health Care Fraud Enforcement Action using criminal enforcement to target a wide variety of alleged health care fraud schemes.

What Has Stayed the Same and What Has Changed?

Similar to last year’s all-encompassing “takedown,” this year’s enforcement action charged defendants with schemes related to telemedicine and laboratory fraud; diversion of controlled substances (HIV medications and prescription stimulants); addiction treatment schemes; opioids and other familiar types of health care fraud (such as home health, DME and kickbacks).  However, the “headline” this year was a $900 million case in Arizona involving medically unnecessary amniotic wound grafts.

The 2024 enforcement action charged 193 defendants who allegedly have committed over $2.75 billion in fraud. The cases were brought by 32 different U.S. Attorneys’ Offices and 11 State Attorney Generals’ Offices. Although the dollar figure at issue is slightly higher than the 2023 enforcement action, the number of defendants is strikingly higher, with almost two and a half times as many defendants charged. Similarly, the cases were brought in almost twice as many federal districts as last year, suggesting that the Fraud Section is building more partnerships with U.S. Attorney’s Offices nationwide.  

On May 9, 2024, the U.S. Department of Justice’s Antitrust Division (“DOJ”) announced a new task force to address “pressing antitrust problems in health care markets.” This new initiative, named the Task Force on Health Care Monopolies and Collusion (“HCMC”), will focus on DOJ’s view that there are “widespread competition concerns shared by patients, health care professionals, businesses and entrepreneurs, including issues regarding payer-provider consolidation, serial acquisitions, labor and quality of care, medical billing, health care IT ...

On March 7, 2024, Deputy Attorney General Lisa Monaco announced the launch of a 90-day sprint to develop and implement a pilot program for DOJ’s latest “carrot” to incentivize companies to invest in a culture of compliance: a whistleblower rewards program. In an address at the American Bar Association’s 39th National Institute on White Collar Crime, Monaco explained: “[t]he premise is simple: if an individual helps DOJ discover significant corporate or financial misconduct — otherwise unknown to us — then the individual could qualify to receive a portion of the ...

In an indictment announced on October 26, 2023 in Miami, the U.S. Department of Justice, Criminal Division’s Fraud Section, working with the FBI and HHS-OIG, brought what may be only the second federal criminal charges directly related to the Medicare Advantage (Medicare Part C) risk adjustment payment methodology.  DOJ enforcement in the Medicare Advantage risk adjustment space overwhelmingly has proceeded civilly under the False Claims Act. Although the allegations suggest conduct far more troubling than prior civil cases under risk adjustment, these criminal charges ...

Six months from the date of closing. That’s how long acquiring companies have under the newly announced Department of Justice (DOJ) Mergers and Acquisitions (M&A) Safe Harbor Policy to disclose misconduct discovered in the context of a merger or acquisition – whether discovered pre or post-acquisition.  And the acquiring company has one year from the date of closing to remediate, as well as provide restitution to any victims and disgorge  any profits.

Over the last two years, the DOJ has made clear its priority to encourage companies to self-disclose misconduct aiming to ...

On June 28, 2023, the U.S. Department of Justice (“DOJ”) and the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), along with other federal and state law enforcement partners, announced a nationwide health care fraud enforcement action targeting a variety of alleged health care fraud schemes. As has been the case over the last few years, DOJ and HHS-OIG have moved away from categorizing the enforcement action as a “takedown”. The government has not explained the naming change, but one explanation is that it is no longer properly considered a true “takedown” because the enforcement activity (charges, arrests) occurs over many weeks leading up to the day it is announced.  

The U.S. Department of Justice (“DOJ”) remains busy updating its policies relating to corporate prosecutions, evaluations of compliance programs, and voluntary disclosures. In a pair of speeches at March’s ABA White Collar Conference in Miami, Deputy Attorney General Lisa Monaco and Assistant Attorney General Kenneth Polite, Jr. returned to the Department’s revision of its Evaluation of Corporate Compliance Program (“ECCP”) by unveiling several significant policies, including those relating to a corporation’s access to and retention of employee electronic communications as well as a company’s compensation structure for executives and employees.

In response to a recent Department of Justice (DOJ) request that all DOJ components write voluntary self-disclosure policies and “clarify the benefits of promptly coming forward to self-report [as] a good business decision,” on January 17, 2023, Assistant Attorney General (AAG) Kenneth Polite, Jr. announced updates to the DOJ Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP). The updated CEP, policy 9-47.120, which was previously known as the Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy, expands the applicability of the CEP to now apply to all corporate criminal matters handled by the DOJ’s Criminal Division. The updated CEP, which is effective prospectively only, offers new, significant, and concrete incentives to corporations to have effective compliance programs, to voluntarily disclose allegations of criminal misconduct (including that of its officers, directors and employees), to fully cooperate with the government’s investigation of alleged misconduct, and to timely and appropriately remediate the misconduct. In announcing the updated policy, AAG Polite stated, “Our number one goal in this area – as we have repeatedly emphasized – is individual accountability. And we can hold accountable those who are criminally culpable—no matter their seniority—when companies come forward and cooperate with our investigation.”

Given the volume of funds that were quickly dispersed during the COVID-19 pandemic, there were plenty of new areas for fraud and abuse. The Department of Justice (“DOJ”) initially set its sights on targeting the borrowers of such funds. Now, the DOJ is ramping up enforcement with the first ever False Claims Act (“FCA”) settlement with a lender of Paycheck Protection Programs (“PPP”) funds.

It has been four years since Congress enacted the Eliminating Kickbacks in Recovery Act (“EKRA”), codified at 18 U.S.C. § 220. EKRA initially targeted patient brokering and kickback schemes within the addiction treatment and recovery spaces. However, since EKRA was expansively drafted to also apply to clinical laboratories (it applies to improper referrals for any “service”, regardless of the payor), public as well as private insurance plans and even self-pay patients fall within the reach of the statute.

In a rebuke of the Department of Justice, the Third Circuit recently overturned money laundering conspiracy convictions for a reverse distributor pharmaceutical company, Devos Ltd., and two of its former executives, CEO Dean Volkes and CFO Donna Fallon. The Third Circuit’s opinion, United States v. Fallon, affirmed other convictions against the company and individuals but ordered a resentencing and a recalculation of the sums subject to forfeiture.

Building on attempts in recent years to strengthen the Department of Justice’s (DOJ’s) white collar criminal enforcement, on September 15, 2022, Deputy Attorney General Lisa Monaco announced revisions to DOJ’s corporate criminal enforcement policies. The new policies, and those that are in development, further attempt to put pressure on companies to implement effective compliance policies and to self-report if there are problems. Notably, the new DOJ policies set forth changes to existing DOJ policies through a “combination of carrots and sticks – with a mix of incentives and deterrence,” with the goal of “giving general counsels and chief compliance officers the tools they need to make a business case for responsible corporate behavior” through seven key areas:

The Supreme Court recently granted certiorari in In re Grand Jury to resolve a circuit split regarding what standard governs the application of the attorney-client privilege to dual-purpose communications, that is communications which contain both legal and non-legal advice. The petition was filed on behalf of an unnamed law firm which asserted the privilege in response to a federal grand jury subpoena.

In a brush-back pitch to DOJ opioid initiatives, the U.S. Supreme Court this past June issued an important decision clarifying the mental state the government must establish to convict a licensed medical professional of illegal drug distribution under the federal Controlled Substances Act (“CSA”). No longer can a doctor be convicted of such a crime based on objectively unreasonable prescribing practices alone. The government now must show that the medical professional subjectively, knowingly, and intentionally prescribed a controlled substance with no legitimate medical purpose. While unlikely to materially impact the number of DOJ opioid prosecutions, the case will no doubt inform charging decisions in marginal cases and will support important defense arguments at trial.

On April 20, 2022, the U.S. Department of Justice (“DOJ”) announced a nationwide coordinated law enforcement action to combat health care-related COVID-19 fraud. In line with the announcement, the federal government has continued throughout this year to focus its enforcement on fraud in the COVID-19 space, particularly on misuse of Provider Relief funds and COVID-19 testing fraud.

Last week, the U.S. Department of Justice’s Deputy Attorney General Lisa Monaco announced plans to increase its enforcement of white collar crimes against individuals and corporations. Monaco made the announcement speaking at the American Bar Association’s While Collar Crime Conference. She made clear to “those of you who are counselors and voices in the C-Suite and Boardroom” that DOJ “will not hesitate to take action when necessary to combat corporate wrongdoing.”

Monaco, DOJ’s second in command, is no stranger to prosecuting corporate crimes having ...

Our colleague Lauren Petrin of Epstein Becker Green has a new post on Health Law Advisor that will be of interest to our readers:  "DOJ's Recent Telehealth Enforcement Action Highlights Increased Abuse of COVID-19 Waivers."

The following is an excerpt:

On May 26, 2021, the Department of Justice (“DOJ”) announced a coordinated law enforcement action against 14 telehealth executives, physicians, marketers, and healthcare business owners for their alleged fraudulent COVID-19 related Medicare claims resulting in over $143 million in false billing.[1] This coordinated ...

Our colleague Stuart Gerson of Epstein Becker Green has a new post on SCOTUS Today that will be of interest to our readers: Biden DOJ No Longer Argues That the ACA Is Unconstitutional

The following is an excerpt:

While the Supreme Court is in recess this week, and public attention is drawn to the trial of Donald Trump in the Senate, there is one event at the Court that is worthy of attention, particularly by those who counsel clients in the health care space. In a letter to the Court, the Biden Department of Justice (“DOJ”) has reversed the position that the previous administration had ...

Our colleagues Janene Marasciullo and David J. Clark of Epstein Becker Green have a new post on the Trade Secrets and Employee Mobility blog that will be of interest to our readers: "Less Than a Month After DOJ Brings Its First Wage-Fixing Indictment, DOJ Brings Its First "No-Poach" Indictment."

The following is an excerpt:

In the past month, the U.S. Department of Justice (DOJ) has made good on its 2016 threat, contained in its Antitrust Guidance for Human Resource Professionals (“Antitrust Guidance”) to bring criminal charges against people or corporations who enter into ...

The Paycheck Protection Program (“PPP”) provided forgivable loans to assist small businesses with expenses during the COVID-19 shutdown, seemingly creating a lifeline for many of these enterprises.  As explained here, a borrower could obtain a loan equal to the lesser of $10 million or the sum of its average monthly payroll costs for 2.5 months, (reduced to the extent that any individual was paid more than $100,000 per year) plus the balance of any Economic Injury Disaster Loan received between January 31, 2020 and April 3, 2020.  Like many federal programs, however ...