On February 22, 2023, the U.S. Department of Justice (DOJ) announced a new nation-wide policy to incentivize companies to self-report criminal activity. Among the cited benefits of self-reporting are discounts on fines and non-prosecution agreements. This new policy arrives on the heels of the “Monaco Memo,” issued in September 2022 by Deputy Attorney General Lisa Monaco, which directed each prosecutorial DOJ component to review its policies on corporate voluntary self-disclosures and update to reflect the guidance’s core principles. The policy also is in addition to guidance from Attorney General Merrick Garland, who in December 2022 emphasized prosecutorial leniency in criminal cases. Together, these memos show a shift from prior administrations, which emphasized prosecuting the “most serious, readily provable offense,” not leniency for self-disclosures. Notably, the new policy does not impact individual actors, who, since the 2015 Yates Memo, still are a DOJ priority. Indeed, the new policy emphasizes that crediting voluntary self-disclosure by companies will help DOJ “ensure individual accountability” for individual criminal conduct. We break down key elements of the DOJ’s policy below, including our quick thoughts on how this policy may impact corporate decisions going forward.
Charles Kreindler is a partner in the Governmental Practice in the firm's Los Angeles office. He is also Leader of the White Collar Defense and Corporate Investigations Practice Group.
On Monday, the Supreme Court placed significant limits on the Securities and Exchange Commission’s (“SEC”) ability to seek disgorgement, a powerful tool that often was used more like a penalty than an equitable remedy. The Supreme Court held the SEC may only seek disgorgement of ill-gotten gains that do not exceed a wrongdoer’s net profits and are awarded for victims under 15 U.S.C. §78u(d)(5)’s provision of equitable relief. This opinion reaffirms the SEC’s power to seek disgorgement of ill-gotten gains through civil actions as equitable relief, eliminating any doubt created by its prior opinion in Kokesh v. SEC. However, the Supreme Court left a few key questions for lower courts to decide, such as what may be considered legitimate expenses and deducted from a disgorgement award, and whether the Government can retain the funds disgorged by the defendants. The resolution of these issues may provide additional relief to future defendants in SEC enforcement cases.
Continue Reading Supreme Court Limits SEC’s Authority to Disgorge Ill-Gotten Gains in Civil Suits
With the Department of Justice’s (DOJ) decision to drop charges against Michael Flynn, materiality has come to the forefront of popular legal discourse. At the same time, prosecutors and whistleblowers will carefully consider enforcement/false claims actions against entities who may have wrongfully received relief funds under the Coronavirus Aid, Recovery, and Economic Stability Act (CARES Act). Such actions likely will turn on whether alleged misrepresentations were materially false. Those applying for CARES Act funds, such as those under the Paycheck Protection Program (PPP), must ensure all of their representations and certifications are truthful. However, those accused of making misrepresentations in order to receive government funds may find refuge in a more narrow view of the materiality requirement.
Continue Reading Materiality Concerns For CARES Act Enforcement Cases
The C-Suite rarely wants to consider, much less worry about, the impacts of criminal conduct on their business. The reality is, however, companies can and do get pulled into criminal and quasi-criminal enforcement actions as both victims and (albeit unintentional) perpetrators. Two areas of criminal conduct that perhaps do not receive the amount of C-Suite attention they deserve are internal trade secret theft and human trafficking.
Continue Reading How to Prevent or Defend Against Business Crimes, including Trade Secrets and Human Trafficking
The Federal False Claims Act (“FCA”), 31 U.S.C. § 3729, et seq., has unique procedural aspects that come into play when a private whistleblower (the “relator”) seeks to sue on behalf of the Government. One of these, the so-called “first-to-file” bar, applies when two “related” whistleblower actions are filed: “When a person brings an [FCA action], no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U.S.C. § 3730(b)(5). The circuits are split as to whether the bar applies only while the first-filed action is “pending,” or applies even if the first-filed action has been dismissed. For example, the Fourth Circuit held “that once a case is no longer pending the first-to-file bar does not stop a relator from filing a related case.” U.S. ex rel. Carter v. Kellogg Brown & Root Servs., Inc., 710 F.3d 171, 181, 183 (4th Cir. 2013), cert. granted, 134 S. Ct. 2899, 189 L. Ed. 2d 853 (2014). On the other hand, the D.C. Circuit expressly disagreed with Carter, rejecting the concept that the first-to-file bar is a “temporal limit” to related suits, and concluding that related actions are barred “regardless of the posture of the first-filed action.” U.S. ex rel. Shea v. Cellco P’ship, 748 F.3d 338, 343-44 (D.C. Cir. 2014), reh’g denied en banc (July 16, 2014). In finding that the statutory reference to “pending action” means the first-filed action, the D.C. Circuit noted that its interpretation “better suits” the policy of the bar—to prohibit subsequent private actions once the Government is on notice of the fraud. The Supreme Court’s July 1, 2014 grant of certiorari to review the Fourth Circuit’s decision in Carter should resolve the circuit split.
Continue Reading You Again?: Application of the First-to-File Bar Where Subsequent Actions Are Brought By the Same Relator
In February 2013, we reported (on our Healthcare Law Blog) that the Centers for Medicare and Medicaid Services (CMS) announced the final rule for the Physician Payments Sunshine Act. In the interest of providing more transparency for patients, the final rule requires pharmaceutical and medical device manufacturers and group purchasing organizations to report payments or transfers of value provided to physicians or teaching hospitals and to report physician ownership and investment interests. The deadline for submission of aggregate data was March 31, 2014, and the deadline for submission of detailed data is June 30, 2014. CMS has already established a website to display that data beginning in September 2014. In the meantime, also in the interest of transparency, on April 9, 2014 CMS touted the “historic” release of data showing utilization, payments, and submitted charges for services and procedures provided by physicians and other health care professionals to Medicare beneficiaries. As claimed by CMS, this data covers “880,000 distinct health care providers who collectively received $77 billion in Medicare payments in 2012, under the Medicare Part B Fee-For-Service program” and will enable “a wide range of analyses that compare 6,000 different types of services and procedures provided, as well as payments received by individual health care providers.” (See press release. The data is available here.) The consequences of such unprecedented releases of payment/investment interest and Medicare billing data are significant.
Continue Reading Cloudy Skies Ahead for Providers? CMS’ Release of Medicare Billing Data Combined with Physician Payment Sunshine Act Data May Boost Fraud Litigation
On March 10, 2014, just days before trial, Halifax Hospital Medical Center and Halifax Staffing, Inc. (collectively “Halifax”) entered into an $85 million settlement with the U.S. Department of Justice resolving allegations that they violated the False Claims Act (“FCA”) by submitting Medicare claims that violated the Stark law. See Notice of Settlement and Settlement filed in U.S. ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, Civ. Act. No. 6:09-CV-1002 (M.D. Fla.) The settlement effectively ended a qui tam action that had been filed by an insider in June 2009. The Government had intervened based on employment agreements with six medical oncologists that compensated the physicians based on the operating margin of Halifax’s medical oncology program. The compensation arrangement, referred to as an “Incentive Bonus,” covered a four-year period—from 2005-2008. There are a few lessons to be learned from this case.
Continue Reading How Are Your Physicians Compensated? Stark Law + False Claims Act = Halifax Paying $85 Million