Impact of DOJ's Corporate Healthcare Fraud Enforcement Strategies On Providers and Defense Counsel David Douglass Partner, Sheppard Mullin William Pericak Partner, Jenner & Block LLP Leo Reichert Exec. V.P. & General Counsel, WellStar Health System 14 th Annual
Yates Memorandum Issued by DOJ s Deputy General Sally Yates in Sept. 2015 Seeks consistency in efforts to hold to account individuals responsible for illegal corporate conduct Establishes six measures that DOJ attorneys must adopt
DOJ s Policy re Individuals What is DOJ s policy on the relationship between cooperation credit for a company and individual culpability?
DOJ s Policy re Individuals (1) in order to qualify for any cooperation credit, corporations must provide to the Department all relevant facts relating to the individuals responsible for the misconduct;
Civil vs. Criminal? Is the Yates Memo limited to just criminal investigations?
Civil vs. Criminal? The guidance in this memo will also apply to civil corporate matters.
Conflicts Due to Other DOJ Policies Are there other policies or strategies that DOJ is pursuing that could lead to conflicts between the company and its employees?
Proactive Investigations work alongside qui tam counsel AAG Leslie R. Caldwell, Sept. 17, 2014 The [Corporate HCF] unit is staffed by experienced health care fraud prosecutors, who carefully review virtually every False Claims Act lawsuit filed by qui tam relators across the U.S. We now have over a dozen active corporate investigations, and we are steering additional prosecutorial resources to this area. AAG Caldwell, April 18, 2016 Obtain real time data from CMS to create/corroborate investigative leads, identify data outliers and strategic trends, and corroborate fraud tips. AAG Caldwell, April 18, 2016 DOJ is increasingly applying traditional investigative techniques... undercover officers, informants with body wires, bugs in offices, hidden cameras, GPS trackers and many other law enforcement tools in... corporate health care fraud investigations. AAG Caldwell, May 14, 2015
Examples Cases involving fraud by executives at health care providers such as hospitals are also a high priority for us AAG Leslie R. Caldwell, Sept. 17, 2014 Riverside Hospital catalyst - aberrant real time data trends body wire used to record hospital administrator discussing kickback payments; search warrants executed Tenet Hospital catalyst qui tam complaint Government agents confronted hospital administrator and kickback payee; both decided to plead guilty and cooperate
Conflicts What conflicts do you see from the Yates Memo? especially the Memo s requirement that companies turn in their employees?
Upjohn Co. v. United States, 449 US 383 (1981) What are the legal requirements for Upjohn warnings, and are there any other considerations in providing them.
ABA Model Rule 1.13 Organization as Client (f) In dealing with an organization's directors, officers, employees, members, shareholders or other constituents, a lawyer shall explain the identity of the client when the lawyer knows or reasonably should know that the organization's interests are adverse to those of the constituents with whom the lawyer is dealing
Sample Upjohn Warnings How comprehensive should Upjohn warnings be?
ABA White Collar Crime Working Group (2009)
Do I need a lawyer? It s very common for an employee to whom an Upjohn warning is given to ask, Do I need to get my own counsel? How should counsel respond?
ABA Model Rule 4.3 ABA Model Rule 4.3 provides: The lawyer shall not give legal advice to an unrepresented person, other than the advice to secure counsel, if the lawyer knows or reasonably should know that the interests of such a person are or have a reasonable possibility of being in conflict with the interests of the client.
Hypothetical During the course of an interview, an employee asks the interviewers, This is all protected by our attorney-client privilege, right? How should counsel respond?
ABA Model Rules 4.1 and 4.3 In the course of representing a client a lawyer shall not knowingly (a) make a false statement of material fact or law to a third person; (Rule 4.1) When the lawyer knows or reasonably should know that the unrepresented person misunderstands the lawyer s role in the matter, the lawyer shall make reasonable efforts to correct the misunderstanding. (Rule 4.3)
Should counsel tell employees about the Yates memo? and say they will serve the employee up in order to save the company?
Ethical Implications
Who pays for the lawyer? Another question employees sometimes ask is, if I get a lawyer, Who will pay my legal fees? Should companies pay for counsel for their employees? Should companies purchase D&O insurance policies?
Joint Representation Should the lawyer who represents the company also represent the employees?
Model Rule 1.7: Conflict of Interest: Current Clients (a) Except as provided in paragraph (b), a lawyer shall not represent a client if the representation involves a concurrent conflict of interest. A concurrent conflict of interest exists if: (1) the representation of one client will be directly adverse to another client; or (2) there is a significant risk that the representation of one or more clients will be materially limited by the lawyer's responsibilities to another client, a former client or a third person or by a personal interest of the lawyer.
Common Interest and Joint Defense Agreements What is a common interest agreement and should the Company enter into a common interest agreement with its employees?
Does DOJ Have a Policy on Joint Defense Agreements ( JDAs ) Frequently Asked Questions About the Yates Memo https://www.justice.gov/dag/individualaccountability/faq
DOJ s JDA Policy Q. Can a cooperating company enter into a [JDA] with individuals counsel? A. mere participation in JDA agreement does not render the corporation ineligible to receive cooperation credit and prosecutors may not request that a corporation refrain from entering into such agreements. USAM 9-28.730. Of course, entering into [JDA] has the potential to complicate a corporation s ability to cooperate, and, therefore, the corporation may wish to avoid putting itself in the position of being disabled... from providing some relevant facts to the government and thereby limiting its ability to seek such cooperation credit. Such might be the case if the corporation gathers facts from employees who have entered into a joint defense agreement with the corporation, and who may later seek to prevent the corporation from disclosing the facts it has acquired. Id. Ultimately, [c]orporations may wish to address this situation by crafting or participating in joint defense agreements, to the extent they choose to enter them, that provide such flexibility as they deem appropriate. Id.
Termination or Other Discipline? If employee declines to be interviewed by company counsel refuses to cooperate in government investigation is believed by company to be culpable can/should company terminate employment? can/should company discipline employee? can/should company refuse to pay legal fees?
Frequently Asked Question #3 [A] company is not required to take specific actions against employees... to obtain cooperation credit. But, [a] corporation's response to misconduct says much about its willingness to ensure that such misconduct does not recur. Therefore, prosecutors should consider whether the corporation appropriately disciplined wrongdoers, once those employees are identified by the corporation as culpable for the misconduct.
United States v. Embraer S.A.
20% Discount Reflects Full Cooperation but Incomplete Remediation
False Claims Act Anti-Retaliation FCA protects employee from being discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated against in the terms and conditions of employment by his or her employer because employee investigated, reported or sought to stop an employer from engaging in practices which defraud the United States.
Waiver of Privilege What is DOJ s position on whether a company must waive privilege, if waiver is not required, what kind of cooperation does DOJ expect of the company?
Frequently Asked Question #3 Receiving cooperation credit is in no way contingent on a waiver of either the attorneyclient or the work product privilege. Now, as before, prosecutors should not ask for such waivers and are directed not to do so. Exception - prosecutor may ask corporation for privileged communications allegedly supporting advice of counsel defense - USAM 9-28.720(i)
SEC Enforcement Manual, 4.3 requires staff to respect legitimate assertions of the attorney-client privilege and attorney work product protection, but adds: The staff should not ask a party to waive the attorney-client privilege or work product protection without prior approval of the Director or Deputy Director. A proposed request for a privilege waiver should be reviewed initially with the Assistant supervising the matter and that review should involve more senior members of management as appropriate before being presented to the Director or Deputy Director.
Disclosing Facts How exactly does counsel disclose facts without waiving privilege? does counsel provide a copy of the memos? read the memos to the government? something else? does that result in a privilege waiver?
Interview Memoranda vs. Oral Downloads interview memoranda given to gov t; privilege waived United States v. Treacy, 2009 WL 812033 (S.D.N.Y. 2009). oral download verbatim reading of written memorandum - privilege waived. S.E.C. v. Vitesse Semiconductor Corp., 2011 WL 2899082 (S.D.N.Y. 2011) oral download - general impressions - but did not relay interviews in substantial part, no waiver. S.E.C. v. Vitesse Semiconductor Corp., 2011 WL 2899082 (S.D.N.Y. 2011); United States v. Treacy, 2009 WL 812033 (S.D.N.Y. 2009).
Hypothetical Proffers oral hypothetical proffer of what witness might say if DOJ were to speak to witness United States v. Camacho, 2004 WL 1367457, at *4 (S.D.N.Y. 2004).
Should the company be concerned about waiving privilege, or is that just a lawyer s concern?
Subject Matter Waivers Where there is a waiver, is it a subject matter waiver?
Fed. R. Evid. 502(a) (a) Disclosure Made in a Federal Proceeding or to a Federal Office or Agency; Scope of a Waiver: When the disclosure is made in a federal proceeding or to a federal office or agency and waives the attorney-client privilege or workproduct protection, the waiver extends to an undisclosed communication or information in a federal or state proceeding only if: (1) the waiver is intentional; (2) the disclosed and undisclosed communications or information concern the same subject matter; and (3) they ought in fairness to be considered together.
Fed. R. Evid. 502(d) (d) Controlling Effect of a Court Order. A federal court may order that the privilege or protection is not waived by disclosure connected with the litigation pending before the court in which event the disclosure is also not a waiver in any other federal or state proceeding. S.E.C. v. Bank of Am. Corp., No. 09 CIV. 6829 (JSR), 2009 WL 3297493, at *1 (S.D.N.Y. Oct. 14, 2009).
Clawbacks and Quick Peeks Does Rule 502 permit clawbacks and quick peeks?
Advisory Committee Notes the rule [Fed. R. Evid. 502] contemplates enforcement of claw-back and quick peek arrangements as a way to avoid the excessive costs of pre-production review for privilege and work product. citing Zubulake v. UBS Warburg LLC, 216 F.R.D. 280, 290 (S.D.N.Y. 2003) The rule provides a party with a predictable protection from a court order predictability that is needed to allow the party to plan in advance to limit the prohibitive costs of privilege and work product review and retention.
How to Get a Rule 502 Order What litigation is pending before the court that would allow a court to enter a 502 order in connection with a proffer to DOJ regarding the results of an internal investigation?
Cooperate or Not Can/should a company decline to cooperate?
USAM 9-28.720 Companies like individuals are not required to cooperate. FAQ #2 government cannot compel and corporation has no obligation to make disclosures of facts (although the government can obviously compel the disclosure of certain records and witness testimony through subpoenas) corporation's failure to provide relevant information about individual misconduct alone does not mean the corporation will be indicted. It simply means that the corporation will not be entitled to mitigating credit for that cooperation.... [E]ven the most sincere and thorough effort to cooperate cannot necessarily absolve a corporation that has, for example, engaged in an egregious, orchestrated, and widespread fraud. Cooperation is a potential mitigating factor, but it alone is not dispositive.
Petro Tiger vs. Alstom https://www.justice.gov/opa/speech/assistant -attorney-general-leslie-r-caldwell-deliversremarks-american-conference
What if the only evidence of an inculpatory fact comes from the employee s oral admission to counsel, and without waiver there effectively can be no prosecution? Does that change anything?
Frequently Asked Question #5 Where a company genuinely cannot get access to certain evidence or is actually prohibited from disclosing it to the government the company will bear the burden of explaining the restrictions it is facing to the prosecutor. The prosecutor will make a determination, based on all the circumstances, about the validity of the claim, and discuss an appropriate resolution with company counsel. In instances where there is a claim of privilege over one or more relevant facts, counsel for the corporation must let the prosecutor know about the existence of and basis for such a claim, so that the prosecutor is aware that there are relevant facts that are not being provided and has an opportunity to understand the basis for the claim of privilege.
Pre-existing Compliance Program Olympus Corporation of America $623M Fine, DPA, Monitor [Olympus] dropped the compliance ball and failed to have in place policies and practices that would have prevented the substantial kickbacks and bribes they paid U.S. Attorney Paul Fishman, 3/1/2016 It is appropriate that they be punished for that. At the same time, the deferred prosecution agreement takes into account the companies cooperation and commitment to fully functional corporate compliance.
Pressure Testing Pressure testing can: uncover trouble and provide opportunity to self report avoid paper tiger label on compliance program provide post-transaction tangible evidence of third party s work product A company should conduct periodic reviews and testing of its compliance code to improve its effectiveness in preventing and detecting violations. Kick the tires regularly. AAG Caldwell, 10/1/2014 Erin Schrantz, Pressing the Soft Spots, Corporate Counsel December 26, 2013 (recommending risk-based audit as an effective tool to measure efficacy of compliance program)
Hui Chen s Questions How thoughtful is your design? Does it address the wrongful conduct in first place Is there a match between program and conduct Who owns the different pieces of the program How well have you dialogued with stakeholders in design of program How operational is your program? payment, HR, vendor mgt. systems, audit & investigation processes Is compliance tied to approval & necessary to complete transaction How well do your stakeholders communicate with each other? Finance, Legal, HR, audit, investigations Do employees feel free to raise issues? Whistleblower program? How are incentives communicated? How well-resourced is your program? $, attention, commitment (how often are Board, CEO briefed) Are they based on data collection? Anecdotes? Want to see real attention