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The Justice Department’s Criminal Division recently announced that it is committing more resources and “stepping up” its review of cases filed under the civil False Claims Act for potential criminal prosecutions. The announcement formalizes the government’s recent trend to open parallel criminal investigations for qui tam whistleblower lawsuits. Last year alone, approximately 750 qui tam lawsuits were filed by whistleblowers—more than two per day. The potential impact on businesses, particularly healthcare providers with ties to the government, cannot be overstated and emphasizes the need to have effective compliance programs in place.

Focus on healthcare fraud

Assistant Attorney General for the U.S. Department of Justice's Criminal Division, Leslie R. Caldwell, confirmed the policy in a speech on Sept. 17, 2014 to qui tam plaintiff attorneys in Washington, D.C. Caldwell placed particular emphasis on healthcare fraud, which has accounted for the bulk of the False Claims Act lawsuits and recoveries in recent years. Caldwell cited the success of the Medicare Fraud Strike Force in obtaining approximately 1,400 convictions since 2007 and the Criminal Division’s determination to bring more such cases.

Civil investigations

Dealing with a government civil investigation is difficult enough: government subpoenas; document production; preservation of electronic communications; interviews of employees, suppliers, and customers by federal agents; internal investigation and analysis to assess the allegations; and overall uncertainty of the final outcome. Government investigations can normally last two to four years and longer, diverting a company’s focus and finances from its business to the government’s action.

Criminal investigations

Adding a criminal investigation to the mix significantly compounds the difficulties and raises the stakes more than many people realize. Given the volume and complexities of existing laws, rules, and regulations, one person’s good faith efforts to increase profit can easily be viewed by government officials as an effort to defraud taxpayers. There is often a fine line between a company’s perceived “honest error” and a prosecutor’s charge of “willful blindness” or “intent to defraud.” A criminal investigation also raises Fifth Amendment concerns, reporting requirements to shareholders, future debarment and exclusion possibilities, bad publicity and undue pressure to settle a False Claims action, whatever the merits of the case. This is the new reality that businesses and healthcare providers must contend.

We continue to emphasize the need for businesses to maintain a strong and vibrant compliance program. Whoever the regulators may be (e.g., HHS, CMS, EPA, IRS, OSHA, DoD, OCC, FDIC, state agencies), a strong compliance program is essential to demonstrate to government officials that management has done all it can to prevent errors and deter wrongdoing. Don’t wait for a knock on the door by agents, or a government subpoena in the mail requesting years of records, before taking affirmative steps to protect you organization.

You can read the announcement here.

For more information and to answer your questions, contact one of the attorneys listed below.