Defending Health Care Investigations Bart Daniel Cory Manning - - PowerPoint PPT Presentation

Defending Health Care Investigations

Bart Daniel Cory Manning

North Carolina Healthcare Association South Carolina Annual Meeting October 28, 2019

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Introduction to Health Care Fraud Investigations

• Why such aggressive health care fraud enforcement?
• Healthcare spending today = 18% of GDP

▪ $3.5 Trillion or more than $10 G per person

• 2018: Civil fraud recoveries more than $2.5 Billion
• Since the 1986 Amendments to False Claims Act,

health care fraud recoveries have exceeded $38 Billion

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Intro to Health Care Fraud Investigations

• Since HIPAA & ACA were enacted, civil and criminal enforcement

has increased exponentially

• ROI more than $9.00 for every $1 Congress invested

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Intro to Health Care Fraud Investigations

• Difficult to separate Civil from Criminal health care fraud

investigations

• Most begin as both
• Civil AUSA’s work closely with criminal counterparts
• OIG & FBI Agents are same in both investigations
• Agents & Prosecutors have formed well-trained teams with

enhanced weapons

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Intro to Health Care Fraud Investigations

• Prosecutors, Agents & Auditors employ a holistic

approach:

• Criminal Prosecution
• Civil Judgments
• Payment Suspensions
• Restitution
• Forfeiture
• Exclusion

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How an Investigation Begins

• Early Warning Signs:
• Independent Audit under the Recovery Audit

Contractor Program (RAC’s)

• Administrative Demands
• Civil Investigative Demands
• Agent Interviews
• Grand Jury Subpoenas
• Target or Subject Letters
• Execution of Search Warrants

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How an Investigation Begins

• Federal Grand Jury Investigations
• Powerful investigative tool
• Can compel witness testimony & document

production

• Power and limitations
• Who may be present

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Investigation Basics

• Whether to perform an investigation
• Investigative scope
• Developing a plan
• Documents and electronically stored information
• Interviewing witnesses
• Dialoguing with regulators
• Documenting the process

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Whether to Investigate

• Should we conduct an internal investigation?
• Possible bases for such an inquiry:
• Notice from DOJ or regulator—FBI, OIG, IRS, SEC, DOD, EPA,

OSHA, FDIC, OCC, DOR (state), DHEC (state) ▪ Target or Subject letter ▪ Administrative Demand ▪ Civil Investigative Demand ▪ Grand Jury Subpoena ▪ Execution of Search Warrant

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Whether to Investigate

• Should we conduct an internal investigation?
• Possible bases for such an inquiry:
• Finding from an internal audit
• Whistleblower—noisy resignation letter, exit interview,

hotline message, complaint to human resources

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Whether to Investigate

• Determine next steps by reference to facts rather than

assurances or pledges about the existence and efficacy of compliance programs or controls.

• A sound factual basis is critical in showing that the

company’s response to allegations was appropriate, reasonable, and informed.

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Investigative Scope

• Make the scope broad enough to capture all relevant

facts to allow the board to make an informed and reasonable conclusion and response to the allegations.

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Investigative Scope: Considerations

• Expense
• Both in terms of disruption and hard dollars
• This is often the first thing companies consider, which

can result in an overly narrow scope.

• Expanding the scope later almost always costs more.

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Investigative Scope: Considerations

• Cooperation Optics
• Scope limitations are often considered by regulators in

determining the level of cooperation provided by a subject or witness in an investigation.

• Avoid artificial limitations.
• Consider communicating with the regulator on the front

end with respect to scoping decisions.

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Investigative Scope: Considerations

• Timing
• Time constraints work against making a final scoping

determination at the outset of an investigation.

• Determine the scope at the outset and consider it an

initial scope.

• Identify certain events, facts, or findings that could affect

the scope.

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Investigative Scope: Considerations

• Geographic and Temporal Scope
• Identify all offices and individuals that may have

documents and other electronic information.

• Determine a timeline of events related to the

investigation and use that timeline to define the scope.

• This will inform what documents to collect and which

individuals to interview.

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Investigative Scope: Considerations

• Geographic and Temporal Scope
• Even if the regulator identifies a particular time frame,

such a communication is almost always followed the question, “Did you find anything else?”

• There is no substitute for the nimble exercise of good

judgment to go beyond (as appropriate) a time frame suggested by a regulator.

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Investigative Scope: Considerations

• Documentation
• Internally document the scoping decisions that are

made, including any events that may change the scope

• f the investigation.
• Such documentation will be subject to the attorney-

client privilege and/or the work product doctrine.

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Developing a Plan

• Inform the Board
• Inform the entire board if a committee alone made the

decision to move forward with an investigation.

• Every investigation may not require board involvement.
• Any significant investigation (e.g., those involving senior

management or allegations that may have a material affect on the company’s financials) will almost always require board involvement and/or approval.

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Developing a Plan

• Stop the Alleged Conduct or Practice
• This seems obvious, but it can be overlooked in the rush

to get the investigation started or the desire to perform the investigation (at least initially) behind the scenes.

• This directive is most effective when it comes from the

board or similar authority.

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Developing a Plan

• Select an Oversight Committee
• This depends on the issue(s) being investigated.
• Selection should be driven by independence and

disinterestedness.

• Guidance from the Securities and Exchange Commission

suggests a committee made up solely of outside directors.

• Best practice is to have all but the most minor of

investigations overseen by a committee of outside directors,

• ften from the audit committee.

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Developing a Plan

• Who’s the client?
• This is usually the company as an entity rather than any

specific individual.

• In situations involving derivative claims, the “client” is
• ften defined as the oversight committee designated by

the board.

• Yates Memo considerations will often be part of this

“client identification” discussion.

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Developing a Plan

• Identify and Engage Investigation Leaders
• External or internal counsel?

▪ Certain matters may be appropriate for in-house counsel in coordination with the audit committee or selected persons from human resources.

• Corporate counsel or another firm?

▪ Depends on the nature of the allegations—common refrain ▪ If related to disclosures in public filings (in which corporate counsel would have been involved), it is often better to select other independent counsel.

• Who will assist outside counsel?
• What does the flow of information and chain of command look like internally?

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Developing a Plan

• Identify and Inform “Need to Know” Individuals
• Those individuals critical to the fact-gathering

process—e.g., the CFO or controller if the allegations are focused on financial irregularities.

• These individuals will be part of the core

investigative team and will assist outside counsel in conducting the investigation.

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Developing a Plan

• Determine Internal/External Messaging Strategies
• At the appropriate time, the internal message needs to inform employees

without paralyzing the organization. ▪ Factual information with the requisite emphasis on confidentiality are critical elements of this message. ▪ The message should also convey that total cooperation is expected and that the information should not be discussed with anyone other than the general counsel or other need-to-know persons who are part of the core investigative team. ▪ Caution favors notifying company auditors as soon as possible about any issues that may raise material questions about the company’s financial statements.

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Developing a Plan

• Determine Internal/External Messaging Strategies
• The external strategy needs to consider several factors:
• 1. Materiality—from a disclosure standpoint
• 2. Confidentiality concerns
• 3. Commercial reputation
• 4. Cooperation optics

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Developing a Plan

• Early consideration of a strategy (as opposed to early

external disclosure) is important, because any comments made by company spokespersons may be treated as admissions by the company or cross-examination fodder against the speaker.

• The baseline external message should convey the

company’s commitment to honesty, a full investigation, and a desire to remedy any violations that might be uncovered by the investigation.

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False Claims Act

• False Claims Act (FCA) imposes liability for submitting a False

Claim to the government

• Treble Damages
• $10,781 - $21,563 per claim

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False Claims Act

• Background of FCA
• Enacted during Civil War due to defective

munitions sold to the Union

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False Claims Act

• 1986 Amendments:
• Lowered Burden of Proof from “clear & convincing” to by a

“preponderance of the evidence”

• Established liability for deliberate ignorance and reckless

disregard: Obliterated Ostrich Defense

• Imposed:

▪ Treble Damages ▪ Civil Fines $10,781 - $21,563

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False Claims Act

• 2009: Amended the “intent” requirement
• Only needs to be “material to the claim”
• 2010: Reverse False Claim
• If Government mistakenly overpays, provider has 60 days to

return payment or subject to civil liability & criminal prosecution

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What to do First when Learn of Investigation

• Contact experienced White Collar Counsel
• Institute a Legal Hold (document preservation)
• Contact the AUSA or other agent directing the investigation
• Counsel should meet with the AUSA as soon as possible to

determine the nature & scope of the investigation

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Protecting Privilege

• Allow outside counsel to retain all consultants
• CC outside counsel
• Educate employees
• Benefit of communications or public relations consultant
• Execute Joint Defense Agreement (JDA)

33

Individual Counsel

• Consideration if there is a criminal investigation
• Importance of "team players"
• JDA: allows counsel to work together & share info while

protecting Attorney-Client Privilege; Loyalty to individual clients: all spelled out in JDA

• Coordination through company lawyer
• No surprises

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Working with Government Investigators & Prosecutors

• Role of counsel
• Promptness
• Constant communication
• Message of cooperation; cannot retrieve hand grenade once

thrown

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Prepping Employees

• Beating investigators to the punch
• Inform employees of right not to talk to agents
• Furthers internal investigation

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Communications and Public Relations

• Benefits of early retention
• Define message
• Diffuses employee apprehension
• Preserve privilege by having consultant work under the direction
• f and report to counsel

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Documents and Electronically Stored Information

• Issue a legal hold/preservation notice to all individuals who

might have relevant information or access to systems that contain relevant information.

• Hard copy and all electronically stored information (“ESI”) must

be preserved.

• Documents located in file cabinets, desk drawers, off-site

filing storage warehouses, hard drives (local and public), mobile devices, and cloud servers. Everywhere.

• Consider whether to “image” certain devices at the outset in
• rder to ensure preservation for later review.

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Documents and Electronically Stored Information

• Do not “fire off and forget” the legal hold memorandum or

request for relevant documents.

• Counsel should participate in the gathering process by at

least confirming frequently that the preservation notice is being heeded and that the requested documents are being provided. Qualcomm Order.

• It is often preferred that counsel participate in the

gathering of documents—face-to-face.

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Documents and Electronically Stored Information

• Suspend all routine and non-routine document deletion

protocols and identify all backup processes in place.

• Make sure the legal hold remains in place until the

company and investigation counsel are comfortable that no further regulatory action (or related private litigation) is forthcoming.

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Documents and Electronically Stored Information

• Protect attorney-client and work product privileges
• Identify all attorneys who are most likely to have privileged

communications and all non-attorneys close to the issues and necessary for the investigation.

• Preserve the privileges by having attorneys and/or outside

counsel instruct all non-attorneys in all activities that are relevant to the investigation.

• Allow outside counsel to retain all consultants/experts.
• Execute joint defense agreements where appropriate.

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Documents and Electronically Stored Information

• Remember who the client is.
• If the company is the client, then the company owns the

privileges that protect documents and communications.

• This must be clearly communicated to individuals involved in

the investigation.

• Failure to provide this communication could result in the

discovery of witness statements in subsequent litigation or regulatory actions.

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Interviewing Witnesses

• Prepare, prepare, prepare
• Efficiency sometimes requires that interviews proceed

without a full review or understanding of the available documentary evidence; however, this should be the exception rather than the rule.

• Failure to comprehend the available documentary

evidence can result in repeated interviews or misinformed updates to regulators.

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Interviewing Witnesses

• Provide an Upjohn Warning
• This is a set of specific disclosures to witnesses designed to preserve the

company’s privilege.

• Make clear to the witness the following:

1. You are the company’s attorney; you are not the witness’s attorney. 2. That the discussion is privileged and the witness should not disclose the contents of the discussion to anyone other than a

• utside or in-house counsel.

3. That the witness understands that the company “owns the privilege” and that the company has the right to waive the privilege and disclose the substance of the interview to the regulator or

• ther third parties.

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Interviewing Witnesses

• Impact of the Yates Memo
• DOJ guidance that U.S. Attorneys and AUSAs should

target individuals (CEO, CFO, responsible corporate

• fficers) and organizations
• May impact cooperation credit
• Highlights the importance of separate counsel

45

Interviewing Witnesses

• Emphasize the importance of cooperation
• An employee should understand that his or her cooperation is expected.
• It is appropriate to have company general counsel in attendance at the

interview to state this expectation and note that any failure to provide such cooperation could result in disciplinary action. ▪ A less aggressive way to encourage candor and cooperation is to interview employees outside of the presence of senior executives. ▪ For example, have the general counsel provide the statement referenced above and then excuse herself from the remaining portion of the interview.

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Interviewing Witnesses

• Staff the interview with two attorneys from the investigative team.
• One questions and the other takes notes.
• Observing demeanor is difficult while one is attempting to

memorialize a conversation.

• The scrivener can also focus on incorporating his or her mental

impressions (as opposed to merely transcribing the interview) to help protect the notes as work product.

• Finally, this structure provides two sets of ears for receiving the

witness’s answers.

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Dialoguing with Regulators

• Developing a rapport with regulators is important for

several reasons.

• Addressing the regulator’s concerns
• Conveying an attitude of cooperation and candor
• Managing the regulator's expectations with respect to

timing and results

• Providing necessary context for any eventual finding

meeting or presentation

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Dialoguing with Regulators

• Several points should be addressed at the initial discussion with

the regulator:

• Scope—discuss and seek regulator input
• Plan—outline a plan to demonstrate that you have a

reasonable and defensible process in place

• Constraints—possible inability to retrieve documents or

interview witnesses

• Timing—expectations on status updates and deliverables

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Avoid Pitfalls

• Paralyzing the Company
• Failing to have a deployable plan in place can paralyze a

company involved in an internal investigation.

• Take action based on solid facts and balance efficiency

with efficacy.

• Strive not to repeat interviews or document gathering

exercises—i.e., have a plan and execute.

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Avoid Pitfalls

• Misdefining and Failing to Redefine the Scope
• It is important to reevaluate the scope of the

investigation at certain points and be willing to adjust course as new information is uncovered.

• Ignoring new issues that may be outside of the current

scope risks extending the length and cost of an investigation or worse, failing to satisfy the regulator’s inquiry, calling the entire investigation into question.

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Avoid Pitfalls

• Failing to Build a Rapport with the Regulator
• The importance of this cannot be understated.
• Not only do rapport-building communications like regular

updates and scoping discussions demonstrate that the company is serious, but they also show an interest in getting to the truth.

• Communications showing that the company understands

that the regulator has a job to do will go a long way in building the trust necessary for the regulator to view the investigation as one having integrity.

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Federal Sentencing Guidelines

• Federal Sentencing Guidelines (FSG’s) est. 1991
• Purpose: Defendants across USA accused of similar crimes should

receive similar sentences

• Abolished Parole
• Judges required to sentence Defendants within a narrow

Guideline Range ▪ If Judge sentenced below FSG, Government could appeal ▪ If Judge sentenced above FSG, Defendant could appeal

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Federal Sentencing Guidelines

• 2005: Booker v. USA
• Judge Thomas wrote unanimous opinion
• Unanimous Supreme Court ruled FSG cannot be mandatory b/c

that would be unconstitutional under separation of powers doctrine

• FSG’s should be advisory and given the same weight as the

“traditional” factors in sentencing as contained in 18 U.S.C. § 3553

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Federal Sentencing Guidelines

• 2007: Gall v. USA
• Sentencing Judge can only be overturned if there was an

abuse of discretion

• FSG’s driven by the dollar amount of the fraud
• Starting: Base offense level – 7

Amount of fraud > $250G but ≯$550 - +12

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FSG Worksheet

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Collateral Consequences

• Payment Suspensions
• Civil Forfeiture
• Criminal Forfeiture
• Federal Exclusion
• Mandatory
• Permissive
• If FCA liability: payment of Relator’s attorney’s fees
• Professional licenses & certifications: potential sanctions

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Questions?

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Contact Information

Bart Daniel

(843) 534-4123 bart.daniel@nelsonmullins.com Charleston, SC

Cory Manning

(803) 255-5524 cory.manning@nelsonmullins.com Columbia, SC

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