Recent Compliance Updates & Tips
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Michael Granston, Director of the Department of Justice (DOJ) Civil Fraud Section, recently issued an internal “general framework” memorandum (“Granston Memo”) for DOJ litigators to use when they evaluate qui tam (“whistleblower”) cases under the federal False Claims Act (FCA). When qui tam suits are initiated, the DOJ can join the litigation or decline to intervene. The latter option permits the whistleblower (or “relator”) to proceed alone on the government’s behalf. The Granston Memo outlines circumstances where the DOJ should seek dismissal of a case rather than allow the relator to pursue the case further. The DOJ has not commonly used this power in the past, and relators are ordinarily left to pursue the case on their own.
This Granston Memo now encourages DOJ attorneys to dismiss qui tam cases that lack substantial merit. It notes that the DOJ has seen “record increases” in qui tam actions in the past few years. Since January 1, 2012, relators have voluntarily dismissed over 700 qui tam actions after learning that the DOJ declined to intervene. However, even when the DOJ chooses not to intervene, it expends substantial resources to monitor cases and comply with discovery requests, among other responsibilities. Additionally, the Granston Memo notes that cases without merit can “generate adverse decisions” that affect the DOJ’s ability to enforce other merited claims.
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Fraud Cases Involving Qui Tam Lawsuits
In an end-of-the-year report, the DOJ Civil Division announced that it recovered over $3.7 billion from civil FCA and fraud cases for the fiscal year. Particularly noteworthy is the fact that ninety-two (92%) percent of these recoveries came from qui tam lawsuits under the FCA. During this past year alone, qui tam relators filed 669 suits, averaging approximately 12 new cases every week. Significantly, nearly two-thirds of the total settlements and judgments involved the health care industry, including drug companies, hospitals, pharmacies, laboratories, and physicians. The great majority of civil fraud cases implicated the Anti-Kickback Statute, and nearly all major settlements with the DOJ are referred to the Department of Health and Human Services (HHS) Office of Inspector General (OIG) for Corporate Integrity Agreements.
In this compliance environment, organizations should resolve problems that may provide the impetus for someone to become a qui tam relator. The Granston Memo calls for the DOJ to dismiss relators who bring information that lacks sufficient merit or is already known to the government. Further, it recommends the dismissal of cases where the entity has taken steps to resolve problems through other government channels. Therefore, it is critical to channel potential whistleblowers internally and ensure allegations are investigated quickly. Compliance officers should remember the following key facts: (a) nine out of ten FCA cases originate through whistleblowers; (b) health care cases are predominant; (c) most qui tam relators claim that they were compelled to report externally, as internal reporting was not a credible option; and (d) most employees do not trust an internally operated hotline. When a DOJ investigation identifies potential violations, they are promptly disclosed to an appropriate agency for resolution.
16 Tips for Compliance Officers
- Provide a 24/7 hotline that is externally operated;
- Review and update hotline-related policies/procedures (confidentiality, anonymity, non-retaliation, duty to report policies, etc.);
- Expand compliance communication channels beyond just the hotline;
- Re-evaluate the effectiveness of compliance communication channels;
- Consider engaging experts to evaluate the effectiveness of compliance communication channels;
- Ensure that reporting of suspected wrongdoing is stressed in the Code of Conduct, policies, and training;
- Promote the reporting of wrongdoing (through newsletters, the intranet, training programs, etc.);
- Find ways to provide feedback so that employees feel that their reporting is taken seriously;
- Promptly investigate allegations of potential violations of law or regulations;
- Review and update investigation and resolution of allegations policies/procedures;
- Ensure that individuals are trained and competent to conduct prompt investigations;
- Consider having on-call expert investigators to assist, if needed;
- Take appropriate disciplinary action against identified wrongdoers;
- Promptly disclose all cases where investigation indicates potential violations;
- Understand CMS and OIG self-disclosure protocols that may avoid FCA investigation; and
- Promptly disclose investigations finding potential violations of law to the DOJ.
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