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How to Avoid False Claims Act Exposure: Effective Tools for Prevention, Investigation, and Resolution Presented By: Deborah Goldstock Ringel, Senior Legal Counsel, Accenture LLP Steven Kaufmann, Partner, Morrison & Foerster LLP Stacey Sprenkel, Partner, Morrison & Foerster LLP September 16, 2015
Civil False Claims Act - 31 USC 3729 The Civil False Claims Act creates liability against any person who knowingly submits a false claim to the government; knowingly makes a false record or statement to get a false claim paid by the government; conspires with another to violate the FCA Knowingly actual knowledge deliberate ignorance of the truth or falsity of the information reckless disregard of the truth or falsity of the information Implied Certification an entity that merely requests payment from the government without disclosing a known breach of a material term can violate the FCA 3
States With Their Own False Claims Statutes 4
FCA: DOJ s Civil Weapon of Choice Substantial exposure $45 billion in federal civil recoveries since 1987 Treble damages (i.e., three times actual damages) Fines of $5,500 to $11,000 for each false claim Attorneys fees and costs to prevailing plaintiff Suspension and debarment 5
Recent Flood of FCA Lawsuits More than 700 new FCA matters initiated each year In 2014, 804 suits were filed, more than 700 were filed by qui tam relators Vast majority of these are brought by qui tam relators $5.7 billion in FCA settlements and judgments in 2014 alone $435M went to qui tam relators 87% Qui Tam Relators 6
Managing Your Risk ü Tone from the top Establish an effective program for complying with laws and regulations Supervision Policies and procedures for audits Conduct regular trainings Conduct periodic compliance audits Privilege Emphasize importance of regular timekeeping and billing under government contracts Maintain close oversight of subcontractors and their billing practices Include indemnification provisions in government subcontracts 7
Managing Your Risk (cont d.) ü Tone from the top again Detailed reporting procedures, including procedures to evaluate and address issues when identified Ethics hotline In-person reporting Training and Support Conduct internal investigations when necessary Secure your information Closely monitor settlements and unsealed cases Who is getting creative? Obtain insurance against FCA claims As a practical matter uncommon and expensive 8
Effective Investigations When an Issue Arises Critical decisions need to be made quickly: Is an investigation warranted, and what is the appropriate scope? Scope should be defined but flexible Do you have a self-disclosure obligation? If so, what is the standard requiring self-disclosure, and what constitutes a timely self-disclosure? 9
Who Supervises and Conducts the Investigation? Who supervises? Management? The Board? Who investigates? In-House Counsel? Outside Counsel? Independent/Special Counsel? 10
Engaging Outside Consultants Forensic accountants E-Discovery consultants Subject matter consultants Industry experts Private investigators 11
Protecting the Privileged Nature of the Investigation Take steps to preserve privilege Witness Interviews Notes Documenting Conclusions Balancing protecting the privilege with government cooperation 12
Other Key Considerations To disclose or not to disclose (if no disclosure obligation)? And when to disclose? Conducting interviews Who to interview? When to interview? Who should be present? Potential Whistleblowers Remediation 13
DOJ: No Plans to Slow Down Plans to commit even more resources to its Fraud Section to investigate and file FCA cases Diversifying its enforcement activities to ensure record recoveries Plans to systematically pursue criminal charges in tandem with civil FCA suits Renewed emphasis on non-monetary remedial measures 14
From Civil to Criminal Enforcement AAG Caldwell: DOJ will bring unparalleled experience prosecuting health care fraud, procurement fraud, and financial fraud to investigations and prosecutions that stem from allegations in [FCA] suits. All new qui tam complaints are shared by the Civil Division with Criminal Division as soon as the cases are filed. DOJ seeking admissions of misconduct and sanctions against individuals as part of settlements. 15
Dangers of DOJ Settlements Admissions Debarment Criminal Charges 16
Decision Points Compliance Program Learning of a Problem Internally Discovered Government Outreach (CID) Government Investigation Agency Review DOJ Possibly Qui Tam Driven Litigation Filed or Unsealed Early Settlement Motion to Dismiss 17
Settlement Considerations What s the price Ability to pay Scope of the release conduct and parties Avoiding suspension or debarment Remediation corporate integrity program; monitors; ongoing cooperation Government objections or relator s objections Multi-jurisdiction settlements Relator s attorney fees Collateral litigation 18
For More Information: Steven Kaufmann skaufmann@mofo.com (202) 887-8794 Stacey Sprenkel ssprenkel@mofo.com (415) 268-6040 19
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