Healthcare executives beware: The DOJ wants you
What's the first thing that comes to mind when you think about Coca-Cola? Is it the dozens of executives who reside in the company's corporate offices? Or do you think about polar bears?
Unless you are one of those corporate executives, my guess is the latter. What you're thinking about is the brand--a brand that shapes your perspective of that company. Coca-Cola is just one example; you could rattle off dozens of others. McDonalds: Golden Arches; Nike: Swoosh; Disney: Mickey Mouse.
These branding techniques personify the company. Eventually we begin thinking of Coca-Cola not just as a corporation, but as a living, breathing individual. Decades of branding and marketing make it easy to forget that these corporations are really the sum of a vast collection of individuals. Ultimately, it's a person--or a group of people--steering the ship, for better or for worse.
It appears the Department of Justice (DOJ) is well aware of this dynamic, particularly as it relates to fraud and other white-collar crime.
Last week, the DOJ released a memo to federal prosecutors around the country outlining the department's retooled approach to white-collar crime, and specifically the individuals who perpetrate those crimes. No longer will the DOJ simply focus on the corporations accused of fraud or public corruption. Now individuals--and specifically high-level corporate executives--will be held accountable for wrongdoing.
"Corporations can only commit crimes through flesh-and-blood people," Sally Q. Yates, deputy U.S. attorney general and the author of the memo, told The New York Times. "It's only fair that the people who are responsible for committing those crimes be held accountable."
In the memo, Yates recognized the challenges that prosecutors face in "pursuing individuals for corporate misdeeds," namely, the fact that high-level executives can easily deflect responsibility or simply feign ignorance.
However, the guidelines outline a number of ways the DOJ plans to target individuals entangled in corporate crimes. Civil and criminal investigators will place more focus on individual wrongdoing from the beginning of the investigation, and prosecutors are encouraged to take a bottom-up approach, piecing together culpability with the same method used to bust a drug ring. Furthermore, the DOJ will only show leniency to corporations that cooperate in full by turning over all facts and documents related to the investigation, regardless of whom that implicates.
"Crime is crime. And it is our obligation at the Justice Department to ensure that we are holding lawbreakers accountable regardless of whether they commit their crimes on the street corner or in the boardroom," Yates said in a speech announcing the policy at the New York University School of Law. "In the white-collar context, that means pursuing not just corporate entities, but also the individuals through which these corporations act."
Yates, for her part, is no stranger to corporate crimes. Before she was appointed to her post as deputy attorney general in May, she spent the majority of her career focusing on white-collar prosecutions as the chief of the Fraud and Public Corruption Section at the U.S. Attorney's Office in the Northern District of Georgia.
The implications of these guidelines appear to be a warning shot fired primarily in the vicinity of Wall Street. The DOJ has been routinely criticized for its leniency on the financial institutions guilty of fraud and corruption. Yes, the banks paid high-priced settlements, but the Wall Street executives went largely untouched.
However, the guidelines are just as applicable to the healthcare industry, particularly as it relates to fraud and false claims. There's no question that healthcare fraud is already a focal point at the federal level, and that officials as far up as the White House are intent on devoting more money and resources toward fraud prevention and detection.
In some ways, we've already seen this individual-focused approach play out in some high-profile cases. In May, U.S. Assistant Attorney General Leslie R. Caldwell noted that healthcare executives would be held accountable for fraud schemes that occur under their watch. A month later, three top administrators at Riverside General Hospital were sentenced to 115 years collectively for their role in a fraud scheme that stole more than $150 million from Medicare. In August, three executives at the now-defunct Sacred Heart Hospital in Chicago were sentenced for a kickback scheme that billed Medicare $35 million. Former owner and CEO Edward Novak received four-and-a-half years.
The DOJ's recent memo adds another layer to this aggressive approach that will likely emerge in future healthcare fraud investigations and litigation. Healthcare providers facing fraud investigations can expect a more direct approach that goes beyond corporate compliance policies and targets the individuals responsible for these schemes. Of course, one glaring question remains: Is the real-world application of these guidelines practical?