Remarks as Prepared for Delivery
Good afternoon, and thank you for inviting me to speak at the 20th anniversary of this important forum, which brings together compliance experts across the pharmaceutical and medical device industries. It is truly a pleasure to be here on behalf of the Criminal Division of the Department of Justice.
At the outset, I would like to commend you for the important work that you do. The Department greatly values the role of the corporate compliance community. Every day, you work hard to reinforce legal and regulatory compliance and ethical behavior in business organizations, work that benefits all of us.
The role of the federal prosecutor is, of course, different from that of a corporate compliance professional, but in many ways our goals are aligned. We both want to deter corporate criminal misconduct, and we both want to detect such misconduct when it does occur, holding wrongdoers to account in our respective ways.
With apologies for repeating a cliché -- the corporate compliance function is in some ways more important than the prosecution function.
It can actually prevent misconduct in the first place through robust systems of controls, and by fostering a culture where compliance is valued and rewarded. And while this aspect of corporate compliance is always important, it is especially important in the industries in which you operate, where the health and safety of patients often are at stake.
I came to my current role as the head of the Criminal Division from private practice, where I worked on investigations and compliance reviews for numerous life sciences clients.
I know first-hand – both from that experience and my time with the Department – that the good corporate citizens within the pharmaceutical and medical device industries invest heavily in their compliance programs. And they need to do so. Most of you operate in a heavily regulated space, and the risks of non-compliance are high.
For at least the last two decades, the Department has made it clear that it expects companies to invest in effective compliance programs. But I don’t think the Department has always been as clear about what that means – both in terms of what the Department would look for in an effective program, and with regard to how the Department’s prosecutors would factor compliance into resolving their corporate cases.
Over the last few years, including before I arrived, the Criminal Division has worked to be more transparent about how it approaches its evaluation of compliance programs, including developing new policies and guidance designed to help encourage responsible companies to fully invest in compliance, but also to invest wisely and efficiently.
Building on past efforts, in April of this year, the Criminal Division issued a newly expanded and refined guidance document for our white-collar prosecutors clarifying how to evaluate corporate compliance programs.
This guidance promotes greater transparency in the specific factors we will use to evaluate the design and effectiveness of a compliance program. It spells out numerous factors that the Criminal Division has frequently found relevant, but organizes them around three fundamental questions, which are always at the heart of our inquiry:
1) Is the compliance program well designed?
2) Is the program being implemented effectively and in good faith?
3) And does the compliance program work in practice?
In setting forth these various factors, we were not seeking to be prescriptive. We are not regulators, and we recognize that every company and industry is different. There is no such thing as a one-size-fits-all compliance program, nor should there be.
We also know that no compliance program is 100% effective. No system of controls is absolutely bulletproof.
Corporations employ people, and not all of those people are going to be uniformly law-abiding and ethical. Bad actors in a company will work to identify and exploit weak controls and compliance structures.
The Criminal Division’s policies need to reflect that reality, especially because our prosecutors will invariably find themselves assessing a compliance program’s adequacy in hindsight, after a problematic event has already occurred.
The policies and tools they bring to their analysis need to account for the fact that misconduct is sometimes going to happen, even within good organizations. Our prosecution efforts need to differentiate between companies that are investing adequately in compliance and working hard to build a strong culture, and those that are not.
Our written compliance guidance is crafted to avoid being overly rigid, allowing for each company’s program to be evaluated based on its unique risk profile.
But the Division’s written guidance document is only part of what we’ve done to improve our prosecutors’ understanding of corporate compliance programs.
In concert with our development of written compliance program guidance, we also trained all Criminal Division attorneys who work on corporate investigations to give them a range of perspectives on compliance program effectiveness.
As part of that training, we brought in experts from inside the Department of Justice, as well as outside voices from industry and the accounting profession to share their views on various compliance challenges and how industry is confronting them.
We looked at compliance challenges in high-risk markets and industries, as well as challenges that come with M&A due diligence and post-acquisition integration. We also focused on an area of growing attention in your industries, namely the evolution of compliance technology and data tools.
All of this is part and parcel of a common effort in the Criminal Division to promote effective compliance regimes. By training our prosecutors, we are making them better able to objectively assess the role of compliance in any corporate resolution, including whether to impose a monitor. And by providing written guidance, our prosecutors should be working from a common understanding of how to do those assessments.
But we also want you all to have a window into our thinking, so you can make wise, informed, and cost-effective decisions about whether and how to develop, grow, and enhance your compliance programs.
This transparency hopefully will foster better alignment of the common goals I mentioned at the outset – deterrence of corporate crime on the front end, holding bad actors accountable on the back end, and doing so in a way that is fair and objective.
We’ve made other policy changes as well that align with these goals. Deterrence, of course, also is the objective behind applying the FCPA Corporate Enforcement Policy in all of our corporate criminal cases, including health care fraud cases. Under this policy, a company receives the presumption of a declination if it voluntarily self-discloses the misconduct, fully cooperates with the Department, and engages in timely and appropriate remediation.
Even if aggravating circumstances call for a criminal resolution, companies can get up to a 50% reduction off the bottom of the applicable fine range if the conditions of voluntarily self-disclosure, full cooperation, and timely and appropriately remediation are met.
In a nutshell, the policy makes clear that when a company is serious about maintaining a culture of compliance, it can enjoy the peace of mind that the government will recognize that fact, and treat it fairly.
Deterrence is also the objective behind the so-called “anti-piling on” policy. That policy encourages enforcement components inside and outside of the Department of Justice to coordinate with one another when imposing penalties for the same conduct.
Coordination includes crediting and allocating financial penalties and forfeitures to avoid disproportionate punishment.
The “anti-piling on” policy is designed to encourage companies to aggressively root out perpetrators without fearing that they later will be subject to multiple penalties from multiple regulators.
Deterrence is likewise the common thread behind our decision to be more transparent about corporate declinations under the enforcement policy.
We now routinely publish corporate declinations on our website so that defense attorneys and corporate counsel can refer to these declination memoranda to understand the analysis behind our decision to not bring criminal charges.
All of these efforts have been geared toward enhancing transparency and fostering ethical corporate practices and behaviors so that companies will have the tools and information needed to invest fully in compliance, and so that criminal wrongdoing is deterred before it ever calls for the attention of the Department of Justice.
Enforcement
A few words about enforcement. White-collar criminal enforcement and health care fraud continue to be a top priority for the Department of Justice and the Criminal Division.
In 2018, our Fraud Section posted record numbers of white-collar prosecutions in a number of categories.
In one year alone, we brought 10 corporate enforcement actions and recovered more than $1 billion in corporate U.S. criminal fines, penalties, restitution, and forfeiture, as part of resolutions that returned $3 billion globally.
We also held individuals accountable for their criminal acts. In 2018, the numbers of individuals charged increased by 33% from the prior year, and we convicted 40% more individuals at trial.
And as we near the end of 2019, we are on track to surpass many of those 2018 benchmarks.
In addition to general corporate enforcement, we have been laser-focused when it comes to combatting health care fraud and opioid fraud and abuse schemes that have destroyed so many lives across the United States.
Health care fraud is a betrayal of the public trust -- it robs American taxpayers of billions of dollars every year and threatens our most vital federal programs, all while driving up the cost of health care and insurance.
Illegal opioid schemes exploit the disease of addiction and corrupt the time-honored relationship between doctors and patients.
During my tenure, we have brought the full power of the law to bear on the perpetrators of all these schemes.
Over the last several months, we have announced indictments charging a variety of health care fraud, Anti-Kickback Statute, money laundering, and Controlled Substances Act violations in a number of regions of the country from Tennessee, Kentucky, West Virginia, and Ohio to Texas, California, New Jersey, and elsewhere.
These indictments resulted from the successful work of our Strike Force model that combines seasoned prosecutors from the Criminal Division and U.S. Attorneys’ Offices, analysts, and law enforcement agents in federal districts across the country.
The Strike Force model has proven to be highly successful in combatting health care fraud and opioid abuse by combining data analytics and the use of traditional law enforcement investigative techniques.
It has allowed us to shine a bright light on dirty doctors, clinic owners, pharmacists, and others who long believed they could perpetrate their frauds and exploit their patients for personal financial gain without visibility.
The data in our possession allows us to see them, however remote or rural their corner of the country. With the overlay of traditional investigative techniques, we are able to use data analytics to track down the worst of the worst offenders and quickly build strong cases against them.
In the past year, we expanded our Strike Force program to the Appalachian region to target opioid abuse related crimes and in the Rio Grande Valley and San Antonio, Texas. We now have 15 total Strike Forces operating in 24 districts.
In just 2019 alone, the Criminal Division’s Health Care Fraud Strike Forces have brought charges against 354 individuals with a loss amount of over $4.1 billion.
I’d like to highlight for you some of the schemes that we have uncovered and prosecuted which exploit new medical technology, like telemedicine, and use sophisticated money laundering to facilitate and disguise fraud.
In April of this year, we announced the takedown of one of the largest health care fraud schemes ever investigated by the FBI and HHS-OIG, and prosecuted by the Criminal Division and U.S. Attorney’s Offices.
The takedown resulted in charges against 24 defendants, including the CEOs, COOs, and others, associated with five telemedicine companies, the owners of dozens of durable medical equipment (DME) companies, and three licensed medical professionals, for their alleged participation in health care fraud schemes involving more than $1.2 billion in loss.
Significantly, as part of this operation, our partners at the Center for Medicare and Medicaid Services’ Center for Program Integrity took simultaneous adverse administrative action against 130 DME companies that had submitted over $1.7 billion in claims and were paid over $900 million. These actions resulted in the immediate suspension of payments from the program and/or termination of the companies’ rights to bill the program at all.
As alleged in the indictments, DME companies paid illegal kickbacks and bribes in exchange for the referral of Medicare beneficiaries by medical professionals working with fraudulent telemedicine companies for back, shoulder, wrist, and knee braces that were medically unnecessary.
Additionally, an international telemarketing network lured hundreds of thousands of elderly and/or disabled patients into a criminal scheme that crossed borders, involving call centers in the Philippines and throughout Latin America.
These defendants allegedly paid doctors to prescribe DME either without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen.
The proceeds of the fraudulent scheme were then allegedly laundered through international shell corporations and used to purchase exotic automobiles, yachts, and luxury real estate in the United States and abroad.
The Criminal Division coordinates closely with its law enforcement and agency partners to ensure that we are proactively identifying and addressing the most serious threats to the Medicare program. And this forward-leaning approach has led us to tackle health care fraud in new frontiers of medicine.
Within just months of announcing the DME indictments, the Criminal Division unveiled another significant enforcement action involving fraudulent genetic cancer testing, in partnership with the U.S. Attorney’s Offices for the Southern and Middle Districts of Florida, the Southern District of Georgia, and the Eastern and Middle Districts of Louisiana
As part of that operation, we charged 35 defendants associated with dozens of telemedicine companies and genetic testing laboratories for their alleged participation in one of the largest health care fraud schemes ever charged – a scheme involving more than $2.1 billion in fraudulent Medicare billings.
This investigation targeted an alleged scheme involving the payment of illegal kickbacks and bribes by genetic testing laboratories in exchange for referrals of Medicare beneficiaries. The referrals were made by medical professionals working with fraudulent telemedicine companies. And the referrals were for expensive cancer genetic tests that were medically unnecessary.
Indeed, often times the diagnostic results were never even provided to the beneficiaries or were worthless to their actual doctors.
In addition to our efforts to combat health care fraud and opioid fraud and abuse on the home front, I want to highlight a recent corporate resolution that demonstrates our efforts to hold providers accountable for paying bribes to foreign government officials to gain a competitive advantage in the medical services industry.
In March, I announced that the Fraud Section had entered into a corporate resolution with Fresenius Medical Care, one of the leading providers of dialysis products and services in the world.
The company had agreed to pay $231 million to resolve investigations by the DOJ and the SEC into violations of the FCPA in connection with Fresenius’ participation in various corrupt schemes to obtain business in multiple foreign countries.
Fresenius admitted that between 2007 and 2016, it paid bribes to publicly employed health and/or government officials to obtain or retain business in Angola and Saudi Arabia, as well as in Morocco, Spain, Turkey, and countries in West Africa. Fresenius also admitted that it knowingly and willfully failed to implement reasonable accounting controls over financial transactions and failed to maintain books and records that accurately and fairly described the transactions.
This resolution, under which Fresenius agreed to retain an independent compliance monitor for two years, reflects the Department’s firm commitment to rooting out bribery and promoting the kind of effective compliance programs that will prevent misconduct going forward.
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It’s been a pleasure to speak here today. As I hope you can tell, the Criminal Division will continue to aggressively investigate and prosecute health care and other frauds in the drug and device sectors. I also hope my remarks give your industries some comfort that when we do investigate and prosecute, we will do so fairly, pursuant to clearly identified policies. There should be no mystery about how and why we bring and resolve enforcement actions. And hopefully this transparency will help you prevent corporate crime, and help you make wise decisions about how to best deploy your compliance resources.
Thank you very much, and I wish you the best for the remainder of the conference.
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