The Rise Of Parallel Proceedings In Health Care Fraud Investigations: How To Tell When You’re A Target

When Dewey & LeBoeuf lawyer Zachary Warren was indicted for fraud recently, his surprised reaction made headlines.1 Warren, the New York Times reported, had spoken with government investigators without the assistance of counsel because he believed he was being questioned as a potential witness in a civil Securities and Exchange Commission ("SEC") investigation. He never imagined he might be the target of a parallel criminal investigation. By the time he realized what was happening, it was too late to undo the damage.

Mr. Warren's predicament likely will resonate with members of the health care industry. Although "parallel proceedings"—a shorthand term for simultaneous criminal, civil and administrative investigations—are a widespread government practice, health care matters lend themselves to a collaborative, team investigative approach with particular frequency. Long-standing Department of Justice ("DOJ") policies promote early collaboration and information sharing between its criminal and civil divisions, as well as between the criminal and civil divisions of each individual U.S. Attorney's office. The policies instruct prosecutors to "ensure maximum recovery" in health care fraud investigations by pursuing criminal, civil and administrative sanctions.2 A typical DOJ investigation into a health care matter will accordingly involve criminal prosecutors, counsel representing the Department of Health and Human Services ("HHS"), attorneys from DOJ's civil division, and civil Assistant U.S. Attorneys ("AUSAs"). The government increasingly employs a three-pronged strategy: it prosecutes responsible companies and persons, collects civil damages and penalties from those same targets, and imposes administrative sanctions such as exclusion from federally funded programs or compliance agreements.

Many of the government's recent settlement announcements conform to the parallel proceedings model. Indeed, since May 2012, there have been at least five settlements of parallel proceedings in health care matters where the total amount paid by the defendant exceeded $100 million.3

The government's use of parallel investigations, however, is not limited to such big-ticket proceedings. In light of DOJ policies regarding information sharing and cooperation between civil and criminal prosecutors, there is always the potential for a health care case to develop into a parallel proceeding. Given that possibility, it is essential that health care companies remain aware of this potential risk and take steps to avoid the mistake of realizing too late that a government investigation is proceeding on more than one track. This article discusses the current administration's renewed emphasis on parallel proceedings and explains how to identify and effectively negotiate a health care fraud investigation with criminal, civil, and administrative components.

An Emphasis on Collaboration Between the Criminal and Civil Divisions

Although parallel proceedings are by no means new phenomena, under the current administration they have become more prevalent. DOJ policies in place since 1997 instruct its attorneys to maximize government resources by fostering "greater cooperation, coordination and teamwork between the criminal and civil prosecutors who are often conducting parallel investigations of the same offenders and matters."4 In January 2012, Attorney General Eric Holder issued an updated memorandum ("Holder Memorandum") placing even stronger emphasis on parallel proceedings.5 The Holder Memorandum mandates information sharing between the civil and criminal divisions "to the fullest extent appropriate to the case and permissible by law." As a result, every single case referral—including an agency referral, a self-disclosure, or a qui tam action—is now expected to be shared between the civil and criminal divisions. Further, the Holder Memorandum instructs prosecutors to use investigative strategies that increase the government's ability to share information among criminal, civil and agency administrative teams whenever possible. In practice, this results in more administrative subpoenas, search warrants and witness interviews outside of the grand jury process.

Although the Holder Memorandum applies to all types of parallel proceedings, it has a particularly powerful effect in health care fraud investigations. In 2010, as part of the Affordable Care Act ("ACA"), Congress relaxed some of the jurisdictional requirements for bringing qui tam actions.6 The result has been a dramatic increase in the number of qui tam actions filed. During the decade prior to these amendments, the number of qui tam cases consistently ranged from 300 to 400 per year. In the past two years, new filings have nearly doubled; in 2011, there were 638 new qui tam cases filed, and last year new filings hit an all-time high of 647.7 In 2011 and 2012 alone, qui tams resulted in recoveries totaling more than $6.1 billion.8 The practices set forth in the Holder Memorandum mean that, in practice, all of these qui tam filings should be brought to the attention of DOJ's criminal division. In other words, more than 300 cases that were once considered purely civil are now being shared with, and likely investigated to some degree by, the criminal division at DOJ each year.

Does the government have the power to share information when conducting parallel civil and criminal proceedings? In general, the answer is yes. Absent evidence of bad faith or trickery on the part of the government or special circumstances indicating that the rights of the investigated party will be prejudiced, courts have approved cooperation and information sharing between civil and criminal investigators.9 In United States v. Kordel, the Supreme Court observed that "[i]t would stultify enforcement of federal law to require a government agency . . . invariably to choose either to forego recommendation of a criminal prosecution once it seeks civil relief, or to defer civil proceedings pending the outcome of a criminal trial."10 More recently, in United States v. Stringer, the Ninth Circuit unequivocally condoned the government's practice of mounting an investigation on two fronts, stating, "[t]here is nothing improper about the government undertaking simultaneous criminal and civil investigations[.]"11 In light of...