DOJ Announces New Guide on Corporate Investigations

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By Matthew Loughran

Sept. 10 — The Department of Justice has announced a new emphasis on holding corporate executives accountable for corporate wrongdoing in a memo to its prosecutors.

The Sept. 9 memo, which emphasizes “seeking accountability from the individuals who perpetrated the wrongdoing,” may have far-reaching effects on the efforts that health-care organizations undertake to prevent Medicare billing fraud and kickbacks.

Under the guidelines outlined in the memo, corporate cooperation credit will only be available to those companies that provide “all relevant facts relating to the individuals responsible for the misconduct.”

In addition, civil and criminal attorneys at the DOJ will work in tandem on corporate investigations, focusing on the culpability of high-level individuals when conducting both criminal probes and civil actions.

Effects on Health-Care Industry

While this guidance seems to be geared toward avoiding criticisms such as those of the DOJ's handling of investigations into the financial crisis of 2008, at least one expert thinks that it will also have a great effect on the corporate governance within the health-care industry.

Michael Peregrine, a partner at McDermott Will & Emery in Chicago told Bloomberg BNA, “I think that the new guidelines have the potential to initially be greeted with a shrug by an industry that has been as heavily regulated as health care—until the board and senior management take a closer look at the intensity by which the government is focusing on individual conduct.”

“Ultimately, I think the new approach has the potential to increase the organizational commitment to compliance; prompt the board to place greater focus on protections it may lawfully provide officers and directors; and encourage the board to be alert to the potential change in the governance/leadership dynamic during investigations,” Peregrine said.

He also pointed to a recent spike in criminal prosecutions for fraud in the health-care industry, including that of Edward J. Novak, the former CEO of Sacred Heart Hospital in Chicago, who was sentenced in July to just over four years in prison for his role in a long-running kickback and bribery scheme to refer Medicare and Medicaid patients to the now-shuttered hospital.

The guidance may also have a chilling effect on executive involvement in transactions in order to avoid any liability for any potential fraud involved in the transaction. “There could be an unintended effect of executives retreating from transactions with increased risk without much more clear and unequivocal legal opinions on the legality of the transaction—which opinions may be difficult to provide given the nature of the laws,” Peregrine said.

To contact the reporter on this story: Matthew Loughran in Washington at

To contact the editor responsible for this story: Brent Bierman at

Text of the memo is at

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