U.S. Attorney Changes Mean Opportunities for Fraud Defendants

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By Eric Topor

Sept. 7 — The end of the Obama administration could prompt a rush to wrap up health-care fraud investigations and settlements at the DOJ, according to several former agency attorneys.

The start of a new presidential administration on Jan. 20, 2017, means that U.S. attorneys in the 93 districts around the country will be replaced by new appointees, whether either Hillary Clinton or Donald Trump win the presidential contest in November.

Those U.S. attorney transitions usually occur in stages over a period of time, rather than abruptly, according to Laurence J. Freedman with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC. However, he said there typically is an “administration end rush to get things wrapped up that are of significant importance to a U.S. attorney.”

Freedman, a partner in Mitz Levin's health care group in Washington and a former assistant director with the Civil Fraud Section of the Department of Justice, told Bloomberg BNA that significant health-care fraud investigations can be a resumé achievement for a U.S. attorney, so “there is an interest” in wrapping up these matters “and get credit for it” before a new administration comes in.

Transition Can Create Opportunities

U.S. attorneys facing the end of a current administration's term are on a limited clock, Michael K. Loucks, a partner in Skadden, Arps, Slate, Meagher & Flom LLP's health care enforcement group in Boston, told Bloomberg BNA.

“U.S. attorneys know that the clock could run out at any moment after January 20,” Loucks said, and that “sometimes creat[es] opportunities for companies to more favorably resolve their cases.”

Loucks said that pressure to resolve matters an the end of an administration can “make the DOJ more amenable to compromise” in trying to resolve a health care fraud investigation, or negotiation of a settlement.

Loucks said the transition period “creates heightened opportunity for companies to try to favorably resolve pending issues, but they also must be diligent in watching what new issues might become a focus under the new regime.”

Loucks, who is a former acting U.S. attorney for the District of Massachusetts and a first assistant U.S. attorney, also said the time pressure before an administration transition can push a U.S. attorney “to get a high-profile, splashy indictment before they leave.”

Delaying Tactics

James G. Sheehan, the current chief of the Charities Bureau at New York State Department of Law and former fraud enforcement attorney for the DOJ and the New York Medicaid program, said that defense lawyers for health-care investigation targets sometimes engage in delaying tactics when nearing the end of a presidential administration.

Sometimes a health-care provider under investigation decides they are “better off waiting for a new person to come in, because you’re going to get more delay, it’s going to take time [for them] to get up to speed, there may be a new assigned assistant on the case,” Sheehan told Bloomberg BNA. “Delay, in our world, works towards the advantage of the defense.”

However, that sentiment isn't universal among all health-care defense attorneys, or applicable in all situations Sheehan said.

“It’s driven more by the facts and the law of the case,” Sheehan said, adding that “some defense lawyers calculate that they’re better off seeing things continue without resolution until the new administration comes in, and others may make the decision that they’re better off trying to deal with someone they have a current relationship with.”

Health-Care Enforcement ‘Continuity.'

Regardless the outcome of the November presidential election, the expectation among health-care attorneys is that health-care fraud enforcement will be a continuing priority at the DOJ.

A DOJ spokesman said that “[r]egardless of the status of the United States Attorney, the work of career prosecutors continues uninterrupted during and after any transition.”

“There has been a lot of continuity in priority of health-care fraud enforcement since the mid-1990s, throughout many administrations,” Freedman said.

He added that health-care fraud enforcement has been “officially a high priority” for years, and “it’s not been subject to political winds, typically.”

Sheehan likewise said he doesn't anticipate a shift away from health-care fraud enforcement, given the huge role health care plays in the economy.

Loucks said a new administration could shift DOJ resources to reflect changing enforcement priorities, but “we likely won't see a significant change in the types of cases brought in health care in the near future.” Loucks said current enforcement areas, such as kickback payments and nursing home concerns, are likely to continue.

However, Loucks also noted that a shift in certain types of health-care fraud cases, specifically a shift away from off-label promotion cases, has already occurred.

Loucks said the DOJ's shift away from off-label promotion cases would likely continue into the next administration “due to lack of success this year” in those cases. This year the DOJ tallied losses in off-label drug promotion cases against Abbott Labs ( United States ex rel. Colquitt v. Abbott Labs. f/k/a Guidant Corp., N.D. Tex., No. 06-cv-01769, verdict 4/7/16 ) and Vascular Solutions ( United States v. Vascular Solutions, W.D. Tex., No. 5:14-cr-00926, verdict 2/26/16 ).

Sheehan said that one aspect of health-care fraud enforcement under the Obama administration has been a “strong interest in and support of whistle-blower cases.” Sheehan said health-care attorneys should watch to see if that interest remains with the DOJ under the next administration.

Transition Hurdles

The handoff of ongoing investigations from one administration to another, and from one U.S. attorney to a new one, is usually smooth, Freedman said.

Freedman said an incoming U.S. attorney won't “typically make changes” in an investigation initiated before their term because “there’s such a high value on professionalism and continuity.”

But a new U.S. attorney will still “look at the highest profile investigations in the office and makes sure that he or she is satisfied that they are appropriate and on track.”

Sheehan noted that the logistics of staff transitions between administrations can sometimes hamper investigations simply from staff uncertainly on where their place will be in the district office once the new administration is in place, or if they will have a role at all.

“[I]n every administration that I’ve been a part of in [it's] last year, whether it’s the [Mayor] Bloomberg administration, or the [David] Patterson administration, or the [George W.] Bush administration, there is a lot of [copying] of resumés, and people are very much focused on what they’re going to do next.” Sheehan said that “you lose momentum because people are thinking about what they’re next role is going to be, and how they’ll fit.”

A new U.S. attorney might also shift how the district office's resources are allocated among its various investigative units, or cases within those units, even if a general focus, like health care fraud, remains a priority. Loucks said that “white collar and health care fraud cases brought against the bigger companies are pretty resource intensive,” and limited investigative or prosecution resources in a district office means that “it can be difficult to ensure that these [larger] cases get appropriate resources.”

Shifting resources away from a larger DOJ health care investigation can have a fatal effect, Loucks said. “A big white collar health care fraud investigation is like a shark. If it stops moving, it dies.”

Life After Service

Most U.S. attorneys who transition out of their role end up in private practice in the defense bar, said Freedman, though he noted that the current administration “has a number that went to the qui tam bar.”

Jerry E. Martin, former U.S. attorney for the Middle District of Tennessee from 2010 to 2013, is one such example. Martin now represents whistle-blowers in fraud cases in health care, tax and securities matters, is now of counsel at Robbins Geller Rudman & Dowd LLP in Nashville, Tenn.

Freedman said that U.S. attorneys also have been known to pursue politics after leaving the DOJ, though that route was “atypical.” One notable example: New Jersey Gov. Chris Christie (R) served as U.S. attorney for the District of New Jersey from 2002 to 2008.

To contact the reporter on this story: Eric Topor in Washington at etopor@bna.com

To contact the editor responsible for this story: Kendra Casey Plank at kcasey@bna.com

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