United States: Who's Going Under The Bus? Federal Policy On Individual Responsibility For Corporate Wrongdoing

​In a wake-up call to health care corporate officers and managers, Deputy Attorney General Sally Yates earlier this fall announced a new, tougher U.S. Department of Justice policy regarding individual responsibility for corporate wrongdoing, both civil and criminal. DOJ needs this new policy, she said, because it is so difficult to identify the person or group of people in a large company who knew they were doing something wrong and had the intent to be legally culpable.

When a company has up-coded services and overcharged its payors, it may be easy to show that the company did something seriously wrong. The codes and bills are all recorded on the servers, as are all the clinical services rendered.  Comparing one to the other, the codes may be wrong and the overpayments indisputable.

But the company's liability raises questions: Who knew what was happening, when did they know it, and did they know it was wrong?  Typically, the clinicians will say they had no role in the coding, the billing staff will say they were trained to code things the way they did, the trainers will say they relied on information from headquarters, while corporate officers will say they hired consultants to tell the company what to do. And so it goes because – as we all know – the search for someone else to blame is never fruitless.  

The Key Change

In the past, in cases like the example above, the federal government has been inclined to do what was easier and go after the company without insisting on finding the people who made the improper decisions for the corporation. The government would even let the company cooperate with the investigation and would lessen its financial penalties.

But no more. The Department of Justice has made companies tell all.  In the words of Deputy Attorney General Yates, "[i]f a company wants any consideration for its cooperation, it must give up the individuals, no matter where they are in the company." Someone – the right someone – has to go under the bus, or the corporation will suffer.

Important Elements of the New Federal Policy

The key statement in the new federal policy, the one which Deputy Attorney General Yates summed up when she said "give up the individuals," is this: "In order for a company to receive any credit for cooperation... the company must completely disclose to the Department [of Justice] all relevant facts about individual misconduct. Companies cannot pick and choose."

In some other key items, the federal government also said:

  • It will focus its investigations on individuals "from the very beginning."
  • The settlement with the corporation will seldom, if ever, provide any civil or criminal protection to individuals.
  • The government will no longer be willing to forgo action against an individual simply because the individual cannot pay back to the government an appreciable amount of money.

Taken together, these factors demonstrate the DOJ's new emphasis on punishment and restitution as well as deterrence. 

Business tip

This new policy may give new power to corporate compliance officers. In the past, the compliance officer (CO) could tell management it might be possible to protect both the company and the responsible individuals, so management could ask the CO to do both. Under the new policy, however, only full disclosure of "all relevant facts about individual misconduct" will help the company, so the CO is less likely to face conflicting instructions.

Legal tip

All concerned should remember that the company's lawyers represent the company and not any of its directors, officers, or employees. The job of those lawyers is to help the company decide whether it is in the company's interest to cooperate, i.e., turning over the individuals to the government to get a better deal for the company itself. Any officers or employees suspected of individual wrongdoing cannot rely on company counsel for advice; they must have their own lawyers, and they need them initially. In some instances, the company or its insurers will pay separate lawyers to represent the individuals caught up in the investigation, but separate counsel will usually be necessary from early on. The only thing more uncomfortable and dangerous than sorting out these conflicts at the start of an investigation is to do it halfway through the process.

Conclusion

Ben Franklin may have said that he and his patriot friends should "all hang together" against the Crown, or else they would "assuredly all hang separately."  This warning may still apply when the government comes to investigate small companies, such as the three-doctor practice or the independent pharmacy. On the other hand, when a company is large enough to have multiple locations, various unrelated lines of business, a distant corporate headquarters, or an independent board of directors, people could cooperate with the investigation because their welfare depends on the company's well-being. But there will also be people, such as those whose decisions led to the investigation, with interests that are adverse to the company's. More than ever before, the DOJ intends to find and hold the responsible people accountable by any means necessary, including the DOJ's pitting one group of people against another. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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