Recent developments may merit a measured
briefing to corporate leadership on the potential exposure of
health industry officers and directors to financial penalties and
other sanctions arising from corporate regulatory violations.
On September 19 and 27, 2016, the Department of Justice
announced separate False Claims Act (FCA) settlements that required
senior corporate leaders to pay significant financial penalties to
resolve allegations that they violated federal law. The September 19 settlement
involved allegations that the nursing home operator North American
Health Care, Inc. (NAHC) violated the FCA by submitting false
claims for medically unnecessary rehabilitation therapy services
provided to its skilled nursing home facility residents. NAHC
agreed to pay a penalty of $28.5 million, and its board chairman
and its senior vice president of reimbursement analysis agreed to
pay penalties of $1 million and $500,000, respectively. The September 27 settlement
involved the payment of $1 million by the former CEO of Tuomey
Healthcare System, to resolve allegations relating to his
involvement in what a jury concluded was the health system's
FCA and Stark Law violations. The settlement also included a four
year Medicare participation exclusion. In addition, the former CEO
waived any rights to indemnification he may have had against the
It is important not to overreact to the impact
of these two settlements. However, it is worthwhile to note that
they are consistent with the Yates memorandum theme on individual
accountability and the application of Yates to civil, as well as
criminal matters. The DOJ's announcements of these settlements
leave little doubt that efforts to assert individual accountability
will extend to officers and executives who "lead or
participate" in what are perceived to be illegal conduct. This
perspective was echoed in a September 26 speech by a
senior Department of Justice official. Certainly these are not the
only FCA-related settlements involving corporate employees.
However, they are noteworthy to the extent that they involve very
senior leaders and apply significant penalties. Given the continued
emphasis on Yates and individual accountability, it is possible
that these represent a new wave of FCA settlements that will
incorporate material penalties against senior corporate leadership.
These are messages that the board and senior executive should
hear, in a presentation that balances the likelihood of risk, the
significance of the potential penalties and the importance of
continued leadership over legal compliance.
After global media organisations published the leaked Panama Papers from law firm Mossack Fonseca revealing how corporates and some of the world's wealthy and powerful used offshore companies to hide their assets . . .
The global drive for greater transparency of corporate and other legal entities continues.
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