United States: Unintended Consequences: Ex-U.S. Activities Impacting U.S. Federal Health Care Business

 Given the uptick in global awareness and enforcement of anti-bribery and corruption laws, most health care companies are attuned to the risks associated with legal infractions caused by ex-U.S. activities. However, ex-U.S. activities may also impact health care companies' ability to conduct business within the U.S. For example, overseas conduct could trigger exclusion, debarment or suspension from federal procurement or health care programs, such as Medicare and Medicaid, even if the alleged wrongdoing (e.g., conduct relating to bribery or corruption) occurs entirely outside of the U.S. and has no tie to any federal program. Further, quasi-government entities, such as the World Bank, also have debarment policies which can impact U.S. health care companies. This alert first explores the interaction between the OIG exclusion statute and the Foreign Corrupt Practices Act ("FCPA"). Second, it discusses how debarment of federal contractors participating in development programs run by quasi-governmental organizations (such as the World Bank) could lead to unexpected scrutiny by U.S. federal agencies.

I. The FCPA and Mandatory Exclusion

A felony FCPA plea or conviction triggers fines and penalties under U.S. securities laws, and could also impact a company's ability to participate in U.S. federal health care programs. The Office of Inspector General of the Department of Health and Human Services ("OIG") has the authority to exclude individuals and entities from all federally funded health care programs as required by statute ("Mandatory Exclusion")1,  or based on OIG's discretion ("Permissive Exclusion").2 A company charged with a violation of the FCPA books and records and internal controls provisions,3 a felony under federal law4 could be excluded based on: (i) a guilty plea or conviction in a court with competent jurisdiction; and (ii) OIG's determination that the underlying conduct meets the language of the Mandatory Exclusion statute. Mandatory Exclusion compels OIG to exclude individuals and entities convicted of certain offenses, including felony convictions relating to health care fraud, from participation in all federal health care programs for a minimum of five years.5 The consequences of exclusion, either mandatory or permissive, are severe: exclusion prevents items or equipment sold by an excluded manufacturer that are used in the care or treatment of federal health care program beneficiaries from being reimbursed, directly or indirectly, by any federal health care program. Although OIG has not yet excluded a company for an FCPA violation, the self-executing nature of the statute and OIG's lack of discretion leave open the real possibility that such an exclusion could happen in the future,6 a fact which the Department of Justice has acknowledged.7 This threat of exclusion has doubtless impacted numerous companies facing prosecution in their decisions to cooperate and enter into Deferred Prosecution Agreement, despite the high associated costs of compliance.

To determine whether a violation triggers Mandatory Exclusion, OIG evaluates the conduct underlying the guilty plea or conviction. For an FCPA books and records and internal controls violation, OIG would consider whether the misconduct was undertaken: (1) "in connection with the delivery of a health care item or service"; and (2) "relating to fraud, theft, embezzlement, breach of fiduciary responsibility, or other financial misconduct."8 Unlike other parts of the statute governing Mandatory Exclusion, a violation under § 1320a-7(a)(3) does not require any nexus to a government health care item or service, but broadly covers "any felony conviction under Federal, State, or local law related to health care fraud, even if governmental programs are not involved."9

OIG has wide latitude in determining whether an offense was carried out "in connection with . . . a health care item or service" and "relat[ed] to fraud . . . or other financial misconduct"—which could be interpreted to incorporate a broad range of conduct.10 For the first prong, OIG need only determine that the conduct underlying the FCPA violation was carried out "in connection with . . . a health care item or service," which just requires a "common sense connection" or "nexus" between the "underlying facts and circumstances of the offense and the delivery of health care items or services to individuals for their health care needs."11 As to the second prong, OIG may look to the conduct as plead and courts have consistently held—both in the context of exclusion jurisprudence and more broadly—that the terms "in connection with" and "relates to" are "generally interpreted expansively."12 In this case, whether a failure to satisfy the accounting provisions would be "relat[ed] to fraud . . . or other financial misconduct" likely would turn on the facts underlying the company's conduct. Courts have noted, however, that the statute does not require a felony for health care fraud, but only a felony relating to health care fraud—a distinction that is bound to encompass more conduct rather than narrow the potential applicability of 42 U.S.C. § 1320a-7(a)(3).13

If OIG does determine that the requirements for Mandatory Exclusion have been met, it has no discretion pursuant to statute and exclusion must follow. In light of the above, U.S. health care companies should carefully consider all potential applicable laws, including the OIG exclusion statute, when resolving FCPA matters.

II. Development Bank Debarments and Their Domestic Consequences

Health care companies with federal procurement arrangements may also face unexpected consequences from ex-U.S. activities if they find themselves debarred by an international development bank, such as the World Bank. In 2016, the World Bank alone invested over $64 billion in both private and public sector organizations.14 In order to protect current investments and deter bad actors, development banks employ sanctioning regimes that rely heavily on debarments, which exclude entities from eligibility for World Bank financing for a period of time. The World Bank identifies five forms of misconduct subject to sanctions: corrupt practices, fraudulent practices, coercive practices, collusive practices and obstructive practices,15 covering activities such as bribes, misrepresentations, collusive pricing, threats of force, as well as interfering with World Bank investigations.16

Development bank debarment actions are public and may be highly publicized depending on the situation and underlying conduct in order to deter future misconduct.17 Further, in 2010, a consortium of major development banks, including the World Bank, executed a cross-debarment agreement, which provides that debarment of an entity by one bank triggers exclusion by all.18 Additionally, the World Bank at times refers the results of its investigations directly to state authorities.19 Given the broad scope of development banks' public and private sector activities, companies with any type of federal contract should be aware of the potential effects of debarment. This quasi-governmental debarment action could cause a U.S. federal agency to view the debarred contractor as an unreliable partner, leading to a potential investigation or debarment action in accordance with General Services Administration ("GSA") regulations.

GSA regulations give broad discretion to agency officials to determine whether to debar a firm with a federal contract, including for "[c]ommission of any . . . offense indicating a lack of business integrity or business honesty that seriously and directly affects the present responsibility of a Government contractor or subcontractor."20 While this provision only permits agencies to issue debarments, rather than mandating they do so, it captures a wide range of misconduct, similar to the activities identified in the debarment provisions of development banks.

In assessing whether to debar, the government agency will decide whether the firm's conduct "indicate[s] a lack of business integrity" and whether that lack of integrity is closely enough related to the firm's "present responsibility."21 Triggering conduct need not directly arise from the firm's conduct related to a government contract, nor must it take place under U.S. jurisdiction. Debarment from U.S. government contracts is meant only to protect the public interest, not to punish supposed wrongdoers, and GSA regulations provide agencies with broad discretion to decide what facts to consider in judging a firm's integrity.22

Health care companies with federal contracts should proceed carefully when faced with a quasi-governmental debarment, given the possible impact on their U.S. government business. GSA regulations do weigh timely disclosure of misconduct as a mitigating factor in an agency's determination of whether to debar a firm, and as a result, proactive disclosure to the applicable federal agency, particularly in the event of highly publicized misconduct, may be a course worth considering.23

Click here to visit our Global Health Care Compliance website.


1 42 U.S.C. § 1320a-7(a).
2  42 U.S.C. § 1320a-7(b).
3  See 15 U.S.C. § 78m(b)(2)(A)–(B).
4  See 15 U.S.C. § 78m(b)(5); 15 U.S.C. § 78ff(a).
5  42 U.S.C. § 1320a-7(c)(3)(B).
6  See Travers v. Sullivan, 791 F. Supp. 1471, 1480–81 (E.D. Wash. 1992), aff'd sub nom. Travers v. Shalala, 20 F.3d 993 (9th Cir. 1994); Diane Amicucci, DAB No. CR540, 1998 WL 479299 (H.H.S. June 29, 1998); see also Harkonen v. Sebelius, No. C 13-0071 PJH, 2013 WL 5734918, at *2 (N.D. Cal. Oct. 22, 2013).
7  See, e.g., Deferred Prosecution Agreement with Johnson & Johnson, United States v. DePuy, Inc., ¶ 4.j (D.D.C. filed Apr. 8, 2011); see also U.S. Dep't of Justice & U.S. Sec. Exch. Comm'n, A Resource Guide to the U.S. Foreign Corrupt Practices Act 69-70 (2012); Lanny A. Breuer, Assistant Attorney Gen., Criminal Div., U.S. Dep't of Justice, Keynote Address to the Tenth Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum (Nov. 12, 2009) (warning that FCPA conviction could lead to "possible exclusion from Medicare and Medicaid").
8  42 U.S.C. § 1320a-7(a)(3).
9 See Health Care Programs: Fraud and Abuse, 63 Fed. Reg. 46,676, 46,676 (to be codified at 42 C.F.R. pt. 1001); Harkonen, 2013 WL 5734918, at *2, 8-9; see also Medicare and State Health Care Programs: Fraud and Abuse, 79 Fed. Reg. 26,810, 26,810.
10 See Friedman v. Sebelius, 686 F.3d 813, 821 (D.C. Cir. 2012). Under Friedman, even if the text of the FCPA accounting provisions itself does not require proof of fraud, misrepresentation, or other direct showing of financial misconduct as an element of the criminal offense, OIG can look beyond the "technical components" of the law to determine whether the statutory criteria for Mandatory Exclusion are met.
11 Harkonen, 2013 WL 5734918, at *4.
12 Id. at 7 (citing Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985) ("relate to" has a "broad common-sense meaning" and a statutory provision containing the phrase therefore has "broad scope"); see also Ellen L. Morand, DAB No. 2436, 2012 WL 369634, at *8-9 (H.H.S. Jan. 17, 2012); Charice D. Curtis, DAB No. 2430, 2011 WL 7444589, at *2-5 (H.H.S. Dec. 21, 2011); Kenneth M. Behr, DAB No. 1997, 2005 WL 2835001, at *4 & n.5 (H.H.S. Sept. 28, 2005) (all applying "common sense connection" or "nexus" interpretation of phrase "in connection with" together with "delivery" in context of § 1320a-7(a)(3)).
13 See, e.g., Morand, 2012 WL 369634, at *7 (finding that 42 U.S.C. § 1320a-7(a)(3) "does not require a 'felony conviction for health care fraud,' but rather a '[f]elony conviction relating to health care fraud'" (emphasis and brackets in original)); Curtis, 2011 WL 7444589, at *4 (finding that 42 U.S.C. § 1320a-7(a)(3) "does not require that the felony conviction be for an offense specified as 'health care fraud,'" that the plain language "encompasses felonies 'relating to' fraud," and, by including the term "other financial misconduct" within the scope of offenses, "Congress clearly intended to broadly encompass financially-related offenses").
14 See World Bank, Annual Report 2016 3.
15 See International Finance Corporation, World Bank Group, Definitions and Interpretive Guidelines (2009).
16 See Sope Williams, The Debarment of Corrupt Contractors from World Bank-Financed Contracts, 36.3 Pub. Cont. L. J. 277, 287–88 (Spring 2007); World Bank, Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants (Oct. 15, 2006).
17 See Anne-Marie Leroy & Frank Fariello, The World Bank Group Sanctions Process and Its Recent Reforms, The World Bank 15 (2012) ("The Bank Group's sanctions regime has the dual purpose of protecting Bank Group funds and also promoting both specific and general deterrence.").
18 Agreement for Mutual Enforcement of Debarment Decisions, dated as of April 9, 2010, by and among the African Development Bank Group, Asian Development Bank, European Bank for Reconstruction and Development, Inter-American Development Bank Group and World Bank Group.
19 See, e.g. Integrity Vice Presidency, The World Bank Group, Annual Update, Fiscal Year 2016 40 (2016) (listing referrals made to state governments during fiscal year 2016).
20 F.A.R. § 9.406-2(a)(5).
21 If a contracting agency initiates an investigation, those questions are answered pursuant to a formal process mandated by GSA regulations. For example, the Veterans Administration requires an extensive reporting process for complainants, after which notice is given to the accused firm along with an opportunity to respond. Depending on an informal review of that response, the accusation is dismissed or a formal hearing resembling a lawsuit begins. See F.A.R. § 809.406-3.
22 See F.A.R. § 9.402 (setting out the policy that debarment and suspension from U.S. government contracts shall be imposed "only in the public interest for the Government's protection and not for purposes of punishment"); Federal Acquisition Institute, Transcript: Suspension and Debarment, last accessed September 13, 2017, (noting that this "broad" mandate encompasses behavior that does "not . . . relate to work on a federal government contract").
23 See F.A.R. § 9.406-1 ("Before arriving at any debarment decision, the debarring official should consider factors such as . . . [whether] the contractor brought the activity cited as a case for debarment to the attention of the appropriate Government agency in a timely manner.").

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.