Source: https://www.omm.com/resources/alerts-and-publications/alerts/joint-enforcement-of-the-anti-kickback-statute-and-the-foreign-corrupt-practices-act/
Timestamp: 2019-04-21 09:00:43+00:00

Document:
The Olympus action represents a rare example of a case involving simultaneous enforcement of both the AKS and the FCPA. Although the two statutes prohibit similar—and often identical—conduct, healthcare companies and other actors typically facing AKS charges are rarely also subject to enforcement under the FCPA in the same action. There are several possible reasons for this phenomenon.
Despite this relative paucity of joint criminal enforcement actions under the AKS and FCPA, the recent Olympus settlement may be a harbinger of what is to come. Recent years have witnessed a significant rise in enforcement activity under both statutes individually, and DOJ has increasingly placed an emphasis on cross-agency and interdepartmental coordination in prosecuting fraud charges.
In 2011, for example, then U.S. Attorney—and now Attorney General—Loretta E. Lynch announced that “fighting heath care fraud” had become one of DOJ’s top priorities.18 The AKS, as one of the statutory tools to combat healthcare fraud, has been an integral part of pursuing this goal.19 Indeed, in the almost five years since Attorney General Lynch made that statement, DOJ has entered into increasingly frequent and significant AKS settlements with healthcare providers, pharmaceutical companies, medical laboratories, and others. Only a few months before the Olympus settlement, for example, DOJ entered into a settlement agreement with Millennium Health (“Millennium”), a San Diego-based urine testing laboratory, under which Millennium agreed to pay $256 million to resolve allegations under the False Claims Act that Millennium provided free items to physicians who agreed to refer expensive laboratory testing business to Millennium, in violation of the AKS and the Stark Law.20 Such large enforcement actions under the AKS have become commonplace, as the recent Olympus settlement demonstrates.
Nordion (Canada) Inc.: SEC enforcement action alleging that a company employee paid Russian government officials through a third-party agent to obtain approval to distribute Nordion’s liver cancer treatment in Russia. Settled with the SEC in March 2016 for $375,000.
SciClone Pharmaceuticals: SEC enforcement action alleging that SciClone subsidiaries provided cash, gifts, and travel expenses to healthcare professionals at state-owned hospitals in China in order to increase prescription orders. Settled with the SEC in February 2016 for $12.8 million.
Mead Johnson Nutrition: SEC enforcement action alleging that a Mead Johnson subsidiary used distributor allowances to funnel payments to healthcare providers in order to incentivize them to market Mead Johnson products. Settled with the SEC in July 2015 for $12 million.
Bruker Corporation: SEC enforcement action alleging that Bruker subsidiaries made unlawful payments through sham collaboration agreements with state-owned enterprises in China. Settled with the SEC in December 2014 for $2.4 million.
Bio-Rad Laboratories: SEC and DOJ enforcement actions regarding allegations that foreign subsidiaries of Bio-Rad funneled unlawful payments to officials in Vietnam, Thailand, and Russia. Settled with the SEC and DOJ in November 2014 for a combined $55 million.
which recently announced that it had received a grand jury subpoena from the DOJ for potential FCPA violations related to its sales practices in Africa, Asia, and Latin America.
Moreover, while the DOJ units responsible for enforcing the AKS and FCPA have not historically coordinated their efforts, DOJ has increasingly placed emphasis on cross-agency and interdepartmental collaboration to aid in enforcement efforts. The FCPA Unit has similarly begun to enlist the aid of foreign agencies in enforcing the FCPA.
Each of these trends—increasing enforcement activity under the AKS and FCPA, and rising collaboration among departments—supports the notion that cases like Olympus will soon become the norm, rather than the exception. Healthcare companies, both foreign and domestic, should take remedial measures to safeguard themselves against the substantial risk of liability presented by joint enforcement under the AKS and FCPA. Essential steps include educating employees about the risks that these statutes present, instituting an effective compliance program tailored to the specific needs of the company, and allocating responsibility for compliance mechanisms and rules.
1 Press Release, U.S. Dep’t of Justice, Office of Pub. Affairs, Medical Equipment Company Will Pay $646 Million for Making Illegal Payments to Doctors and Hospitals in United States and Latin America (March 1, 2016), available here, [hereinafter “DOJ Press Release”].
3 Criminal Complaint, United States v. Olympus Corp. of the Ams., No. 16-3524 (MF) (D.N.J. Mar. 1, 2016), available here.
5 42 U.S.C. § 1320a–7b.
6 Criminal Complaint, United States v. Olympus Latin Am., Inc. No. 16-3525 (MF) (D.N.J. Mar. 1, 2016), available here.
8 15 U.S.C. § 78dd-1.
9 For example, according to the FCPA Professor, the Olympus action marks the twentieth corporate enforcement action based on the theory that “employees (such as physicians, nurses, mid-wives, lab personnel, etc.) of certain foreign health care systems are ‘foreign officials’ under the FCPA.” Issues to Consider from the Olympus Enforcement Action, FCPA Professor (Mar. 10, 2016), available here.
10 31 U.S.C. § 3730.
11 Id. § 3739(d)(2); United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 225–26 (1st Cir. 2004). Consequently, the majority of FCA actions are brought by relators. See David Kirman & Alex Wyman, Anti-Kickback Statute Enforcement Trends, 28 Health Law. 43, 48 n.56 (Dec. 2015), available here.
12 DOJ Press Release, supra note 1. Owing to the size of the settlement, Mr. Slowik will receive $44,102,573 from the federal settlement and $7 million from the state settlement. Id.
13 See HEAT Task Force, Dep’t of Health & Human Servs. & DOJ, available here.
14 There are, however, SEC whistleblower bounties that apply to a range of legal issues for U.S. issuers, including FCPA violations.
15 See generally U.S. Dep’t of Justice & U.S. Secs. & Exch. Comm’n, A Resource Guide to the U.S. Foreign Corrupt Practices Act 52–53 (2012).
16 See Dep’t of Justice, Criminal Division, About The Criminal Division, Sections/Offices, Fraud Section, Health Care Fraud Unit, available here. Civil enforcement actions involving the AKS under the False Claims Act are handled by DOJ’s Civil Fraud section, which handles all qui tam litigation, regardless of whether it is related to healthcare.
17 U.S. Dep’t of Justice, U.S. Attorneys’ Manual § 9-47.110 (2008), available here. Civil enforcement authority of the FCPA is handled by the Securities and Exchange Commission through the FCPA Unit of its Enforcement Division.
18 April 5, 2011 Statement of Loretta E. Lynch, available here.
19 See Kirman & Wyman, supra note 11, at 44.
20 See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Millennium Health Agrees to Pay $256 Million to Resolve Allegations of Unnecessary Drug and Genetic Testing and Illegal Remuneration to Physicians (Oct. 19, 2015), available here.
21 See Richard L. Cassin, Here’s our new Top Ten list, with VimpelCom landing sixth, FCPA BLOG (Feb. 19, 2016, 9:28 AM), available here.
22 See, e.g., U.S. Dep’t of Justice, Office of Pub. Affairs, Remarks for Deputy Attorney General James M. Cole Press Conference Regarding Alstom Bribery Plea (Dec. 22, 2014), available here.
(“[T]his Department of Justice will be relentless in rooting out and punishing corruption to the fullest extent of the law, no matter how sweeping its scale or how daunting its prosecution. Let me be very clear: corruption has no place in the global marketplace.”).
23 See Vince Farhat & David Kirman, Current Trends in FCPA Enforcement in the Healthcare Industry, Compliance Today, Jan. 2016, at 28, 30.
24 See Michael Petkov, Healthcare Companies Claim Second Place on the Current FCPA Investigation List, Transparency International UK (Feb. 22, 2016), available here; see also Richard L. Cassin, The Corporate Investigations List (January 2016), FCPA Blog (Jan. 5, 2016 7:28 AM), available here (listing fifteen healthcare companies as under investigation, including SciClone, Nordion, and Olympus).
25 Alere Inc. 8-K SEC Filing (Mar. 15, 2016), available here.
27 See U.S. Dep’t of Justice, Office of Pub. Affairs, Press Release, Assistant Attorney General Leslie R. Caldwell Speaks at American Conference Institute’s 31st International Conference on the Foreign Corrupt Practices Act (Nov. 19, 2014), available here (“The increase in international collaboration is not only enhancing our own FCPA enforcement efforts but it is also resulting in anti-corruption enforcement actions by other countries.”).
O’Melveny & Myers LLP White Collar Defense and Corporate Investigations Partner David Kirman is a former federal prosecutor at the United States Attorney’s Office in the Central District of California and Partner Jeremy Maltby served in the White House Counsel’s Office as Special Assistant and Senior Counsel to President Barack Obama. Alex Wyman is an associate in O’Melveny’s Los Angeles office and also a member of the White Collar Defense and Corporate Investigations Practice . The opinions expressed in this article do not necessarily reflect the views of O'Melveny or its clients, and should not be relied upon as legal advice.

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