FCA Enforcement: United States Department of Justice Linda A. Kontos Assistant United States Attorney U.S. Attorney’s Office Civil Fraud Section Central District of California

Overview: Background Re: Government False Claims Act Investigation Recent Amendments to the federal FCA (2009 & 2010) Questions *** The views expressed today, in this oral and PowerPoint presentation and in conversation with you, are those only of Linda Kontos personally, and are not, and should not be taken as, official positions of either the Office of the U.S. Attorney or the Department of Justice.

FEDERAL FALSE CLAIMS ACT BACKGROUND & INVESTIGATION PHASES TOPIC 1: FEDERAL FALSE CLAIMS ACT BACKGROUND & INVESTIGATION PHASES

Our Main Tool: FCA Elements required to prove FCA case: CLAIM FOR PAYMENT TO THE GOVERNMENT (e.g., Medicare/Medicaid) FALSITY MATERIALITY REQUIRED STATE OF MIND (“SCIENTER”) Potential Exposure: TREBLE the amount of damages sustained by the US + Civil penalty per false claim &/or false statement: $5-11K + Exclusion/debarment from program (admin. remedy)

Mechanics of a Qui Tam (Whistleblower) Action Suit is Filed Under Seal (Confidential) Government Investigates Government Intervenes or Declines Intervention Case Either Settles or Proceeds to Trial

The Investigation - Phase 1 Different Tools - Examples Civil CIDs Documents Interrogatories RFAs Agency (OIG) Subpoenas Criminal Search Warrants AIDs Grand Jury Subpoenas Administrative Suspension of Payments Seizure Warrants and Asset Forfeiture (Civil or Criminal)

The Investigation - Phase 2 Putting the Evidence Together Document Review Witness Interviews CID Depositions Experts/Consultants If Criminal Component Consensual monitoring Undercover operations

The Investigation – Phase 3 Settlement Intervention or Declination (Qui Tam) Gear Up for Trial (discovery) Motions (dismissal, summary judgment) Trial

TOPIC 2: FEDERAL FALSE CLAIMS ACT AMENDMENTS – The Fraud Enforcement and Recovery Act – May 2009 (“FERA”): CIDs & “Reverse” False Claims The Patient Protection & Affordable Care Act – March 2010 (“PPACA”): Kickbacks

FERA / CIDs Primary Purpose: To overrule judicial decisions with which Congress disagreed Prior FCA: CIDs sparingly issued for docs/rogs/depos FERA (§ 3733(a)(1)) + Regs (75 FR 14070) = CID authority delegated to U.S. Attorneys

FERA: “Reverse” False Claims Former § 3729 (a)(7): New § 3729 (a)(1)(G): False statement required Not required for clause 2 Liability: “knowingly, makes, uses or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government” (emphasis added) “[1] knowingly makes, uses or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or [2] knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government”

FERA: “Reverse” False Claims cont’d. Clause 2 (new): knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government No false statement necessary Liability for retaining federal funds you are not entitled to have (e.g., Medicare overpayments) Knowing retention of overpayment: FCA liability if funds initially improperly paid OR if funds legitimately received initially but later required to be returned

The Patient Protection & Affordable Care Act (“PPACA”): KICKBACKS FCA actions based on underlying violation of the Anti-Kickback Statute (“AKS”) – 42 U.S.C. § 1320a-7b AKS: criminal offense to “knowingly and willfully” exchange remuneration for a referral for medical items/services that may be paid for by a federal health care program (e.g., Medicare/Medicaid). 13

AKS – Ninth Circuit Specific Intent Hanlester Network v. Shalala, 51 F.3d 1390 (9th Cir. 1995) required prosecutors in the Ninth Circuit to show that ∆: “(1) kn[e]w that [the AKS] prohibits offering or paying remuneration to induce referrals, and (2) engage[d] in prohibited conduct with the specific intent to disobey the law.” Id. at 1400 (emphasis added). 14

PPACA: No Specific Intent Under AKS Appears to legislatively overrule Hanlester: no specific intent required PPACA § 6402(f) adds language to the AKS – “(h) . . . a person need not have actual knowledge of [the AKS] or specific intent to commit a violation of this section.” Practical effect: easier to prove kickback cases 15

QUESTIONS??? Linda A. Kontos Assistant United States Attorney United States Attorney's Office Central District of California Civil Fraud Section linda.kontos@usdoj.gov