Sally Yates. Yes, we all remember her from her landmark termination on January 20, 2017. But, few of us are cognizant of her landmark directive issued on September 9, 2015, titled: Individual Accountability for Corporate Wrongdoing, what we at akiro simply call the Yates Memo. It ushered in a new aggressive stance by the DOJ in pursuing individual liability for corporate failures to conform with the law.
Some believe that the genus for this new aggressive focus by the DOJ was triggered by a case in akiro’s very own industry, federal compliance in healthcare transactions. In the Toumey case, (US v Toumey, Case No: 3:05-2858-MBS (D. S.C. 2013)), the hospital system failed to consider Stark Law, the False Claims Act and the Anti-Kickback Statute in structuring compensation for 19 part-time physicians, resulting in an initial judgement against the health system of over $275M.
Importantly, the hospital CEO was held personally accountable for a one-million-dollar fine that could not be reimbursed by his employer.
Individual liability is being sought by DOJ prosecutors in matters as recent as the Life Spine Anti-Kickback case. (US v. Life Spine, Inc., Michael Butler and Richard Grieber, Case No. 18 Civ 1131 (JSR) (S.D.N.Y, July 22, 2019). Of note, Butler was named by the Relator because he is the CEO of Life Spine. Grieber, VP of Business Development, was added by the DOJ because he was “responsible for ensuring that Life Spine’s relationships with surgeons complied with applicable laws and regulations.” The DOJ is prosecuting an additional individual responsible for compliance. This expansion of personal liability beyond the C-Suite is noteworthy.
Further, the former CEO and COO of Pine Creek Medical Center agreed to pay $171,480 to resolve anti-kickback violations of Pine Creek (reported July 22, 2019).
Ms. Yates emphasizes: “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.”, particularly that [DOJ] “attorneys investigating corporate wrongdoing should maintain a focus on the responsible individuals, recognizing that holding them to account is an important part of protecting the public fisc in the long term.”
Moreover, she outlines additional guidance to prosecutors as follows:
- “Department attorneys should be proactively investigating individuals at every step of the process before, during and after any corporate cooperation.”
- “Criminal and Civil corporate investigations should focus on the individual from the inception of the investigation.”
- “Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.”
Pretty chilling stuff if you’re a healthcare C-suite executive, the head of a physician practice with physician compensation arrangements, board member or second-tier vice president.
Don’t ignore your compliance requirements, engage a third party to review your transactions for regulatory conformity, including fair market value testing and commercial reasonableness both in anticipation of a transaction and routinely after the transaction is consummated.