The Department of Justice (DOJ) has further focused its sights on individual executives as responsible parties for corporate misconduct.  On September 9, 2015, Deputy Attorney General Sally Quillian Yates issued a strongly worded seven-page memorandum to all U.S. Attorneys and the Assistant Attorneys General of DOJ’s various divisions nationwide titled “Individual Accountability for Corporate Wrongdoing” (the “Memorandum”).  Overall, the Memorandum imposes further expectations that government attorneys will investigate the acts of individual executives and management personnel before providing cooperation credit to or allowing the resolution of a civil or criminal case against a corporate entity.  Moreover, the Memorandum serves as a tacit warning to defense counsel that it will be even harder to negotiate concessions for corporate liability without providing information about potentially responsible individuals that is satisfactory to the investigating agencies.

The Memorandum’s Six Principles Governing the Investigation of Corporate and Individual Culpability

The Memorandum uses six principles to frame DOJ’s expectations of its attorneys with respect to investigating individual liability in the context of pursuing cases against corporate entities:

  1. In order to qualify for any cooperation credit, corporations must provide DOJ with all relevant facts relating to the individuals responsible for the misconduct. (original emphasis).
  2. Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
  3. Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
  4. Absent extraordinary circumstances or approved departmental policy, no corporate resolution will provide protection from criminal or civil liability for any individuals.
  5. Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires, and declinations as to individuals in such cases must be memorialized.
  6. Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.

The Memorandum’s Implications for Investigations of Health Care Corporations and Their Executives

Overall, the Memorandum requires the liability of individual corporate officials to be a more significant factor in the appropriate resolution of criminal or civil cases against corporations. But in the health care world, many principles in the Memorandum were already in practice.

First, the criminal and civil divisions of DOJ already collaborate regularly on investigations of health care fraud under the False Claims Act and the Anti-Kickback Statute.  And in fact, the Department of Health and Human Services’ Office of the Inspector General (HHS-OIG) has been focused on increasing investigations and penalties against individual corporate officials for at least the past five years. For instance, the HHS-OIG’s “Guidance for Implementing Permissive Exclusion Authority Under Section 1128(b)(15) of the Social Security Act” published in October 2010 specifically sets out the OIG’s considerations used to exclude an officer or managing employee of an entity convicted of or previously excluded for certain offenses.

But now, the Memorandum clearly sets a floor for all DOJ attorneys to follow, creating less flexibility for defense counsel to leverage goodwill with local Assistant U.S. Attorneys (AUSAs) to resolve cases and avoid collateral consequences such as exclusion from federal health care programs. This is because any significant deviation from the Memorandum’s overall principles, such as a release from criminal or civil liability, would only be granted under “extraordinary circumstances” and with personal written approval from the relevant Assistant Attorney General or U.S. Attorney.

Second, the Memorandum indicates that individual corporate officials alleged to have a hand in the corporate entity’s purported misconduct can no longer rely on the hope that an AUSA will value a stiff penalty against the corporate entity over fines and penalties against individuals.  In fact, the Memorandum takes special pains to note that “a company seeking cooperation credit [that] declines to learn of such facts or to provide the Department with complete factual information about individual wrongdoers” will forfeit the ability for its cooperation to be considered as a mitigating factor under the guidelines in the U.S. Attorneys’ Manual section on Principles of Federal Prosecution of Business Organizations.  The Memorandum also decreases the ability of individual corporate officials to raise inability to pay issues to deter DOJ from prosecuting them.

Going forward, the Memorandum indicates that the determination of whether to bring a criminal or civil action against an individual will be on factors such as the scope and seriousness of the individual corporate official’s conduct. Specifically, the Memorandum requires DOJ lawyers “to not agree to a corporate resolution that includes an agreement to dismiss charges against, or provide immunity for, individual officers or employees.” This clearly confirms that the closing or resolution of an investigation against a corporate entity will not mean that inquiries into responsible individuals have ended as well. DOJ has long-refrained from providing “cold comfort” letters to defense counsel, but this Memorandum could create even more uncertainty for inexperienced counsel who may not realize how many loose ends can remain with respect to individual liability as a result of a corporate inquiry. This increasingly aggressive posture in corporate investigations may make it more imperative for defense counsel to enter into (and be ready to end) common interest or joint defense agreements at earlier stages of investigations and court proceedings.

Finally, the fifth principle in the Memorandum implies that DOJ has taken note of the increasing pressure from District Courts for the government to make progress in investigations.  Particularly in health care fraud prosecutions under the False Claims Act, there has been a trend of District Court judges imposing absolute limits on the number of times the government can extend the 60-day period that a qui tam is under seal from the public or to complete an investigation. And obviously, judges take a dim view of cases involving misconduct preceding applicable periods dictated by statutes of limitation.  AUSAs will have to be more persuasive in convincing their superiors and District Court judges that the investigation is moving forward in a timely and organized fashion.

Important Takeaways for Health Care Corporations and Executives

As a result of this Memorandum, investigating agencies and defense counsel have an even higher burden to meet before clearing a case due to increased pressure to go after individuals as a part of an investigation against a corporate entity.  Therefore, corporate entities and executives in the health care industry, especially those submitting claims to federal health care payors, should expect more inquiries into whether they fully adhered to applicable compliance, corporate ethics, or integrity programs.  In addition, the focus of the investigation may subject a corporation’s bylaws as well as minutes from compliance and corporate board meeting minutes to even more scrutiny.  As the HHS-OIG and DOJ have continually stated, the “tone at the top” will influence the culture of compliance within an organization.  The Memorandum merely reinforces that the enforcement agencies will fully evaluate whether individuals at all levels of a corporation under investigation have complied with such corporate integrity policies and followed appropriate investigation and corrective actions in response to internal reports of potentially illegal conduct.

Because the Memorandum notes that DOJ attorneys will consider the appropriate level of cooperation required “within the bounds of the law and legal privileges,” corporations should involve outside counsel as soon as possible to ensure the solid establishment of these boundaries early in an internal investigation or at the beginning of an inquiry from the enforcement agencies. Furthermore, outside counsel can ensure that pleas or settlement agreements explicitly address whether information that comes to light after the resolution of a portion of covered conduct will result in stipulated penalties or a determination of a material breach.

Overall, the Memorandum shows that DOJ is becoming more dogged in pursuing prosecutions, fines, and penalties against individual executives and managers and will break down a corporate entity’s walls to do so.

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Photo of John Brennan John Brennan


John T. Brennan, Jr. is a partner at Crowell & Moring and a member of the firm’s Health Care Group. His practice primarily focuses on health care fraud and abuse matters. He defends clients in federal litigation, investigations and enforcement actions, especially relating…


John T. Brennan, Jr. is a partner at Crowell & Moring and a member of the firm’s Health Care Group. His practice primarily focuses on health care fraud and abuse matters. He defends clients in federal litigation, investigations and enforcement actions, especially relating to the federal False Claims Act and the anti-kickback and physician self-referral (Stark Law) statutes. He deals frequently with the Department of Justice and Health & Human Services – Office of the Inspector General. In addition to his litigation practice, John often advises clients on compliance matters,and conducts internal investigations related to potential fraud and abuse issues. John’s practice also includes advising clients on reimbursement, transactional, physician relations, licensure and certification, and other regulatory issues.

Photo of Troy A. Barsky Troy A. Barsky

Troy Barsky is a partner in Crowell & Moring’s Washington, D.C. office, and serves as a member of the firm’s Health Care Group Steering Committee where he focuses on health care fraud and abuse, and Medicare and Medicaid law and policy. Troy counsels…

Troy Barsky is a partner in Crowell & Moring’s Washington, D.C. office, and serves as a member of the firm’s Health Care Group Steering Committee where he focuses on health care fraud and abuse, and Medicare and Medicaid law and policy. Troy counsels all types of health care entities, including hospitals, group practices, and health plans on the physician self-referral law (Stark Law) and the Anti-Kickback Statute, innovative healthcare delivery models, such as Accountable Care Organizations (ACOs), and Medicare & Medicaid payment and coverage policy. He also defends clients seeking resolution of government health care program overpayment issues or fraud and abuse matters through self-disclosures and negotiated settlements with the U.S. Department of Justice, U.S. Health & Human Services Office of the Inspector General and the Centers for Medicare & Medicaid Services (CMS).