Though there appears to be a dim light at the end of the pandemic tunnel, much remains uncertain – everything from the timing of school reopenings to the nature and business of the healthcare industry.
Part of that uncertainty revolves around fraud litigation: specifically, how much of it has taken place during the pandemic. The one thing that seems certain is that fraud prosecution will be a priority in the coming year.
The main factor driving this certainty is that the U.S. The Department of Justice recorded the lowest total recoveries in FCA settlements in more than a decade during the COVD-19 public health emergency.
According to Jacques Smith, a partner at law firm Arent Fox and a member of the firm's Business Loan Task Force, fraud was likely more widespread than usual in 2020, but wasn't a priority for the Trump Administration.
Instead, that administration was focused more on keeping the economy going and dealing with the coronavirus; enforcement was not top-of-mind. With the change in administration and a potential loosening of the stranglehold the pandemic has had on the country, the chickens will be coming home to roost, and Smith expects record years for fraud recoveries in 2021 and 2022.
"2020 didn't have blockbuster resolutions," Smith said. "In Fiscal Year 2021, we're already seeing different results. For settlements on opioid litigation, there's been $8 billion of recoveries on the books already, $4 billion by Purdue.
"What we're looking at now is the government is off to a banner start, and that's going to be the start of a record year, this year and next."
The chaos caused by COVID-19, said Smith, encouraged fraudulent behavior by some opportunists that seems to have run the gamut from PPE fraud to Medicare reimbursement shenanigans.
"During the prior administration, there was a rumor that if you only apply for a million (dollars) or two, the government wasn't going to have any oversight over that money," he said.
"That's simply not the case. We've seen investigations already for small amounts under $2 million. Quite a number of criminal cases are expected."
"A MEMORY OF WHAT HAPPENED BEFORE"
Which types of recoveries and settlements will be the most widespread and prevalent remains to be seen, as these things are often cyclical. A couple of years ago, the government showed interest in pursuing companies that gave contributions to charitable organizations in exchange for prescription medications, and some of that money was misused, leading to more than $1 billion in settlements, according to Smith.
The nature of future settlements is still cloaked in mystery to an extent, since they're still under seal. Senator Chuck Grassley, R-Iowa, has shown interest in amending and modifying the False Claims Act so it can have a greater enforcement arm, as well as stronger whistleblower protection over the next four years. Greater incentives for whistleblowers could open the floodgates.
"It's a misnomer that last year was a down year," said Smith. "There were more cases last year. It was a record year in filings, just not recoveries.
"In 2020, there was an uptick in False Claims Act matters, and there are still many cases under investigation. Remember, courts were shut down, allowing cases to be under seal for a longer period."
That means prosecutors are going to have a busy year wading through the backlog of cases. Large hospitals and the pharmaceutical industry are already thinking about ways in which they can ramp up compliance and redouble their efforts to ensure that their records are kept up-to-date.
"The Biden Administration said they're going to take violations very seriously," Smith said. "Making this a lead priority, they're going to get very aggressive in investigations. And if you look back at history to predict the future, remember, Biden was vice president for Obama for eight years, and the Obama Administration was extremely invested in prosecutions related to the Great Recession.
"They were ruthless in their investigations and prosecution. I think we're going to see a 2.0. Many Biden appointees worked with the Obama Administration, so there's a memory of what happened before.
"I would want to make sure I work for a world-class organization that has a robust compliance plan," he said. "I want to make sure that, if there's a whistleblower that raises a complaint, that we investigate it and take it seriously. And if any of the complaints of allegations turn out to be true, I want a law firm to investigate. I want remediation to avoid enhanced penalties and criminal sanctions."
Smith also said there's a responsibility among various hospital boards, as they have an independent duty to conduct oversight over the companies they've been appointed to helm. This is reflected in the increased reliance on separate, independent councils for boards, which have their own fiduciary responsibility.
"For the compliance office, I would want the ability to go directly to a board. If a CEO is engaged in some kind of improper conduct, I would want that organization protected," he said. "I think that's really good common sense."