Attendees of the Federal Bar Association’s annual Qui Tam Conference gained valuable insights from one of DOJ’s top False Claims Act enforcers last month. Commercial Litigation Branch Deputy Assistant Attorney General Brenna Jenny presented a keynote speech outlining the government’s enforcement philosophy and priorities, and was a panel member for a session titled “‘Illegal DEI’ as an FCA Trigger?” All recipients of government funding will want to take note of what DOJ had to say, but those in the healthcare industry – the industry generating the most FCA recoveries for the government – will be especially interested.
The Government’s Prosecutorial Discretion
The False Claims Act is a far-reaching statute that has evolved over time as government spending has spread to new industries and as bad actors have devised new schemes for wrongfully obtaining funds from the government. At the same time, the FCA is famously not an “all-purpose antifraud statute” “or a vehicle for punishing garden-variety breaches of contract or regulatory violations.”[1] Among other things, DOJ uses its prosecutorial discretion to balance these sometimes competing realities, and the keynote speech described some factors that may be more or less persuasive to the Department in exercising that discretion:
- DOJ is more likely to pursue claims involving concrete harm and less likely to pursue those involving theoretical harm. But, she added, there are two important caveats. First, if a defendant put people in harm’s way but got lucky and no one was harmed, that is still concrete harm. Second, harm at the “program” level like misallocation of funds is still concrete harm, even if there is not concrete harm at an individual level.
- Following on from this broad definition of “harm,” the inability to quantify damages may not dissuade DOJ from a case. “Programmatic harm matters even in the absence of mathematical precision.”
- So long as the statute of limitations is satisfied, stale conduct is still of interest to the DOJ, unless there have been intervening changes in law or agency positions, which would raise “serious questions” about whether liability is appropriate.
- The defense of “everyone does it” is likely to provoke, not reduce, DOJ interest in a case, although a defendant may be able to make a compelling argument that the industry-wide practice was known to and accepted by the relevant agency. If conformity to the norm is conformity to fraud, DOJ’s job is to “reset the baseline, not reward conformity.”
- Sub-regulatory guidance is not an independent basis for liability, a limitation the first Trump administration was particularly aggressive in applying.
The Rise of Data Mining Relators
DOJ has historically made substantial use of its own internal review of agency data to identify trends and potential cases, including in reviewing opioid prescribing and dispensing data. It continues to do so. External data miners are a growing portion of qui tam complaints and can sometimes help the DOJ in identifying patterns it hasn’t identified for itself yet. But Ms. Jenny expects insider whistleblowers to continue to represent the bulk of qui tam relators, because those insiders have the missing insider information that neither DOJ nor the third-party data miners have.
Dismissal of Qui Tam Cases by DOJ
The first Trump Administration announced it would increase DOJ’s use of its dismissal authority under 31 U.S.C. 3730(c)(2)(A). In the second Trump Administration this has been institutionalized: every case is assessed for potential dismissal at the time an intervention decision is made (and, if not dismissed, case developments may prompt further assessments). Last Fiscal Year the government dismissed a “record” high of 25 cases. Although higher than in the past, it is still a small number relative to all qui tam filings. This reflects DOJ’s intention to exercise its authority “appropriately and sparingly,” but not “reluctantly.” While DOJ will consider many factors in exercising its discretion, merit will continue to be paramount. Ms. Jenny closed this section of her speech with a reminder that declined cases are not necessarily meritless, pointing to sizable recent recoveries in such cases.
Enforcement Trends and Priorities
Ms. Jenny ended by highlighting DOJ’s current enforcement priorities. These were not particularly surprising to close followers of DOJ’s FCA practice generally, or this blog in particular. Managed care, especially in enrollment, broker kickbacks, and denial of care, continues to be a focus, as do allegations of direct and indirect improper drug pricing. The Administration’s focus on discrimination and DEI remains a “priority” and those cases are receiving expedited and prioritized treatment.
DEI and the FCA
Earlier in the morning Ms. Jenny was one of several panelists in a discussion about the Administration’s focus on “illegal DEI” and the FCA. Importantly for those that continue to desire them, she confirmed that entities “can operate a DEI program without discriminating.” That said, DOJ believes it is developing strong cases against entities that went too far. According to Ms. Jenny, these cases involve entities that established demographic goals for the company and DEI goals for individual employees and tied compensation or performance evaluations to whether those goals were achieved. Another member of the panel questioned whether this conduct was necessarily “illegal.” Sheppard’s Government Contracts and Investigations Blog covered that session in more detail.
DOJ and the EEOC have, in the last year, put out guidance on the Administration’s current views of “legal” and “illegal” DEI efforts. It will be interesting to see how DOJ uses this new guidance, given the emphasis in the keynote speech on limiting use of sub-regulatory guidance and the “serious questions” about imposing liability where an agency’s legal interpretation has changed. The healthcare, government, and labor & employment teams at Sheppard will continue monitoring for developments.
FOOTNOTES
[1] United Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176, 194 (2016).