Corporate Compliance Officer Liability Under the Responsible Corporate Officer Doctrine

By Gabriel Imperato and Tara Epstein

The aggressive prosecution of individuals in health care fraud cases continues and is reflected by the criminal and civil penalties imposed on corporate executives, including individual owners, officers, or managing employees, holding them personally accountable for corporate wrongdoing. A federal judge recently upheld an order excluding three Purdue Pharma executives from participating in Medicare, Medicaid and all other federal health care programs for 12 years. The case is pending before the D.C. Circuit Court of Appeals. The exclusion followed the officers’ guilty pleas to misdemeanor violations involving the misbranding of Oxycontin entered as part of a global settlement of the government’s investigation of Purdue-Frederick Company, a subsidiary of Purdue Pharma. Significantly, the executives’ liability was founded solely on the “responsible corporate officer” doctrine.

The responsible corporate officer doctrine provides that an individual may be charged with a crime for violating the law simply by virtue of his or her position within a company. Under the doctrine, a person may be found guilty if he had, “by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct,” an act in violation of the law, but failed to do so.

The Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) has begun focusing on incorporating the responsible corporate officer doctrine into its existing authority to exclude individuals from participating in federal health care programs. In October, 2010, the OIG published guidance on the imposition of exclusions under Section 1128(b)(15) of the Social Security Act and established the criteria and factors to be considered when determining the exclusion of a health care company’s owner, officer, or managing employee. These factors are: the circumstances of the misconduct and seriousness of the offense; the individual’s role in the sanctioned entity; the individual’s actions in response to the entity’s misconduct; and information about the entity, including whether it has previously been convicted of a crime or found liable, or resolved civil or administrative charges with a federal or state enforcement authority, and the size and structure of the entity and its subsidiaries.

On March 2, 2011, Inspector General Dan Levinson testified before Congress stating the OIG’s concern that providers may consider engaging in fraud schemes, and paying civil penalties and criminal fines if caught, as a cost of doing business. The OIG intends to address this problem by “alter[ing] the cost-benefit calculus of the corporate executives who run these companies.” Inspector General Levinson’s testimony further revealed that the OIG intends to use its exclusion authority to combat health care fraud, which could include violations of the Anti-Kickback law or the Stark law. The exclusion of Purdue-Frederick’s Chief Executive Officer, Chief Medical Officer and General Counsel demonstrates that the OIG will not only examine the company’s wrongdoing, but also will examine the individual’s duties and responsibilities, the actions and omissions of the individual, and the extent, whether directly or indirectly, to which the company’s wrongdoing is attributable to that individual’s action or failure to act.

Please click here to view the article in “South Florida Hospital News.”

This entry was posted in Compliance, Fraud/Abuse, Gabriel Imperato, Malpractice, Regulatory and tagged , , , , , , , , , , , , , , , , . Bookmark the permalink.

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