Does Ability to Pay Count for Anything Any More?

By: Benton Curtis

Through the Health Care Fraud and Abuse Control Program Report (the “HCFAC”), the Department of Health and Human Services and the Department of Justice (“DOJ”) annually trot out their most recent efforts to combat health care fraud – be it criminally, civilly, or administratively – around the country.  The HCFAC often times showcases the most prominent of matters, either in terms of conduct or monetary recovery, and the statistics embedded within the HCFAC are undoubtedly used as a justification to request of Congress continued (or preferably increased) funding in the space.  Sadly what is lost, though, amongst these splashy figures are certain policies that, while well-intentioned, cut against the federal government’s ability to efficiently and thoughtfully obtain a return on their investment.

 To the above point, on September 9, 2015, DOJ issued a new policy memorandum, signed by Deputy Attorney General Sally Quinlan Yates, that addressed the need for more individual accountability in instances of corporate misconduct (the “Yates Memo”).  The Yates Memo specifically established a series of new guidelines intended to further this overarching new policy and one of those guidelines promulgated that “[c]ivil 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.”  In setting forth this point, DAG Yates noted that while the twin aims of civil enforcement efforts – recovering as much money as possible and accountability for and deterrence of individual misconduct – can be in tension with one another at times, they are nonetheless equally important and “the fact that an individual may not have sufficient resources to satisfy a significant judgement should not control the decision on whether to bring suit.”

 While in theory this aggressive new civil position could generate the desired perception that a lack of seizable assets will not render an individual judgment-proof, its practical application will likely result in immeasurable, wasted government resources.  Indeed, your typical civil False Claims Act investigation, whether standing alone or as part of a parallel matter, is neither streamlined nor brief; quite the opposite as most civil investigations, regardless of scope and complexity, languish for years as government agents and attorneys plod through potential evidence to determine if their prosecutorial theory has any merit.  As any investigation proceeds, though, agents and attorneys should begin to gain a firmer grasp of core issues, such as the size of the alleged fraud, an individual’s involvement with or contribution to that alleged fraud, and an individual’s ability to monetarily atone for their actions.  In other words, the government should always be able to discern within a reasonable amount of time whether someone has sincere civil exposure and whether they have the financial resources necessary to cover that exposure.

 Under the Yates Memo, civil attorneys are rigidly forced at times to lurch forward and pursue individuals, even when they know – sometimes well in advance – that those individuals are insolvent, near insolvent, or incapable of fully satisfying a future judgment.  Moreover, those same civil attorneys lurch forward knowing that to the extent individuals still have resources to satisfy all or part of a judgment, those remaining resources will be depleted by the legal fees associated with defending against unnecessarily prolonged government investigations.

As I write the above, I recognize there is no silver bullet approach.  But, given the glaring need for fiscal responsibility by our federal government, DOJ needs to quantify the value of deterrence (assuming it even can be calculated) and determine if that value exceeds, or at least equals, the opportunity cost associated with investigating and prosecuting judgment-proof individuals.  If it does not, DOJ should soften this approach and afford its prosecutors more discretion to pursue individuals who can actually satisfy a significant judgment.

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