The Intersection of Civil and Criminal Law

The Intersection of Civil and Criminal Law

THE INTERSECTION OF CIVIL AND CRIMINAL LAW Erica Benites Giese Jackson Walker LLP Senior Counsel (Former Assistant U.S. Attorney, WDTX) Jay Dewald

Jackson Walker, LLP Partner (Former Assistant U.S. Attorney, NDTX) SOURCES OF INVESTIGATIONS Partnering by enforcement agencies Traditional media Short Sell Investors

Initiatives, working groups, and task forces Health Care Insurance Companies Civil Litigation Data mining Competitor complaints Patient/family complaints Self-disclosures

Whistleblowers Social media SROs (e.g., FINRA) GOVERNMENTS INVESTIGATIVE TOOLS Data analytics Surveillance Consensual monitoring

(Recorded Conversations) Qui tams, Whistleblowers Interviews Search warrants Subpoenas

Grand jury Agency Administrative AID/HIPAA CIDs Requests for information GOVERNMENT CONTACT CONTINUUM

1. 2. 3. 4. 5. 6. 7. 8. Knock-and-Talk, Agents Visit Employees

Administrative, Investigative Subpoenas Audit Grand Jury Subpoena Wells Notice (SEC) Target Letter Search Warrant Arrest (via Complaint or Indictment) KNOCK-ANDTALK

ENFORCEMENT LANDSCAPE Federal and state budget shortfalls DOJ adds 311 new prosecutors (violent crime and immigration focus) BUT, SEC attrition and hiring freeze Attrition of Federal Prosecutors Increased Aggressiveness of State Attorney General Offices ENFORCEMENT LANDSCAPE Shifting Priorities (Increased Importance Areas)

National Security (Counter-terrorism and Export Control) Immigration (Visa Fraud and Human Trafficking) Government Program Fraud (Health Care Fraud, IRS Reform, etc.) NATIONAL HEALTH CARE FRAUD TAKEDOWN Corruption (FCPA, Public Official Corruption) Cybercrime and security (High FBI Priority. Increased Resources Trade Secret Theft, Computer Fraud, etc.) SEC: Main Street vs. Wall Street


HEAT STRIKE FORCE CORPORATE ENFORCEMENT TRENDS HEALTH CARE FRAUD Perception that Health Care Fraud is rampant Data analytics Whistleblowers Private Payer actions, Influence with DOJ Investigation and prosecution of medical necessity Continued increased focus on individual actors

Kickback schemes involving pharmacies and laboratories SUPPORT/EKRA (opioids) expansion of AKS to private labs, recovery, etc. False or fraudulent claims, Retention of overpayments Improper financial relationships/referrals ENFORCEMENT TRENDS HEALTH CARE FRAUD NATIONAL HEALTH CARE FRAUD TAKEDOWN JUNE 2018 601 individuals charged (76 doctors, 89 nurses) Over $2 billion in alleged fraudulent billings

2700 program exclusions MAIN FOCUS Opioids HEAT Strike Force (Healthcare Enforcement Action Teams) Not Just Medicare/Medicaid Private Insurance Has the Feds Ear Health Care Entrepreneurs Shark-infested waters ENFORCEMENT TRENDS - SEC

ENFORCEMENT TRENDS - SEC Shortseller Enrichment Commission Elon Musk Digital Assets Bitcoin & Ethereum not securities April 2019 Guidelines: Howey test Charged as registration violations More focus on retail investors Individual Accountability Novel Remedies Theranos

From broken windows to harm-based case selection ENFORCEMENT POLICY 11/2018 ROSENSTEIN REVISIONS TO YATES MEMO Individual Accountability Remains the Focus Companies seeking cooperation credit must identify every individual involved/responsible Focus on individuals significant roles in setting a company on a course of criminal conduct

Dont delay disclosure for sake of identifying individuals unlikely to be prosecuted or insubstantial involvement Companies must be TIMELY and PROACTIVE If a company wishes to obtain maximum cooperation credit, [it] must do a timely selfanalysis and be proactive in voluntarily disclosing wrongdoing and identifying all individuals substantially involved in or responsible for the misconduct, without making the government compel such disclosures with subpoenas or other investigative demands. ENFORCEMENT POLICY REVISIONS TO YATES MEMO (CONT.)

STILL - near-complete cooperation by company to receive any credit thus, conflicts between Company and its Execs arise sooner need for experienced white collar counsel to conduct investigations and ensure compliance with subpoena response and discovery Toned down absolute rhetoric in favor of DOJ discretion to focus on highest value targets criminal or civil STILL - all Civil Investigations to Consult Criminal (and vice versa) Any government request can be referred for criminal prosecution

PARALLEL PROCEEDINGS PARALLEL PROCEEDINGS Civil Cases Can Become Sources of Criminal Liability

Private Civil Lawsuits Government Civil Investigations, Qui Tams Regulated Industries (Health Care, Government Contracts, Export Controls, ) Depositions Easily Become Confessions Fifth Amendment Right Not to Self-Incriminate!!! PARALLEL PROCEEDINGS Statutes with Civil and Criminal Sanctions False Claims Act Computer Fraud and Abuse Act

Theft of Trade Secrets Consider Stay of Civil Proceedings while Criminal matter is Pending In DOJ, renewed push to conduct parallel investigations MUST CONSIDER INVOKING FIFTH AMENDMENT FIFTH AMENDMENT FIFTH AMENDMENT - BASICS

No person shall be compelled in any criminal case to be a witness against himself. (U.S. Constitution, Fifth Amendment.) Only natural persons (including sole proprietorships) may assert. Applies in criminal, civil, administrative, or investigatory proceedings. Can be asserted even if innocent. FIFTH AMENDMENT - BASICS Can be asserted in response to any question, the answer to which

would furnish a link in the chain of evidence needed to prosecute the claimant for a crime. Invoked proceeding-by-proceeding. Failure to invoke in one proceeding does not waive the right to assert in a later proceeding. FIFTH AMENDMENT - EXAMPLE Client is defendant in Civil Enforcement Action brought by federal agency (here, the U.S. Department of Labor) Client receives grand jury subpoena regarding related activity. Client settles civil enforcement action, but DOL demands that she

testify against the others. DOL refuses to immunize Client FIFTH AMENDMENT & ADVERSE INFERENCE In civil proceedings The Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them: the Amendment does not preclude the inference where the privilege is claimed by a party to a

civil cause Baxter v. Palmigiano, 425 U.S.308, 319 (1976). CIVIL FORFEITURE PROCEEDINGS Civil forfeiture actions differ from most other civil actions Brought by federal prosecutors Often based on the very same criminal activity that may be prosecuted in a separate criminal proceeding Wide variety of cases Fraud, Drugs, Tax, Money Laundering, Customs & Immigration Violations

Puts defendants in a position of choosing between self-incrimination and loss of property False Claims Act Civil in nature Restitution & TREBLE damages Qui Tam - Complaint based on false claim - Civil action initiated by Relator/Whistleblower on behalf

of government Anti-Kickback Statute / Stark Act Kickback, bribe or rebate Comp structures Must provide details of link between improper practices and submission of false claims Government decides whether or not to intervene in qui tam

Falsely certifying compliance with AKS in connection with claim may be basis for FCA liability Method of compensation may give rise to AKS problems Criminal Liability in FCA and AKS and Beyond Civil and Criminal liability Remember parallel proceedings?

Common types of Cases: Upcoding (health care) Unbundling (health care) Money in Exchange for Referrals (health care, contracts)

Money in Exchange for Favors (corruption in municipal, state, federal contracts) Selling Damaged or Used Parts (government contracts) SEC/Employment Law Intersection Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Section 21F [15 U.S.C. 78u-6] Securities Whistleblower Incentives and Protections Two categories of violations: 1) Impeding whistleblowers; & 2) Retaliating against whistleblowers.

SEC/Employment Law Intersection 1) IMPEDING WHISTLEBLOWERS No person may take any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications. Gag or muzzle clauses in confidentiality, separation, and other employment-related agreements.

SEC/Employment Law Intersection 1) IMPEDING WHISTLEBLOWERS (CONT.) Violations can trigger enforcement actions whether or not the employer is accused of/under investigation for other violations. In re BlackRock, Inc., Exchange Act Rel. No. 79804 (Jan. 17, 2017) Violation even if no employee was prevented from reporting. In re SandRidge Energy, Inc., Exchange Act Rel. No. 79607 (Dec. 20, 2016) SEC/Employment Law Intersection

2) RETALIATION AGAINST WHISTLEBLOWERS No employer may discharge, demote, suspend, threaten, harass, directly or indirectly, or in any other manner discriminate against, a whistleblower in the terms and conditions of employment because of any lawful act done by the whistleblower[.] Violation can trigger enforcement actions whether or not the WB tip ends up concerning actual violations of the securities laws i.e., actionable retaliation is possible regardless of whether the WB tip has merit. SEC/Employment Law Intersection

2) RETALIATION AGAINST WHISTLEBLOWERS (CONT.) Employee need only have a reasonable belief that the information he or she is providing to the Commission relates to a possible violation of the federal securities laws in order to qualify for protection under Dodd-Franks anti-retaliation provisions. Materiality not required! ETHICS CONSIDERATIONS ETHICS OF REPORTING CRIMINAL CONDUCT

A lawyer shall not present, participate in presenting, or threaten to present criminal charges solely to obtain an advantage in a civil matter. ETHICS OF REPORTING CRIMINAL CONDUCT Threatening to use the criminal process solely to coerce a party in a private matter improperly suggests that the criminal

process can be manipulated by private interests for personal gain. TDRPC, 4.04, Cmt.2. ETHICS OF REPORTING CRIMINAL CONDUCT However, giving any notice required by law or applicable rules of practice or procedure as a prerequisite to instituting criminal charges does not violate this Rule, unless the underlying criminal charges were made without probable cause. TDRPC, 4.04, Cmt.2.

When important? Global Settlements with federal authorities to resolve Civil and Criminal Liabilities Contentious Civil Litigation with private parties Concurrent Criminal Investigation and Civil Forfeiture Proceedings Civil Litigation involving Criminal Restitution Judgments Defendants and Victims (corporate and individual) alike Attorneys COMPLIANCE. THE OUNCE OF

CURE Especially effective for Corruption, Anti-Money Laundering, Cybersecurity, Export Controls, Health Care, Employment, and heavily regulated industries Effective compliance plans can prevent unwanted government investigator attention Can also undermine criminal and/or fraudulent intent where government does become interested

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