Rob Gerberry, Senior Vice President and Chief Legal Officer, Summa Health, speaks with Michael Peregrine, Partner, McDermott Will & Emery, about the Department of Justice Criminal Division’s recent release of its new white collar criminal enforcement plan and the board’s oversight responsibility for corporate compliance with the law. They discuss how the new plan relates to governance, the government’s current approach to health care fraud and abuse enforcement, and key compliance takeaways for boards to consider.
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Episode Transcript
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SPEAKER_00 (00:00):
This episode of AHLA's Speaking of Health Law is
brought to you by AHLA membersand donors like you.
For more information, visitAmericanHealthLaw.org.
SPEAKER_01 (00:17):
Hello, everyone.
This is Rob Gerberry.
I'm the Chief Legal Officer ofSumma Health and excited to
announce thePresident-elect-designate of the
American Health Law Association.
I'd like to welcome you to ourlatest in our continuing series
of podcasts on corporategovernance issues affecting
healthcare organizations.
Today's topic is one ofcontinuing interest to our
membership and our clients, theboard's oversight responsibility
(00:40):
for corporate compliance withlaw.
This is a topic that's beenaround, one we're not trying to
recycle, but one which has a newthrust back in the headlights
with the May 12th, 2025 releaseby the Department of Justice
criminal division of its newwhite collar enforcement plan.
And it's an importantdevelopment, not just because of
the seriousness of the issue,white collar enforcement, but
(01:02):
also because of the very clearfocus on healthcare fraud.
So it's natural that as we reachback into our files, so to
speak, and dust off ourcollective memories about
compliance oversight, that wetalk about the impact to the
board, the audit committee, andthings that they need to focus
and know about.
And of course, as the leadinggovernance advisor to the board,
(01:22):
the general counsel and thechief legal officer, likely
teaming up with their corporatecompliance officer.
They're well-situated to briefthe board and their key
committees on this newdevelopment.
And for us, we're lucky enoughtoday to have my HLA colleague
and friend, Michael Peregrin ofMcDermott, Willow& Emory, who's
also an HLA fellow and a fellowof the American College of
Governance Counsel.
(01:44):
So Michael, before we dive intotoday's topic, I've got a
fundamental question for you tostart.
Everything we've read during thepresidential transition was that
the new administration was goingto change directions on white
collar enforcement to maybe easeoff the throttle a bit.
And all that seemed to beconfirmed by some of their early
actions with respect toenforcement of the Foreign
Corrupt Practices Act or theanti-mundering laundering laws.
(02:08):
But did I miss something?
What happened here?
SPEAKER_02 (02:10):
Well, no, you didn't miss anything, Rob.
I think in a broad sense, we allwere thinking kind of the same
thing, that the government wasgoing to focus on stuff like
human smuggling operations, theflow of fentanyl and other
dangerous drugs, childpredators, and those kinds of
violent crimes.
And it's still going to do so.
The Department of Justice viewsthose and stuff like
(02:32):
international money launderingand illicit financial and
logistical networks as realthreats to national security.
So that's clearly a focus of thecriminal division right now.
But the division is still in thecorporate fraud enforcement and
individual accountability gameand is definitely interested in
(02:53):
federal program fraud.
And you know what that means.
So I think we were half rightand half wrong.
But the most important thing is,I think, from a board
perspective, that the May 12threlease reminds boards of their
fundamental obligation toexercise oversight of
compliance.
(03:14):
And the criminal divisionremains very much in the health
care fraud game.
SPEAKER_01 (03:20):
So fair enough.
But even given with thatbackground you just shared,
Should this be a discussion moreappropriately held by a white
collar practice group, or do youthink this definitely has
governance connection?
SPEAKER_02 (03:30):
Well, I think that's really an excellent question,
Rob.
It's one of those areas, I thinkantitrust is another, where
there has to be a teaming ofwhite collar expertise and
governance expertise, because weneed to keep in mind that
compliance impacts theobligations of the board and of
senior management.
They have a fiduciary obligationto exercise oversight of the
(03:52):
organization's complianceprogram and its mission critical
risks.
As you know, and I don't wantto, I think you were still in
junior high at this time, butsince the days of Enron,
corporate governance and whitecollar law have been
inextricably intertwined.
Advice on the latter needs to beintegrated and coordinated with
advice on the former because somuch of the white collar stuff
(04:16):
in their resolution needs to besubject to board oversight and
decision-making.
I wanna underscore anddecision-making.
And as I said, we've got thevery clear application of
Caremark to all this.
The obligation of the board tomonitor the compliance and
related mission risks of thecompany, including but not
(04:36):
limited to maintaining aneffective compliance program.
And the stuff that's in this newplan really needs to be shared
with the board and its audit andcompliance committee if it's
going to be in a position tosatisfy those care mark duties.
So I think it's super valuableto have in the corporate minutes
that the chief legal officer andthe chief compliance officer had
(04:56):
briefed the board on the plan.
Very valuable.
But maybe you want to have thatin tandem with your outside
white-collar counsel.
It's got to be a team effort.
SPEAKER_01 (05:08):
So we're back to Caremark again, aren't we?
It seems like we can never quiteget past the implications of
that case.
But we previously talked aboutthe new plan being important for
management as well.
Can we highlight why Caremark'snot only important to boards?
SPEAKER_02 (05:22):
Yeah, I think that's one of the things that's
missing.
We've perhaps become a littlebit too sensitized to the many
Caremark cases coming out ofDelaware.
We've lost sight of the factthat the latest and most
complete iterations of Caremarkreference the obligations of the
senior corporate executives.
to affect care mark lightoversight of the compliance
(05:44):
issues arising within theirlittle world, their scope of
responsibility.
And that's gonna differ, ofcourse, depending upon the title
and duties of each seniorexecutive.
But I think the case law speakspretty clearly to a broad
expectation at both levels ofsenior leadership, the board and
management, And I'm not surethat all management teams get
(06:05):
that, Rob.
If you were to poll the C-suitemembers other than the CEO of a
lot of health systems, wouldthey be aware that they may be
subject to care markresponsibilities within their
own sphere of influence?
This is another opportunity toremind them of that.
Not that they're going to wantto hear it, not that they're
going to be happy to hear it,but it's a reality.
SPEAKER_01 (06:27):
Great.
So going back to that May 12threlease, Where do you view the
administration as going withthis new plan?
What are they really trying toachieve here?
SPEAKER_02 (06:35):
Well, I think this is where it gets interesting.
From my read, and I think ofothers, the Department of
Justice is trying to make abreak from what they perceive to
be the excesses of the prioradministration when it comes to
corporate fraud enforcement.
And I'm not trying to do Bidenbashing or anything of that
nature or kind of read intosomething political, which is
not there.
But it's pretty clear in thespeech introducing the plan, the
(06:57):
new head of the criminaldivision described those prior
enforcement efforts as havingcome at too high of a cost for
business.
that too often businesses havebeen subject to unchecked and
long-running investigations thatcan be costly, not only to the
subjects and targets of theinvestigations, but also to the
Department of Justice, and thatthese kinds of investigations
(07:19):
can really mess up and interferewith business operations.
And you're going to get a lot ofhead shaking up and down by
corporate executives in thatregard.
To me, it's a pretty strongmessage.
And you see it not only from theplan itself, but from the
speeches of the new chief of thecriminal division.
The government thinks that theprior approach under the Biden
(07:40):
administration, and there wereplenty of corporate fraud
enforcement mechanisms andincentives that were built into
that administration.
The current administrationthinks that the prior approach
has deterred companies fromcooperating.
That's an important message.
They think that the heavyemphasis on investigations has
forced companies to push backand be less willing to cooperate
(08:04):
and allows the government tomore readily target the more
culpable actors.
In other words, I think they'resaying that a lot of time has
been wasted by both companiesand the government on pursuing
investigations which may or maynot have merit, and that force
the government to take its eyeoff the ball of the kinds of
(08:27):
targets and actors that they nowfeel are most culpable.
And in my mind, and I think ofothers, it looks like the
administration now is seeking amore of a carrot and stick
approach to enforcement.
So, again, I think it's if youif We have business executives
who read some of the speechesgiven by the criminal division
(08:50):
chief.
They're going to say, hey,that's music to my ears, tone
down investigations.
And they're kind of suggestingthat, but they're saying we're
going to be more efficient andfair in our investigations.
SPEAKER_01 (09:04):
So if companies or their boards were going to
exhale and say, particularlythose in the healthcare space,
this new plan signals somethingwhere we're going to get more
latitude, would that be amisinterpretation?
SPEAKER_02 (09:14):
Yeah, I think that's the danger.
It would be fair on firstreading, again, if you read the
speeches from the chief of thecriminal divisions, you would
exhale.
You'd say, wow, we're off thehook.
We're going to throttle back.
But then if you start turningthe page, you're going to see
it's different.
The new plan expands theDepartment of Justice's
(09:36):
whistleblower awards program toadd what the Trump
administration views as newpriority areas for tips, for
whistleblowing.
And that falls into the broadarea of procurement customs
enforcement, and federal programfraud.
But this is what I think the keymessage is from the chief legal
(09:56):
officer.
Healthcare waste, fraud, andabuse is the number one, repeat,
number one, top of the list,first in the class priority item
listed in the plans, subjectmatters where the criminal
division is prioritizing itsinvestigation and prosecution.
And I want to repeat that.
Healthcare waste, fraud, andabuse is at the top of the list
(10:19):
of the topics that the criminaldivision is prioritizing with
respect to investigation andprosecution.
SPEAKER_01 (10:27):
So as if we didn't have enough challenges already
in healthcare, we're number oneon the hit parade, huh?
SPEAKER_02 (10:31):
Well, that's, you know, unfortunately, you know,
so the good news on the one handis the government is focused on
being more fair and efficient inits investigation.
But the bad news is that they'vearticulated very clearly that
they are hot to preventprocurement and federal program
fraud.
And they list health care fraudright at the top of the list.
And that's something, Rob, Ithink the board has to be aware
(10:55):
of.
The plan clarifies thisvoluntary self-disclosure policy
to provide enhanced incentivesfor companies to self-report.
This is really important.
They also provide greatertransparency on the factors
prosecutors will consider whenimposing a corporate monitor.
(11:16):
We haven't seen a lot of that inthe healthcare industry, but I
think it's important that theboard understand, given its
ultimate care markresponsibilities, that the new
voluntary disclosure policy is,intended to offer what the chief
of the criminal division saysthe most generous benefits the
criminal division can offer.
(11:36):
Now, you may want to put yourhand over your wallet there, but
it really makes clear that itprovides, that the goal of the
voluntary self-disclosure policyis to provide a clear path to
declination of prosecution.
That's a big deal.
If a company is about to besubject to investigation where
(11:56):
it's concerned about itsexposure and believes that a
voluntary self-disclosure willresult in a declination of
prosecuting the company, boy,it's got to consider that.
And certainly it would be theboard's decision to authorize a
self-disclosure, not management.
And for the compliance officerswho we work with, the boards
(12:17):
also will want to be remindedthat an organization can only
self-disclose what it learnsthrough its own diligence.
And that, of course, requires arobust compliance program.
So we may be number one on thepriority hit list, but the
criminal division's planbelieves that it's providing
some carrots as well as sticks.
SPEAKER_01 (12:39):
So those are interesting developments.
But when we think about thoseself-disclosures, Am I hearing
you right?
That's a board call, notmanagement.
Historically, I've seenmanagement teams below certain
thresholds have the latitude tomake those decisions, and the
board makes decisions above ahigher certain penalty
threshold.
Is that not how you're seeingit?
SPEAKER_02 (12:56):
Not at all.
And people may disagree with me,but I think that this is a board
call all the way for threereasons.
First, I think a decision tomake a voluntary self-disclosure
is of such significance that theboard has to be involved in any
related decision.
Too much is on the line.
Second of all, the ability totake advantage of the new
(13:19):
self-disclosure program dependsin part on the effectiveness of
the organization's complianceplan, which is absolutely in the
board's ambit.
And third, and this is a littlebit sensitive and it's going to
irritate some people, but theboard's got to be attentive to
the potential for conflict ofinterest, especially the case
when options for resolving acontroversy and getting a
(13:41):
declination throughself-disclosure would create a
conflict for executivemanagement and their personal
interests and those of thecompany.
In other words...
And this has always been thecase with any kind of
self-disclosure, especially whenthe government is so focused on
individual accountability.
The board has to be aware thatthe members of the executive
(14:02):
management team could beunintentionally conflicted if
the result of theself-disclosure could result in
their own individual exposure orculpability.
You don't know where that goes.
And this kind of goes, Rob, tosomething we talked about a
couple of months ago in ourpodcast about some new
(14:22):
professional responsibilityrules.
It's a murky mess, but it justsimply means that the board
ultimately, in my mind, has tohave the final call on whether
or not you're going to make somekind of self-disclosure of the
new plan.
Too much is at stake.
SPEAKER_01 (14:37):
Great.
So our members hear this podcasttoday, they go to their audit
committee chair and ask for 15minutes to talk at an upcoming
meeting on this topic.
What do you think the focusshould be?
SPEAKER_02 (14:46):
Well, I think one is to overcome misperceptions.
And this is going to be a big,this is why I think the
compliance program is reallygoing to need to be
re-energized.
If you read the plan, it'sintended to reflect a
significant shift from priorgovernment policies on corporate
fraud enforcement.
And again, not a politicalstatement, but it just says that
in black and white.
I think you read it as trying tostrike at a balance between the
(15:09):
need to identify and investigatecorporate and individual
criminal wrongdoing, while atthe same time minimizing what it
perceives to be unnecessaryburdens on the day-to-day
operations of the business.
But to infer from that, thatthere's gonna be a relaxation on
(15:31):
corporate fraud enforcement isgonna be a huge mistake.
And it's important that theboard recognize that as such.
As we've talked about, the planmakes clear that the government
is very much, remains in thecorporate fraud enforcement
business and on holdingindividuals accountable for
their actions.
I mean, the headlines may havebeen on the international
(15:52):
terrorism and child traffickingand fentanyl issues from the
Department of Justice, butcorporate fraud is still a main
target of theirs.
And The board's gonna thereforeis gonna be incentivized to
maintain a compliance orientedtone at the top to correct any
misperceptions or misconceptionsfrom the management team.
(16:16):
Again, we all, like you startedour conversation today, Rob, all
of us kind of thought that thefoot was gonna kind of come off
the throttle or the pedal alittle bit in the new
administration, that they wouldbe less interested in pursuing
corporations.
And that's just not gonna be thecase.
And so the board needs to workwith management to support the
(16:37):
vitality of the complianceprogram and in developing
additional ways to reduceorganizational exposure.
I know there are a lot of peoplein a lot of client management
teams that just saying, youknow, we're tired of spending
money on compliance programs,especially in this exceedingly
difficult financial environment.
And that's just, boy, that'spenny wise and pound foolish in
this new climate.
(16:59):
So we're not suggestingmicromanagement by the board,
but we are suggesting that givethe board the information it
needs to address an importantongoing fiduciary
responsibility.
Corporate leadership at both theboard and executive levels, I
think would welcome a briefingby its general counsel on this
new compliance development.
SPEAKER_01 (17:21):
So as we get into that discussion, isn't the issue
of management conflict ofinterest a bit tricky?
SPEAKER_02 (17:27):
Well, yeah, Rob, I don't know if you ever remember
the old movie, YoungFrankenstein, where the Marty
Feldman character looks at the–they're approaching a door down
to the bottom of the castle, andMarty Feldman goes to– Gene
Wilder, this looks dangerous.
You go first.
I think the concept ofindividual accountability and
(17:49):
its implications for management,you don't want to be the
messenger telling this to theexecutive management team
because there's an inferencethat they're going to do the
wrong thing.
I think the point is that therejust is this inescapable
potential for conflict betweenthe interests of executives as
individuals and theirrelationship to whatever conduct
(18:13):
the company might disclose inorder to get a declination of
prosecution.
There's a potential at somepoint that those interests could
clash.
So the board has to keep itsfinger on the pulse of that
situation and handle itdiscreetly.
You're not trying to condemn theexecutives or throw them under
(18:34):
the bus, but you've got torecognize that that's one of the
challenges that when you'remaking a self-disclosure.
SPEAKER_01 (18:43):
So you're saying this does have potential to be a
double-edged sword forhealthcare companies and their
board, doesn't it?
SPEAKER_02 (18:48):
Yeah, I think it really is.
And that's why it has to be, Ithink, discussed really
thoroughly at the board andaudit committee level.
On the one hand, there are theaspects of the plan and the
policy changes from thegovernment that are meaningful
and will be welcomed byorganizational leadership.
And that's the stuff about...
the goal of makinginvestigations short, limited,
(19:10):
and efficient, and recognizingthat prior investigations have
been overbearing and costly tocompanies.
That's going to be welcomed byboards.
On the other hand, thegovernment is still very much in
the criminal law enforcementbusiness.
And I know that, as I notedbefore, healthcare fraud is
right at the top of the list.
So it's going to be at the topof the whistleblower focus too,
(19:31):
and their counsel.
I'm sure that the whistleblowercouncils have cut that out and
pasted it on their bulletinboard, the list of what it is,
10 or 12 priority items topursue.
SPEAKER_01 (19:42):
Well, Michael, this has been very informative as
usual.
It adds another item for ourdiscussions with our board in
upcoming meetings and anotherthing to put on our plate.
It seems like many of ourmembers have a new government
policy that they're going toneed to read that just came out
and find some time to make surethey brief their board and their
management teams on this topic.
So thanks as always for sharingyour thoughts with us.
(20:03):
We'll be back next month withour next governance podcast
discussion.
At that time, we're going to diginto the distinction between
recusal and abstention, whenthey're appropriately applied
and when they're misapplied.
And as we go into spring, eventhough it doesn't feel like it
here in the Midwest, the onlysubject, Michael, you know more
about than corporate governancebeing baseball.
Any early thoughts on theseason?
SPEAKER_02 (20:23):
Look up who Ronnie Simon is and what happened to
him the other night against thePadres and how his teammates
played.
provided the most effectivedemonstration of a positive
workforce culture that anybodycould ever imagine.
So that's my tease for the grouptoday.
SPEAKER_01 (20:41):
Fantastic.
Thanks again, Michael.
We look forward to talking nextmonth.
Thank you, Rob.
SPEAKER_00 (20:50):
To subscribe and add this private podcast feed to
(21:15):
your podcast app, go toAmericanHealthLaw.org
dailypodcast.
you
This episode of AHLA's Speaking of Health Law is
brought to you by AHLA membersand donors like you.
For more information, visitAmericanHealthLaw.org.
SPEAKER_01 (00:17):
Hello, everyone.
This is Rob Gerberry.
I'm the Chief Legal Officer ofSumma Health and excited to
announce thePresident-elect-designate of the
American Health Law Association.
I'd like to welcome you to ourlatest in our continuing series
of podcasts on corporategovernance issues affecting
healthcare organizations.
Today's topic is one ofcontinuing interest to our
membership and our clients, theboard's oversight responsibility
(00:40):
for corporate compliance withlaw.
This is a topic that's beenaround, one we're not trying to
recycle, but one which has a newthrust back in the headlights
with the May 12th, 2025 releaseby the Department of Justice
criminal division of its newwhite collar enforcement plan.
And it's an importantdevelopment, not just because of
the seriousness of the issue,white collar enforcement, but
(01:02):
also because of the very clearfocus on healthcare fraud.
So it's natural that as we reachback into our files, so to
speak, and dust off ourcollective memories about
compliance oversight, that wetalk about the impact to the
board, the audit committee, andthings that they need to focus
and know about.
And of course, as the leadinggovernance advisor to the board,
(01:22):
the general counsel and thechief legal officer, likely
teaming up with their corporatecompliance officer.
They're well-situated to briefthe board and their key
committees on this newdevelopment.
And for us, we're lucky enoughtoday to have my HLA colleague
and friend, Michael Peregrin ofMcDermott, Willow& Emory, who's
also an HLA fellow and a fellowof the American College of
Governance Counsel.
(01:44):
So Michael, before we dive intotoday's topic, I've got a
fundamental question for you tostart.
Everything we've read during thepresidential transition was that
the new administration was goingto change directions on white
collar enforcement to maybe easeoff the throttle a bit.
And all that seemed to beconfirmed by some of their early
actions with respect toenforcement of the Foreign
Corrupt Practices Act or theanti-mundering laundering laws.
(02:08):
But did I miss something?
What happened here?
SPEAKER_02 (02:10):
Well, no, you didn't miss anything, Rob.
I think in a broad sense, we allwere thinking kind of the same
thing, that the government wasgoing to focus on stuff like
human smuggling operations, theflow of fentanyl and other
dangerous drugs, childpredators, and those kinds of
violent crimes.
And it's still going to do so.
The Department of Justice viewsthose and stuff like
(02:32):
international money launderingand illicit financial and
logistical networks as realthreats to national security.
So that's clearly a focus of thecriminal division right now.
But the division is still in thecorporate fraud enforcement and
individual accountability gameand is definitely interested in
(02:53):
federal program fraud.
And you know what that means.
So I think we were half rightand half wrong.
But the most important thing is,I think, from a board
perspective, that the May 12threlease reminds boards of their
fundamental obligation toexercise oversight of
compliance.
(03:14):
And the criminal divisionremains very much in the health
care fraud game.
SPEAKER_01 (03:20):
So fair enough.
But even given with thatbackground you just shared,
Should this be a discussion moreappropriately held by a white
collar practice group, or do youthink this definitely has
governance connection?
SPEAKER_02 (03:30):
Well, I think that's really an excellent question,
Rob.
It's one of those areas, I thinkantitrust is another, where
there has to be a teaming ofwhite collar expertise and
governance expertise, because weneed to keep in mind that
compliance impacts theobligations of the board and of
senior management.
They have a fiduciary obligationto exercise oversight of the
(03:52):
organization's complianceprogram and its mission critical
risks.
As you know, and I don't wantto, I think you were still in
junior high at this time, butsince the days of Enron,
corporate governance and whitecollar law have been
inextricably intertwined.
Advice on the latter needs to beintegrated and coordinated with
advice on the former because somuch of the white collar stuff
(04:16):
in their resolution needs to besubject to board oversight and
decision-making.
I wanna underscore anddecision-making.
And as I said, we've got thevery clear application of
Caremark to all this.
The obligation of the board tomonitor the compliance and
related mission risks of thecompany, including but not
(04:36):
limited to maintaining aneffective compliance program.
And the stuff that's in this newplan really needs to be shared
with the board and its audit andcompliance committee if it's
going to be in a position tosatisfy those care mark duties.
So I think it's super valuableto have in the corporate minutes
that the chief legal officer andthe chief compliance officer had
(04:56):
briefed the board on the plan.
Very valuable.
But maybe you want to have thatin tandem with your outside
white-collar counsel.
It's got to be a team effort.
SPEAKER_01 (05:08):
So we're back to Caremark again, aren't we?
It seems like we can never quiteget past the implications of
that case.
But we previously talked aboutthe new plan being important for
management as well.
Can we highlight why Caremark'snot only important to boards?
SPEAKER_02 (05:22):
Yeah, I think that's one of the things that's
missing.
We've perhaps become a littlebit too sensitized to the many
Caremark cases coming out ofDelaware.
We've lost sight of the factthat the latest and most
complete iterations of Caremarkreference the obligations of the
senior corporate executives.
to affect care mark lightoversight of the compliance
(05:44):
issues arising within theirlittle world, their scope of
responsibility.
And that's gonna differ, ofcourse, depending upon the title
and duties of each seniorexecutive.
But I think the case law speakspretty clearly to a broad
expectation at both levels ofsenior leadership, the board and
management, And I'm not surethat all management teams get
(06:05):
that, Rob.
If you were to poll the C-suitemembers other than the CEO of a
lot of health systems, wouldthey be aware that they may be
subject to care markresponsibilities within their
own sphere of influence?
This is another opportunity toremind them of that.
Not that they're going to wantto hear it, not that they're
going to be happy to hear it,but it's a reality.
SPEAKER_01 (06:27):
Great.
So going back to that May 12threlease, Where do you view the
administration as going withthis new plan?
What are they really trying toachieve here?
SPEAKER_02 (06:35):
Well, I think this is where it gets interesting.
From my read, and I think ofothers, the Department of
Justice is trying to make abreak from what they perceive to
be the excesses of the prioradministration when it comes to
corporate fraud enforcement.
And I'm not trying to do Bidenbashing or anything of that
nature or kind of read intosomething political, which is
not there.
But it's pretty clear in thespeech introducing the plan, the
(06:57):
new head of the criminaldivision described those prior
enforcement efforts as havingcome at too high of a cost for
business.
that too often businesses havebeen subject to unchecked and
long-running investigations thatcan be costly, not only to the
subjects and targets of theinvestigations, but also to the
Department of Justice, and thatthese kinds of investigations
(07:19):
can really mess up and interferewith business operations.
And you're going to get a lot ofhead shaking up and down by
corporate executives in thatregard.
To me, it's a pretty strongmessage.
And you see it not only from theplan itself, but from the
speeches of the new chief of thecriminal division.
The government thinks that theprior approach under the Biden
(07:40):
administration, and there wereplenty of corporate fraud
enforcement mechanisms andincentives that were built into
that administration.
The current administrationthinks that the prior approach
has deterred companies fromcooperating.
That's an important message.
They think that the heavyemphasis on investigations has
forced companies to push backand be less willing to cooperate
(08:04):
and allows the government tomore readily target the more
culpable actors.
In other words, I think they'resaying that a lot of time has
been wasted by both companiesand the government on pursuing
investigations which may or maynot have merit, and that force
the government to take its eyeoff the ball of the kinds of
(08:27):
targets and actors that they nowfeel are most culpable.
And in my mind, and I think ofothers, it looks like the
administration now is seeking amore of a carrot and stick
approach to enforcement.
So, again, I think it's if youif We have business executives
who read some of the speechesgiven by the criminal division
(08:50):
chief.
They're going to say, hey,that's music to my ears, tone
down investigations.
And they're kind of suggestingthat, but they're saying we're
going to be more efficient andfair in our investigations.
SPEAKER_01 (09:04):
So if companies or their boards were going to
exhale and say, particularlythose in the healthcare space,
this new plan signals somethingwhere we're going to get more
latitude, would that be amisinterpretation?
SPEAKER_02 (09:14):
Yeah, I think that's the danger.
It would be fair on firstreading, again, if you read the
speeches from the chief of thecriminal divisions, you would
exhale.
You'd say, wow, we're off thehook.
We're going to throttle back.
But then if you start turningthe page, you're going to see
it's different.
The new plan expands theDepartment of Justice's
(09:36):
whistleblower awards program toadd what the Trump
administration views as newpriority areas for tips, for
whistleblowing.
And that falls into the broadarea of procurement customs
enforcement, and federal programfraud.
But this is what I think the keymessage is from the chief legal
(09:56):
officer.
Healthcare waste, fraud, andabuse is the number one, repeat,
number one, top of the list,first in the class priority item
listed in the plans, subjectmatters where the criminal
division is prioritizing itsinvestigation and prosecution.
And I want to repeat that.
Healthcare waste, fraud, andabuse is at the top of the list
(10:19):
of the topics that the criminaldivision is prioritizing with
respect to investigation andprosecution.
SPEAKER_01 (10:27):
So as if we didn't have enough challenges already
in healthcare, we're number oneon the hit parade, huh?
SPEAKER_02 (10:31):
Well, that's, you know, unfortunately, you know,
so the good news on the one handis the government is focused on
being more fair and efficient inits investigation.
But the bad news is that they'vearticulated very clearly that
they are hot to preventprocurement and federal program
fraud.
And they list health care fraudright at the top of the list.
And that's something, Rob, Ithink the board has to be aware
(10:55):
of.
The plan clarifies thisvoluntary self-disclosure policy
to provide enhanced incentivesfor companies to self-report.
This is really important.
They also provide greatertransparency on the factors
prosecutors will consider whenimposing a corporate monitor.
(11:16):
We haven't seen a lot of that inthe healthcare industry, but I
think it's important that theboard understand, given its
ultimate care markresponsibilities, that the new
voluntary disclosure policy is,intended to offer what the chief
of the criminal division saysthe most generous benefits the
criminal division can offer.
(11:36):
Now, you may want to put yourhand over your wallet there, but
it really makes clear that itprovides, that the goal of the
voluntary self-disclosure policyis to provide a clear path to
declination of prosecution.
That's a big deal.
If a company is about to besubject to investigation where
(11:56):
it's concerned about itsexposure and believes that a
voluntary self-disclosure willresult in a declination of
prosecuting the company, boy,it's got to consider that.
And certainly it would be theboard's decision to authorize a
self-disclosure, not management.
And for the compliance officerswho we work with, the boards
(12:17):
also will want to be remindedthat an organization can only
self-disclose what it learnsthrough its own diligence.
And that, of course, requires arobust compliance program.
So we may be number one on thepriority hit list, but the
criminal division's planbelieves that it's providing
some carrots as well as sticks.
SPEAKER_01 (12:39):
So those are interesting developments.
But when we think about thoseself-disclosures, Am I hearing
you right?
That's a board call, notmanagement.
Historically, I've seenmanagement teams below certain
thresholds have the latitude tomake those decisions, and the
board makes decisions above ahigher certain penalty
threshold.
Is that not how you're seeingit?
SPEAKER_02 (12:56):
Not at all.
And people may disagree with me,but I think that this is a board
call all the way for threereasons.
First, I think a decision tomake a voluntary self-disclosure
is of such significance that theboard has to be involved in any
related decision.
Too much is on the line.
Second of all, the ability totake advantage of the new
(13:19):
self-disclosure program dependsin part on the effectiveness of
the organization's complianceplan, which is absolutely in the
board's ambit.
And third, and this is a littlebit sensitive and it's going to
irritate some people, but theboard's got to be attentive to
the potential for conflict ofinterest, especially the case
when options for resolving acontroversy and getting a
(13:41):
declination throughself-disclosure would create a
conflict for executivemanagement and their personal
interests and those of thecompany.
In other words...
And this has always been thecase with any kind of
self-disclosure, especially whenthe government is so focused on
individual accountability.
The board has to be aware thatthe members of the executive
(14:02):
management team could beunintentionally conflicted if
the result of theself-disclosure could result in
their own individual exposure orculpability.
You don't know where that goes.
And this kind of goes, Rob, tosomething we talked about a
couple of months ago in ourpodcast about some new
(14:22):
professional responsibilityrules.
It's a murky mess, but it justsimply means that the board
ultimately, in my mind, has tohave the final call on whether
or not you're going to make somekind of self-disclosure of the
new plan.
Too much is at stake.
SPEAKER_01 (14:37):
Great.
So our members hear this podcasttoday, they go to their audit
committee chair and ask for 15minutes to talk at an upcoming
meeting on this topic.
What do you think the focusshould be?
SPEAKER_02 (14:46):
Well, I think one is to overcome misperceptions.
And this is going to be a big,this is why I think the
compliance program is reallygoing to need to be
re-energized.
If you read the plan, it'sintended to reflect a
significant shift from priorgovernment policies on corporate
fraud enforcement.
And again, not a politicalstatement, but it just says that
in black and white.
I think you read it as trying tostrike at a balance between the
(15:09):
need to identify and investigatecorporate and individual
criminal wrongdoing, while atthe same time minimizing what it
perceives to be unnecessaryburdens on the day-to-day
operations of the business.
But to infer from that, thatthere's gonna be a relaxation on
(15:31):
corporate fraud enforcement isgonna be a huge mistake.
And it's important that theboard recognize that as such.
As we've talked about, the planmakes clear that the government
is very much, remains in thecorporate fraud enforcement
business and on holdingindividuals accountable for
their actions.
I mean, the headlines may havebeen on the international
(15:52):
terrorism and child traffickingand fentanyl issues from the
Department of Justice, butcorporate fraud is still a main
target of theirs.
And The board's gonna thereforeis gonna be incentivized to
maintain a compliance orientedtone at the top to correct any
misperceptions or misconceptionsfrom the management team.
(16:16):
Again, we all, like you startedour conversation today, Rob, all
of us kind of thought that thefoot was gonna kind of come off
the throttle or the pedal alittle bit in the new
administration, that they wouldbe less interested in pursuing
corporations.
And that's just not gonna be thecase.
And so the board needs to workwith management to support the
(16:37):
vitality of the complianceprogram and in developing
additional ways to reduceorganizational exposure.
I know there are a lot of peoplein a lot of client management
teams that just saying, youknow, we're tired of spending
money on compliance programs,especially in this exceedingly
difficult financial environment.
And that's just, boy, that'spenny wise and pound foolish in
this new climate.
(16:59):
So we're not suggestingmicromanagement by the board,
but we are suggesting that givethe board the information it
needs to address an importantongoing fiduciary
responsibility.
Corporate leadership at both theboard and executive levels, I
think would welcome a briefingby its general counsel on this
new compliance development.
SPEAKER_01 (17:21):
So as we get into that discussion, isn't the issue
of management conflict ofinterest a bit tricky?
SPEAKER_02 (17:27):
Well, yeah, Rob, I don't know if you ever remember
the old movie, YoungFrankenstein, where the Marty
Feldman character looks at the–they're approaching a door down
to the bottom of the castle, andMarty Feldman goes to– Gene
Wilder, this looks dangerous.
You go first.
I think the concept ofindividual accountability and
(17:49):
its implications for management,you don't want to be the
messenger telling this to theexecutive management team
because there's an inferencethat they're going to do the
wrong thing.
I think the point is that therejust is this inescapable
potential for conflict betweenthe interests of executives as
individuals and theirrelationship to whatever conduct
(18:13):
the company might disclose inorder to get a declination of
prosecution.
There's a potential at somepoint that those interests could
clash.
So the board has to keep itsfinger on the pulse of that
situation and handle itdiscreetly.
You're not trying to condemn theexecutives or throw them under
(18:34):
the bus, but you've got torecognize that that's one of the
challenges that when you'remaking a self-disclosure.
SPEAKER_01 (18:43):
So you're saying this does have potential to be a
double-edged sword forhealthcare companies and their
board, doesn't it?
SPEAKER_02 (18:48):
Yeah, I think it really is.
And that's why it has to be, Ithink, discussed really
thoroughly at the board andaudit committee level.
On the one hand, there are theaspects of the plan and the
policy changes from thegovernment that are meaningful
and will be welcomed byorganizational leadership.
And that's the stuff about...
the goal of makinginvestigations short, limited,
(19:10):
and efficient, and recognizingthat prior investigations have
been overbearing and costly tocompanies.
That's going to be welcomed byboards.
On the other hand, thegovernment is still very much in
the criminal law enforcementbusiness.
And I know that, as I notedbefore, healthcare fraud is
right at the top of the list.
So it's going to be at the topof the whistleblower focus too,
(19:31):
and their counsel.
I'm sure that the whistleblowercouncils have cut that out and
pasted it on their bulletinboard, the list of what it is,
10 or 12 priority items topursue.
SPEAKER_01 (19:42):
Well, Michael, this has been very informative as
usual.
It adds another item for ourdiscussions with our board in
upcoming meetings and anotherthing to put on our plate.
It seems like many of ourmembers have a new government
policy that they're going toneed to read that just came out
and find some time to make surethey brief their board and their
management teams on this topic.
So thanks as always for sharingyour thoughts with us.
(20:03):
We'll be back next month withour next governance podcast
discussion.
At that time, we're going to diginto the distinction between
recusal and abstention, whenthey're appropriately applied
and when they're misapplied.
And as we go into spring, eventhough it doesn't feel like it
here in the Midwest, the onlysubject, Michael, you know more
about than corporate governancebeing baseball.
Any early thoughts on theseason?
SPEAKER_02 (20:23):
Look up who Ronnie Simon is and what happened to
him the other night against thePadres and how his teammates
played.
provided the most effectivedemonstration of a positive
workforce culture that anybodycould ever imagine.
So that's my tease for the grouptoday.
SPEAKER_01 (20:41):
Fantastic.
Thanks again, Michael.
We look forward to talking nextmonth.
Thank you, Rob.
SPEAKER_00 (20:50):
To subscribe and add this private podcast feed to
(21:15):
your podcast app, go toAmericanHealthLaw.org
dailypodcast.
you
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