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DOJ, SEC & FBI Host Virtual Town Hall on Foreign Bribery and Health Care Fraud Enforcement DOJ, SEC & FBI Host Virtual Town Hall on Foreign Bribery and Health Care Fraud Enforcement

DOJ, SEC & FBI Host Virtual Town Hall on Foreign Bribery and Health Care Fraud Enforcement

The Federal Government’s enforcers disclosed in a virtual town hall that while they face some additional difficulties in enforcing laws against bribery and fraud due to COVID-19, they continue to pursue cases and find ways to overcome these challenges. On May 20, 2020, the U.S. Department of Justice (“DOJ”), U.S. Securities and Exchange Commission (“SEC”), and Federal Bureau of Investigation (“FBI”) held a virtual town hall where top officials from these agencies shared important insights on Foreign Corrupt Practices Act (“FCPA”) and health care fraud enforcement. Joining the town hall were:
  • Robert Zink, Chief of DOJ’s Fraud Section;
  • Joe Beemsterboer, Senior Deputy Chief of DOJ’s Fraud Section, overseeing health care fraud enforcement;
  • Daniel Kahn, Senior Deputy Chief of DOJ’s Fraud Section, overseeing FCPA enforcement;
  • Charles Cain, Chief of the SEC’s FCPA Unit; and
  • Leslie Backschies, Chief of the FBI’s International Corruption Unit.
Enforcement Challenges & Responses

Both the DOJ and SEC officials acknowledged at the outset of the town hall that the lack of access to the courts, including grand juries, and the limited ability to conduct in-person interviews have presented some difficulties to their enforcement efforts.

However, all of the officials emphasized that their units were operating at a pace similar to prior to the COVID-19 shutdown. Both the DOJ and SEC have not only continued to move along existing cases, but they have also opened new investigations during the past several months. Both the DOJ and SEC have developed creative approaches to move investigations forward, including conducting some interviews via secure virtual platforms. The FBI has also sought judicial approvals for warrants by telephone, which is not new but has been mostly reserved for urgent matters in the past.

Enforcement Priorities

In terms of enforcement priorities, Cain noted the SEC is focused on particular risks related to microcap fraud, offering fraud, insider trading, market manipulation, and financial statement/other disclosure fraud. He also reiterated that the SEC has developed a COVID-19 steering committee and is seeking to coordinate efforts with other federal and state agencies and self-regulatory organizations.

Zink indicated the DOJ is particularly focused on fraud in connection with stimulus funds, including the Paycheck Protection Program, as well as COVID-19-related and general market-based fraud.

Beemsterboer added that the Healthcare Fraud Unit remains focused on its traditional priorities, but that COVID-19 has introduced specific risks. In particular, Beemsterboer noted the DOJ is concerned with individuals seeking to exploit the pandemic by offering free COVID-19 testing in order to obtain personal identifying information, billing beneficiaries for unnecessary services, and payments for referrals. The DOJ will vigorously pursue these types of schemes.

Disclosure and Cooperation Expectations

Cain noted companies have continued to make self-disclosures during the pandemic, and as usual, there are a variety of approaches. He recommended starting the dialogue with the SEC staff early, adding that they would work with companies as they always have.

Kahn addressed the DOJ’s expectations of companies in responding to government requests during the COVID-19 shutdown. He acknowledged that companies are facing obstacles and resource constraints that might make it difficult to respond to certain requests. Although companies cannot simply point to the current crisis as a reason to ignore a request, the DOJ is willing to work with companies in setting timelines for responses.

Internal Controls Expectations

The speakers also noted they recognize that COVID-19 has placed significant resource constraints on businesses, which may affect their internal controls capabilities. Although he declined to advise companies on how to specifically address these resource constraints, Zink indicated the DOJ’s expectation is that companies will take the time to ensure that proper controls are in place, that they are effective, and that they are tested. He recommended companies assess and evaluate their controls now, and he emphasized training and updates to internal policies.

Cain added that he expects there will be a shift in resources and priorities as the pace of business picks up, and Kahn added that the DOJ will want to understand what companies have done to prevent and respond to violations. Kahn also noted that the DOJ understands companies will reallocate resources and there are likely to be budget shortfalls, but the impact of the pandemic on operations will not be a defense to a violation.

The speakers also made clear they are aware that compliance officers face many obstacles during this time, but the DOJ still expects internal investigations to move forward, even if in-person interviews have to be delayed.

Supply Chain Issues

Kahn specifically addressed two potential issues that could arise due to the constraints on supply chains: customs and charity issues. These concerns are not new, and the DOJ has always looked at them from a corruption/risk standpoint, which companies should also continue to do.

Kahn raised the example of a payment to a customs official that may be made for the purpose of obtaining personal protective equipment (“PPE”). He suggested that whether such a payment constitutes an FCPA violation would depend on whether the intent was to obtain or retain business or was intended to procure the PPE to protect the health and safety of the company’s employees. He seemed to suggest that in the latter case, the DOJ might take the same approach as it has with extortion demands that involve life and death, and as Kahn noted, the DOJ has discretion in these areas and this type of fact would inform its discretion about which actions to pursue.

Path Forward

Moving forward, the officials emphasized that data analytics will play a crucial role and that the agencies’ strategies for investigations will have to be flexible and adapt, particularly as states reopen at different rates.

Both the DOJ and SEC continue to monitor potential fraudulent activity, especially as it relates to COVID-19. Even though they are facing unprecedented challenges to their businesses, companies must still ensure they are fulfilling their legal obligations. Zink suggested there will be a significant amount of DOJ activity in the coming months.

Should you have any questions or concerns, please do not hesitate to contact Ice Miller’s White Collar Defense & Investigations Group for assistance.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. It speaks only to guidance available as of May 13, 2020. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances. 


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