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Be Prepared:
Understanding and Surviving a Fraud Investigation

W. Thomas Dillard and David M. Eldridge

Table of Contents

Criminal Statutes
Health Care Fraud (18 U.S.C. § 1347)
False Statements Relating to Health Care Matters (18 U.S.C. § 1035)
Theft or Bribery Concerning Programs Receiving Federal Funds (18 U.S.C. § 666)
Medicare Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b))
Theft or Embezzlement in Connection with Health Care (18 U.S.C. § 669)
Criminal Penalties for Acts Involving Federal Health Care Programs (42 U.S.C. § 1320a-7b(a)(3))
Mail Fraud (18 U.S.C. § 1341)
Wire Fraud (18 U.S.C. § 1343)
False Claims (18 U.S.C. § 287)
Laundering of Monetary Instruments (18 U.S.C. § 1956)
Engaging in Monetary Transaction in Property Derived From Specified Unlawful Activity (18 U.S.C. § 1957)
False Statements (18 U.S.C. § 1001)
Deliberate Ignorance
Sixth Circuit Definition of "Scheme to Defraud"
Civil Statutes
False Claims Act (31 U.S.C. § 3729)
Qui Tam (False Claims Act, 31 U.S.C. § 3730

Criminal Statutes
(PROOF BEYOND A REASONABLE DOUBT)


Health Care Fraud
(18 U.S.C. § 1347)

Whoever knowingly and willfully executes, or attempts to execute, a scheme or artifice--

(1) to defraud any health care benefit program; or
(2) to obtain , by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program,

in connection with the delivery of or payment for health care benefits, items, or services, shall be fined under this title or imprisoned not more than 10 years, or both. If the violation results in serious bodily injury (as defined in section 1365 of this title), such person shall be fined under this title or imprisoned not more than 20 years, or both; and if the violation results in death, such person shall be fined under this title, or imprisoned for any term of years or for life, or both.


False Statements Relating To Health Care Matters
(18 U.S.C. § 1035)

False statements relating to health care matters

(a) Whoever, in any matter involving a health care benefit program, knowingly and willfully --
(1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; or
(2) makes any materially false , fictitious, or fraudulent statements or representations, or makes or uses any materially false writing or document knowing the same to contain any materially false , fictitious, or fraudulent statement or entry, in connection with the delivery of or payment for health care benefits, items, or services, shall be fined her this title or imprisoned not more than 5 years, or both.
(b) As used in this section, the term "health care benefit program" has the meaning given such term in section 24(b) of this title.


Theft Or Bribery Concerning Programs Receiving Federal Funds
(18 U.S.C. § 666)

(a) Whoever, if the circumstance described in subsection (b) of this section exists--
(1) being an agent of an organization, or of a State, local or Indian tribal government, or any agency thereof--
(A) embezzles, steals, obtains by fraud, or otherwise without authority knowingly converts to the use of any person other than the rightful owner or intentionally misapplies, property that--
(i) is valued at $5,000 or more, and
(ii) is owned by, or is under the care, custody, or control of such organization, government, or agency; or
(B) corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more; or

(2) corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent of an organization or of a State, local or Indian tribal government, or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more; shall be fined under this title, imprisoned not more than 10 years, or both.
(b) The circumstance referred to in subsection (a) of this section is that the organization, government, or agency receives, in any one year period, benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance.


Medicare Anti-Kickback Statute
(42 U.S.C. § 1320a-7b(b))

Illegal Remunerations

(1) whoever knowingly and willfully solicits or receives any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind--
(A) in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program , or
(B) in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program , shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.

(2) whoever knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind to any person to induce such person--
(A) to refer an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a Federal health care program , or
(B) to purchase, lease, order, or arrange for or recommend purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program , shall be guilty of a felony and upon conviction thereof, shall be fined not more than $25,000 or imprisoned for not more than five years, or both.
. . .
(f) For purposes of this section, the term "Federal health care program" means--
(1) any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government (other than the health insurance program under chapter 89 of Title 5); or
(2) any State health care program, as defined in section 1320a-7(h) of this title.


Theft Or Embezzlement In Connection With Health Care
(18 U.S.C. § 669)

(a) Whoever knowingly and willfully embezzles , steals, or otherwise without authority converts to the use of any person other than the rightful owner, or intentionally misapplies any of the moneys, funds, securities, premiums, credits, property, or other assets of a health care benefit program , shall be fined under this title or imprisoned not more than 10 years, or both; but if the value of such property does not exceed the sum of $100 the defendant shall be fined under this title or imprisoned not more than one year, or both
(b) As used in this section, the term "health care benefit program: has the meaning given such term in section 24(b) of this title.


Criminal Penalties For Acts Involving Federal Health Care Programs
(SOCIAL SECURITY ACT)
(42 U.S.C. § 1320a-7b(a)(3))

(a) Making or causing to be made false statements or representations
Whoever --
(3) having knowledge of the occurrence of any event affecting (A) his initial or continued right to any such benefit or payment, or (B) the initial or continued right to any such benefit or payment of any other individual in whose behalf he has applied for or is receiving such benefit or payment, conceals or fails to disclose such event with an intent fraudulently to secure such benefit or payment either in a greater amount or quantity than is due or when no such benefit or payment is authorized, shall (I) in the case of such a statement, representation, concealment, failure, or conversion by any person in connection with the furnishing (by that person) of items or services for which payment is or may be made under the program, be guilty of a felony and upon conviction thereof fined not more than $25,000 or imprisoned for not more than five years or both, or (ii) in the case of such a statement, representation, concealment, failure, conversion, or provision of counsel or assistance by any other person, be guilty of a misdemeanor and upon conviction thereof fined not more than $10,000 or imprisoned for not more than one year, or both.


Mail Fraud
(18 U.S.C § 1341)

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined under this title or imprisoned not more than five years, or both. If violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.


Wire Fraud
(18 U.S.C. § 1343)

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than five years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.


False Claims
(18 U.S.C. § 287)

Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years and shall be subject to a fine in the amount provided in this title.


Laundering Of Monetary Instruments
(18 U.S.C. § 1956)

(a)
(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity--
(A) (I) with the intent to promote the carrying on of specified unlawful activity; or
(ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or
(B) knowing that the transaction is designed in whole or in part--
(I) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $ 500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both.

(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States--
(A) with the intent to promote the carrying on of specified unlawful activity; or
(B) knowing that the monetary instrument or funds involved in the transportation represent the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part--
(I) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or
(ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $ 500,000 or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer, whichever is greater, or imprisonment for not more than twenty years, or both. For the purpose of the offense described in subparagraph (B), the defendant's knowledge may be established by proof that a law enforcement officer represented the matter specified in subparagraph (B) as true, and the defendant's subsequent statements or actions indicate that the defendant believed such representations to be true.

(3) Whoever, with the intent--
(A) to promote the carrying on of specified unlawful activity;
(B) to conceal or disguise the nature, location, source, ownership, or control of property believed to be the proceeds of specified unlawful activity; or
(C) to avoid a transaction reporting requirement under State or Federal law,
conducts or attempts to conduct a financial transaction involving property represented to be the proceeds of specified unlawful activity, or property used to conduct or facilitate specified unlawful activity, shall be fined under this title or imprisoned for not more than 20 years, or both. For purposes of this paragraph and paragraph (2), the term "represented" means any representation made by a law enforcement officer or by another person at the direction of, or with the approval of, a Federal official authorized to investigate or prosecute violations of this section.
(b) Whoever conducts or attempts to conduct a transaction described in subsection (a)(1) or (a)(3), or a transportation, transmission, or transfer described in subsection (a)(2), is liable to the United States for a civil penalty of not more than the greater of--
(1) the value of the property, funds, or monetary instruments involved in the transaction; or
(2) $ 10,000.


Engaging In Monetary Transaction In Property Derived From Specified Unlawful Activity
(18 U.S.C. § 1957)

(a) Whoever, in any of the circumstances set forth in subsection (d), knowingly engages or attempts to engage in a monetary transaction in criminally derived property that is of a value greater than $ 10,000 and is derived from specified unlawful activity, shall be punished as provided in subsection (b).
(b) (1) Except as provided in paragraph (2), the punishment for an offense under this section is a fine under title 18, United States Code, or imprisonment for not more than ten years or both. (2) The court may impose an alternate fine to that imposable under paragraph (1) of not more than twice the amount of the criminally derived property involved in the transaction.
(c) In a prosecution for an offense under this section, the Government is not required to prove the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity.
(d) The circumstances referred to in subsection (a) are--
(1) that the offense under this section takes place in the United States or in the special maritime and territorial jurisdiction of the United States; or
(2) that the offense under this section takes place outside the United States and such special jurisdiction, but the defendant is a United States person (as defined in section 3077 of this title, but excluding the class described in paragraph (2)(D) of such section).


False Statements
(18 U.S.C. § 1001)

Statements or entries generally
(a) Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully -
(1) falsifies, conceals , or covers up by any trick, scheme, or device a material fact ;
(2) makes any materially false , fictitious, or fraudulent statement or representation ; or
(3) makes or uses any false writing or document knowing the same to contain any materially false , fictitious, or fraudulent statement or entry ; shall be fined under this title or imprisoned not more than 5 years, or both. 18 U.S.C. § 1001.


Deliberate Ignorance
Under circumstances dealing with the failure to disclose information known by an agency, the standard for knowledge and willfulness embedded in these statutes would be a definition of "deliberate ignorance." Essentially deliberate ignorance means:
No one can avoid responsibility for a crime by deliberately ignoring the obvious . . .
The defendant was aware of a high probability that [there was a violation of criminal laws] and that the defendant deliberately closed his eyes to what was obvious. Carelessness, or negligence, or foolishness on his part is not the same as knowledge, and is not enough to convict.
Pattern Criminal Jury Instructions, United States Court of Appeals for the Sixth Circuit, ¶2.09 (Deliberate Ignorance).


Sixth Circuit Definition Of " Scheme To Defraud"
In the case of the mail fraud statute, judicial construction has made the problem of vagueness even worse. This is illustrated most clearly by the "definition" of "scheme to defraud" which has been used in this circuit:
[T]he scheme to defraud element required under § 1341 is not defined according to a technical standard. The standard is a "reflection of moral uprightness, of fundamental honesty' fair play and right dealing in the general and business life of members of society." United States v. Bruce , 448 F.2d 1224, 1229 (5th Cir. 1973), quoting ,Gregory v. United States , 253 F.2d 104, 109 (5th Cir. 1958).
United States v. Van Dyke , 605 F.2d 220, 225 (6th Cir. 1979).

In this case, the jury was given the Van Dyke instruction over objection.

Civil Statutes
(PROOF BY THE PREPONDERANCE OF THE EVIDENCE)


False Claims Act
(31 U.S.C. § 3729)

The False Claims Act (FCA) is a civil remedy used by the government to obtain the proceeds of fraud in benefits programs, including the health care field. This act essentially mirrors the criminal statutes for fraudulent claims, except the standard of proof is lower (by the preponderance of the evidence) and the knowledge element is more less strict.

The knowledge element under the False Claims Act is:
(b) Knowing and knowingly defined. -For purposes of this section, the terms "knowing" and "knowingly" mean that a person, with respect to information-
(1) has actual knowledge of the information;
(2) acts in deliberate ignorance of the truth or falsity of the information; or
(3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required.
31 U.S.C. § 3729 (b) (emphasis added).

The government can recover from $5000 to $10,000 per false claim, plus three (3) times the amount of damages sustained by the government.


Qui Tam
(False Claims Act, 31 U.S.C. § 3730)

Another potential area of civil liability is a Qui Tam action. A Qui Tam action is embedded within the False Claims Act at 31 U.S.C. § 3730.

A Qui Tam action is filed under seal with a federal district court by a "relator," on behalf of himself and the government. The government then, after investigation, elects to proceed with the action or declines to proceed (although it may intervene later if it declines). If the government elects to proceed, the relator can receive as much as 15% to 25% of the proceeds of the action or settlement. If the government declines, the relator can receive as much as 25% to 30% of the proceeds or settlement, including reasonable expenses and costs.

Although the 1986 amendments to the False Claims Act liberalized qui tam actions, they can still be barred jurisdictionally under a variety of conditions. These conditions are found at 31 U.S.C. § 3730(3)(e), which provides:
(e) Certain actions barred.--. . .
(4)(A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.
(B) For purposes of this paragraph, " original source " means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing an action under this section which is based on the information.
31 U.S.C. § 3730(3)(e)(4)(A) and (B).

To detail further, a public disclosure occurs when information forms the basis for a Qui Tam suit is disseminated from:
1. A criminal hearing
2. A civil hearing
3. An administrative hearing
4. A congressional report
5. A congressional hearing
6. A congressional audit
7. A congressional investigation
8. An administrative report
9. An administrative hearing
10. An administrative audit
11. An administrative investigation
12. An GAO report
13. An GAO hearing
14. An GAO audit
15. An GAO investigation
16. From the news media (press release?)
17. Any documents that have been filed with a court in a civil proceeding such as discovery documents and a plaintiff's complaint. See United States v. McKenzie , 123 F.3d 935, 938 (6th Cir. 1997).1

If the person bringing the action is convicted of criminal conduct arising from his or her role in the violation of section 3729, that person shall be dismissed from the civil action and shall not receive any share of the proceeds of the action. Such dismissal shall not prejudice the right of the United States to continue the action, represented by the Department of Justice.

31 U.S.C. § 3730(d)(3).

 

 

THE ROLE OF DEFENSIVE COORDINATOR:

RESPONDING TO A HEALTH CARE FRAUD

INVESTIGATION


TABLE OF CONTENTS

INTRODUCTION

THE FIRST NOTICE OF A CRIMINAL INVESTIGATION

PREPARING FOR A CRIMINAL INVESTIGATION

PREPARING FOR THE EXECUTION OF A SEARCH WARRANT

THE RESPONSE TEAM

RESPONDING TO TYPICAL INVESTIGATIVE TOOLS: SEARCHES AND GRAND JURY SUBPOENAS

A. Search Warrants

B. Warrantless Searches: Inspections and Audits

C. Grand Jury Subpoenas

1. Subpoena for Documents

2. Subpoena for Testimony

FINDING THE WEAKNESSES AND THE STRENGTHS: THE INTERNAL INVESTIGATION

THE RULES BY WHICH THE GAME IS PLAYED: ISSUES THAT CUT ACROSS ALL ASPECTS OF THE ORGANIZATION'S RESPONSE

A. Protecting Privileged Information

1. Attorney-Client Privilege

2. Work Product Privilege

3. Self-Evaluation Privilege

4. Fifth Amendment Privilege

5. Asserting Privileges

B. Obstruction of Justice

C. Obtaining Counsel for Employees

D. Coordinating a Defense

E. Discussions with the Prosecution - Disclosure of the Internal Investigation

F. The Enforcement Climate and Its Impact: The DOJ View

CONCLUSION



INTRODUCTION

One of the greatest challenges facing both the health care provider and their counsel in responding to a fraud investigation by law enforcement authorities is that, in most cases, they are unaware of the investigation until it is well underway, and has already picked up momentum toward the initiation of either criminal charges or efforts to seek monetary penalties.

The ultimate resolution of health care fraud investigations can be fundamentally impacted by early intervention of experienced counsel. Criminal charges can many times be avoided and civil sanctions often can be settled on more favorable terms. Criminal charges or civil enforcement actions that cannot be avoided can certainly be better defended by counsel who has entered the fray early in the process, and is fully aware of the nature and scope of the problem by the time an indictment is returned or lawsuit filed.

Hence, it is valuable to focus on the response to a fraud investigation, particularly in the health care field, in which even the most careful and conscientious providers are under constant and inquisitional scrutiny. This scrutiny comes from intermediaries and investigators who generally have the motivation and desire to claim they have discovered fraud.

The impact a criminal health care fraud investigation has on the subject of it can be devastating regardless of whether criminal charges are ultimately brought. Further, the tools that can be employed in a criminal investigation are far more invasive and disruptive than those available in any other type of inquiry. Finally, almost all health care fraud investigations have the potential for examination by both civil and criminal enforcement authorities. For these reasons, this article will focus more directly on responding to a criminal investigation. Yet, many of the concepts discussed herein, can have applicability in the context of a civil investigation as well.

This article will outline the manner in which such investigations begin, how to prepare for them, and how to deal with them once the fact of the investigation becomes known.

THE FIRST NOTICE OF A CRIMINAL INVESTIGATION

There is of course, no precise list of how a health care criminal investigation begins. A criminal investigation can have at its genesis an anonymous tip, a complaint from a disgruntled employee or, more likely, a disgruntled former employee, information provided to federal authorities by a competitor, the filing of a qui tam lawsuit, or an audit by an intermediary. Information from such sources finds its way through fraud units of intermediaries to the OIG of HHS, to the FBI and, ultimately to one of the federal health care fraud units within the Offices of the United States Attorneys.

Notice of a criminal investigation can be very clear, such as the execution of a search warrant or service of a grand jury subpoena for testimony or documents. Now we can expect the first notice of trouble for a health care provider in the form of Department of Justice Subpoena Duces Tecum authorized by 18 U.S.C. § 3486.2

Sometimes, however, the fact that a criminal investigation is underway must be determined from more subtle indications. Notice may come from the fact that employees (current or former) are being interviewed at their homes, or a change in the pattern of audits.

Whatever the means of notice, counsel for a health care provider in today's enforcement climate will do well to anticipate that, at some point, most providers will be subjected to such an investigation, whether deserved or not. Those that give thought to that prospect and plan accordingly will have the best chance to avoid criminal prosecution, and failing that, to properly defend themselves.

PREPARING FOR A CRIMINAL INVESTIGATION

Preparation for a criminal investigation must be done in a number of subject matter areas.

The preparation for response to grand jury and other subpoenas and authorized investigative demands is altogether different from the preparation for response to the execution of a search warrant. The grand jury subpoena or other subpoena normally call for a response by the submission of documents after a period of time. In fact, 18 U.S.C. § 3486 specifically provides for "a reasonable period of time within which the objects can be assembled and made available." The execution of a search warrant, on the other hand, is without prior warning or notice. The only warning provided is that of the executing officer "knocking and announcing" his or her identity and purpose. Such "warning" is normally followed by a large number of armed agents wearing blue jackets with gold letters FBI (OIG) on their backs swarming the premises bringing shock and fear to management and employees.

Under the latter circumstances, absent prior planning and coordination, the result is chaotic. Counsel may be miles away, perhaps in another city or state. Without some preparation, the hospital administrator, home health care executive, or physician has no idea as to how to react or what to do. Employees have no idea whether they must submit to the interrogation which regularly accompanies such raids or even whether they can or should stay or leave. The execution of a search warrant is the result of a carefully thought out plan, with different agents assigned to different parts of the office and assigned to the task of interrogating employees expected to be present. The prosecution knows ahead of time what their agents are going to do, as well as how and when they are going to do it. Without some preparation and forethought, the providers' response will be disorganized at best and, at worst, insufficient to preserve and perhaps vindicate important rights and privileges later on.

PREPARING FOR THE EXECUTION OF A SEARCH WARRANT

A search warrant will normally be the investigative method of choice in those situations in which the government perceives that the "prior notice" provided by a subpoena or investigative demand may result in destruction of documents or an incomplete or dishonest response.

 A reasonable course of action in preparation for the execution of a search warrant will involve the designation and training of a "response team," the education of employees as to their rights and responsibilities in the event of a search or interrogation, the reasonable efforts to protect privileged documents, and anticipating and preparing for media attention.

THE RESPONSE TEAM

First, the organization should put together a team to respond to the crisis. This team should consist of a response coordinator for each facility it operates, the corporate counsel, and managers of various relevant work areas. The response coordinator should be prepared to alert counsel as soon as a criminal investigation surfaces. In the event of a search warrant, the response coordinator should know to monitor the search. Each other member of the team should be assigned a task to do in the event that there is a search or a grand jury subpoena.

Second, the employees should be prepared for the event of a criminal investigation. Basic rights should be explained to them. Most employees will likely believe that they must speak with government agents and in the panic that results from notice of a criminal investigation, may not be clear or may admit to actions not taken. Employees have the right to refuse to speak with government agents, agree to be interviewed, or agree to be interviewed after consulting counsel and only in counsel's presence. Government agents will likely not explain these options to employees and given the option, most employees will elect to consult with counsel. It is perfectly permissible for these rights to be explained to the employees and fairness to the employees dictates this kind of advice. In order to avoid the possibility that such advice is misconstrued by an employee as a direction not to speak with government agents, it is preferable to prepare this advice in writing and record its presentation to company employees.3

Third, procedures should be established to protect privileged information from being disclosed. These steps include the development of a filing system in which it can keep privileged materials separate from other corporate documents. Procedures should also be initiated once a criminal investigation is underway and the organization is undertaking its own investigation to protect the privileged work product of the internal investigation.

Fourth, planning for the media's reaction to a highly publicized criminal investigation should not be overlooked. Most organizations have an interest in maintaining a positive image as a responsible corporate citizen. The effect of a criminal investigation on the goodwill of the public can be devastating. Accordingly, a relationship with a public relations firm that understands the organization and comes to understand the issues in a criminal investigation can be a valuable asset. The media is powerful and it must be dealt with. An abrupt, likely rude, "no comment" in the face of a crisis should be avoided at all costs. Experienced public relations personnel can assist the company and its counsel in articulating statements that can stem the tide of negative publicity associated with an ongoing criminal investigation.

"Be prepared" are the watchwords in responding to criminal investigations. Plans relating to the above areas will help insure that the company's response is well managed on all fronts.4

RESPONDING TO TYPICAL INVESTIGATIVE TOOLS:
SEARCHES AND GRAND JURY SUBPOENAS

There are two often used tools in a criminal investigation: searches (with or without a warrant) and grand jury subpoenas. These two tools are not mutually exclusive and the chronology of their use varies with the case and the prosecutor. Often times the prosecution will obtain and execute a search warrant, evaluate the evidence obtained and determine that a grand jury subpoena should be used to obtain specific types of other documents or the testimony of witnesses.

The company's response to both of these tools has the same goals: gaining control over the flow of information and documentation of the government's investigation.

A. Search Warrants

Except for a few specific exceptions, all searches must be conducted upon the authority of a search warrant. In order to satisfy fourth amendment requirements, a search warrant must be based upon probable cause and describe the place to be searched and the items to be seized with reasonable precision.

When government agents appear at a facility's door with a search warrant, the response coordinator for that facility should be notified. This person should obtain a copy of the warrant5, and if possible, the affidavit in support of the warrant.6 Counsel should also be called immediately to review the warrant in order to determine that it is specific in its description of the location to be searched and the items to be seized. If legal counsel is not present, the response coordinator should ask the federal agents to secure the area to be searched, but to delay the search until counsel has arrived.

It should also be made clear to the government agents and all employees that all inquiries made during the search should be directed to the response coordinator. Management should also consider shutting down operations for the day and sending all employees home except those designated to coordinate the company's response. This step will minimize the government's access to employees at that time and removes personnel not essential to the search.

The response coordinator(s) should accompany the agents at all times during their search, carefully recording, including possibly videotaping, the conduct, statements and questions of the agents. Access to areas not specifically detailed in the warrant may be denied and it should be noted whether the agents confine their search to the areas described in the warrant.

The response coordinator(s) should document the scope of the search. This information should include the names of the persons present, the length of the search, the items searched for and seized, from where items or documents were taken, and names of employees interviewed and their statements.

Company representatives are not permitted to interfere with a search but they are entitled to effectively monitor it. Accordingly, if the searching agents do not permit the company to follow the agents during the search, follow up with the prosecutor who is listed on the search warrant or identified by the searching agents and renew the request. If the prosecutor does not agree to a reasonable compromise that will give the company the information it needs, go to court and make an emergency motion with the magistrate that signed the search warrant.

When the search is over, the response coordinator should request a debriefing from the agents. If granted, the response coordinator should attempt to find out as much as possible about the search and the investigation. In addition, if anything was seized (which it will be) the response coordinator should request an inventory of items taken.

As the search is progressing, it is also permissible and imperative to identify attorney-client privileged materials. If compliance audits have been conducted and the report is present on the premises, everything that can lawfully be done to protect it, should be done. Such documents identify compliance problems and sometimes violations of the law. Because the document is not usually drafted by attorneys and is widely distributed, it may be difficult to protect. The effort to prevent its disclosure should be made, however.

All documents about which a privilege is asserted should be collected. It then should be suggested to the agents or the prosecution that these documents should be sealed and taken to the magistrate for an in camera review before being turned over.

As a final step relating to documents, a memorandum should be issued instructing all employees that no documents should be destroyed.

B. Warrantless Searches: Inspections and Audits

One specific exception to the warrant requirement is an administrative inspection.

In the health care field, state and federal statutes and regulations provide access to representatives of the HHS-OIG to records relating to Medicare, Medicaid or other state health care programs. See generally The Inspector General Act of 1978, 5 U.S.C. Appendix 3 (1967, Supp. 1994), Section 6(a)(1). The Act specifies access to "all records, reports, audits, reviews, documents, papers ... or other material ..." which relate to Medicare, Medicaid or other state health care programs. Access to provider records is also granted under both state and federal law to state Medicaid fraud control units. 42 U.S.C. § 1320a-7(b)(12); and Tenn. Code Ann. § 71-5-118 (providing sanctions against providers who fail to produce records, upon request, by authorized representatives of the state commissioner "as necessary to substantiate the medical assistance for which claims have been submitted.").

These type of requests can be made only after the agency has "information to suggest" that the provider has violated statutes or regulations pertaining to the delivery of health care. 42 C.F.R. § 1001.1301(a)(3)(ii). This "information to suggest" is a lower threshold than "probable cause" that the agency would have to establish to secure a search warrant.

The hammer of permissive exclusion nonetheless provides a strong incentive for providers to provide such access if properly requested. Permissive exclusion is available under certain circumstances for failure to grant "immediate access" upon "reasonable request" to agency representatives although the grounds for exclusion vary depending upon the circumstances under which access was requested. See 42 C.F.R. § 1001.1301; 42 U.S.C. § 1320a-7(b)(12).

"Immediate access" may not mean "immediate." The provider must be given "reasonable notice" of the need for access. This notice has specific requirements that it be a written statement given during regular business hours and include the authority for the request, the rights of the entity in responding to the request, the definition of reasonable request and immediate access and the penalties for failure to comply, including when the exclusion would take effect. 42 U.S.C. § 1001.1301(a)(2). Further, immediate access may not be necessary for the inspection to be meaningful, thus granting the provider 24 hours to verify the legitimacy of the request and compile the requested materials. See generally 57 Fed. Reg. 3298, 3312 (1992).

The scope of the materials for which access is granted under these statutes and regulations is not unlimited. The materials sought must be that which are found to be "necessary to determine whether such payments [payments under Medicare, Medicaid or state health care program] are or were due and the amounts thereof, ..." and that "necessary to verify such information." 42 U.S.C. § 1320a-7(b)(11).

This is an important point: requests for immediate access to medical records and other documents by OIG representatives are only requests. These regulations permitting access upon a reasonable request DO NOT entitle agents to unlimited access to the premises of the provider or unlimited access to ANY AND ALL records they want. Any such request should be reviewed closely by counsel to insure that it is in compliance with applicable regulations and that the scope of that which is requested is limited to that which the requesting agency is entitled.7

The admissibility as evidence of that which is obtained under such a demand should be examined in the context of a criminal investigation and prosecution; however, it may be necessary to litigate the admissibility of such evidence.

The constitutionality of these regulations and statutes as recited above as a substitute for a warrant may be suspect. Such statutes and regulations must generally provide a constitutionally adequate substitute for a search warrant under fourth amendment jurisprudence.

The so-called administrative search exception to the warrant requirement has only been recognized where a "pervasively regulated business" or "closely regulated" industries "long subject to close supervision and inspection" is involved. See United State v. Biswell, 406 U.S. 311 (1972); Colonnade Catering Corp. v. United States, 397 U.S. 72 (1970).

Recognizing the limited application of this exception to the fourth amendment, the United States Supreme Court struck down as unconstitutional Section 8(a) of the Occupational Safety and Health Act of 1970 which authorized the entry without a warrant of "any factory, plant, establishment, construction site, or other area, workplace or environment where work is performed by an employee of an employer. . .." See Marshall v. Barlow's, Inc., 436 U.S. 307 (1978). The Court held that OSHA was not limited to closely regulated industries.

The Sixth Circuit Court of Appeals has also recognized the limited nature of this exception. See Allinder v. Ohio, 808 F.2d 1180 (6th Cir. 1987). In Allinder, the Court struck down a statute which provided for "warrantless searches of apiaries and other premises, buildings or places where bees or bee paraphernalia are kept." The basis of this decision was that the bee industry was not closely regulated.

Although neither of these cases provide authority directly on point in challenging the access to records regulations discussed here, they do provide the general guidelines upon which such a challenge could be based. An additional factor that would mitigate against a successful constitutional challenge is that of consent based upon the provider's agreements with government health care intermediaries. For example, in United States v. Brown, 763 F.2d 984 (1985), cert. denied, 474 U.S. 905 (1985), the Eighth Circuit Court of Appeals held that a pharmacist was deemed to have consented to the inspection of their premises as a condition of their participation in the Medicare or state health program. See also United States v. Griffin, 555 F.2d 1323 (5th Cir. 1977) (cited in Brown).

C. Grand Jury Subpoenas

A grand jury subpoena for documents or witness testimony is a key tool used when gathering evidence against a company in a health care fraud case. The organization or witness must, of course, comply with the subpoena. Such a mandate does not mean, however, that a coordinated response to both types of subpoenas should not be undertaken.

1. Subpoena for Documents

A grand jury subpoena duces tecum will require the production of records that the government alleges pertain to the criminal investigation. "Records" will include all documents prepared by officers, employees, representatives, directors, and agents of the corporation as part of their duties. "Records" will also include all documents sent, received, maintained, or used in the course of their business. Furthermore, the production of "records" covers almost anything on paper dealing with the corporation's activities (i.e. files, letters, notes, photos, computer storage, etc.). However, "company records" does not include "purely personal" records as they are protected under the fifth amendment.

Certain steps should be taken in responding to a grand jury subpoena duces tecum.8

First, an individual should be designated to receive the subpoena. Upon receipt of the subpoena duces tecum, this individual should note the date and time of service, along with the name and title of the agent serving the subpoena. The subpoena should be forwarded immediately to counsel for a thorough review before any response is made.

Second, a meeting should occur with the prosecutor to determine the focus of the investigation. This will be an important opportunity to establish rapport with the prosecution and to demonstrate the corporation's willingness to cooperate in the investigation. Counsel should attempt to arrange for the production of copies with the promised retention of the originals. Counsel should further attempt (if consistent with strategic and tactical decisions) to narrow the scope of the documents requested by the subpoena and obtain additional time to respond.

Third, counsel should meet with senior management and those directly involved with the facility, division, activity or program described in the subpoena to identify all sources of the requested documents and the location of these documents. If any documents have been destroyed or lost, they should be identified along with the reasons for why they no longer exist.

Fourth, a memorandum should be circulated designating a corporate officer (not involved in the investigated area) responsible for collecting responsive documents. This document should identify and assign certain employees the job of finding responsive documents and delivering them to the responding officer. The memorandum should set deadlines, make clear that no requested documents are to be destroyed, and that failure to produce responsive documents, whether deliberate or unintentional, will probably be perceived by the prosecution as an obstruction of justice.

Fifth, once these documents are compiled, the designated corporate officer and counsel should review the documents to determine relevant documents, privileged information and trade secret material. Clearly mark all privileged information and trade secret material.

Sixth, the corporate officer should create a database or other index to organize the documents. In addition, the corporation should retain a copy of all unprivileged documents. If any documents contain trade secrets, counsel should request an agreement with the government to avoid their disclosure. Privileged documents should of course not be produced.

If no agreement can be reached with the prosecution to narrow the scope of the subpoena, an objection to the subpoena in the form of a motion to quash pursuant to Rule 17© of the Federal Rules of Criminal Procedure can be made. Sufficient grounds for objection exist if the subpoena: 1) is unreasonably broad in scope; 2) is lacking in particularity; 3) includes privileged or otherwise protected material; or 4) is used to prepare for trial after the grand jury has issued an indictment. Mere excessive cost of producing the documents is rarely enough to quash the subpoena.

2. Subpoena for Testimony

It may be the case that counsel for each employee (or clearly segregated groups of employees) will be in place before a grand jury subpoena is served. If not, the service of a grand jury subpoena should make clear that counsel for the employee is necessary. The organization's internal investigation will hopefully be underway by the time a grand jury subpoena is served and therefore the employee will have been interviewed by the organization's counsel. See supra. There will therefore be a basis to evaluate the employee's criminal exposure and the potentially incriminating information the employee knows. If not, the service of a grand jury subpoena should prompt these steps.

Immediately after appearing before the grand jury, each witness should be debriefed while the witness's recollection is fresh. It is important to ascertain the crux of the questioning by taking notes of the prosecutor's questions. Further monitoring of the grand jury is recommended by keeping track of witnesses that appear before the grand jury and attempting to interview all such witnesses.

FINDING THE WEAKNESSES AND THE STRENGTHS:
THE INTERNAL INVESTIGATION

Immediately upon notice that the company is being investigated for criminal violations, an internal investigation should begin. The purpose of this investigation is simple: find the facts. The undertaking of the investigation is more complicated.

The first thing the organization must decide is who will conduct the internal investigation. While the organization may choose to have a non-attorney orchestrate the investigation, there are distinct advantages to having an attorney do so. First, an investigation is likely to raise some complex and sensitive legal issues. Second, the attorney-client privilege will be able to protect communications integral to the investigation.

Once the organization decides to use an attorney to conduct the investigation, it must decide whether that attorney will be in-house or outside counsel. While in-house counsel may have more access to information about the corporation, outside counsel has the advantage of appearing more objective and, if properly selected, will already have a working relationship with the prosecution representatives and agents in charge of the investigation. For this reason the government's lawyers and agents may respond better when working with outside counsel. On balance, the most effective internal investigations are conducted by outside counsel working closely with in-house counsel.

To initiate the internal investigation, management should distribute a letter authorizing the investigation. Further, the letter should inform the employees of the investigation and seek the employee's cooperation with the investigation.

During the investigation all employees who have or are likely to be interviewed by the government should be interviewed. At the beginning of the interview counsel should inform the employee that counsel is the organization's attorney and not the employee's personal attorney. Further, counsel should advise the employee that the attorney-client privilege is held by the organization.9 Finally, the employee should be informed that he or she has the right not to talk to counsel (or to the government); and, if the employee chooses to talk, he or she may have a personal attorney present.

Counsel must keep a record of the information told to the employee at the initiation of the interview. Counsel must also be careful not to engage in "misleading" conduct or speech which might be construed as tampering with the witness in violation of the Federal Obstruction of Justice statutes. See 18 U.S.C. § 1512 et seq. Finally, it is a good idea for counsel to have an assistant present who can be a witness to the procedure followed and the conversation. The interviews should not be recorded and the employee should not be asked to review and sign the memorandum of the interview. If recorded or signed, the memorandum of interview becomes the statement of that witness. Thus, if that employee is called as a witness for the organization at trial, the prosecution would be entitled to his or her statements. The creation of such witness statements should therefore be avoided.

While conducting the internal investigation, counsel should remember to interview former employees and suppliers as well. Counsel must bear in mind that no attorney-client privilege will apply to these interviews. Further, these people are likely to be hostile witnesses at trial.

At the conclusion of the internal investigation, counsel should consider the preparation of a memorandum which summarizes the facts, analyzes the applicable legal principles, identifies any weaknesses in the corporation's practices, outlines arguments against criminal or administrative sanctions, and recommends any corrective actions or other measures which would improve operations.

THE RULES BY WHICH THE GAME IS PLAYED:
ISSUES THAT CUT ACROSS ALL ASPECTS OF THE
ORGANIZATION'S RESPONSE

There are several issues that counsel will have to keep in mind in responding to a criminal investigation and conducting an internal investigation. The following paragraphs will serve as a checklist of those issues and the rules that govern decisions with respect to them.

A. Protecting Privileged Information

From the outset of the criminal investigation, attention should be given to protecting privileged information. Privileged information issues arise at all stages of the investigation. Government agents may seek materials for which a privilege may be asserted in the execution of a search warrant, an administrative inspection, or through a grand jury subpoena. Potentially applicable privileges include attorney-client, work product, self-evaluation and the fifth amendment.

1. Attorney-Client Privilege

The attorney-client privilege protects all confidential communications between the client and the attorney made for the purpose of securing or rendering legal advice as opposed to business advice. Upjohn v. United States, 449 U.S. 383 (1981); Diversified Industries, Inc. v. Meredith, 572 F.2d 596, 610 (8th Cir. 1978 ) (en banc). Further, the individual must have been a client or a potential client at the time of communication. Id. This privilege does not extend to all communications. The attorney-client privilege cannot be asserted for communications made to third parties or for the purpose of committing a crime or tort.

The attorney-client privilege can sometimes extend to communications made between the corporation's attorney and corporate employees depending upon the context in which the communication was made. See Upjohn v. United States, 449 U.S. 383 (1981); In re Coordinated Pretrial Proceedings in Petroleum Products Anti-Trust Litigation, 658 F.2d 1355 (9th Cir. 1981), cert. denied, 455 U.S. 990 (1982) (former employees); Baxter Travenol Laboratories, Inc. v. LeMay, 89 F.R.D. 410, 413-14 (S.D. Ohio 1981) (prospective employees). Certain requirements must be met before such a privilege attaches. First, the communication must be made within the scope of the employee's corporate duties. Second, the communication must be made at the direction of the employee's supervisor. Likewise, the employee's communication must be essential to the corporation's counsel for purposes of providing legal advice to the corporation. Id.

2. Work Product Privilege

In addition to the attorney-client privilege, counsel may also protect the disclosure of materials under the work product doctrine. See Hickman v. Taylor, 329 U.S. 495 (1947); Fed. R.C.P. 26(b)(3). The work product doctrine protects the disclosure of materials prepared by the attorney in anticipation of litigation. Id. These materials may include witness interviews containing counsel's thoughts and impressions and any documentation of counsel's planning or legal strategy (i.e. notes, memoranda, correspondence, etc.).

Work product privileges also extend to materials prepared by those hired to perform services for the criminal investigation. These include, but are not limited to, the following: private investigators, accountants, auditors, consultants and contractors. It is therefore important to have such expert assistants report only to counsel representing the corporation.

However, the work product doctrine is only a qualified privilege. Work product relating to factual matter and not opinion may be obtained by the prosecution by showing a substantial need in the preparation of its case or an undue hardship in obtaining the substantial equivalent of the materials by other means. See e.g., United States v. Brown, 478 F.2d 1038, 1041 (7th Cir. 1973).

It is important to note that some materials produced by a consultant or auditor may not be protected under the work product doctrine or the attorney-client privilege. An example would be a consultant's reports relating to the hospital's compliance with fraud and abuse regulations. Furthermore, audits are even harder to protect when they are routine and used for business advice as opposed to legal advice. As discussed above, since self-audit reports can be key evidence for the prosecution's case, concerted efforts must be made to prevent their disclosure.

3. Self-Evaluation Privilege

The self-evaluation privilege is an emerging legal principle that has not been accepted by all courts, and some courts only recognize the privilege in certain areas. See e.g., Ligon v. Frito Lay, 19 Empl.Prac.Cas. (BNA) 722 (N.D. Tex. 1978); EEOC v. ISC Financial Corp., 16 Empl.Prac.Cas. (BNA) 174 (W.D. Ms. 1977). It was first articulated in Bredice v. Doctor's Hospital, Inc., 50 F.R.D. 249 (D.Ct. D.C. 1970), aff'd mem., 479 F.2d 920 (D.C. Cir. 1973).

The self-evaluation privilege grants qualified protection for documents falling within the grey areas surrounding the attorney-client privilege and the work product privilege. See Note, The Privilege and Self-Critical Analysis, 96 Harv. L. Rev. 1083 (1983). Most courts that recognize the self-evaluation privilege require that three criteria to be met. First, "the information must result from a critical self-analysis undertaken by the party seeking protection; second, the public must have a strong interest in preserving the free flow of the type of information sought; finally, the information must be of the type whose flow would be curtailed if discovery were allowed." Id. at 1086.

The privilege will also not be extended unless the document was prepared with the expectation that it would be kept confidential and has retained its confidential nature. See Dowling v. American Hawaii Cruises, Inc., 971 F.2d 423 (9th Cir. 1992); James F. Flanagan, Rejecting a General Privilege for Self-Critical Analyses, Geo. Wash. L. Rev. 551, 574-76 (1983) (citing 8 J. Wigmore, Wigmore on Evidence § 2285 at 527 (1961); See also Peterson v. Chesapeake & Ohio Ry., 112 F.R.D. 360, 363 (W.D. Mich. 1986) (holding that self-evaluation privilege was not available because the report was not "performed with the expectation that the analysis [would] remain confidential" and in fact had not been kept confidential); Westmoreland v. CBS, Inc., 97 F.R.D. 703, 706 (S.D. N.Y. 1983) (same).

The self-evaluation privilege is most often used to protect documents created as a result of a confidential internal investigation to determine if the law has been violated. Like other privileges, the self-evaluation privilege is not absolute. See In re Crazy Eddie Securities Litigation, 792 F. Supp. 197, 205 (E.D. N.Y. 1992) (refusing to allow the plaintiffs access to the accounting firm's internal report). It is to be applied only to "analysis or evaluation itself and not to the facts upon which the evaluation was based." Id. at 204.

The law is not universal and this privilege is largely untested in the health care field. Accordingly, the self-evaluation privilege is far from a solid shield against disclosure of an internal audit.

4. Fifth Amendment Privilege

Only an individual and not the corporation may use the fifth amendment privilege. This privilege can be asserted by an individual if that which they are being compelled to do is "testimonial" and incriminating. This privilege can apply to documents in their possession if the act of producing a document itself is incriminating.

5. Asserting Privileges

If the corporation asserts that certain documents contain privileged information, the prosecution may request a "Vaughn" index. See Vaughn v. Rosen, 484 F.2d 820 (D.C. Cir. 1973) cert. denied 415 U.S. 977 (1974). A "Vaughn" index requires the party claiming the privilege to list all documents claimed to be privileged and the reasons for their privileged character without disclosing their confidential nature.

In addition to a "Vaughn" index, the prosecution may attempt to redact the privileged documents to require the disclosure of those parts that do not contain confidential information. See United States v. United Shoe Machinery Corp., 89 F. Supp. 357, 359 (D. Mass. 1950). Under the doctrine of severability, the party claiming privileged information must disclose all parts of the documents that do not clearly contain privileged information.

Counsel must zealously protect the documents containing privileged information because the ramifications of disclosure can be devastating. Not only could the disclosure significantly assist the prosecution, but the disclosure could also constitute a "knowing and voluntary" waiver as to all communications on the same subject. In re Martin Marietta, 856 F.2d 619 (4th Cir. 1989); Westinghouse v. Republic of the Philippines, 951 F.2d 1414 (3d Cir. 1991).

B. Obstruction of Justice

Throughout the investigative process, counsel for the company and corporate representatives must walk a line between aggressively responding to a criminal investigation and refraining from conduct that could be construed as obstruction of justice.

There are three federal statutes which deal with the issue of obstruction of justice: 18 U.S.C. § 1503, 18 U.S.C. § 1505, and 18 U.S.C. § 1512. These statutes are interpreted broadly and an understanding of them is essential when representing a corporation under investigation for health care fraud.

Sections 1503 and 1505 are virtually identical and apply to pending judicial proceedings and administrative proceedings respectively. The sections prohibit behavior which would influence, intimidate, or impede a juror or court official; and, any conduct which would influence, obstruct or impede the due administration of justice. In order to violate these statutes, the defendant must act with knowledge of the pending proceeding and with a specific intent to impede the administration of justice. See generally United States v. Barfield, 999 F.2d 1520 (11th Cir. 1993); United States v. Vesich, 724 F.2d 451 (5th Cir. 1984); United States v. Hass, 583 F.2d 216 (5th Cir. 1978), cert. denied 440 U.S. 981 (1979); United States v. Aguilar, 994 F.2d 609 (9th Cir. 1993).

Section 1512 is much broader. This section is known as the witness tampering section of the Victim and Witness Protection Act. While it prohibits threatening and intimidating behavior which "influence[s], delay[s], or prevent[s] testimony or which causes a person to withhold testimony or destroy evidence," it also prohibits the use of "misleading conduct"10 to achieve these same ends. This statute should be reviewed in detail to ensure that no misleading conduct is used while interviewing witnesses.

     The general guides to avoiding obstruction of justice allegations are as follows:

1. Never tell a witness not to talk to a government agent or tell anyone else to give those instructions.

2. Never destroy or hide a document or tell anyone else to do so.

3. Never alter a document or tell anyone else to do so.

4. Never (of course) tell a witness to lie.

5. Protect yourself against obstruction allegations by having a witness present when you do interviews.

C. Obtaining Counsel for Employees

The issue of counsel for employees will arise early on in the investigation - as soon as a government agent wants to interview the employee. Accordingly, counsel must be prepared early to make a recommendation on whether the corporation should retain counsel for the employees.

Retaining counsel for all the individual employees who are involved in the investigation will have the advantage of helping the employees to feel more at ease and protected.

In addition, it will avoid conflict of interest problems between the corporation and the employees, as well as lessen the risk that obstruction of justice allegations will be made against the corporation's dealings with the employees. Finally it will provide additional protection against the government's covert attempts to contact the employees.

D. Coordinating a Defense

Once the employees have independent counsel, the corporation's counsel should work with the employee's attorneys to coordinate an effective defense. Such an arrangement will allow the pooling of money, time, and information.

For added benefit, the various defendants may wish to enter into a formal Joint Common Interest Agreement. This agreement will allow the attorney-client privilege to be extended to all information shared among the various parties. This privilege will remain intact even in the event that a defendant withdraws from the Joint Common Interest Agreement.

In order to qualify for such an agreement, the defendants must share a common interest. Further the information exchanged must be necessary to facilitate the representation and the materials exchanged must be confidential. See Hunydee v. United States, 355 F.2d 183 (9th Cir. 1965). While the agreement does not have to be written to be valid, a written agreement has certain advantages of clarifying the objectives and reducing the chance of conflict of interest.

When considering whether to enter into a Joint Common Interest Agreement, counsel should fully advise the client of all the potential consequences of entering into such an agreement.

E. Discussions with the Prosecution - Disclosure of the Internal Investigation

While it is likely that at some point during the investigation counsel will want to discuss matters with the prosecution, counsel must be very cautious and sensitive to unintentional waiver of attorney-client privilege. Disclosure of the internal investigation may constitute a waiver of all related matters. See In re Martin Marietta, 856 F.2d 619 (4th Cir. 1989); Westinghouse v. Republic of the Philippines, 951 F.2d 1414 (3d Cir. 1991).

In order to insure that the privilege is not waived, counsel should first attempt to strike a deal with the prosecutor that any discussions will be off the record. Such a deal should be reduced to writing if possible. If that does not work, counsel can speak in hypothetical, although this approach is strained. As another alternative, counsel should seek an agreement that the discussions are protected under Federal Rule of Criminal Procedure 11(e)(6)(D) prohibiting use of statements relating to plea negotiations.

F. The Enforcement Climate and Its Impact: The DOJ View

The current climate in which health care fraud investigations are being conducted should be considered in determining how a provider should respond. The Department of Justice is increasingly taking the position that the assertion of the attorney-client privilege, the providing of counsel to employees pursuant to corporate indemnification commitments, and the entering into joint privilege preserving agreements by whatever name, are indicia of a failure to cooperate at best and at worst a continuation of a criminal conspiracy.

The DOJ further takes the position that any effort to protect employees by the company is not cooperative.

This view has recently been confirmed in a recently disclosed DOJ publication entitled "Federal Prosecutions of Corporations" (published in the December 8, 1999 BNA Special Report and summarized in the article entitled "DOJ Guidance Sets Forth Criteria on Criminally Charging Corporations").11

     The Guidance document suggests that a prosecutor evaluating a corporation's cooperation take into account "the corporation's willingness to identify the culprits within the corporation, including senior executives, to make witnesses available, to disclose the complete results of its internal investigation and to waive the attorney-client and work product privileges." The document goes on to state that a corporation's promise to support "culpable" employees either through the advancement of attorney's fees, retaining them, or sharing information about the government's investigation through a joint defense agreement, may be considered in weighing the extent and value of a corporation's cooperation.

Thus, legitimate measures taken by a company to protect its interests and those of loyal hard working employees are now viewed as obstructionist by the DOJ pressing ever increasing demands upon the corporate entity under scrutiny to spend its resources to find and deliver allegedly culpable individuals up for prosecution. This is the unfortunate and misguided reality of the climate in which these decisions must be made. It is a reality though, that must be considered as a health care provider determines the appropriate response to a criminal investigation.

CONCLUSION

The keys to an effective response to a criminal health care fraud investigation are planning ahead and quick action once the investigation is underway. This combination will enable counsel and the client to get on top of the investigation quickly, keep pace with the government, and be able to articulate reasons why the case should not proceed to indictment.

Not only weathering, but effectively responding to, a criminal health care fraud investigation is absolutely essential. Oftentimes, the very continued existence of the organization is at stake. It is thus critically important for the organization and the counsel who advise it to be well prepared to address this ever present risk of providing health care services and staying in business in our increasingly aggressive health care fraud enforcement climate.



SAFE HARBOR REGULATIONS

Payments that will not be considered criminal offenses under the Medicare Anti-Kickback Statute, 42 U.S.C. § 1320a-7b, are as follows:

1. Investment Interests

2. Space Rental

3. Equipment Rental

4. Personal Services and Management Contracts

5. Sale of Practice

6. Referral Services

7. Warranties

8. Discounts

9. Employee Compensation

10. Group Purchasing Organizations

11. Waiver of Beneficiary Coinsurance and Deductible Amounts

12. Health Plans: Increased Coverage, Reduced Cost-Sharing, or Reduced Premiums

13. Price Reductions Offered to Health Plans

14. Expenses Related to Practitioner Recruitment in Underserved Areas

15. Obstetrical Malpractice Insurance Subsidies for Underserved Areas

16. Investments in Group Practices Comprised of Active Investors

17. Cooperative Hospital Service Organizations

18. Investments in Ambulatory Surgical Centers

19. Referral Agreements for Specialty Services in Underserved Areas

20. Price Reductions to Eligible Managed Care Organizations

21. Price Reductions Offered by Contractors with Substantial Financial Risk to Managed Care Organizations


The safe harbors listed above are codified at 42 C.F.R. § 1001.952.



1. In Federal Recovery Services, Inc. v. United States, 72 F.3d 447, 450 (5th Cir. 1995, the Fifth Circuit held that there was a jurisdictional bar on documents based upon the public disclosure provision when: Any information disclosed through civil litigation and on file with the clerk's office should be considered a public disclosure of allegations in a civil hearing for the purposes of § 3730(e)(4)(A). (Quoting United States, ex rel. Siller v. Becton, Dickson and Co., 21 F.3 1339, 1350 (4th Cir.), cert. denied 513 U.S. 928 (1994).

2. An example of such a Department of Justice Subpoena is attached as Exhibit 1.

3. A sample notice to employees advising them of their rights is attached as Exhibit 2.

4. A "checklist" of items to be undertaken in response to a criminal health care fraud investigation and a search warrant is attached as Exhibit 3.

5. A copy of a search warrant is attached as Exhibit 4.

6. At the time of execution, most affidavits in support of search warrants in federal cases are under seal by order of the magistrate. It is very difficult to persuade the magistrate or judge to unseal the affidavit over the government's objection. Accordingly, the most effective course is to persuade the prosecution to agree to its unsealing or the provision of a redacted copy.

7. Attached as Exhibit 5 is an example of the kind of letter that may be presented by TBI or other representatives demanding access to records.

8. Attached as Exhibit 6 is a grand jury subpoena.

9. Attached as Exhibit 7 is a written memorandum that can be distributed to employees as they are interviewed confirming that they were so advised.

10. The term "misleading conduct" is defined in 18 U.S.C. § 1515.

11. A copy of the full text of the DOJ Memorandum from Eric H. Holder, Jr. to DOJ department heads and all United States Attorneys' offices as reprinted in the BNA Criminal Law Reporter is attached as Exhibit 8.