Is All Forgiven by Corporations Coming Clean? The U.S. Department of Justice Unveils Its New Voluntary Self-Disclosure Policy

On February 22, 2023, U.S. Attorneys for the Southern District of New York and Eastern District of New York Damian Williams and Breon Peace revealed a new policy that sets a national standard for circumstances under which companies may receive credit for voluntarily self-disclosing criminal conduct, and makes transparent the specific, tangible benefits to a company for making such disclosures. As such, the new policy provides ways for companies to potentially mitigate criminal liability while simultaneously “promoting an honest corporate culture.”

There are two key components to the new policy: (1) “voluntariness” and (2) “timing.” Pursuant to the new policy, a company will be deemed to have made a voluntary disclosure if “it becomes aware of misconduct by employees or agents before that misconduct is publicly reported or otherwise known to the Department of Justice, and discloses all relevant facts known to the company about the misconduct to a United States Attorney’s Office (USAO) in a timely fashion prior to an imminent threat of disclosure or government investigation.” As noted in the February 2023 press release, there are significant benefits to fully cooperating and timely disclosing misconduct including that the USAO will not seek a guilty plea against a company, assuming there are no aggravating factors. Such factors include if the misconduct: (1) poses a grave threat to national security, public health, or the environment; (2) is deeply pervasive throughout the company; or (3) involved current executive management of the company. It should be noted that the presence of an aggravating factor is not dispositive of a guilty plea being sought. As such, this appears to be more of a balancing test looking at the totality of the circumstances. For a more comprehensive review of the press release please visit the DOJ website at https://www.justice.gov/usao-edny/pr/damian-williams-and-breon-peace-announce-new-voluntary-self-disclosure-policy-united#:~:text=Under%20the%20new%20VSD%20policy,timely%20fashion%20prior%20to%20an.

A recent application of the new policy came in the form of a criminal indictment involving HealthSun Health Plans, Inc. (HealthSun), a Florida company that administers Medicare Advantage plans. The indictment alleged that Kenia Valle Boza, former Director of Medicare Risk Adjustment Analytics at HealthSun, orchestrated a scheme to defraud Medicare by falsifying medical records and entering false diagnoses in beneficiary’s files weeks after being seen by a physician. In turn, the company submitted thousands of false diagnoses codes to the Centers for Medicare and Medicaid Services (CMS) resulting in millions of dollars in overpayments. Also involved in the scheme was Elevance Health, Inc. (Elevance), HealthSun’s parent company.

Despite defrauding CMS out of millions of dollars, the indictment against HealthSun was unexpectedly discontinued and the Department of Justice (DOJ) announced it was declining prosecution in a declination letter issued October 25, 2023. Citing the new policy, the DOJ determined that HealthSun had sufficiently disclosed the misconduct. In making this determination, the Government specifically found HealthSun: (1) timely and voluntarily disclosed its misconduct along with its parent company, Elevance; (2) fully cooperated throughout the entirety of the investigation including disclosure of names of individuals involved; (3) immediately terminated employees involved in the misconduct and made significant improvements to their compliance program; and (4) agreed to pay back $53 million in overpayments.

It is therefore recommended that companies take proactive steps to become aware of misconduct and to consult with their counsel regarding making immediate disclosures as well as changes to their compliance programs. Although such disclosures stand to be very costly and time consuming, companies may benefit significantly from the new policy even though individuals will not be insulated from prosecution.

For more information, please contact David R. Ross, Esq., Shareholder, at dross@olaw.com or at (518) 312-0167. Mr. Ross handles health care fraud cases as well as self-disclosure matters and all aspects of federal and state False Claims Act cases. Charles Serino, Law Clerk, contributed to this article.