Categories: Financial Services

By Stuart M. Gerson

Lawson v. Fidelity Management & Research LLC, et al., No. 10-2240 (1st Cir. Feb. 3, 2012) (pdf), discussed in our February 16 posting, comes as a welcome development to privately-held companies that are providers of health care goods and services because it should, if followed generally, preclude whistleblowers from bringing the kinds of audit-related and financial accounting claims that are within the compass of the Sarbanes-Oxley Act (SOX).

Many of these companies are, however, the recipients of payments that directly or indirectly involve funds generated through federally-financed health care programs like Medicare and Medicaid.

Thus, before breathing a sigh of ultimate relief, such companies should recognize that, especially in view of the amendments to the Federal False Claims Act (FCA) made in the Patient Protection and Affordable Care Act, a clever whistleblower and his or her attorney can transmogrify a claim based on alleged accounting manipulations or misstatements into one that sounds of a so-called “reverse false claim,” i.e., knowingly withholding from the government funds that were improperly reimbursed to the provider.

The FCA not only provides for the recovery of treble-damages and attorneys’ fees, but also has an anti-retaliation provision (that was the basis for the anti-retaliation protections included in Dodd-Frank). The Department of Health & Human Services, whose Inspector General is a principal arbiter of compliance and eligibility for participation in federal health care programs, has opined that, under the FCA, overpayments must be remitted to the government within 60 days of detection. And the agency recently has published a proposed rule on the subject. Companies potentially subject to the rule, whether public or not-for-profit, should review the proposed rule and discuss it with counsel or their trade association and, in any event, should be attentive to managing a thorough-going internal compliance program.

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