CORPORATE CRIME REPORTER
Skadden’s
Loucks on Health Care Fraud
24 Corporate Crime Reporter 30, July 22, 2010
For more than 20 years, he was the lead health care fraud prosecutor in the
country.
He was based in the U.S. Attorney’s office in Boston.
He brought the big cases.
And secured a string of criminal convictions against some of the biggest corporations in America – and their executives.
Then earlier this year, he decide he’d rather switch than fight.
So, he signed on as a partner in Skadden, Arps’ Boston office.
Defending the corporate criminals he used to prosecute.
Loucks says that over the past 20 years, the government has recovered $24 billion in health care fraud cases.
Seven billion of that was secured by his unit at the Boston office.
The problem is – by some estimates – health care fraud is ten percent of all health care expenditures.
Health care expenditures this year would be about $2 trillion.
That means over twenty years – you get the picture.
The government has recovered less than one percent of the hundreds of billions stolen over the last twenty years.
As an assistant U.S. Attorney in Boston, Loucks tried to get more resources to fight health care fraud.
But it was an uphill battle.
“Over the past five or six years, I was pushing hard for more resources,” Loucks told Corporate Crime Reporter last week. “If you look at monies allocated to the U.S. Attorneys for health care fraud – it rose to about $30.4 million in 2003. But then it was flat from there to 2009. Maybe it went up a little bit in 2009. But if you corrected for inflation, flat allocation is actually a declining figure. And you will see the same thing in terms of resources allocated to the FBI and HHS for this during that time period.”
“The monies allocated to fight health care fraud declined between 2003 and 2008. And during that same time period, the money spent by the federal government on health care grew dramatically.”
“Baby boomers hit 65 this year. So, has Congress allocated enough resources to fight health care fraud? No.”
“The funding for enforcement has not kept pace with the growth in expenditures. It doesn’t have to keep pace one to one for it to work. But it does have to keep pace.”
As a high profile prosecutor of major corporate crimes, Loucks bucked the national trend and shied away from settling cases with deferred prosecution agreements.
“Deferred prosecution agreements have a place,” Loucks said.
“But when I was a prosecutor, if there was proof there had been criminal conduct, there was a strong reason for doing the actual prosecution in court.”
“The federal court is a check on prosecutors. It’s also a check on agreements that parties reach. If someone pleads guilty, they have to go into court. The prosecutor has to get up and present a statement of facts.”
“The defendant has to say – yes, we plead guilty. And the judge has to approve the plea.”
“And the judge is not just a rubber stamp. So, there is a benefit to the whole process. If someone pleads guilty, they can’t with much credibility say – that did not happen that way. The government just made me do it.”
“I don’t know if I’m old fashioned or what. We started in 1980 doing it this way. And that’s how I did them.”
“I thought there was a benefit to being pushed around by a judge to make sure that the government is not overreaching, the defendant is pleading guilty to something the defendant did, the defendant is well represented by counsel, and it is an appropriate outcome for society.”
“When you have a deferred prosecution agreement, that doesn’t take place. That doesn’t mean it’s a bad outcome.”
Instead of deferred prosecutions, Loucks often insisted that some unit of the company plead guilty.
But often, it was a unit of the company that could afford to be excluded – with no loss of business to the parent.
Didn’t that present a double standard?
Individual commits a crime – excluded from government business.
Big corporation commits a crime – no effective exclusion?
Loucks admits he fashioned plea agreements “so that exclusion does not put the parent company out of business.”
“Absolutely. Entities were prosecuted. We worked with defense counsel to have a prosecution but not exclude an ongoing viable entity.”
“You say a double standard. I don’t agree.”
But Loucks says that Congress earlier this year tightened the exclusion law.
“There is a provision in the changes that say that a parent corporation can be excluded if a subsidiary pleads guilty,” Loucks said. “So, if you have a subsidiary that is a small entity, or used to be an operating business that exists in name only, and that entity pleads guilty, then the parent can be excluded.”
“And it will create enormous pressure – more than there was – on prosecutors to look for another solution. And that solution might well be more deferred prosecution agreements.”
Loucks also said he resisted the urge to bring prosecutions under the responsible corporate officer doctrine of federal food and drug law.
“One of the areas where I spent a lot of time was working on Food Drug and Cosmetic Act prosecutions.”
“There are felony and misdemeanor culpability levels in that statute. One of the things I never did was misdemeanor prosecutions under the responsible corporate official doctrine.”
“That’s where the government can prosecute somebody without there being any criminal intent. I know that the current FDA commissioner has said that there is going to be a push to more misdemeanor prosecutions. I know folks at the office of the Inspector General have said the same thing. I didn’t agree with that then. I don’t agree now. It’s a bad idea.”
“But if you see a push towards that, the compromise position will be somewhere in the middle. And you might see deferred prosecutions there as a result.”
In addition to defending big corporations and their executives, Loucks is working on a re-write – with Carol Lam – of his manual – Prosecuting and Defending Health Care Fraud Cases (BNA, 2001). The new edition is due out at the end of this year.
[For a complete transcript of the Interview with Michael Loucks, see 24 Corporate Crime Reporter 30(10), July 26, 2010, print edition only.]
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