When Can Business Owners Be Held Personally Liable?
In federal healthcare fraud investigations and other federal cases targeting partnerships and corporate entities, one of the biggest questions for company owners is “Am I at risk of being held personally liable?” While the best-case scenario is to avoid liability all together, if any liability is going to be imposed, for obvious reasons, it is far better for a settlement or judgment to involve a business entity rather than the business’s owners.
However, in 2015, the U.S. Department of Justice (DOJ) issued a memorandum in which it outlined a new strategy of targeting individuals in cases of corporate fraud. According to the memorandum entitled Individual Accountability for Corporate Wrongdoing, the DOJ’s current position is that:
“One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing. Such accountability is important for several reasons: it deters future illegal activity, it incentivizes changes in corporate behavior, it ensures that the proper parties are held responsible for their actions, and it promotes the public’s confidence in our justice system.”
Since issuing the memorandum, the DOJ has stayed true to form. Over the past few years, we have seen a significant increase in the number of federal fraud cases targeting business owners, including specifically the owners of medical practices and other healthcare businesses. In one case decided earlier this year, a federal jury imposed personal liability in the amount of $51 million on three individuals found guilty of being personally involved in a corporate Medicare and Tricare fraud scam. According to a DOJ press release, the three co-conspirators had each been personally involved in the payment of “illegal kickbacks to physicians across the country in order to get them to order medically unnecessary blood tests . . . in violation of the Anti-Kickback Statute and the False Claims Act.”
Individual Liability in Civil and Criminal Healthcare Fraud Investigations
So, when can business owners face personal liability in healthcare fraud investigations and other federal matters? The answer to this question comes down to a matter of personal involvement: If an individual business owner was personally involved in the commission of a civil or criminal federal fraud offense, in today’s world, there is a strong chance that the DOJ will pursue personal liability.
This stands in contrast to the rule that applies in civil litigation. In disputes with patients, customers, vendors, and competitors, the general rule is that corporate owners are not liable unless (i) they acted outside of the scope of their corporate authority, or (ii) there are grounds to “pierce the corporate veil.” But, in federal enforcement actions and criminal prosecutions, business owners can face personal liability regardless of whether they acted in their corporate capacity and regardless of whether they have taken the necessary steps to establish and maintain a limited liability entity.
Examples of Federal Cases That Can Result in Personal Liability for Business Owners
With these general principles in mind, there are numerous types of federal cases that can lead to personal liability for business owners. This includes cases involving allegations of:
- Anti-Kickback Statute violations
- False Claims Act violations
- Bank, mail, and wire fraud
- Conspiracy
- Identify fraud and unlawful use of health information
- Medicare, Medicaid, and Tricare fraud
- Money laundering, bribery, and other related criminal offenses
- Prescription drug fraud (including opioid-related offenses)
- Stark Law violations
- Other forms of healthcare fraud
Another way that healthcare practitioners and business owners can face personal responsibility is as a result of failing to adequately respond to a grand jury subpoena. Even when subpoenaed in a corporate capacity (i.e. as a corporate representative or as a records custodian), individual owners can be personally charged with contempt of court and sent to federal prison. To avoid this result and to avoid giving testimony that triggers further investigation or criminal charges, business owners who receive grand jury subpoenas must begin working with their attorneys to prepare effective and strategic responses immediately.
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Dr. Nick Oberheiden
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U.S. Department of Justice
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Joanne Fine DeLena
Former Assistant U.S. Attorney
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Joe Brown
Former U.S. Attorney & Former District Attorney
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Amanda Marshall
Former U.S. Attorney
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Aaron L. Wiley
Former Federal Prosecutor
Local Counsel
Roger Bach
Former Special Agent (OIG)
Michael Koslow
Former Supervisory Special Agent (FBI)
Chris Quick
Former Special Agent (FBI & IRS-CI)
Ray Yuen
Former Supervisory Special Agent (FBI)
Personal Liability for Healthcare Fraud
What exactly does it mean to be held personally liable for healthcare fraud or another fraud-related federal offense? The answer to this question depends upon the specific offenses charged and whether the DOJ’s investigation is civil or criminal in nature. In a civil case, individual owners’ liability can include:
- Personal liability for treble (triple) damages
- Civil monetary penalties
- Fines imposed on a per-violation basis
In a criminal case, individual owners can face:
- Fines
- Imprisonment
Federal fraud offenses often carry substantial fines and lengthy prison sentences that, like civil fines, can be imposed for each individual count filed against a business owner. Business owners charged in federal fraud cases will often face multiple charges as well (e.g., charges for False Claims Act violations, Anti-Kickback Statute violations, mail fraud, wire fraud, and money laundering), and this can easily lead to insurmountable financial liability and decades of imprisonment. Licensed practitioners can also face license suspension or revocation, and providers can risk loss of assignment privileges and other consequences as well.
Avoiding Personal Liability in a Federal Healthcare Fraud Investigation
If your healthcare business or practice is being targeted in a federal investigation, the key to protecting yourself is to seek experienced legal representation. An attorney who is intimately familiar with federal healthcare law and the DOJ’s approach to targeting individual business owners will give you the best chance to resolve the government’s investigation without any civil or criminal liability. With your financial future – and potentially even your freedom – on the line, you cannot afford to take risks. And you need to intervene in the government’s investigation as soon as possible.
Start Building Your Federal Defense Strategy Today
Dr. Nick Oberheiden is an experienced federal law defense attorney who has a significant record of success in complex healthcare fraud investigations. He has successfully represented individuals and corporate entities nationwide, with the majority of his cases resulting in no civil or criminal liability for his client. Additionally, our healthcare fraud defense attorneys assist service providers and businesses under investigation for alleged Qui Tam Lawsuit, Stark Law, False Claims Act, or Anti-Kickback violations. If you need a federal defense lawyer, Dr. Oberheiden is available to help you. To request a free and confidential case assessment, call 888-680-1745 or get in touch online now.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.
