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Acting Assistant Attorney General for the Civil Division Stuart F. Delery Speaks at American Bar Association Forum


United States

Thank you for that kind introduction. I am very happy to be here and to be able to speak to you today, although it appears that you may have been expecting someone else when you signed up to come here. I am new to my post. My predecessor, Tony West, was advertised as today’s speaker. Let me just say, I know Tony West. Tony West is a friend of mine. I am not Tony West.

In my new role as the head of the Civil Division, I oversee much of the federal government’s civil litigation in courts across the country. The cases are as varied as the government’s reach is broad. Attorneys in the Civil Division litigate matters concerning national security; immigration policy; and every manner of initiative pressed by the President, law passed by Congress, and regulation promulgated by federal agencies.

The Civil Division is also at the forefront of the government’s efforts to protect consumers and recapture the billions of taxpayer dollars lost to fraud, waste and abuse. Health care fraud, procurement fraud, student loan fraud, in fact any fraud on any government contract or program falls within the ambit of the Civil Division. To combat that fraud, we use civil tools, like the False Claims Act, and the Food, Drug, and Cosmetic Act, which provides for both civil and criminal remedies. (Yes, despite its name, the Civil Division does criminal cases.) And we have been successful, securing historic recoveries and unprecedented sentences.

To bring real change in business practices and compliance with the laws of the land, however, the government cannot act alone. We need partners in industry. So, today I want to discuss the critical role businesses like yours – and the professional advisors you turn to – play in these enforcement efforts.

Just ten days ago, the Department announced that Abbott Laboratories would pay $1.5 billion to resolve criminal and civil allegations arising from its illegal marketing of the prescription drug, Depakote. This was the latest in a series of so-called “off-label marketing” cases in which the Civil Division, working with U.S. Attorney’s offices around the country, has prosecuted pharmaceutical and device manufacturers who violate the Food, Drug and Cosmetic Act by marketing their products for uses not approved as safe and effective by the FDA.

For those who are not familiar with it, let me share a few details about this case. The FDA approved Depakote for treatment of epilepsy. For nearly a decade, Abbott marketed Depakote for a variety of other uses, like control of agitation and aggression in elderly dementia patients, as well as schizophrenia, even though the FDA had never approved the medication for those purposes. And Abbott targeted this unlawful marketing of Depakote on a particularly vulnerable population, the elderly – encouraging nursing homes to circumvent federal regulations designed to protect residents from unnecessary use of powerful drugs and then giving pharmacists who serviced nursing homes financial incentives to increase the use of Depakote. Abbott did all this even though its own studies showed not only that Depakote was not effective in the control of dementia or schizophrenia, but also that it had serious adverse side effects – like dehydration and anorexia – on elderly study participants. In total, Abbott waited over two years to come forward with the complete study results – unlawfully promoting and profiting from Depakote the entire time. As last week’s resolution demonstrated, Abbott’s conduct was a criminal violation of the FDCA and caused false claims to be submitted to federal health care programs, in violation of the False Claims Act.

Now, I raise Abbott first, not just because it reminds us why this work is so important —which it does — or because it is one of the largest health care fraud cases ever pursued by the Department — which it is, but rather because the settlement illustrates the creativity and innovation we are bringing in our pursuit of corporate fraud.

The Abbott resolution was the most recent result of the President’s initiative to crack down on health care fraud. As you may know, in May of 2009, Attorney General Holder and Health and Human Services Secretary Kathleen Sebelius elevated the fight against health care fraud to a cabinet level priority when they formed the Heath Care Fraud Enforcement and Prevention Action Team – or HEAT. Since HEAT’s formation – and not including the Abbott resolution — we have recovered more than $8.85 billion in criminal and civil settlements, judgments, fines, restitution, disgorgements and forfeitures in health care matters brought under the False Claims Act and the FDCA. We have established Medicare Fraud Strike Forces in nine cities that have charged more than 800 defendants with seeking to defraud the Medicare program of more than 2.2 billion taxpayer dollars.

Despite this incredible success, we know that record monetary settlements will never be enough. Rather, we need to make sure that whatever penalties we seek, they make a real difference and deter future illegal conduct – that they are not just the cost of doing business. So, while we will continue to seek significant monetary penalties where appropriate, we will also seek to implement appropriate non-monetary measures aimed at encouraging a culture of compliance from within.

And we did just that in the Abbott case. We worked with the company to identify innovative, non-monetary measures that will help us to fully redress the wrong and prevent its recurrence. These measures include:

  • A term of probation for five years which requires Abbott to report any probable violations of the FDCA to the probation office, and requires that its CEO personally certify compliance with this reporting requirement;
  • A corporate integrity agreement with the Inspector General of the Department of Health and Human Services that requires, among other things, Abbott’s board of directors to review the efficacy of the company’s compliance efforts; and
  •  A requirement that Abbott institute policies to ensure that scientific research and any resulting publications foster increased understanding of scientific, clinical or healthcare issues.

These provisions, among others, reflect our view that good corporate citizenship requires companies to be proactive not only in avoiding illegal or unethical conduct, but also in rooting it out and reporting it when it does occur. And we are glad to see that more and more corporations are heeding that call, and voluntarily taking common sense steps to police themselves and report bad conduct.

If I have one message here today, it is this one: Corporate compliance is not just the right thing to do – it is the right thing for business. There are legal requirements, policies, and practices in place that encourage business organizations to combat fraud on their own, and reward organizations that do just that.

For example, as many of you may know, under the False Claims Act, self-disclosure of violations can mean a drastic reduction in potential damages—from trebles to doubles.

And in the criminal arena, both the Sentencing Guidelines and the Department’s Principles of Federal Prosecution of Business Organizations encourage consideration of whether and to what extent the corporation cooperated with the Government's investigation when making prosecution and sentencing decisions.

Even more importantly, companies that engage with the government and cooperate with the investigation will have an opportunity to present information to the government that is material to the investigation. You are in a position to evaluate the areas that appear to be of concern to the government, and you can readily assess where you have risks and where you do not. Separating the wheat from the chaff allows both the government and your legal team to spend time on issues that really matter, and where the company has real exposure. By cooperating with the government, you are more likely to be in a position to make a persuasive case as to what happened, how the company responded, and whether there are valid defenses the government should consider.

And because disclosure and cooperation show a sincere interest in cleaning house – and ensuring a culture of doing the right thing – they can help companies demonstrate the necessary responsibility to continue participating in government programs and contracts.

So, a decision to come in promptly and work with the government to resolve any liability that may arise from past wrongdoing is more than the right decision. It is a good business decision.

But, for those outliers who need additional encouragement, we are seeing an increasing number of fraud statutes and regulations that not only require proactive behavior, but also hold corporations accountable in its absence.

As one example, the 2008 amendments to the Federal Acquisition Regulation, or the FAR, require government contractors to timely disclose credible evidence of wrongdoing, like fraud, bribery, or gratuities, rather than wait for the government to find it. As a result of this change, the government must include in all new covered contracts a clause requiring contractors to establish an ethics awareness and compliance program and an internal control system that includes, among other things, timely disclosure of wrongdoing to the government and full cooperation with government agencies responsible for audits, investigations, or corrective actions. And the FAR rule carries some significant consequences—a contractor’s failure to make the required disclosures is an express basis for suspension or debarment from government contracting.

In addition, just this year, the Centers for Medicare & Medicaid Services published a proposed rule (implementing the Affordable Care Act) that requires health care providers to report and return overpayments made by Medicare.  Specifically, it requires a person who has received an overpayment to report and return the overpayment by the later of 60 days after the overpayment was identified or the date any corresponding cost report is due.  And again, the consequences are notable – the knowing and improper failure to return an overpayment subjects the violator to liability under the False Claims Act, including treble damages and penalties.

All of my discussion so far has focused on the behaviors of corporations as entities. But, corporations are made up of people – individuals who set corporate policies, make corporate decisions, and carry out corporate directives. And any shift in a company’s behavior will necessarily begin with a shift in individuals’ behavior. That is, in part, why we continue to seek greater personal accountability from those who implement fraud schemes within the organization.

Of course, each case presents a unique set of circumstances and factors, so there is no one formula for cooperation – just as there is no formula for the right penalty for wrongdoing. But if we all aim to encourage a culture of compliance, to implement policies that can identify problems early, and to earnestly work together when fraud is found, your companies and your customers will be in the best possible position.

That is why I am so pleased to be here and so convinced that conferences such as this are vital. These gatherings enhance our respective practices and our understanding of our respective positions. They allow all of us to consider – and debate – new ideas and varying perspectives. In so doing, they help us to come up with the best, fairest, and most just solutions to the problems that we all face. I thank the organizers for bringing together such a terrific faculty and I look forward to working with all of you in the future.

Thank you.

Updated September 17, 2014