Private Equity Firms Seeing Increasing Scrutiny Under the False Claims Act–Emerging Trends
Private equity firms are facing increasing scrutiny under the False Claims Act (FCA). Recently, the Massachusetts Attorney General announced the largest reported healthcare fraud settlement against a private equity firm, amounting to $25 million. The case was brought under the qui tam provisions of Massachusetts’s FCA.
Earlier this year, the DOJ reported a $15.3 million settlement with medical testing company Alliance Family of Companies LLC, resolving claims brought under the FCA. Importantly, the DOJ also reported a $1.8 million settlement with Alliance Family’s minority owner, the private equity firm Ancor Holdings LP. According to the DOJ, Ancor discovered Alliance Family’s alleged fraud but took no actions to stop it.
In the past, private equity firms have agreed to settle FCA claims involving allegations of kickbacks and promoting drug-device systems for unapproved uses. The recent push towards holding private equity firms accountable through the FCA makes it worthwhile to review the ways in which private equity firms can face FCA liability.
Reaching Private Equity Firms Through the FCA
In order to hold private equity firms liable under the FCA, the government (or private relators suing under the FCA’s qui tam provisions) must show that the firm was both aware of the illegal conduct and caused the false claims to be presented to the government.
For instance, in the Alliance Family case, the DOJ alleged that Ancor “learned of the kickbacks based on due diligence it performed prior to investing in Alliance and then caused false claims by allowing that conduct to continue once it entered into an agreement to manage Alliance.”
In another case, a private equity firm agreed to settle FCA allegations premised on its subsidiary’s continued illegal activity after being acquired by the firm.
The Need for Whistleblowers
Like any other type of fraud, healthcare fraud involving private equity firms can be extremely difficult to discern from the outside. As a result, individuals with inside knowledge are crucial to preventing the continued abuse of our healthcare system.
By bringing allegations of fraud through the FCA’s qui tam provisions, private whistleblowers can receive between 15%-30% of any recovered sum, which includes triple damages. In addition, whistleblowers are protected by the FCA’s anti-retaliation provisions.
At Price Armstrong, we have extensive experience litigating healthcare fraud cases under the False Claims Act. We work hard to protect whistleblowers every step of the way under the False Claims Act while maximizing their recovery. Contact us for a free initial consultation and review of your case.