This transcript has been auto generated
00;00;01;23 - 00;00;29;10
Jonathan Porter
Welcome to another episode of Husch Blackwell's False Claims Act Inside's podcast. I'm your host, Jonathan Porter. We're a month past the presidential election and a month away from inauguration. And after inauguration, there will be a significant transition in all executive branch agencies, including the United States Department of Justice. In fact, the Justice Department may be at the forefront of agencies that President elect Trump has an eye on when he's speaking about major reform.
00;00;30;00 - 00;00;53;29
Jonathan Porter
Given that focus, you might ask what impact that could have on False Claims Act enforcement. That's a great question, one that we've heard from many clients over the last month and today we're going to answer that question. We're gonna talk about what happens during a transition in the Justice Department, what impact transition has on pending investigations, and what might happen in the upcoming Trump administration when it comes to False Claims Act enforcement.
00;00;54;22 - 00;01;13;25
Jonathan Porter
One of the big questions I have is whether we might see the Trump administration's Justice Department embrace the Zafirov upholding of the Florida Federal Court that qui tams are unconstitutional. What might that look like? Hot topics today on the podcast. So hot that we're going to split this episode into two parts so that we can cover a lot of ground.
00;01;14;03 - 00;01;41;12
Jonathan Porter
This is a hugely important topic and I don't want to leave anything out, so you'll need to come back later to hear about our Zafirov predictions. Hot topics today on the podcast and joining me on the podcast to talk about the future of DOJ and FCA enforcement is my law partner, Cormac Connor. Cormac is a former federal prosecutor from the DC U.S. Attorney's Office, and at Husch Blackwell, Cormac helps clients with a range of government enforcement issues, including False Claims Act defense.
00;01;41;23 - 00;02;13;14
Jonathan Porter
I'd love to talk about all of the great work that Cormac has done for defense contractors under FCA investigation, and he's had a lot of great results for our defense contractor clients. But what I really want to highlight is Cormac excellent work leading the firms pro-bono partnership with the Dr. Lorna Breen’s Heroes Foundation. Cormac works with the foundation to allow medical professionals to seek help for mental health issues without risking their medical license, which involves lobbying state governments to improve their laws to help medical professionals get the help they need.
00;02;13;28 - 00;02;39;01
Jonathan Porter
This excellent work Cormac was just awarded Husch Blackwell's 2024 Pro-bono Impact Award. It's a big deal here at the firm. And Cormac, I'm tremendously proud of the work that you're doing, those in the pro-bono world and for our firm’s FCA clients. So Cormac, I'm glad that you're joining us on the podcast today to tell our listeners about what to expect with the upcoming administration turnover when it comes to FCA enforcement.
00;02;39;10 - 00;02;58;12
Cormac Connor
Thank you, Jonathan. I'm really glad to be joining you today and I'm flattered by the shout out, frankly, for our pro-bono work and the Lorna Breen Heroes Foundation. It's a it's an amazing organization, and I certainly appreciate your recognizing that here on your podcast, and encourage anybody is listening to, go check them out.
00;02;58;20 - 00;03;15;19
Jonathan Porter
Absolutely. And what we can do, Cormac, is we can link in the show notes. So if you're listening to this now, go to the show notes. You can read all about the foundation and the excellent work that they're doing. So Cormac, as I just mentioned, we've heard from a lot of clients with questions about how the new administration could change the FCA landscape.
00;03;15;20 - 00;03;40;13
Jonathan Porter
You know, really good, thoughtful questions about the extent to which change leadership at DOJ impacts specific investigations. Now we're going to talk about some specific things that have happened in the past, but Cormac is probably best for us to start with a high level overview of how changes in administrations actually impacts DOJ. Do all DOJ attorneys resign and the President or attorney general?
00;03;40;13 - 00;03;50;22
Jonathan Porter
Did they just hire all new attorneys? Do only some resign the generally? What happens to existing investigations when a new administration comes in? Get us started with some background information.
00;03;50;22 - 00;04;13;19
Cormac Connor
Cormac Dewar Well, as you know, I think with both of us having worked at the Department of Justice, that is a giant organization. Last I checked, there are something like 115,000 employees. So no, not all of them are going to be turning over with the change of administration. It's really only the top level, the most senior I shouldn't say senior, because seniority really didn't have anything to do with it.
00;04;14;01 - 00;04;39;27
Cormac Connor
It's the leadership of the organization, the changes. So really there's two categories. One is political appointees and then career employees. The vast majority of DOJ personnel fall into that latter category of career employees. So but when we're talking about the transition with the administration, like I said, it's really only the highest level at DOJ, the leaders that are political appointees.
00;04;39;27 - 00;05;04;19
Cormac Connor
And these are almost certainly going to be turning over because like the name implies, they're political appointments that are made by the sitting president. So these are the folks, these political appointees are the ones that you see on the news that are going through the whole Senate approval process. The names you're hearing come up most recently with President elect Trump is as he's proposing nominees for various government positions.
00;05;04;19 - 00;05;25;01
Cormac Connor
There are a lot of the higher level that you make the news, but there are other low level political positions that don't make the news as much still in that bucket of political appointees. But focusing on DOJ, like I said, it's really only those highest level officials that will be turning over from the Biden administration and then coming in do from Trump administration.
00;05;25;15 - 00;05;54;29
Cormac Connor
These are the leadership within DOJ. It's not like it's not connected to their seniority. It's just their leadership status. So it's important to remember the DOJ is a large organization that is based in DC main justice, as we call it, is in the District of Columbia. But it also has a footprint in every state. So each state has at least one US attorney's office and the District of Columbia has its own U.S. Attorney's office, e.g. as Attorney office has a US attorney.
00;05;54;29 - 00;06;26;26
Cormac Connor
So all of those U.S. attorneys are also most likely going to turn over there. Some historically sitting U.S. attorneys that carry over from one ministry in the next. But that's unusual. Each of those U.S. attorney's offices have their own more localized, trial focused areas of responsibility, but they're all part of the DOJ family. And again, it's that leadership level, the top band of leadership at the DOJ and the U.S. attorney's offices that will be turning over with the new administration.
00;06;26;26 - 00;06;49;21
Cormac Connor
So that's the political appointee category. The larger, much larger category are career employees. And that's what you and I were when we were at the US Attorney's Office. What the name implies is what it is, is that if you're a career employee, you are there for what could potentially be your entire career. Lots of people end up retiring as DOJ employees.
00;06;49;21 - 00;07;09;03
Cormac Connor
That has nothing to do with who's in the White House and not subject to any kind of political employment. So that would apply to the line level attorneys that handle investigations that are on the defense side. That's who we are interacting with. It would also include paralegals and support staff and all the people that help DOJ do its business.
00;07;09;25 - 00;07;38;02
Cormac Connor
So again, these are the people that provide continuity. The DOJ functions that organization 150,000. If every employee turnover with each administration, it would be completely chaotic and DOJ just wouldn't be able to get any work done. And frankly, folks on the defense side, you would have an incentive to just run out the clock and wait for a new administration with every investigation so that while it might be good for defense, it's not great for government in any of it.
00;07;38;14 - 00;08;05;10
Cormac Connor
So we look at that in those larger category of career employees, we shouldn't expect any real major case specific changes just because there's a new administration or cases that were handling are generally going to keep going and continue to proceed. The investigations that exist now are likely going to carry on into the next administration unless something truly bizarre happens.
00;08;05;10 - 00;08;32;11
Cormac Connor
And look, you never know. But most likely the cases that exist today will continue to exist in January. February is the Trump administration. The reason for that is that most DOJ investigations and let's focus on FCA cases, those FCA cases are fraud investigations. And so in general, both political parties are anti-fraud, right? I mean, that's a category in an issue that is bipartisan.
00;08;32;11 - 00;09;02;13
Cormac Connor
And so the FCA or the False Claims Act is largely viewed by the public and by government officials on both sides as being an effective and useful anti-fraud law enforcement tool. In fact, the most vocal supporter of the FCA in Congress is publican senator. Senator Grassley from Iowa, who has been on record for decades as being a champion for the False Claims Act and making sure that it is robust and maintains a valuable tool for law enforcement.
00;09;03;04 - 00;09;30;26
Cormac Connor
So I don't expect either party, whoever is in the White House or whoever is holding the levers of the Justice Department is likely to get the False Claims Act if suddenly effect cases were to dry up. For some reason. Alluding to the Zakharov case that you're talking about, I would expect that senators like Senator Grassley and others in Congress would frankly go ballistic and start holding DOJ and White House officials in for oversight investigations.
00;09;30;26 - 00;09;51;02
Cormac Connor
So by and large, there may be some tinkering with it, but I don't expect it's going to be a wholesale change again, because the statutes been around for so long now. Anybody who's watching the news knows that incoming President elect Trump has signaled a strong desire to shake up the DOJ. What that's going to mean is remains to be seen.
00;09;51;18 - 00;10;15;22
Cormac Connor
It's also clear that the last few elections at the presidential level have been deeply polarizing the country. So while we could see more turnover than usual at the line attorney level of those career employees, some of whom may or may not have a fondness for the incoming president, that may happen. But I think there's also a long line of lawyers out there who would love to have those jobs.
00;10;16;05 - 00;10;36;23
Cormac Connor
And so DOJ is going to fill the positions if a departing attorney decides to leave, for whatever reason the caseload remains. And so a new attorney is going to come in and take it over, which is why, again, in the big picture, I expect that the vast majority of cases that exist today, they're ongoing today will continue into the next administration.
00;10;37;18 - 00;11;06;24
Jonathan Porter
Thanks. Cormac. Yeah, I agree with everything you just said. I was at DOJ during the transition from the first Trump administration to the Biden administration. We had very little turnover at the line attorney level. Our Senate confirms U.S. Attorney resigned, but I think just about everyone else stayed. That's the way it normally works. There's a lot of continuity at the Justice Department because exactly what you just said, Cormac, If there was wholesale turnover, those under investigation would have a lot of incentives to just run out the clock, like you said.
00;11;06;24 - 00;11;26;14
Jonathan Porter
And that's just not the way it works. And honestly, this thinking about the way our justice system should work, you shouldn't want people to be able to just run out the clock when things happen. There should be a lot of continuity so that people who do bad things are the human traffickers and the like, that they are being held accountable and that justice isn't administered just during certain years.
00;11;26;23 - 00;11;55;09
Jonathan Porter
So Cormack, rather than case specific changes to me, was far more common in my experience in change administrations as two things changed priorities and changed policies. And that's where I think we'll see noticeable differences in the next administration, not on specific cases, but on priorities and policies. And Cormac, I think it'll be helpful for us to talk through the last three administrations and highlight the biggest policy or priority changes that we saw.
00;11;55;09 - 00;12;13;14
Jonathan Porter
So let's go chronologically, starting with the Obama administration. To me, Cormac, the biggest FCA policy shift in the Obama administration was the Yates memo named after my fellow Georgian Sally Yates. Cormac started this history portion of the podcast by telling our listeners about the Yates memo.
00;12;13;25 - 00;12;39;05
Cormac Connor
Certainly, and completely agree that that's kind of what happens is that that policy level is where each incoming administration kind of wants to make their mark and influence how the DOJ is going to operate. But it's typically at the higher level. So like you were saying, what we tend to see with changes administrations is that those higher level priorities may be adjusted in the memo when it was issued caused a lot of buzz.
00;12;39;07 - 00;13;07;29
Cormac Connor
It was you know, frankly, our conversation illustrates that that we're still talking about it here today. It's only 24, still front of mind for defense attorneys like us who deal with federal government investigations just because it did put a different focal point in the way that the federal government was running their investigation. So as background, the memo issued back in September of 2015, Sally Yates, as you said, was was the deputy attorney general, DOJ.
00;13;07;29 - 00;13;51;11
Cormac Connor
That means that she was basically number two on command at DOJ. She reported directly and only to, I should say, only the president, of course. But within DOJ, she reported to the attorney general was responsible, both civil and criminal law enforcement. And the USDA falls on the civil side. So the perception at the time that it's sort of where did this memo and this policy shift comes from really came from the fact that we were on the downhill side of financial crisis and there was just a lot of dissatisfaction and not happiness in the country, frankly, that so many of the big banks and mortgage lenders and companies that had gotten bailouts and had contributed
00;13;51;11 - 00;14;14;29
Cormac Connor
to the financial crisis, but few of the people within those organizations that actually got penalized or were investigated by DOJ. And so really the Yates bill was trying to address that issue and what it did was she's a priority to look at the fact that these larger companies investigations may have been forced to pay fines and shareholders are losing money and employees are getting laid off.
00;14;14;29 - 00;14;36;01
Cormac Connor
But the senior executives that ran those companies and made the decisions that led to some of the problems were not getting punished. So what the memo is doing is trying to get DOJ attorneys and these to be like career line attorneys that have been talking about setting a policy change to have them focus on any corporate investigation, not just the company.
00;14;36;01 - 00;15;02;01
Cormac Connor
And was the company doing, but what individuals within the companies or within the banks or the other organizations were themselves accountable and should also be treated as being part of the problem in the context. What that meant was looking at individuals, leadership of the companies and perhaps them being targets of false claims, complaints and then settlements with those individuals.
00;15;02;01 - 00;15;32;20
Cormac Connor
In addition sometimes to the companies. So the memo got so much attention among the defense bar. You know, people that do what we do now because is that the companies were potentially going to be required to push specific employees into the bullseye of a DOJ investigation. And the incentive, if you can think of that as being an incentive, the reason that a company would do that is because companies that are under investigation are looking for what is called cooperation credit.
00;15;33;07 - 00;16;06;04
Cormac Connor
And so what that means is it's kind of a fuzzy, amorphous concept, but it generally translates during an investigation to the company trying to get a lighter punishment or less severe consequences for any bad conduct. If the DOJ investigators believe that the company has fully cooperated and shared information. So what companies are looking for when they talk about cooperation credit is it's kind of an amorphous concept, generally translates to the company trying to get a lighter or less severe punishment.
00;16;06;19 - 00;16;37;22
Cormac Connor
If it can demonstrate to the investigators that it's been cooperative, that it's sharing information and trying to get solve whatever problems the government is seeing. Under the memo, the DOJ line prosecutors were instructed that they could not give any cooperation credit unless the company was exposing individual employees, essentially putting them, like I said, into the bull's eye, the investigation and identifying individuals who may have contributed to any misconduct that was under investigation.
00;16;38;14 - 00;16;59;17
Cormac Connor
Now, on the defense side, as a defense lawyer, I tried very hard not to do that. If I'm representing a company for obvious reasons, I don't want to be pushing individuals into causing exposure and expanding the level of exposure that they might have. But what the Yates memo was doing was signaling that if the company wanted to get credit, it was going to have to do exactly that.
00;16;59;23 - 00;17;31;10
Cormac Connor
And so that's why it got so much attention. Now, when we get back to the topic of the podcast, what happens with the transitions? Well, the Yates memo existed throughout the Obama administration. It's still in place, to be clear. But with the first Trump administration took office in 2017, the Yates memo was essentially a watered down but modified essentially to say that while DOJ was blind, attorneys were still being encouraged to focus on individuals who were bad actors.
00;17;31;28 - 00;18;09;04
Cormac Connor
It was no longer an all or nothing calculation. The company might not get maximum cooperation credit cooperation, credit if it did not identify the individual employees, but it could still get some cooperation credit. And this is just sort of kind of reading in the middle, essentially, if you will, where if a company was unwilling or reluctant to identify or expose individual employees but was cooperative in every other way, they could still under this modification to the memo, they could still get cooperation, credit and still potentially get a lighter penalty if they were otherwise cooperating.
00;18;09;18 - 00;18;27;17
Jonathan Porter
Thanks, Cormac. Yeah, and what I like about the Yates memo is this is the type of example of a policy shift from one administration to the next. I think this is the type of thing that could happen in the upcoming ministration, is policies like this one, where you change the way False Claims Act investigations will work just at a fundamental level.
00;18;27;23 - 00;18;50;19
Jonathan Porter
So that's why we wanted to talk about the memos, because it's a great example, something that fundamentally changes the way these things work. So Cormac, going forward in time for the first Trump administration, what stands out to me from an FCA policy shift was the brand memo. Cormac Tell our listeners about the brand memo, what it did, and then tell us whether you think it's reasonable to expect the return of the brand memo in the second Trump administration.
00;18;51;01 - 00;19;19;05
Cormac Connor
Sure memos. Look at it like you said, because one came from a political person, one came from a career person, and both ended up influencing DOJ policy. So the brand memo was issued in 2017 by Associate Attorney General Rachel Brand for reference background, the associate attorney general or AG is essentially the third in command at DOJ reporting to the DAG or the Deputy Attorney General.
00;19;19;05 - 00;19;46;10
Cormac Connor
And in the Trump administration. Rachel Brand was responsible in that role for several of DOJ's components, including the Civil Division. The civil division is the component within DOJ that handles FCA cases. So focusing on that brand memo and what it was trying to do, going back in time, historically, a lot of FCA enforcement is based, as we might imagine, on statutes and laws and regulations.
00;19;46;22 - 00;20;23;01
Cormac Connor
For example, the Institute back laws where if you were to pay a kickback and then try and make claims to the government that would involve those kickbacks that you've committed a violation. And that's the basis for a lot of different types of investigations. But over time, a lot of the FCA enforcement that we were seeing was focused not so much on those enacted statutes and regulations, but on less formal agency guidance documents and documents that issue from agencies don't go through formal notice and comment processes.
00;20;23;15 - 00;20;43;26
Cormac Connor
And so, like I said, they're less formal. And there was some question over time as to what weight do these have if you're looking at a company or a person's conduct in submitting claims, if they were to violate the statute, that's one thing. But if they violate an informal guidance document, is that the same level in the health care space?
00;20;44;20 - 00;21;11;15
Cormac Connor
An example of this might be where you have a coverage determining where in the Medicare contractor's draft to say what they'll pay for and what they want. The problem is that before the brand memo, DOJ would bring cases under the False Claims Act. They would be based sometimes largely, sometimes poorly relying on these agency guidance documents or these informal notices.
00;21;11;15 - 00;21;39;14
Cormac Connor
Then a lot of times they would use those as evidence to try and prove that a defendant knew what they were doing. In any case, the government has to prove that the company or whoever's under investigation knew what they were doing was wrong. Then what the investigators were doing in many cases is looking at these less formal agency guidance documents and saying, Well, the agency issued a statement saying they think you should do X, Y and Z.
00;21;39;29 - 00;22;06;21
Cormac Connor
You didn't do X, Y and Z. Therefore, you knew what you were doing was wrong. And that's created a lot of tension on the defense side because like I said, there is a question as to what weight you had to give these informal documents and whether you had to follow them to the letter, that kind of thing with the brand memo did was announced that DOJ attorneys could no longer base an FCA action on those types of what A.C. brands called stub regulated records.
00;22;07;08 - 00;22;39;15
Cormac Connor
And essentially what she was saying and through the memo, what the DOJ policy was saying is that if an investigator is going to label something as a knowingly false claim, that's the basis to start. In the case that you said, the DOJ must think that somebody submitted a claim and they knew it was false. There's got to be something that's either a statute or a regulation that went through a formal notice comment or the legislative process, something more hefty, if you will, an informal agency guidance document.
00;22;40;04 - 00;23;07;12
Cormac Connor
That's where the brand memo shifted. DOJ policy is to take those sub regulatory guidances as A.G. Brand describe them off the table as kind of an evidentiary basis for bringing up the case. So the memo, the brand memo was obviously defense business friendly development because it effectively shop the field as to what could be used by DOJ to bring in the case and the types of evidence that could use to prove knowledge.
00;23;07;29 - 00;23;39;17
Cormac Connor
However, the memo did not enjoy bipartisan support. And so when the Biden administration came in the incoming attorney general, Merrick Garland, rescinded the BRIMELOW ads, basically took us back to the days before the first Trump administration, one that some regulatory gods could be used as the basis for false claims case. So since we are looking now at Trump 2.0, I think there is a very good chance that the brand bubble comes back or something similar to it.
00;23;40;00 - 00;24;10;14
Cormac Connor
So easy to do, right? I mean, memos already been written. The Justice Manual and guidance for attorneys had been modified once before. Then AG Garland's changed it and it could just as easily get changed back. So I do think that that's pretty likely to see a change that we see come back for the second Trump administration, especially because, as we all know, the candidate Trump has been highly critical of federal regulations, administrative agency generally.
00;24;10;14 - 00;24;24;08
Cormac Connor
So bringing in a or restoring guidance from the brand memo would certainly be consistent with incoming Trump administration's policies and certainly politically popular to Trump's voting base.
00;24;24;08 - 00;24;43;10
Jonathan Porter
Thinks that's a reasonable prediction to make to me that the brand memo in some form will come back. Like you said, it's a very easy thing to do. You don't need to go through notice and comment or anything. You just reissue the memo. It's already drafted, so it's probably you'd guess and correct. I think that's a good place for us to pause.
00;24;43;10 - 00;25;05;23
Jonathan Porter
So to our listeners, I hope you enjoyed this initial discussion of how a changed administration could impact FCA enforcement. We'll come back very soon to tell you about how FCA enforcement shifted in the Biden administration and how Cormac and I think FCA enforcement will shift in the upcoming Trump administration. I'll talk about how the brand memo actually impacted what I did when I was at DOJ.
00;25;06;07 - 00;25;28;10
Jonathan Porter
And we'll talk about about the potential FCA bombshell. Could the next DOJ embrace the Zafirov holding and try to end qui tams? That's all coming your way on our next episode. Coming to airwaves or Internet waves, a series you tubes, I don't know. Whatever. It's coming your way very soon. Thanks for listening to part one. We'll see you next time.