In recent weeks, the US Department of Justice (DOJ) Criminal Division’s Fraud Section released its annual Year in Review report, summarizing the Fraud Section’s accomplishments in 2023. This detailed account points to a continuation of certain trends, such as a focus on healthcare fraud, while presenting a surprising turn in others, such as changes in the corporate resolution process.
The report also shows how 2023 brought reforms to certain Fraud Section leniency programs, resulting in an increase in public declinations from prior years.
BY THE NUMBERS
The Fraud Section tried fewer cases and convicted fewer individuals at trial in 2023, a decrease from the prior year for the first time since 2020. That reduction in 2020 can be attributed—at least in part—to the pandemic. As safety measures relaxed, the numbers increased each year, hitting record levels in 2022 that exceeded the pre-pandemic figures of 2018 and 2019. While the numbers tell one story, the Year in Review emphasizes that DOJ continues to “focus on holding gatekeepers to account,” with approximately 26% of the 240 individuals charged in 2023 being executives (23), lawyers (2), or medical professionals (38).
Although fewer individuals were charged and convicted in 2023, those who were experienced an increase in the average sentence length for individual white-collar convictions. The Fraud Section also hit an all-time-high average of alleged fraud loss per individual charged at over $28 million, continuing the figure’s historic trend of increasing each year.
Predictably, the Fraud Section’s Health Care Fraud (HCF) Unit was the driver of the Department’s trials and convictions. While many of the figures above demonstrate a reduction in the overall number of trials and convictions, the HCF Unit experienced a negligible reduction in cases tried from 38 in 2022 to 36 in 2023. As always, healthcare corporations, employees, and the attorneys who represent them must remain diligent in detecting, resolving, disclosing, and preventing illegal conduct.
2023 was the first year in recent history to see an increase in corporate resolutions, with DOJ securing eight resolutions, compared to seven in 2022. There were eight resolutions in 2021 as well, and this increase is likely the result of natural fluctuation rather than an indication of change in DOJ strategy. This figure also remains far below the number of resolutions in 2020 (13) and 2019 (15).
What is striking, however, is the drastic decrease in total global settlement amounts collected as a result of those resolutions. From $2.14 billion in 2022 to $689.5 million in 2023, this figure dropped significantly. Much of this decrease is attributable to the 2022 Glencore guilty plea, in which the company Glencore paid over $1.1 billion to jointly resolve foreign bribery and market manipulation allegations.
As seen in 2022, the majority of DOJ’s corporate resolutions proceeded from the Foreign Corrupt Practices Act (FCPA) Unit and Market Integrity and Major Frauds (MIMF) Unit, with six FCPA and two MIMF resolutions in 2023. This distribution is relatively unchanged from the prior year, with five FCPA and two MIMF resolutions in 2022. However, the 2022 MIMF resolutions were significant and totaled $785 million—36% of the $2.14 billion total global settlements, and more on their own than the $689.5 million total global settlements of 2023. In contrast, the 2023 MIMF resolutions totaled $32.2 million and made up only 5% of total global settlements, likely attributable, at least in part, to the size of the significant resolutions MIMF pushed forward in 2022.
GOING FORWARD
Despite DOJ Deputy Attorney General Lisa Monaco’s prior 2022 statement that individual accountability was DOJ’s “top priority,” the figures described above demonstrate an unexpected decline in individual charges and convictions. However, DOJ has taken measures in 2023 that could advance the DOJ’s increased individual accountability goal.
For example, in December 2023, DOJ announced the FCPA Unit’s International Corporate Anti-Bribery Initiative, designed to help engagement efforts with foreign authorities, and President Joseph Biden signed into law the Foreign Extortion Prevention Act, expanding criminal liability to the demand side of foreign bribery. These measures, along with tools like the FCPA Unit’s expanded ability to obtain and analyze both public and non-public data to identify targets, may be an opening for DOJ to seek and obtain increased individual charges and convictions.
The FCPA Unit’s recent resolutions reflect DOJ’s nuanced approach in applying the new practices and policies implemented by the Criminal Division in 2023. These policies, which sought to apply a softer touch in the wake of the Biden administration’s earlier tough rhetoric on corporate crime, include a revised Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP), updated Evaluation of Corporate Compliance Programs Guidance, a revised Memorandum on the Selection of Monitors in Criminal Division matters, and the announcement of the Compensation Incentives and Clawbacks Pilot Program. Of particular focus is the CEP, which was first announced in 2017 and serves to provide guidance on how companies, including those with aggravating circumstances, may qualify for a declination.
After the FCPA Unit failed to issue a single public declination pursuant to CEP in 2021, it has issued two public declinations pursuant to the program each subsequent year. In 2023, both companies to receive declinations had voluntarily disclosed the misconduct, provided full cooperation with DOJ’s investigation, implemented timely remediation, and agreed to disgorge a portion of the illicit gains. One of the companies, Lifecore Biomedical Inc., presents an early illustration of DOJ’s Safe Harbor Policy for voluntary self-disclosures made in the context of the mergers and acquisition, which was newly introduced in October 2023 to encourage timely disclosure of misconduct identified during the M&A process.
Under the Safe Harbor Policy, acquiring companies that promptly and voluntarily disclose criminal conduct, cooperate with the investigation, and engage in remediation, restitution, and disgorgement receive the presumption of a declination. The FCPA Unit’s declinations demonstrate DOJ’s continued consideration of—and leniency for—a company’s willingness to take accountability, swiftly resolve current misconduct, and actively prevent future violations. Any additional declinations in 2024 will provide more data points and guidance on the FCPA Unit’s approach to implementing these corporate enforcement policy developments.
2023 was also a historic year for the HCF Unit, which issued its first public declination of criminal charges against a healthcare company pursuant to the CEP. DOJ attributed HCF enforcement in part to an “increasing emphasis on investigations of both individuals and corporations.” In declining to charge HealthSun Health Plans Inc., the HCF Unit relied on familiar factors—swift and voluntary self-disclosure, cooperation, remediation, and a payout of $53 million.
The HCF Unit also dedicated resources to a number of significant initiatives—its Data Analytics Team, the National Rapid Response Strike Force, and the Telemedicine Fraud, Opioid Abuse, and Sober Homes Initiatives. In stride, the MIMF Unit continued its focus on fraud and manipulation schemes in the securities and commodities, cryptocurrency, consumer and investment, and federal program sectors. The MIMF Unit is also prioritizing the detection and prosecution of fraud related to pandemic relief measures, including the Paycheck Protection Program and Economic Injury Disaster Loan program. An increase in investigations, charges, prosecutions, and convictions in the COVID-19 relief space is a reasonable prediction for 2024.
While 2023 saw some conflict between DOJ’s policy and outcomes, such as the number of individual convictions, we can likely expect certain strongholds like healthcare fraud prosecution to maintain or increase pace in 2024. The resources dedicated throughout 2023 to improving and expanding the Fraud Section’s capabilities are continued evidence of the current administration’s determination to come down hard on white collar crime.
This tougher-on-corporate-crime policy stance has already had significant—and possibly troubling—ramifications in 2024 with Deputy Attorney General Lisa Monaco’s announcement earlier in March 2024 of an expanded whistleblower compensation program that will provide financial incentives to whistleblowers in criminal cases who meet certain enumerated requirements. This policy, which is still being developed and is expected to be implemented later in 2024, presents the only circumstances under which a witness in a criminal case will have a direct interest in the outcome.
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