Joint Enforcement of the Anti-Kickback Statute and the Foreign Corrupt Practices Act

April 1, 2016

Olympus Corporation of the Americas Settlement

On March 1, 2016, the Department of Justice (“DOJ”) announced that Olympus Corporation of the Americas (“Olympus”) entered into two deferred prosecution agreements with DOJ, under which Olympus will pay a total of $646 million to resolve criminal charges under the Anti-Kickback Statute (“AKS”) and the Foreign Corrupt Practices Act (“FCPA”).1   Olympus has agreed to pay $312.4 million as a criminal penalty for violations of the AKS, $310.8 million to settle related civil claims under the False Claims Act (“FCA”) and similar state statutes, and a criminal penalty of $22.8 million for violations of the FCPA.2

According to the criminal complaint filed by DOJ, Olympus, the largest distributor of endoscopes and related equipment in the United States, secured new business and rewarded sales of its products by providing physicians and hospitals in the United States with kickbacks, which included consulting payments, foreign travel, lavish meals, millions of dollars in grants, and free endoscopes.3  As a result of this kickback scheme, Olympus allegedly realized over $600 million in sales and more than $230 million in gross profits.4  The complaint alleges that this arrangement violated the AKS, which prohibits knowingly and willfully paying or receiving remuneration in exchange for patient referrals, where  payment may be made by a federally funded healthcare program, including Medicare, Medicaid, and Tricare.5

The alleged conduct underlying the FCPA charges was similar.  The Miami-based subsidiary of Olympus, Olympus Latin America (“OLA”), was charged with offering improper payments to government health officials in Central and South America.6  Between 2006 and 2011, OLA sought to increase sales of its medical equipment by providing health care practitioners at government-owned health care facilities with things of value, including cash, money transfers, personal grants, personal travel, and free or significantly discounted equipment.7  According to DOJ, these actions violated the anti-bribery provisions of the FCPA, which prohibit payments to foreign officials for the purpose of “obtaining or retaining business.”8  The DOJ and the Securities and Exchange Commission (“SEC”) have brought numerous FCPA anti-bribery cases in the healthcare sector on the theory that healthcare professionals employed in state-owned medical facilities are foreign officials under the FCPA.9

Joint Enforcement of AKS and FCPA

The Olympus action represents a rare example of a case involving simultaneous enforcement of both the AKS and the FCPA.  Although the two statutes prohibit similar—and often identical—conduct, healthcare companies and other actors typically facing AKS charges are rarely also subject to enforcement under the FCPA in the same action.  There are several possible reasons for this phenomenon.

For example, FCPA and AKS actions begin in different ways.  Many AKS cases originate with a sealed civil complaint under the FCA. To encourage robust enforcement against government contractors for defrauding the government, the FCA enables private citizens to file a civil qui tam action on behalf of the federal government alleging violations of the AKS and other statutes.10  Whistleblowers—or “relators”—who file such actions are permitted to share in the government’s overall recovery (typically between 15 and 30 percent).11  In the Olympus case, for example, the former chief compliance officer of Olympus, John Slowik, filed a qui tam action alleging violations of both federal and state false claims acts.12  Other AKS actions have resulted from the government’s affirmative enforcement activity, such as investigations initiated by the Health Care Fraud Prevention and Enforcement Action Team, a coordinated initiative between DOJ and the Department of Health and Human Services (“HHS”) that is dedicated to preventing and detecting fraud that impacts the Medicare and Medicaid programs.13  By contrast, although SEC whistleblower provisions may bring FCPA allegations to the surface, the FCPA does not have an independent qui tam provision,14 and FCPA actions are typically initiated when DOJ opens an investigation or files criminal charges against a potential offender.15

Relatedly, criminal enforcement actions under the AKS and FCPA are handled by different departments within DOJ that historically have operated independently, without frequently collaborating on specific matters.  Criminal AKS actions are prosecuted by the Health Care Fraud Unit of DOJ, which typically works closely with HHS and prosecutes a variety of different types of healthcare fraud.16  Criminal enforcement actions under the FCPA, meanwhile, are handled by the FCPA Unit, a specialized group based in Washington, DC, that works primarily with the Federal Bureau of Investigation, and often works closely with the SEC.17

Potential Rise in Joint Enforcement Actions

Despite this relative paucity of joint criminal enforcement actions under the AKS and FCPA, the recent Olympus settlement may be a harbinger of what is to come.  Recent years have witnessed a significant rise in enforcement activity under both statutes individually, and DOJ has increasingly placed an emphasis on cross-agency and interdepartmental coordination in prosecuting fraud charges.

In 2011, for example, then U.S. Attorney—and now Attorney General—Loretta E. Lynch announced that “fighting heath care fraud” had become one of DOJ’s top priorities.18  The AKS, as one of the statutory tools to combat healthcare fraud, has been an integral part of pursuing this goal.19  Indeed, in the almost five years since Attorney General Lynch made that statement, DOJ has entered into increasingly frequent and significant AKS settlements with healthcare providers, pharmaceutical companies, medical laboratories, and others.  Only a few months before the Olympus settlement, for example, DOJ entered into a settlement agreement with Millennium Health (“Millennium”), a San Diego-based urine testing laboratory, under which Millennium agreed to pay $256 million to resolve allegations under the False Claims Act that Millennium provided free items to physicians who agreed to refer expensive laboratory testing business to Millennium, in violation of the AKS and the Stark Law.20  Such large enforcement actions under the AKS have become commonplace, as the recent Olympus settlement demonstrates.

Similarly, FCPA enforcement actions have skyrocketed over the past decade, particularly with regard to foreign-based companies like Olympus’s Japanese parent.  Eight of the top ten largest enforcement actions under the FCPA involved foreign companies, and seven of these eight actions were resolved post-2010:21

  1. Siemens (Germany):  $800 million (2008)
  2. Alstom (France):  $772 million (2014)
  3. KBR / Halliburton (United States): $579 million (2009)
  4. BAE (United Kingdom): $400 million (2010)
  5. Total, S.A. (France):  $398 million (2014)
  6. VimpelCom (Holland):  $397.6 million (2016)
  7. Alcoa (United States):  $384 million (2014)
  8. Snamprogetti Netherlands B.V. / ENI S.p.A (Holland/Italy):  $365 million (2010)
  9. Technip SA (France):  $338 million (2010)
  10. JGC Corporation (Japan):  $218.8 million (2011

As with the AKS, DOJ’s aggressive enforcement under the FCPA has only been underscored by public statements made by DOJ officials in recent years.22

This trend of aggressive FCPA enforcement holds true in the healthcare industry as well. With the recent action against Olympus, there are now at least twenty healthcare companies alleged to have violated the FCPA since 2002.23  Other recent examples include:

  • Nordion (Canada) Inc.:  SEC enforcement action alleging that a company employee paid Russian government officials through a third-party agent to obtain approval to distribute Nordion’s liver cancer treatment in Russia.  Settled with the SEC in March 2016 for $375,000.
  • SciClone Pharmaceuticals:  SEC enforcement action alleging that SciClone subsidiaries provided cash, gifts, and travel expenses to healthcare professionals at state-owned hospitals in China in order to increase prescription orders.  Settled with the SEC in February 2016 for $12.8 million.
  • Mead Johnson Nutrition:  SEC enforcement action alleging that a Mead Johnson subsidiary used distributor allowances to funnel payments to healthcare providers in order to incentivize them to market Mead Johnson products.  Settled with the SEC in July 2015 for $12 million.
  • Bruker Corporation:  SEC enforcement action alleging that Bruker subsidiaries made unlawful payments through sham collaboration agreements with state-owned enterprises in China.  Settled with the SEC in December 2014 for $2.4 million.
  • Bio-Rad Laboratories:  SEC and DOJ enforcement actions regarding allegations that foreign subsidiaries of Bio-Rad funneled unlawful payments to officials in Vietnam, Thailand, and Russia.  Settled with the SEC and DOJ in November 2014 for a combined $55 million.

In addition to these actions, public filings indicate that at least another thirteen healthcare companies remain under investigation, including Alere Inc.,

which recently announced that it had received a grand jury subpoena from the DOJ for potential FCPA violations related to its sales practices in Africa, Asia, and Latin America.

Moreover, while the DOJ units responsible for enforcing the AKS and FCPA have not historically coordinated their efforts, DOJ has increasingly placed emphasis on cross-agency and interdepartmental collaboration to aid in enforcement efforts.   The FCPA Unit has similarly begun to enlist the aid of foreign agencies in enforcing the FCPA.


Each of these trends—increasing enforcement activity under the AKS and FCPA, and rising collaboration among departments—supports the notion that cases like Olympus will soon become the norm, rather than the exception.  Healthcare companies, both foreign and domestic, should take remedial measures to safeguard themselves against the substantial risk of liability presented by joint enforcement under the AKS and FCPA.  Essential steps include educating employees about the risks that these statutes present, instituting an effective compliance program tailored to the specific needs of the company, and allocating responsibility for compliance mechanisms and rules.

1 Press Release, U.S. Dep’t of Justice, Office of Pub. Affairs, Medical Equipment Company Will Pay $646 Million for Making Illegal Payments to Doctors and Hospitals in United States and Latin America (March 1, 2016), available here, [hereinafter “DOJ Press Release”].

2 Id.

3 Criminal Complaint, United States v. Olympus Corp. of the Ams., No. 16-3524 (MF) (D.N.J. Mar. 1, 2016), available here.

4 Id.

5 42 U.S.C. § 1320a–7b.

6 Criminal Complaint, United States v. Olympus Latin Am., Inc. No. 16-3525 (MF) (D.N.J. Mar. 1, 2016), available here.

7 Id.

8 15 U.S.C. § 78dd-1.

9 For example, according to the FCPA Professor, the Olympus action marks the twentieth corporate enforcement action based on the theory that “employees (such as physicians, nurses, mid-wives, lab personnel, etc.) of certain foreign health care systems are ‘foreign officials’ under the FCPA.”  Issues to Consider from the Olympus Enforcement Action, FCPA Professor (Mar. 10, 2016), available here.

10 31 U.S.C. § 3730.

11 Id. § 3739(d)(2); United States ex rel. Karvelas v. Melrose-Wakefield Hosp., 360 F.3d 220, 225–26 (1st Cir. 2004).  Consequently, the majority of FCA actions are brought by relators.  See David Kirman & Alex Wyman, Anti-Kickback Statute Enforcement Trends, 28 Health Law. 43, 48 n.56 (Dec. 2015), available here.

12 DOJ Press Release, supra note 1.  Owing to the size of the settlement, Mr. Slowik will receive $44,102,573 from the federal settlement and $7 million from the state settlement.  Id.

13 See HEAT Task Force, Dep’t of Health & Human Servs. & DOJ, available here.

14 There are, however, SEC whistleblower bounties that apply to a range of legal issues for U.S. issuers, including FCPA violations.

15 See generally U.S. Dep’t of Justice & U.S. Secs. & Exch. Comm’n, A Resource Guide to the U.S. Foreign Corrupt Practices Act 52–53 (2012).

16 See Dep’t of Justice, Criminal Division, About The Criminal Division, Sections/Offices, Fraud Section, Health Care Fraud Unit, available here. Civil enforcement actions involving the AKS under the False Claims Act are handled by DOJ’s Civil Fraud section, which handles all qui tam litigation, regardless of whether it is related to healthcare.

17 U.S. Dep’t of Justice, U.S. Attorneys’ Manual § 9-47.110 (2008), available here. Civil enforcement authority of the FCPA is handled by the Securities and Exchange Commission through the FCPA Unit of its Enforcement Division.

18 April 5, 2011 Statement of Loretta E. Lynch, available here.

19 See Kirman & Wyman, supra note 11, at 44.

20 See Press Release, Office of Pub. Affairs, U.S. Dep't of Justice, Millennium Health Agrees to Pay $256 Million to Resolve Allegations of Unnecessary Drug and Genetic Testing and Illegal Remuneration to Physicians (Oct. 19, 2015), available here.

21 See Richard L. Cassin, Here’s our new Top Ten list, with VimpelCom landing sixth, FCPA BLOG (Feb. 19, 2016, 9:28 AM), available here.

22 See, e.g., U.S. Dep’t of Justice, Office of Pub. Affairs, Remarks for Deputy Attorney General James M. Cole Press Conference Regarding Alstom Bribery Plea (Dec. 22, 2014), available here.
(“[T]his Department of Justice will be relentless in rooting out and punishing corruption to the fullest extent of the law, no matter how sweeping its scale or how daunting its prosecution.  Let me be very clear: corruption has no place in the global marketplace.”).

23 See Vince Farhat & David Kirman, Current Trends in FCPA Enforcement in the Healthcare Industry, Compliance Today, Jan. 2016, at 28, 30.

24 See Michael Petkov, Healthcare Companies Claim Second Place on the Current FCPA Investigation List, Transparency International UK (Feb. 22, 2016), available here; see also Richard L. Cassin, The Corporate Investigations List (January 2016), FCPA Blog (Jan. 5, 2016 7:28 AM), available here (listing fifteen healthcare companies as under investigation, including SciClone, Nordion, and Olympus).

25 Alere Inc. 8-K SEC Filing (Mar. 15, 2016), available here.

26 See, e.g., U.S. Dep’t of Justice, Office of Pub. Affairs, Press Release, Justice Department and Federal Partners Announce Enforcement Actions of Dietary Supplement Cases (Nov. 17, 2015), available here (describing DOJ’s inter-agency collaboration—with the Food & Drug Administration, the Federal Trade Commission, the U.S. Postal Inspection Service, the Internal Revenue Service, the Department of Defense, and the U.S. Anti-Doping Agency—to prosecute 100 dietary supplement companies:  “The Justice Department and its federal partners have joined forces to bringing to justice companies and individuals who profit from products that threaten consumer health.”)

27 See U.S. Dep’t of Justice, Office of Pub. Affairs, Press Release, Assistant Attorney General Leslie R. Caldwell Speaks at American Conference Institute’s 31st International Conference on the Foreign Corrupt Practices Act (Nov. 19, 2014), available here (“The increase in international collaboration is not only enhancing our own FCPA enforcement efforts but it is also resulting in anti-corruption enforcement actions by other countries.”).

O’Melveny & Myers LLP White Collar Defense and Corporate Investigations Partner David Kirman is a former federal prosecutor at the United States Attorney’s Office in the Central District of California and Partner Jeremy Maltby served in the White House Counsel’s Office as Special Assistant and Senior Counsel to President Barack Obama. Alex Wyman is an associate in O’Melveny’s Los Angeles office and also a member of the White Collar Defense and Corporate Investigations Practice . The opinions expressed in this article do not necessarily reflect the views of O'Melveny or its clients, and should not be relied upon as legal advice.