Headlines that Matter for Companies and Executives in Regulated Industries

US Supreme Court Declines to Consider AKS ‘Willfulness’ Question

On October 7, the US Supreme Court denied a petition in which a whistleblower asked the Court to decide whether a “willful” act under the federal Anti-Kickback Statute (AKS) requires that a defendant knew their actions violated the law.

We previously covered the whistleblower’s petition for certiorari to the Supreme Court here, and the Second Circuit Court of Appeal’s decision here.

Adam Hart, a former business development executive at McKesson Corporation, filed suit against his previous employer in 2015. Mr. Hart claimed that McKesson had violated the False Claims Act (FCA) when it offered free business tools to oncology centers so long as they agreed to sign up to purchase a certain amount of McKesson drug products.

In March, the Second Circuit Court of Appeals affirmed the District Court’s dismissal of Mr. Hart’s federal claims, while reversing the dismissal of his state claims. On the federal claims, the Second Circuit Court of Appeals concluded that “to act ‘willfully’ under the AKS’s criminal provisions, a defendant must act knowing that his conduct is unlawful, even if he is not aware of the AKS specifically.” Meaning, in order to violate the AKS, the “defendant must act knowing that [their] conduct is, in some way, unlawful.”

Following the dismissal of his federal claims, Mr. Hart petitioned for a writ of certiorari to have the Supreme Court consider the following question: “To act ‘willfully’ within the meaning of the Anti-Kickback Statute, must a defendant know that its conduct violates the law?” Specifically, Mr. Hart sought a determination of whether a whistleblower must plead and prove that a defendant intentionally acted wrongfully — in line with the Second Circuit Court of Appeals finding — or whether it is enough that a defendant was on notice that their conduct was improper.

The Supreme Court denied the petition on October 7. As is common, no explanation for the denial was provided. One possible reason is that the Supreme Court does not believe there is a circuit split on this issue.

For now, Mr. Hart may proceed on the state law claims that survived the Second Circuit Court of Appeal’s decision because, per the appellate court, some of the state anti-kickback laws have no scienter requirement or a lesser requirement than willfulness. Nonetheless, as we explained previously, on remand, the district court could ultimately decline to exercise supplemental jurisdiction over the state law claims now that no federal FCA claims remain.

The Second Circuit Court of Appeals Decision, United States ex rel. Hart v. McKesson Corp., 96 F.4th 145 (2d Cir. 2024), is available here. The petition for a writ of certiorari is available here. The Supreme Court’s denial of the petition is viewable here.

Unsealed Indictment Reveals Alleged $68 Million Medicaid Fraud Scheme

On October 9, an unsealed indictment in Brooklyn, New York, revealed that eight individuals had been charged for their alleged roles in a scheme to defraud Medicaid out of approximately $68 million. Per the indictment, Zakia Khan and Ahsan Ijaz operated two social adult day cares and a home health care financial intermediary that were paying kickbacks and bribes for services that had not been provided.

The indictment reveals that the social adult day cares and home health care financial intermediary operated as part of the New York Medicaid Consumer Directed Personal Assistance Services Program, which permits family members of Medicaid recipients to receive payment for assisting Medicaid recipients with activities of daily living. While such programs are intended to assist seniors, the six additional defendants allegedly paid kickbacks and bribes to obtain referrals of Medicaid recipients to the social adult day cares and home health care financial intermediary. Additionally, they paid kickbacks and bribes to Medicaid recipients for services that were billed to Medicaid but were either not provided or were induced by the kickbacks and bribes.

Collectively, the defendants are charged with varying counts of conspiracy to commit money laundering, money laundering, conspiracy to commit health care fraud, health care fraud, conspiracy to defraud the United States and to pay and receive health care kickbacks, and paying health care kickbacks. These charges carry a maximum penalty of 20 years in prison for each count of conspiracy to commit money laundering and money laundering, 10 years in prison for each count of conspiracy to commit health care fraud, health care fraud, and paying health care kickbacks, and five years in prison for conspiracy to defraud the United States and to pay and receive health care kickbacks.

The US Department of Justice’s press release is available here.

Lead Suspect in $424 Million Telehealth Fraud Scheme Requests Modified Bail

In 2019, Creaghan Harry and 24 others were arrested and charged for their participation in a Medicare fraud scheme. Federal officials alleged that Mr. Harry paid health care providers to order unnecessary orthotic braces for Medicare beneficiaries and solicited bribes and kickbacks from brace suppliers in exchange for patient referrals.

Mr. Harry was granted bail by a New Jersey federal court in November 2019 on the basis that he had no criminal history and strong ties to the community. Nonetheless, he was unable to meet bail conditions until he was ultimately released in May 2024.

Mr. Harry now seeks modifications to his conditions of release. Specifically, Mr. Harry argued that the monitoring software he is required to utilize for his cellphone and internet creates a “logistical nightmare” to review or find new discovery with his attorneys. Mr. Harry additionally noted that he is limited to speaking with counsel on speakerphone utilizing his wife’s cellphone.

Mr. Harry’s counsel explained that the software triggers when words such as “fraud” and “kickback” are used, which creates challenges for communications between Mr. Harry and his counsel, as Mr. Harry’s case centers entirely around fraud. Mr. Harry’s counsel specifically noted that communications with his client are vulnerable to a data breach and may no longer be privileged due to how the software functions.

As such, Mr. Harry now seeks modifications to his conditions of release to allow him to have unmonitored communications with his counsel, attend religious services, go to the gym, and to work.

Roberto Martinez also contributed to this article.