Headlines that Matter for Companies and Executives in Regulated Industries

US Supreme Court to Address FCA’s Scienter Requirement in Safeway Case

The US Supreme Court granted certiorari to resolve a circuit split regarding whether a defendant “knowingly” violates the False Claims Act (FCA) if the defendant relies on an objectively reasonable interpretation of the law. In United States ex rel. Proctor v. Safeway, Inc., Thomas Proctor, a whistleblower, filed a complaint alleging that Safeway Inc. knowingly submitted false claims to Medicare and Medicaid and overcharged federal healthcare programs for prescription drugs. In his argument before the Seventh Circuit, Proctor alleged that Safeway reported its retail price for certain drugs as its “usual and customary price,” even though the general public paid much less than the retail price. 

The Seventh Circuit stated that the definition of “usual and customary price” was open to multiple reasonable interpretations and that no authoritative guidance cautioned against Safeway’s interpretation of the regulations, and therefore, the defendants did not knowingly violate the FCA. In his petition to the Supreme Court, Proctor argued that the Seventh Circuit misinterpreted the FCA’s scienter requirement. The outcome of this case is likely to be a significant development for FCA litigation as defendants are often charged with violations of complex and esoteric statutory provisions and regulations. 

The case is United States ex rel. Proctor v. Safeway Inc., Case No. 22-111.

American Businesswoman Sentenced for Unregistered Lobbying Campaign

An American businesswoman was sentenced to two years in prison for her role in facilitating an unregistered lobbying campaign on behalf of foreign principals. Nickie Mali Lum Davis, along with her co-conspirators, agreed to lobby the then-president of the United States, the attorney general, and other high-level US government officials to drop civil forfeiture proceedings in a criminal investigation into the embezzlement of billions of dollars from a Malaysian strategic investment and development company, 1Malaysia Development Berhad (1MDB). Lum Davis and her conspirators were paid millions of dollars for their efforts by a participant in the 1MDB scheme and also agreed to lobby US government officials on behalf of the People’s Republic of China. 

Lum Davis was paid at least $3 million for her role in the scheme, which she agreed to forfeit, while other conspirators, some of whom pled guilty in the scheme, were paid up to $9 million. 

Read the US Department of Justice (DOJ) press release here.

New York Man Sentenced for Exploiting Elderly Through Mail Fraud Scheme 

A New York man was sentenced to 36 months in prison, followed by two years of supervised release for a direct-mail scheme that sent fraudulent prize notification mailings to thousands of consumers. Scott Gammon engaged in the scheme from August 2014 to August 2019, whereby customers were induced to pay a fee in return for a large cash prize, but none ever received a prize. Two other defendants also pleaded guilty to committing mail fraud in the scheme and are scheduled for sentencing at a later date.
 

Read the DOJ press release here.