DOJ Fraud Division Issues Directive Outlining a ‘Comprehensive Approach’ to Fraud Enforcement

DOJ Fraud Division Issues Directive Outlining a ‘Comprehensive Approach’ to Fraud Enforcement 

On October 7, Assistant Attorney General Colin M. McDonald issued Directive 26-13, directing US Department of Justice (DOJ) Fraud Division prosecutors to use every available tool to investigate and prosecute fraud in all its forms, including health care, government programs and procurement, tax, and trade fraud. It builds on the Division’s August 13 Enforcement Priorities memorandum and Directive 26-12, the corporate enforcement directive issued October 1.

This most recent directive asks prosecutors to look beyond common fraud charges. In every case, they must assess possible tax violations and, where useful, bring in Internal Revenue Service Criminal Investigation and the Division’s Tax Section. The Public Trust and Financial Integrity Section are directed to prioritize securities fraud tied to government programs and contracts, service members, and health care, tax, or trade fraud, using the National Fraud Detection Center to generate new matters. Prosecutors are also directed to consider consumer fraud charges such as mail, wire, and bank fraud and identity theft. In addition, the directive urges prosecutors to prioritize early seizure of fraud proceeds and work with the Asset Recovery Section throughout each case.  

Under the directive, the Fraud Division will leverage proactive cooperators and undercover operations but emphasizes that cooperators “will not get a free pass” and must accept responsibility, forfeit proceeds, and pay restitution. In evaluating cooperation, prosecutors will consider whether (1) the cooperator disclosed criminal activity previously unknown to law enforcement, (2) the cooperation resulted in material advancement of the investigation, (3) the seizure of criminal proceeds or instrumentalities, (4) the conviction of others, and (5) the substantial disruption of ongoing harm.

Among other things, the directive also reaffirms Directive 26-12 and the Corporate Enforcement Section’s lead role in prosecuting and holding corporate entities accountable, while crediting those that demonstrate a willingness to disclose misconduct, cooperate, and remediate.  

Read the directive here.

DOJ’s National Fraud Enforcement Division and HHS-OIG Announce Self-Disclosure Protocol

On October 15, the DOJ’s National Fraud Enforcement Division and the US Department of Health and Human Services Office of Inspector General (HHS-OIG) issued a policy clarifying that companies seeking to voluntarily report potential criminal health care fraud need only disclose to the National Fraud Enforcement Division to receive benefits under the DOJ’s Corporate Enforcement Policy (CEP) and HHS-OIG’s Health Care Fraud Self-Disclosure Protocol (SDP). The policy aims to avoid delay and ensure prompt enforcement before evidence against culpable individuals becomes stale.

HHS-OIG also updated the SDP to clarify that criminal conduct should be disclosed to the DOJ. A disclosure made only to HHS-OIG will not be considered a voluntary self-disclosure to the DOJ and generally will not qualify for a declination. As a result, companies that want the benefits of both programs should make their first voluntary self-disclosure of potential criminal conduct to the DOJ. Under the CEP, a good-faith disclosure to another DOJ component still qualifies if the matter is later handled by the appropriate component, and a disclosure made only to HHS-OIG can still count toward cooperation and remediation credit.

Read the directive here.

CVS Agrees to Pay $315 Million to Resolve FCA Claims

On October 13, the DOJ announced that CVS Pharmacy Inc. and related entities agreed to pay $315 million to resolve allegations that, from October 17, 2013, through December 2, 2025, CVS filled invalid prescriptions for opioids and other controlled substances in violation of the Controlled Substances Act. The government also alleged that CVS then billed many of those prescriptions to Medicare and other federal health care programs in violation of the False Claims Act (FCA).

The United States intervened in a qui tam suit filed by former CVS employee Hillary Estright, United States ex rel. Estright v. CVS Health Corporation, et al., No. 22-cv-00222 (D.R.I.), and filed its complaint on December 13, 2024. The government alleged that CVS pharmacists knowingly filled prescriptions despite clear red flags. These included excessive opioid quantities, early refills, “trinity” combinations (an opioid, a benzodiazepine, and a muscle relaxant), and prescriptions from suspected “pill mill” prescribers who issued large numbers of controlled substance prescriptions without any medical purpose. According to the complaint, these prescriptions lacked a legitimate medical purpose, were not valid, or were not issued in the usual course of professional practice. Many of them were ultimately billed to and reimbursed by federal health care programs.

The complaint also tied the alleged violations to corporate policy, citing performance metrics, incentive compensation, and staffing levels that allegedly put profits ahead of patient safety. The government further alleged that CVS failed to employ enough pharmacists to serve patients, comply with its legal obligations, and meet corporate performance metrics. It also alleged that internal policies kept pharmacists from warning one another about problematic prescribers.

In addition to the payment, CVS entered into a memorandum of agreement with the US Drug Enforcement Agency, under which CVS is required to establish a reporting hotline for employees and the public, proactively monitor its pharmacies’ dispensing patterns, and create a process to evaluate prescribers suspected of illegal prescribing.

Read the DOJ’s press release here.

The claims resolved by the settlements are allegations only, and there has been no determination of liability.

Oklahoma Chiropractor Sentenced to 14 Years for $30 Million Fraud Scheme  

On October 8, Dr. Mark Loftis, a chiropractor and business owner from Cushing, Oklahoma, was sentenced to 14 years in prison for his role in a years-long scheme to defraud Medicare, TRICARE, and the Civilian Health and Medical Program of the US Department of Veterans Affairs. According to the government, the scheme sought more than $30 million for unnecessary orthotic braces, continuous glucose monitors, and other durable medical equipment (DME).

According to court documents and trial evidence, Loftis and his co-conspirators hid from Medicare who owned and managed the DME company. They also hid that unenrolled entities were billing claims through the company. Loftis paid more than $1 million in illegal kickbacks, including through a shell marketing company, to marketers, purported telemedicine companies, and a call center. The call center persuaded elderly and disabled Americans to disclose their personal information and accept DME they did not need. Loftis and his co-conspirators also bought sham doctors’ orders generated by telemedicine doctors and nurse practitioners who never examined, and often never spoke to, the beneficiaries. In total, they submitted more than $30 million in false and fraudulent claims and were paid more than $8 million.

Loftis was convicted of conspiracy to commit health care fraud and wire fraud after a 12-day jury trial. Loftis was also ordered to pay more than $8 million in restitution and to forfeit over $560,000. For more information, read the Investigation Blog’s alert on Loftis’ indictment and conviction.

Read the DOJ’s press release here.