SEC and FDA Enter Three-Year Memorandum of Understanding to Strengthen Enforcement Cooperation

SEC and FDA Enter Three-Year Memorandum of Understanding to Strengthen Enforcement Cooperation

On August 31, the US Securities and Exchange Commission (SEC) and the US Food and Drug Administration (FDA) announced a three-year memorandum of understanding (MOU) to enhance information sharing related to FDA-regulated products in support of each agency’s oversight and enforcement responsibilities.

Under the MOU, the agencies intend to share information related to FDA-regulated products and activities, as well as information about persons and companies that manufacture, distribute, and sell FDA-regulated products. The stated purpose is to “establish a framework to support the parties’ respective regulatory and enforcement responsibilities and otherwise enhance cooperation.” Each agency will maintain a designated mailbox for receiving information requests and a means for providing nonpublic information.

The MOU specifically identifies situations in which companies disseminate false or misleading statements concerning FDA reviews, product approvals, or clinical trial results, “or other matters within the FDA’s regulatory authority that could affect investors’ decisions.” SEC Chairman Paul S. Atkins stated that “FDA-related disclosures by public companies have a significant impact on our markets.” Acting FDA Commissioner Kyle Diamantas said the partnership aims to “enhance transparency across the life sciences sector.” The MOU is effective for three years and can be extended or modified by written agreement of the agencies.

Eleventh Circuit Holds That FCA Qui Tam Provisions Do Not Violate the Appointments Clause

On September 1, the US Court of Appeals for the Eleventh Circuit held that the False Claims Act’s (FCA) qui tam provisions do not violate the Appointments Clause of the US Constitution. The decision preserves the ability of private citizens to sue entities on behalf of the United States for allegedly defrauding the federal government. The panel vacated a Florida federal court’s ruling that the qui tam provisions violate the Appointments Clause by allowing whistleblowers who are not presidentially appointed to usurp executive power by suing on behalf of the federal government, even when the US Department of Justice (DOJ) declines to intervene.

Writing for the panel, US Circuit Judge Elizabeth L. Branch concluded that “relators are not officers of the United States because they do not occupy a continuing position established by law.” The court applied the US Supreme Court’s three-factor test for evaluating whether a person holds a continuing position: (1) whether their tenure is “permanent” as opposed to “occasional or temporary”; (2) whether their employment has a specific time duration; and (3) whether they receive a “continuing emolument.” On each factor, the court found that relators fall short of officer status. Their tenure lasts only the length of one case; they are not required to keep a place of business, and their entitlement to a share of any recovery is not a continuing emolument.

The case arose from a 2019 lawsuit brought by relator Clarissa Zafirov, a physician and former employee of one of the defendants. Zafirov accused Florida Medical Associates, Physician Partners LLC, Anion Technologies LLC, Freedom Health Inc., and Optimum Healthcare Inc. of bringing patients in for medically unnecessary doctor’s visits and submitting unsubstantiated diagnosis codes to increase Medicare Advantage reimbursements. The government declined to intervene at the trial level but intervened on appeal for the limited purpose of defending the constitutionality of the qui tam provisions. The defendants had moved for judgment on the pleadings, arguing that the qui tam provisions violate the Appointments Clause, the Take Care Clause, and the Vesting Clause under Article II. This argument echoed Justice Clarence Thomas’ 2023 dissent in U.S. ex rel. Polansky v. Executive Health Resources Inc. US District Judge Kathryn Kimball Mizelle, a former clerk for Justice Thomas, agreed with the defendants and dismissed the case in September 2024.

In reversing, the Eleventh Circuit joined every other circuit court to address the issue in upholding the constitutionality of the FCA’s qui tam provisions. The panel remanded the case to the district court to consider whether the qui tam provisions violate the Take Care Clause and the Vesting Clause. Constitutional challenges to the FCA’s qui tam provisions remain pending elsewhere, including in the Fifth Circuit in Taylor v. Healthcare Associates of Texas and in the Third Circuit in Johnson & Johnson’s appeal of a $1.6 billion FCA verdict.

The case is Zafirov v. Fla. Med. Assocs. LLC, Nos. 24-13581, 24-13583 (11th Cir. Sept. 1, 2026).

Second Circuit Revives Reverse FCA Claim Against AmerisourceBergen Pharmacy Subsidiary

On August 28, a Second Circuit panel reversed a lower court’s dismissal of a reverse FCA claim against AmerisourceBergen Corp.’s specialty pharmacy business, US Bioservices Corp. The panel held that the whistleblower’s allegations that the pharmacy concealed overpayments from federal health care programs were “sufficiently distinct” from her other, unsuccessful FCA theories.

The case was brought by Patsy Gallian, a former reimbursement manager for US Bio. Gallian alleged that the pharmacy employed a variety of strategies to obtain overpayments from the government, including overcharging for certain drugs and classifying itself as a long-term care pharmacy rather than a retail pharmacy. According to Gallian’s complaint, US Bio retained those overpayments as revenue rather than reporting them to the government. The federal government did not intervene.

A New York federal court dismissed Gallian’s allegations in 2022, finding she failed to identify specific misrepresentations by US Bio and therefore fell short of the heightened pleading requirements under Federal Rule of Civil Procedure 9(b). The district court also dismissed the reverse FCA claim, concluding it “merely echoes her already-rejected false claim theories.” The Second Circuit disagreed on the reverse FCA claim. The panel noted that Gallian’s complaint detailed overpayments made by TRICARE and the US Departments of Labor and Veterans Affairs that US Bio transferred to revenues. The complaint also alleged that the billing practices continued even after specific US Bio officials learned of the overpayments. Those allegations, the panel held, adequately stated a claim that US Bio knowingly concealed, avoided, or decreased its obligation to pay the government. The panel further noted that, while Second Circuit precedent is “unclear” on whether the heightened 9(b) pleading standard applies to all types of reverse FCA claims, Gallian’s claim would meet that standard even if it applied.

The panel left undisturbed the district court’s dismissal of Gallian’s direct FCA claims and its denial of leave to amend.

The case is United States ex rel. Gallian v. AmerisourceBergen Corp., No. 25-2950 (2d Cir. Aug. 28, 2026).

Former Chicago Hospital Executive Pleads Not Guilty to Approximately $290 Million COVID-19 Testing Fraud

On August 31, former Loretto Hospital financial chief Anosh Ahmed pleaded not guilty in Chicago federal court to wire fraud, kickback conspiracy, money laundering, and several other charges in connection with a COVID-19 testing fraud scheme. The government alleges the scheme resulted in the theft of approximately $290 million.

According to the indictment, Ahmed participated in the scheme alongside at least three others after leaving Loretto Hospital. The defendants allegedly collected patient identifying information from various sources, including purported testing sites and individuals who still worked at the hospital, and used it to submit COVID-19 testing reimbursement claims to the government. One lab, O’Hare Clinical Labs, submitted at least one million fraudulent tests as part of the alleged scheme, according to the government. US District Judge Sharon Johnson Coleman accepted Ahmed’s plea after he stopped fighting extradition from Serbia. The judge told the still-detained executive she was “glad to see [him] in the flesh.”

This is the second not guilty plea Ahmed has entered in as many cases the government has lodged over alleged misconduct. He entered a separate not guilty plea the prior week in a case alleging he and other Loretto Hospital executives stole at least $15 million from the hospital in an embezzlement scheme. Ahmed’s counsel told Judge Coleman that his client intends to resolve the government’s case “reasonably quickly,” either by entering a plea agreement or renewing a bid to join codefendants Mahmood Sami Khan and Suhaib Ahmad Chaudhry in their dismissal motion based on alleged prosecutorial grand jury misconduct.

The case is United States v. Ahmed, No. 1:25-cr-00321 (N.D. Ill.).

Danish Researcher Pleads Guilty to Stealing More Than $1 Million in CDC Grant Funds

On September 1, Poul Thorsen, 65, of Denmark, pleaded guilty to wire fraud in federal court in Atlanta for operating a scheme that diverted more than $1 million in grant money intended to fund overseas research into autism and other developmental disorders.

From 2000 through 2009, the Centers for Disease Control and Prevention’s (CDC) Division of Birth Defects and Development Disabilities awarded more than $11 million in grants to two Danish governmental agencies to fund studies into the relationship between autism and exposure to vaccines, between cerebral palsy and infection during pregnancy, and between childhood development and fetal alcohol exposure. Beginning in 2002, Thorsen served as the principal investigator responsible for administering the funds. According to prosecutors, from February 2004 through June 2008, Thorsen submitted over a dozen fraudulent invoices bearing a forged signature purporting to belong to a CDC laboratory section chief. Aarhus University and Odense University Hospital relied on the invoices and transferred hundreds of thousands of dollars to credit union accounts they believed were controlled by the CDC. Prosecutors said the accounts actually belonged to Thorsen. He used the diverted funds for personal expenses, including a home in Atlanta, a motorcycle, and vehicles.

Thorsen had been one of the US Department of Health and Human Services Office of Inspector General’s top 10 most-wanted fugitives since 2011. A federal arrest warrant was issued in April 2011, but Thorsen evaded apprehension by remaining in Denmark until his arrest while traveling in Germany in June 2025. He was extradited to the United States on May 7 and has remained in federal custody since then. US Attorney Theodore S. Hertzberg stated that Thorsen’s “fraud was especially reprehensible because he stole public funds that had been earmarked for research related to infant disabilities and birth defects.”

Thorsen’s sentencing is scheduled for December 1 before US District Judge J.P. Boulee. The case is United States v. Thorsen, No. 1:11-cr-00194 (N.D. Ga.).

Massachusetts Attorney General Issues First-of-Its-Kind $1.15 Million Citation Against Treatment Centers for Unpaid Patient Labor

On September 1, the Massachusetts Attorney General’s Office announced a citation of more than $1.15 million in restitution and penalties against Adult & Teen Challenge Northeast Inc. (TCNE), a faith-based substance use treatment program. The state alleged that TCNE required hundreds of participants to perform unpaid work, including landscaping, moving, cleaning, snow shoveling, and food preparation, for private businesses.

According to the Attorney General’s Office, TCNE is a regional affiliate of the national organization Adult & Teen Challenge USA. The state alleged that TCNE improperly relied on an exception to the state’s minimum wage law that allows for unpaid work in rehabilitation and training programs. TCNE ran a program called “Labor Source” that provided private businesses with workers for various jobs. Beyond the unpaid labor, participants were also required to take part in fundraising activities outside of businesses and on the phone. The Massachusetts Department of Labor Standards concluded last year that the work programs focused more on the requirements of outside businesses and TCNE than on the individual needs of participants. The citation also alleges that TCNE failed to keep accurate time records or to permit participants to accrue sick time.

Attorney General Andrea Joy Campbell stated that the enforcement action “makes clear that when treatment centers require individuals to do work that is unrelated to rehabilitation or training, they must follow our state’s labor laws and pay people for the work they perform.” According to the state, the participants performed more than $850,000 worth of work in programs in Brockton and Worcester.