Health care fraud and abuse politics are simple: Everyone in Congress agrees on strong enforcement. The politically more difficult choices are those that would make health services more effective, which in turn could make enforcement more rational, expert panelists said on Thursday.
“We are paying too much for health care. That’s the basic problem,” Marc Smolonsky, associate deputy secretary at the Department of Health and Human Services, said at a forum hosted by Main Justice on Capitol Hill titled, “What’s Next? Strategies for Improving Compliance with Fraud and Abuse Laws.”
Fraud, he added, “is a manifestation of that problem. People are able take advantage of how much we’re paying for health care by defrauding our systems, not just in the public systems but also the private system.”
While Smolonsky was primarily referring to criminals who fraudulently bill Medicare for ghost patients or products and services not provided, health care industry lawyer Patrick Morrisey cited the billion-dollar settlements the government has reached in recent years with mainstream pharmaceutical companies over their marketing and billing practices. Those huge settlements are also linked to the larger issue of public health spending, he said.
“There’s a perception that the government is perceiving those settlements as a cost of doing business, and that it’s a back-handed way to take money out of the system that it didn’t believe should be there in the first place,” said Morrisey, co-chair of the FDA and Life Science practice group at King & Spalding LLP, which sponsored the forum Thursday.
“The trick is to be upfront and honest about it, and rather than take money out of the back of the pocket, just say upfront, ‘Look, the system does have problems and we’re not spending money as efficiently as we can,’” Morrisey said.
Under that approach, the government might have an incentive to be more clear with industry about its interpretation of the increasingly complex body of law against health care fraud and abuse, panelists said.
“Over the past decade what we’ve seen is a vast expansion in the kinds of possible defendants involved in health care fraud cases,” said Ted Ruger, a law professor at the University of Pennsylvania. “Not criminals but mainstream health care providers [and] mainstream pharmaceutical companies, almost all of which have been embroiled in False Claims Act and off label marketing cases.”
Ruger said prosecutors are giving an expansive reading to statutes such as the Food Drug and Cosmetic Act, the whistleblower False Claims Act; the Anti-Kickback Statute, and the Stark laws (named after Rep. Pete Stark, Democrat of California) that bar physician self-dealing.
Stark and Republican Rep. Wally Herger of California are co-sponsors of a bill, H.R. 675, that would expand the authority of the HHS Office of Inspector General to exclude health care industry executives from doing business with Medicare if their companies are found guilty of fraud.
The bill would codify a policy HHS announced last year to ban individual health industry executives from business with the government – effectively ending their careers – even if they weren’t aware of the underlying misconduct of their employees.
But HHS earlier this year backed off its attempt to exclude the 83-year-old head of pharmaceutical company Forest Laboratories Inc. from government business after the move generated bad publicity.
“This is not something that has yet been fully embraced,” said Kim Brandt, chief healthcare investigative counsel for the Senate Finance Committee minority staff. “But it’s certainly something to watch.”
There is more agreement on how to combat the conventional fraud, waste and abuse attributed to mistakes, improper billing and criminals seeking to bilk the system.
Smolonsky described sophisticated new data analysis implemented by HHS to scour the 4.5 million claims received daily.
“The first day that we turned this on, we identified 300 known mobsters in the Medicare system,” Smolonsky said. “We discovered that providers who had been debarred years ago were still billing” for services.
“And that was low-hanging fruit,” he added.
The Centers for Medicare and Medicaid Services will open a 4000 square foot predictive analytics lab in Baltimore in April that “will look like a NASA control room,” with wall-to-wall computer screens monitoring claims through algorithms, he said.
Bad payments will be stopped in advance through such predictive modeling, ending what Smolonksy called the “pay and chase” system of trying to recover and prosecute fraudsters after they’ve received the money.
“Within minutes of the claim coming in, we know what the risk of that claim could be and whether it should be subjected to further review,” he said. Sharing of such data with providers could improve compliance as far as it is allowed by privacy laws, he said.
Morrisey however addressed a different issue, what he called “the effective criminalization” of the industry’s business practices at the discretion of regulators and law enforcement interpreting an increasingly complex web of laws enacted by Congress.
“If anyone in the room can explain some of the regulatory provisions related to average manufacturing price, best price, and average sales price, and Medicare Part D, good luck,” he said. “And you know what? Many of the prosecutors aren’t able to explain either.”
He showed a slide of the largest pharmaceutical company settlements in recent years: $3 billion that GlaxoSmithKline plc said recently it had agreed to pay to settle drug marketing and billing charges; $2.3 billion for Pfizer Inc. and $1.4 billion for Eli Lilly and Company in 2009.
In 2010, the Justice Department gave out its highest professional awards two teams of lawyers: those who prosecuted Pfizer, and those who prosecuted an attempted Al Qaeda bombing of the New York City subway.
“What’s wrong with that picture?” Morrisey asked. “We have to begin to ask ourselves, what kinds of behavior are we incentivizing here [among law enforcement and regulators]? And can start to we rethink some of the strategies that have led us to this point?”
He agreed with Smolonsky that the government should seek to prevent fraud before it occurs, not after the fact. He made three suggestions to help regulated industry get the clarity he said he needs to comply with the laws.
Prosecutors and regulators should give credit to companies that spend heavily on robust compliance programs to educate employees about lawful practices and stop misconduct. “That should be relevant in a fraud and abuse investigation,” he said.
Also, prosecutors shouldn’t be able to use threats of extreme measures against companies to bring them behind closed doors for settlement negotiations, Morrisey said. The U.S. Attorney’s manual and guidance for the HHS OIG should be updated to enshrine such a policy, he said.
Industry lawyers say these threats – including the possibility of barring companies and executives from government business – mean the companies can’t risk going to court, which in turn means the government’s most controversial legal theories haven’t been scrutinized often by judges and juries.
Finally, Morrisey advocated establishing a Food and Drug Administration advisory opinion process. Timely guidance on legal questions would help “the regulated industry can gain a little more confidence in their understanding” of the law,” as well as “be a really good way of addressing behavior before you move to a fraud and abuse settlement,” he said.
The event Thursday, held in the Rayburn House Office Building, was the third in a series of fraud and abuse enforcement forums hosted by Main Justice and sponsored by King & Spalding. Information about the previous events can be found here and here. A copy of the slide deck presented Thursday can be seen here. A video link to the event will be provided next week.
Attorney General Eric Holder offered a vigorous defense of the Department of Justice on Thursday, condemning “inflammatory and inappropriate rhetoric” and “politically motivated ‘gotcha’ games” that he said threaten to obscure the “historic progress” the DOJ’s 117,000 employees have achieved on the law-enforcement front.
Appearing before the House Judiciary Committee — some of whose Republican members were skeptical and even hostile — Holder acknowledged the failures of the gun-tracking operation known as Fast and Furious and said that its failed tactics must never be repeated. He acknowledged, too, that some information conveyed to Congress about it has been inaccurate — but he heatedly rejected any suggestions that anyone in the DOJ has intentionally misled lawmakers.

Attorney General Eric Holder flanked by aides Ron Weich, the assistant attorney general for legislative affairs; and Tracy Schmaler, the department's top spokesperson.
“As I have repeatedly stated, allowing guns to ‘walk’ – whether in this Administration or in the prior one – is wholly unacceptable,” Holder said, alluding to a previous “gun-walking” operation under the DOJ of President George W. Bush. ” The use of this misguided tactic is inexcusable. It must never happen again.
But he rejected suggestions that he or anyone else in his vast agency has been deliberately deceptive. “Justice Department employees have been working tirelessly to identify, locate, and provide relevant information to this Committee and the two other committees investigating Fast and Furious – all while preserving the integrity of ongoing criminal investigations and prosecutions,” Holder told the judiciary panel.
Holder’s reception at the hearing, which was officially a general DOJ oversight session but was dominated by the Fast and Furious controversy, was a bizarre blend of courtesy and hostility.
Rep. Lamar Smith (R-Texas), the panel’s chairman, said at the outset that he was pleased to welcome the Attorney General and appreciated his appearance — then assailed Holder for running what he called “a closed and secretive Justice Department” that has been less than candid with Congress not only about Fast and Furious but about the role Elena Kagan played in defending President Barack Obama’s health-care legislation while she was Solicitor General and just before she became a Supreme Court justice.
Smith said he is still not satisfied with the DOJ’s answers about “who knew what and when” about Fast and Furious, in which straw buyers were allowed to buy hundreds of guns so that the Bureau of Alcohol, Tobacco, Firearms and Explosives could track them across the U.S.-Mexican border, helping law enforcement root out Mexican gangsters.

The poster behind Rep. Darrell Issa (R-Calif.)was an enlarged version of the Daily Caller, in which Holder scolded a reporter from the conservative website for its drumbeat of stories about lawmakers urging his resignation.
In what is now conceded to be a terrible failure, the ATF lost track of hundreds of guns — two of which were found at the scene of a border shootout last December in which Border Patrol agent Brian Terry was slain. “It’s been a year since the death of Agent Terry,” Smith said. “Yet, many questions remain as to how such a reckless and dangerous law enforcement program was allowed to operate under the Justice Department.”
Two other Republicans on the panel, Reps. Darrell Issa of California and F. James Sensenbrenner Jr. of Wisconsin, seemed to go out of their way to be combative toward the Attorney General, with Sensenbrenner floating vague threats about impeachment, without saying exactly who should be in the crosshairs.
Issa said the House Committee on Oversight and Government Reform, which he chairs, had been “systematically lied to” over Fast and Furious by a DOJ that seems “more interested in data bases” than in actually tracking guns and drugs.
“This program was failed and flawed from the beginning,” Issa said. “Brian Terry is dead, in my opinion, because of this failed program.” And that, Issa said, is “reprehensible.”
“Mr. Attorney General,” Issa said, “the blame must go to your desk.” Why, Issa said, haven’t people been fired over the debacle? While Issa did not specify any names, an obvious target would be Assistant Attorney General Lanny A. Breuer, head of the Criminal Division, around whom the Fast and Furious storm has swirled. Breuer has also been at the center of ambiguities and misinformation that have been conveyed to Congress about Fast and Furious — missteps that Holder has insisted resulted from misunderstandings, not attempts to deceive.
Issa even made a point at the beginning of wanting the Attorney General put under oath, a formality that Smith said could be dispensed with, since someone appearing before Congress is legally bound to tell the truth.
Later, Issa said he wanted to hear more from Holder before his committee and asked him whether he needed to subpoena him. Holder said he would consider any request.
Sensenbrenner, too, was hostile. “Some heads should roll,” he said, wondering aloud “what’s the difference between lying and misleading Congress?”
At one point, Sensenbrenner used language that seemed extraordinary in the context of an exchange with the head of the Justice Department: “I don’t want to say that you have committed a felony, Mr. Attorney General.”
Asserting that “the American people need the truth” and haven’t heard it, Sensenbrenner said there is a remedy: “It’s called impeachment.” But he did not specify who should be the target.
Panel Democrats defended Holder. The ranking Democrat, Rep. John Conyers of Michigan, said Holder deserves credit for helping to forge a partnership with Mexican law enforcement in a bloody and costly battle against drug-trafficking. And Rep. Howard L. Berman of California said some rhetoric hurled at Holder and the DOJ was “quite unbelievably overblown.”
Holder himself remained calm throughout, as when he was asked by Berman if Congress was doing enough to help the DOJ.
“Frankly, no,” Holder said evenly. Among the things Congress should do, he said, is increase funding for ATF teams battling violence along the Southwestern border.
Former Gov. Rod Blagojevich was sentenced to 14 years in federal prison on Thursday, becoming the fourth Illinois governor in recent years to be sent to prison.
Blagojevich, who will turn 55 on Saturday, was uncharacteristically contrite at his sentencing in Chicago, according to an account in The New York Times. “I have nobody to blame but myself for my stupidity and actions, words, things that I did, that I thought I could do,” he said.
Blagojevich, a Democrat, was charged just after Barack Obama, then a U.S. senator from Illinois, was elected president in 2008. He faced a variety of charges that he basically tried to sell the powers of his office to the highest bidder. Most sensationally, he was accused of trying to peddle the Senate seat Obama vacated when he went to the White House.
Blagojevich was sentenced by U.S. Judge James Zagel of the Northern District of Illinois, who imposed a punishment just under the range prosecutors had sought, according to The Times. Since there is no parole in the federal prison system, Blagojevich can expect to serve just under 12 years with time off for good behavior.
Although Blagojevich had been outspoken in the past about his innocence, he was remorseful in court, The Times reported. “I accept the peoples’ verdict, Judge, they found me guilty,” he said adding later, “All I can say is I never wanted to hurt anyone.”
The ex-governor’s contrition was in sharp contrast to the defiance he displayed throughout his case, which included impeachment in the Illinois legislature and two criminal trials, the first ending in a hung jury on nearly all counts and the second in conviction last June (see our report) in a big victory for U.S. Attorney Patrick Fitzgerald.
Blagojevich’s predecessor, former Gov. George Ryan, is currently serving six and a half years in federal prison for corruption. Ryan’s troubles enabled Blagojevich to run as a reform candidate.
Sen. Charles E. Grassley of Iowa, the ranking Republican on the Senate Judiciary Committee, denounced Assistant Attorney General Lanny A. Breuer on the floor of the Senate on Wednesday, declaring that Breuer’s “incredibly poor judgment” and lack of candor over the botched Fast and Furious gun-tracking operation make him unfit to head the Criminal Division.
“It’s past time for accountability at the senior levels of the Justice Department,” Grassley said. “I believe it’s time for him to go.”
Grassley called on Breuer to “do the honorable thing” and tender his resignation. If he refuses to do that, Grassley went on, Attorney General Eric Holder, who will testify before the House Judiciary Committee on Thursday in what is certain to be a hostile and heated session, should fire him at once.
Grassley said Breuer had displayed “a complete lack of judgment,” not only in the Fast and Furious episode but in an earlier gun-tracking operation that originated in the George W. Bush administration known as Wide Receiver. Even worse, Grassley said, Breuer was misleading within the DOJ and in communicating with Congress about what he knew about Fast and Furious, and when.
Average Americans are rightly “outraged and astonished” by the details of Fast and Furious as they seep out, Grassley said. Unfortunately, the senator went on, there appears to be “a vast gulf” between what outrages most Americans and what outrages Breuer.
Grassley’s condemnation of Breuer, while not surprising in view of Grassley’s steady criticism of Fast and Furious and skepticism over the DOJ’s explanations, was dramatic nonetheless. And the timing was unfortunate for Holder, who is guaranteed a hostile reception on Thursday when he appears before the House Judiciary Committee, two of whose members are among the most vociferous Republican critics of the DOJ and want someone to pay for its recent mistakes.
Attorney General Eric Holder is guaranteed a hostile reception on Thursday when he appears before the House Judiciary Committee, two of whose members are among the most vociferous Republican critics of the DOJ and want someone to pay for its recent mistakes.
With the furor over the Fast and Furious gun-tracking operation refusing to go away, Holder can expect harsh questioning from Reps. Lamar Smith of Texas, the panel’s chairman; and another committee Republican, Darrell Issa of California, who as chairman of the House Oversight and Government Reform Committee has regularly criticized Holder and questioned his veracity. Smith has called for a special counsel to investigate the Attorney General (see Main Justice’s earlier report).
Dozens of House Republicans have demanded that Holder step down, as have a few Senate Republicans. And some have signaled that if the Attorney General himself is not forced out, someone close to him should be. The leading candidate to be that “someone” appears to be Assistant Attorney General Lanny A. Breuer, especially after Sen. Charles E. Grassley’s angry Senate floor speech.
Should the members of the House Judiciary Committee tire of asking Holder about Fast and Furious, they can pepper him with questions about Breuer’s comments on “60 Minutes,” in which he defended the DOJ’s performance in the 2008 financial crisis (see Main Justice’s report).
But it is Fast and Furious, the gun-tracking operation run by the Bureau of Alcohol, Tobacco, Firearms and Explosives, that is sure to draw the most fire. Fast and Furious aimed to track firearms to drug traffickers in Mexico via straw buyers. But ATF apparently lost track of hundreds of weapons, and two them were found at the scene of an Arizona shootout that killed Border Patrol agent Brian Terry last December.
Moreover, there have been questions about what Holder knew about Fast and Furious and when he knew it. As Main Justice reported in October, documents seem to indicate that Holder and other top DOJ officials were briefed on Fast and Furious in the summer of 2010, calling into question his testimony before the House Judiciary Committee on May 3, in which he said he had only learned about the operation in the preceding few weeks.
The DOJ said later that Holder had misunderstood a question from the committee, and that he knew in general of the operation but not the specific and most controversial details.
Issa has been incensed about a Feb. 4 letter that Assistant Attorney General Ron Weich sent to Grassley, asserting that the DOJ makes every effort to intercept weapons and prevent them from going to Mexico. The DOJ had to backtrack on that letter, since the purpose of Fast and Furious was to let weapons go to Mexico to track them (see Main Justice’s report).
So far, Issa has refused to accept explanations that the Feb. 4 letter was an innocent, albeit regrettable, mistake. The letter continues to be embarrassing for Breuer, who testified on Capitol Hill in November that he could not remember if he saw a draft of it, a point FoxNews’ Bill O’Reilly and Megyn Kelly made in a discussion on Tuesday.
“So Breuer is going to take the fall, then?” O’Reilly asked. Kelly replied that she couldn’t say.
Grassley has been particularly angry about the letter, and he has been openly disbelieving of Breuer’s explanations, as he was in his Senate remarks Thursday. He has called repeatedly for higher-ups at DOJ to be held accountable, a point he made in an interview on Monday. “They were stonewalling,” he told FoxNews’ Greta Van Susteren on Monday. “And to some extent they still may be stonewalling. But our goals have stayed the same. Number one, we want to find out who approved Fast and Furious, get that person fired.”
Matthew Boyle of The Daily Caller, one of the first to report the breakout of anti-Holder sentiment in the Senate, kept up the pressure on the Attorney General. “Fifty-two House members, two Senators, four presidential candidates and two sitting governors have already demanded Holder’s ouster,” he wrote in his latest dispatch, in which he has Rep. Paul Gosar (R-Ariz.) calling for Holder to go.
As if all that wasn’t enough, the National Rifle Association has trained its sights on the Attorney General, asserting that Fast and Furious was a back-door attempt at gun control and setting up a special website, Fire Holder.
The CBS news show 60 Minutes on Sunday examined the lack of prosecution of high-level culprits in the 2008 financial collapse. Correspondent Steve Kroft interviewed Criminal Division chief Lanny Breuer for the segment, asking him tough questions.
“In our criminal justice system, we have to prove beyond a reasonable doubt that you intended to commit a fraud. But when you can’t or when we think we can’t, there’s still many, many important resolutions and options we have. And that’s why there have been civil lawsuits and regulatory action,” Breuer told Kroft.
The CBS correspondent followed up with a question about why the Sarbanes Oxley law hasn’t been used to hold executives accountable, prodding Breuer with a query about whether he “lack[ed] confidence” to bring those cases.
Breuer said, “No one … really has accused this Department of Justice or this division or me of lacking confidence. If you look at the prosecutors all over the country, they are bringing record cases, with respect to all kinds of criminal laws. Sarbanes Oxley is a tool, but it’s only one tool. We’re confident. We follow the facts and the law wherever they take us. And we’re bringing every case that we believe can be made.”
Later, Kroft said: “The perception. I mean, it doesn’t seem like you’re trying. It doesn’t seem like you’re making an effort. That the Justice Department does not have the will to take on these big Wall Street banks.”
Breuer answered, “Steve, I get it. I find the excessive risk taking to be offensive. I find the greed that was manifested by certain people to be very upsetting. But because I may have an emotional reaction and I may personally share the same frustration that American people all over the country are feeling, that in and of itself doesn’t mean we bring a criminal case.” He added that Americans should “stay tuned,” because Justice is still working hard on cases.
Watch below:
After years of loyal service to Attorney General Eric Holder, some of them in the reflected glare of publicity that goes with the territory in the Department of Justice, Kevin A. Ohlson’s reward is a post that would appear to be less stressful.
He just needs to get through one last Justice Department uproar: The congressional probe of Operation Fast and Furious.
Ohlson, chief of DOJ’s Professional Misconduct Review Unit and former chief of staff for Holder, has been nominated by President Barack Obama for a seat on the United States Court of Appeals for the Armed Forces (USCAAF), which is the military equivalent of the courts of appeal for the various federal circuits.
But his nomination is almost certain to be held over to the next session of Congress that begins in January. Congressional Republicans are looking for a scalp. Sen. Charles Grassley of Iowa has said the highest-ranking official at the Department of Justice who knew about the problematic gun-trafficking investigation, in which some 2000 weapons found their way into the hands of Mexican drug cartels, should resign.
There’s no evidence Ohlson was aware of the details of the operation, conducted by the Bureau of Alcohol, Tobacco, Firearms and Explosives and overseen by the U.S. Attorney’s office in Arizona. But he was nonetheless grilled by Sen. John McCain (R-Ariz.) at his confirmation hearing last month before the Senate Armed Services Committee, and has answered extensive written questions about it.
A congressional staffer familiar with the nomination told Main Justice that even Democrats in the Senate aren’t pushing to rush Ohlson through while investigations proceed in the Republican-led House Government Oversight Committee and by Grassley’s staff in the Senate.
Ohlson declined to comment.
Although it can be hard to gauge such things, it is fair to say that the USCAAF functions below the radar of most Americans — or that of many lawyers, for that matter. The USCAAF reviews courts-martial in serious cases — those that bring a death sentence, imprisonment for a year or more or bad-conduct discharges, for instance — that have already been studied by the four military criminals appeals courts, overseeing the Army, Air Force, Navy and Marine Corps and Coast Guard. Decisions by the USCAAF are subject to review by the United States Supreme Court, as are the decisions by the circuit courts of appeal.
The work load is relatively light – the court heard 43 cases in 2010, 47 in 2009 and 65 in 2008. It is housed in a stately building on E. St. NW near the District of Columbia U.S. Attorney’s office, where Ohlson once worked.
The five judges on the USCAAF get the same pay as the circuit court judges, $184,500, and circuit court judges occasionally participate in USCAAF cases. (So do federal district judges, who also sometimes take part in circuit court proceedings.)
But there are important differences between the USCAAF and the circuit courts of appeal, both in the nomination process and the qualities one needs to get a seat. Nominations to the top military court, unlike those to circuit courts, are not vetted by the American Bar Association. Nominations to the USCAAF are reviewed by the Senate Armed Services Committee, not the Judiciary Committee. And the terms on the top military court are for 15 years, whereas the federal civilian court terms are for life.
Moreover, while military service is not an official requirement to sit on the USCAAF, it is “typical and expected,” according to Eugene R. Fidell, an expert on military law who teaches military justice at Yale Law School. Fidell is a co-founder and former president of the National Institute of Military Justice and a member of the board of directors of the International Society for Military Law and the Law of War.
The four current members of the court, Chief Judge James E. Baker and Judges Charles E. Erdmann, Scott W. Stucky and Margaret A. Ryan, all have military service on their resumes, along with a mix of political connections and court clerkships typically associated with judicial nominees.

Ohlson, third from left sits with Holder Counselor Aaron Lewis, then-Deputy Chief of Staff James Garland and other top aides at a news conference last year.
Ohlson has impeccable military credentials: he was an Army officer, serving both as a paratrooper and judge advocate, and won a Bronze Star for his combat duty in the Persian Gulf War. (Somewhat paradoxically, someone who retires from military service after 20 years or more is disqualified from serving on the court, on the theory that the tribunal should be “civilian” in nature, even though its guidebook is the Uniform Code of Military Justice.)
Fidell said he thinks the court could and should take more cases, a point he made in a talk earlier this year. Asked by Main Justice why he thinks the court doesn’t take more cases, he replied, “I don’t know.”
From 2009 to January 2011, Ohlson was Chief of Staff and Counselor to Holder, according to Ohlson’s biography issued by the White House. From 2007 to 2009, he was the Director of the Executive Office for Immigration Review (EOIR), where he had previously served as Deputy Director from 2002 to 2007. From 2001 to 2002, he was a member of the Board of Immigration Appeals. From 1997 to 2001, he was Chief of Staff to the Holder when Holder served as Deputy Attorney General.
Before that, he was an AUSA and spokesman for Holder when he served as the U.S. Attorney in D.C., managing press on high-profile cases like the public corruption probe of then-House Ways and Means Committee chairman Dan Rostenkowski, snared in the House Bank scandal and accused of having ghost workers on his payroll and trading congressional stamp vouchers for cash. Rostenkowski, who died last year, pleaded guilty to two counts of mail fraud and served 15 months in prison.
Ohlson is a relatively young man; he attended Washington and Jefferson College on an ROTC scholarship and got his law degree from the University of Virginia School of Law in 1985, according to The Washington Post. So it would not be surprising if the apparent tranquility of the military appeals court is not his last career stop.
Mary Jacoby contributed to this report.












