Hiring Conflicts Result in FCA Violations

A recent U.S. Department of Justice (DOJ) settlement highlights the importance of having (and following) a policy that prohibits conflicts of interest. In July 2024, the DOJ entered a nearly $1 million settlement with an oncology testing company (“Company”) based on allegations that the company engaged in conflicts of interest that resulted in False Claims Act violations.

Hiring Conflict Sparked False Claims Act Investigation

The case originated in 2021 when a physician recommended a family friend for an Account Manager position at the Company. Shortly after, the individual was hired. Later that same year, the physician referred his stepdaughter for another role, and she joined the Company in 2022. Both individuals were eventually assigned to support the physician’s account. Following these hires, the physician significantly increased his test orders from approximately 50 per quarter to between 124 and 398 per quarter, representing a dramatic increase in tests ordered of up to 696%.

In June 2023, the Company self-disclosed potential violations of the Anti-Kickback Statute (AKS) and Stark Law to the DOJ, stemming from the physician's employment referrals. The DOJ alleged that Medicare payments were received for tests ordered violating the Stark Law, leading to False Claims Act liability. The Company conducted an internal investigation, ceased billing for the physician’s referrals, and cooperated with the DOJ by identifying those involved and providing requested documentation. These actions and remediation efforts led to a settlement of under $1 million, with credit given under the DOJ’s guidelines for taking disclosure, cooperation, and remediation into account in FCA matters.

Mitigating Risk: The Importance of Conflict-of-Interest Policies

This case highlights the significant risks companies face when conflicts of interest are not properly managed, especially in hiring practices. As seen with this recent settlement, conflicts of interest can trigger enforcement actions under federal laws such as the False Claims Act, leading to severe financial penalties.

Like all compliance policies, an effective conflict of interest policy will be comprehensive and custom-tailored to an entity’s specific circumstances and risks. When conducting investigations, the DOJ evaluates whether companies have proactively addressed operational risks specific to their business. A company with a well-crafted, tailored conflict-of-interest policy—supported by documentation demonstrating consistent, good-faith enforcement—can significantly improve its chances of a more efficient and favorable outcome during a government inquiry.

Contact Us

If you need help developing or strengthening your conflict-of-interest policies, or if you have questions about compliance with the False Claims Act, please contact Gardner Law.