Corporate Executives Beware: Tuomey CEO Settles False Claims Act Violations For $1M and the U.S. Department of Justice’s Push for Individual Accountability
Monday, October 3, 2016

On September 27, 2016 the U.S. Department of Justice announced a $1 million settlement with Ralph Cox III, the former CEO of Tuomey Healthcare (Tuomey), for his responsibility in certain False Claims Act (FCA) violations. The settlement also requires Cox to sign a release for any indemnification claims he may have had against Tuomey and excludes Cox from participating in federal health care programs for four years.

The announcement of Cox’s settlement follows Cox’s 2013 resignation as CEO after Tuomey was found  liable for Stark law and FCA violations. The case centered on the hospital’s illegal compensation of physicians for their patient referrals.  The District Court entered a $237.5 million judgment against Tuomey.  After appeals, Tuomey eventually settled with the U.S. Department of Justice for $72.4 million and agreed to a sale to another health system in South Carolina, Palmetto Health.

Principal Deputy Assistant Attorney General Benjamin Mizer, head of the Justice Department’s Civil Division, addressed the Department of Justice’s motivation behind holding individuals accountable for FCA violations, “sweetheart deals between hospitals and referring physicians distort medical decision making and drive up the cost of healthcare for patients and insurers alike… [the Cox] settlement demonstrates that the Justice Department and its law enforcement partners will hold individual decision makers accountable for their involvement in causing the companies and facilities they run to engage in unlawful activities.”

The Department of Justice’s push toward individual accountability is memorialized in the Yates Memo dated September 9, 2015. In this memo, Deputy Attorney General Sally Quillian Yates urged seeking accountability from individuals to combat corporate fraud and misconduct.

Corporate executives and other individuals taking part in corporate decision-making should be aware of the Department of Justice’s intention to hold individuals accountable for decisions they make that ultimately cause the company to commit FCA violations or other corporate misconduct.  Furthermore, corporate executives and individuals making decisions on behalf of the corporation should understand that it is likely they will not be able to hide behind the company for indemnification if their decisions cause the company to commit such misconduct.

 

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