June 5, 2023

Volume XIII, Number 156


June 04, 2023

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June 03, 2023

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Supreme Court to Hear US Government in FCA Scienter Oral Argument

Supreme Court to Hear US Government in FCA Scienter Oral Argument

On March 20, 2023, the US Supreme Court agreed to allow the federal government to participate in oral argument in the Supreme Court’s review of the Seventh Circuit Court of Appeals’ interpretation of scienter requirements of the False Claims Act (FCA) in two, now consolidated, FCA cases against Safeway Inc. and SuperValu Inc. The government seeks to overturn the Seventh Circuit rulings that the retail chains made “objectively reasonable” interpretations of ambiguous policy in the “usual and customary” prices they offered to Medicare and Medicaid for generic drugs.

In 2021 and 2022, the Seventh Circuit found that the retail chains made objectively reasonable determinations of ambiguous regulatory guidance regarding “usual and customary” pricing and that they were not warned away by authoritative guidance, even if their interpretations had been wrong, thus concluding that they had not acted with scienter. The FCA scienter requirement states that defendants must have acted with knowledge of the falsity of their claims or at least with deliberate ignorance or reckless disregard for the truth. The issues in the Seventh Circuit cases rested on whether an FCA defendant who subjectively believed, or at least “had strong reason to believe,” that a claim they made was false could be considered not to have acted “knowingly” if they could show that their claim “was consistent with an incorrect but objectively reasonable interpretation of those legal requirements,” according to the government.

Following the Seventh Circuit decision, the FCA whistleblowers, or relators, more than 30 state attorneys general, and the federal government all argued to the Supreme Court that the Seventh Circuit “turned the law on its head” and ignored subjective intent in determining scienter. In addition, the government argued that “limited resources and administrative complexity make it impossible to address every potential ambiguity that motivated attorneys might later identify.” Oral argument for the case is set for April 18, 2023.

The cases are U.S. ex rel. Thomas Proctor v. Safeway Inc., case number 22-111 and U.S. ex rel. Tracy Schutte et al. v. SuperValu Inc. et al., case number 21-1326, before the Supreme Court.

Ericsson to Pay $207 Million Over DPA Breach

Swedish telecom company, Ericsson, pleaded guilty to Foreign Corrupt Practices Act (FCPA) violations and was ordered to pay $206.7 million for breaching the cooperation and disclosure terms of a 2019 deferred prosecution agreement (DPA). Ericsson will be required to serve a term of probation through June 2024 and accept a one-year extension of the term of their independent compliance monitor under the DPA.

In 2019, Ericsson entered into a DPA over worldwide bribery and slush fund schemes involving high-level executives and paid over $1 billion to the US Department of Justice (DOJ) and US Securities and Exchange Commission (SEC). According to court documents, Ericsson used third-party agents and consultants from 2000-2016 to make bribe payments to government officials, amounting to millions of dollars, in order to obtain lucrative deals and to manage off-the-books slush funds in Djibouti, China, Vietnam, Indonesia, and Kuwait.

Ericsson falsified books and records and engaged the agents through sham contracts and paid them pursuant to false invoices. Following the imposition of the DPA, Ericsson breached the terms of the agreement by failing to truthfully disclose all evidence and allegations of misconduct related to the Djibouti and China schemes, as well as other potential FCPA anti-bribery, accounting violations, and allegations of misconduct in Iraq.

The case is USA v. Ericsson, case number 1:19-cr-00884, in the US District Court for the Southern District of New York.

NY Man Pleads Guilty to $1.9 Million Baby Formula Fraud Scheme

Amidst the US national baby formula shortage, a New York man pleaded guilty to defrauding insurance plans and medical suppliers by fraudulently procuring specialty baby formula. According to court documents, Vladislav Kotlyar, of Staten Island, obtained prescriptions and medical records for infants who were prescribed specialty baby formula and forged those prescriptions in order to obtain more formula, which was paid for by health insurance. Kotlyar also fabricated issues with the shipments of the formula by falsely claiming the formula was damaged or incorrect in order to obtain additional formula. During the 2022 national baby formula shortage, Kotlyar and his co-conspirators submitted over $1.9 million in fraudulent formula claims to health insurers. Kotlyar has agreed to forfeit $1 million, pay over $738,000 in restitution, and faces a maximum penalty of 20 years in prison.

Read the DOJ press release here.

© 2023 ArentFox Schiff LLPNational Law Review, Volume XIII, Number 83

About this Author

D. Jacques Smith Attorney Litigation ArentFox Schiff Washington DC
Partner and Complex Litigation Practice Co-Leader

Jacques focuses his practice on government investigations and enforcement. Recognized as one of the top False Claims Act practitioners in the country, his clients largely encompass all branches of health care and life sciences. He has more than 30 years of experience handling jury, bench, and administrative trials in a variety of civil and criminal cases in state and federal courts throughout the country. Jacques excels at handling complex commercial disputes and internal investigations and responding to government inquiries. 

Jacques is...

Randall A. Brater Litigation Attorney ArentFox Schiff Washington DC

Randy routinely litigates high-stakes matters in state and federal courts, including preliminary injunctions, motions practice, jury and bench trials, arbitrations, and mediation.

Randy often handles matters related to investigations and the False Claims Act, municipal bond finance, and trademark litigation. Randy also has represented agricultural chemical manufacturers in numerous data compensation disputes arising under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA), environmental actions under CERCLA, employment, trade secret...

Michael F. Dearington Attorney White Collar Defense ArentFox Schiff Washington DC

Mike is a highly sought-after advocate who provides advice to corporate and individual clients in connection with a range of difficult legal issues, and represents clients in high-stakes litigation and investigations. Many of Mike’s clients are in the health care and life sciences industries.

Mike routinely counsels clients on matters involving the False Claims Act, the Foreign Corrupt Practices Act, and federal securities laws, as well as complex commercial litigation and white-collar defense matters. He frequently writes and speaks on these...


Shoshana advises clients on the legal and regulatory landscape for matters that fall within the jurisdiction of the US Food and Drug Administration (FDA), Department of Agriculture (USDA), Environmental Protection Agency (EPA), and their state counterparts.

Examples of her work include:

  • Providing guidance on the newly established FDA Over-The-Counter Monograph Drug User Fee Program

  • Counseling on compliance with the federal Clinical Laboratory Improvement Amendments (CLIA)...

Nadia Patel Business Litigation Lawyer ArentFox Schiff

Nadia regularly represents individuals and businesses involved in a variety of commercial litigation in state and federal court, including cases involving contract claims, Lanham Act violations, and litigation arising out of corporate transactions.  Recently, Nadia has represented foreign companies in civil litigation involving alleged violations of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act.  Nadia also represents employers in employment-related litigation, including matters involving violations of restrictive covenants, the Defend Trade Secret Act, and state trade secret...