Pandemic Relief Fraud- A focus and priority for the Department of Justice

Posted On Tuesday, March 15, 2022
By: Lee K. Goldfarb

Takeaway: Be prepared for the continued aggressive investigation and prosecution of white-collar pandemic relief fraud to continue in 2022 as a new Director has been appointed for the COVID-19 Fraud Enforcement Task Force.


On March 10, 2022 the United States Department of Justice demonstrated its intent to continue its focus on and combat of pandemic-related fraud, by announcing that Associate Deputy Attorney General Kevin Chambers has been appointed as the Director for the Covid-19 Fraud Enforcement Task Force. Director Chambers announced that his plan for the task force is to not only target domestic large-scale criminal organizations but to prioritize overseas actors as well.

As part of this initiative, the 2022 budget seeks to add 120 attorneys across the nation whose focus will be on pandemic relief fraud. The budget also requested $325 million to fund more than 900 agents to support the FBI’s white-collar crime program. Pandemic relief fraud has also attracted the attention and involvement of multiple federal agencies including the IRS, U.S. Postal Service, and Social Security Administration as well as Interpol.

In the last year, the DOJ has seized over $1.2 billion in relief funds which were fraudulently obtained and has charged over 1,000 defendants with related crimes across the country. Deputy Attorney General Lisa O. Monaco has stated that they are currently investigating “more than 1,800 individuals and entities for alleged fraud in connection with more than $6 billion in relief package loans”.

A large focus of the DOJ’s investigative efforts over the past year has been placed specifically on fraud related to Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDLs). This has been evidenced by the various indictments, convictions, pleas, and sentencings that have occurred over the last year. Three men in the Middle District of North Carolina were indicted and sentenced for fraudulently seeking over $2.7 million in PPP and EIDLs. These defendants submitted fraudulent PPP loan applications which misrepresented the number of employees and the payroll expenses of their various businesses between May and June of 2020. In conjunction with the fraudulent PPP loan applications, these defendants also submitted false tax and bank records. In their applications for EIDLs, they misrepresented the number of employees, gross revenues and costs of goods sold for each business.  The three defendants received different terms of imprisonment, with the lowest being 5 years’ incarceration. Each defendant was ordered to pay $498,657 in restitution.

A grand jury in Houston recently returned a superseding indictment against four individuals for fraudulently obtaining and laundering millions of dollars in forgivable PPP loans. This indictment has led to an additional 15 individuals across two states being charged in this conspiracy. In a separate scheme, seven individuals in California were indicted and sentenced for their involvement in attempts to fraudulently obtain over $20 million in PPP and EIDL Covid-19 relief funds. The ringleader of this group was sentenced to 17 years’ incarceration.

It’s clear that the DOJ is going to continue to focus their efforts on investigating and prosecuting pandemic related fraud given this year’s budget request and the announcement of Kevin Chambers’ appointment. The light in which the DOJ views the seriousness and gravity of these cases was demonstrated when Deputy Attorney General Lisa O. Monaco stated that  “these cases demonstrate that these crimes are not victimless… these criminals chose to line their own pockets, at a time when Americans were hurting, when many Americans were dying.” So be prepared for the continued aggressive investigation and prosecution of white-collar pandemic relief fraud to continue in 2022.

Federal “No Surprises Act” Is Now the Law

Posted On Tuesday, January 25, 2022
By: Chalon C. Young

Takeaways: 

  • The No Surprises Act took effect on January 1st, closing gaps in consumer protection and banning surprise medical billing.
  • Health care providers should implement compliance programs that address the new law.

On January 1, 2022, the Biden Administration’s Federal No Surprises Act (NSA) took effect. The NSA provides new protections against unsuspected medical bills. It is intended to combat the negative impact of the rising cost of health care on patients. While many states had enacted laws to address surprise billing, a gap in consumer protection still remained. This gap will now be addressed by a federal ban on surprise billing.

Patients with Medicare and Medicaid already have protections against surprise billing, but until the passage of the NSA these protections did not extend to private health insurance. The NSA protects both privately insured and uninsured individuals. Insured patients are protected from out-of-network cost sharing and balance billing for emergency services from non-participating providers, as well as non-emergency services that are furnished by non-participating providers in participating facilities. The NSA also provides additional protection and requirements for health care providers. 

Providers are required to give uninsured patients a good faith written estimate of the cost of the procedure and obtain signed consent before services. Payment disputes for insured individuals must be settled between the provider and the insurance company in a dispute resolution process that does not involve the patient.

Highlights of the NSA include:

  • Cost Sharing:  a patient’s copayment, coinsurance, or deductible (referred to as cost sharing) for emergency services by an out-of-network provider cannot be higher than in-network amounts. Patients’ out-of-pocket maximums are limited to the amount that would apply had the services been furnished by an in-network provider or facility. Individuals are not liable for costs exceeding in-network cost sharing.
  • Balance Billing:  out-of-network providers of emergency services are prohibited from billing patients the difference between the total cost of services and the amount paid by their insurance.
  • Non-emergency Services:  out-of-network providers of non-emergency services must give patients a good faith estimate of the cost of the procedure and obtain signed consent prior to billing. If the patient is billed more than $400 above of the estimate, they may dispute the bill through an independent dispute resolution process.
  • Independent Dispute Resolution:  the NSA requires that an independent dispute resolution process be established. Disputed amounts for uninsured patients will be negotiated between the provider and patient, and disputed amounts for insured patients will be negotiated between the provider and the insurance company. The losing party pays the costs.
  • Ambulances:  ambulances, both ground and air, are covered under the NSA. For insured patients, the cost sharing for transportation services is limited to the in-network deductible for a participating provider.
  • Increased Transparency:  health plans are required to disclose any provisions for balance billing and cost sharing to patients. Providers are required to inquire if patients are enrolled in a health plan and, if not, to provide a good faith estimate of cost prior to any non-emergency disclosure. Health plans must verify and update their provider databases at least once every 90 days to ensure that patients are given correct information about a provider’s participation.

Providers, both in-network and out-of-network, must ensure compliance with the new law or risk sanctions. Each state is authorized to enforce the NSA’s prohibition on surprise billing. In cases where a state has failed to enforce the requirements of the NSA, the Secretary of Health and Human Services is authorized to impose a civil money penalty of up to $10,000 per violation. The NSA’s arbitration requirement is confusing and continues to evolve. To protect against sanctions and ensure that required notices are being met, providers are encouraged to consult with counsel knowledgeable in these emerging regulations.

With the passage of the NSA, health care providers now have a robust federal law which must be integrated into their compliance policies. Pietragallo Gordon Alfano Bosick & Raspanti, LLP assists health care providers, corporations, and their leadership in proactively enhancing compliance and in responding to government investigations and enforcement.

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