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Business Crimes BulletinFeaturesGovernmentLitigationPrivate Equity and Venture CapitalWhite Collar Crime

False Claims and Private Equity: The Government's Increasing Focus on Private Equity Firms in False Claims Act Cases

By Yvonne W. Chan and Timothy H. Kistner
May 01, 2018

The health care industry continues to hold great potential for private equity (PE) firms, but it also carries with it significant risks and potential exposure to liability. Last year alone, firms invested $83 billion in health care related business. As the pressure to find opportunities has increased, there appears to be a greater appetite for riskier investments including into portfolio companies that experienced or are experiencing compliance challenges.

Historically, the health care industry has been a prime target for FCA claims, in large part because of the ubiquitous nature of government payments through Medicare and Medicaid. In 2016, for example, over half of all federal recoveries in FCA cases came from entities and individuals in health care. Traditionally, the risk presented by compliance-challenged portfolio companies was contained at the portfolio company level. Those risks include the risk of civil claims or criminal charges brought by the government under the False Claims Act (FCA), 31 U.S.C. §3729 et seq. DOJ policy changes have expanded FCA enforcement against individuals — not just entities — and recent investigative activity suggests an increased focus on investment firms and individuals working for those PE firms.

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