by bvernia | November 9th, 2009
In the Government’s case against Christi Sulzbach, former associate general counsel and compliance director for National Medical Enterprises, Inc. (NME), discovery closed in September and both sides filed motions for summary judgment at the end of October.
The gist of the Government’s complaint is that although Sulzbach was informed that contracts an NME hospital entered into with physicians violated the Stark Law, 42 U.S.C. § 1395nn, she knowingly, falsely certified that the company was in compliance with the terms of the company’s Corporate Integrity Agreement (CIA) and federal law.
Sulzbach’s motion attacks both the timeliness and the substance of the Government’s allegations. Sulzbach points to the Government’s earlier case against NME (which subsequently changed its name to Tenet Healthcare Corp.), which alleged that counsel for the company was advised of the contracts’ illegality. Sulzbach claims, therefore, that the case against her personally was not only known to the Government, but alleged in the prior case, more than six years before the US sued her.
Sulzbach’s motion also argues that NME’s CIA was the OIG-HHS’s first such agreement, and that the interpretation of key terms, such as what would comprise a material violation of the CIA, was undefined in the document itself and by OIG-HHS. In an interesting overview of OIG-HHS CIAs, Sulzbach’s motion states:
Since 1994, HHS has entered into more than 1,000 CIAs. Over time, HHS has developed a substantial infrastructure to negotiate, monitor and provide guidance concerning CIAs. The Office of Inspector General (“OIG”), through its Chief Counsel, is responsible for developing and monitoring CIAs and for developing and providing compliance program guidance. All CIAs and related documents dating back to 2000 can be found on the website and generally provide a template for future CIAs. And the HHS website contains voluminous information about CIAs, including substantial interpretative guidance.
But back in 1994, there was no template for CIAs, no infrastructure within HHS for developing compliance programs, and no published guidance to interpret CIA provisions. In fact, there apparently were no corporate integrity agreements at all until HHS suggested one to NME in April 1994 as a condition for HHS agreeing not to exclude NME from participating in Medicare on a going-forward basis.
(Citations omitted.) Sulzbach also asserts that for a company the size of NME, the legal questions presented by its hospital’s contracts were not material for purposes of disclosure under the CIA.
Finally, Sulzbach argues that the evidence establishes that she was never advised that the contracts were, in fact, illegal. Sulzbach acknowledges receiving an internal memo raising concerns about the physician contracts, but points to evidence that attorneys at McDermott, Will & Emery reviewed the contracts, but did not complete their analysis or report to her that they violated federal law.
If Sulzbach’s motion sees the glass as half empty, the US’s motion announces that it’s really half-full. The US focuses on evidence of internal discussions of the contracts’ legality, and on the characterizations of the contracts in the McDermott, Will report, on which Sulzbach was briefed, although she does not recall receiving it. The Government’s motion also relies on the reckless disregard/deliberate ignorance standard, arguing that the evidence establishes that Sulzbach’s conduct met this lower standard of scienter.
It will be interesting to see how both of these issues play out: the Government’s ability to segregate corporate from personal liability for statute of limitations purposes, and its ability to establish personal liability in a case involving false certification of compliance. Although the two motions address the latter issue in a diametrically opposite manner, the US has not yet had a chance to respond to the statute of limitations issue.
Sulzbach is being represented by Paul Huck, Jr., and Roberto Martinez of Coral Gables’ Colson Hicks Eidson, and by Robert Krakow, Joseph Callister, and Rod Stone of Gibson, Dunn in Dallas and Los Angeles.
Representing the US are DOJ Civil Fraud Trial Attorneys David Cohen, David Wiseman, and Jonathan Katz, and by SD Fla. AUSA June Acton.
