By law, insurance companies must offer plans that cover a minimum required portion of drug costs, with the government and Medicare beneficiaries covering the rest, according to the release. Insurance companies are then required to submit bids in which they report the benefits they propose to cover and confirm the ones that meet Part D’s minimum coverage, the release states.

The lawsuit arose out of allegations made by whistleblower and  former actuary for Humana, Steven Scott. Scott’s complaint claims that the insurance giant inflated its bids to the government on an unsupported basis solely for the purpose of generating profit.

According to Scott, Humana accurately predicted the costs for the Walmart Plan but instead decided to base its bids off of unreasonable assumptions. “Although Humana asserted in court documents that the predictions underlying its bids were merely estimates about future behavior, they worked in Humana’s favor 100% of the time over seven years and for 245 bids,” Edward Arens of Phillips & Cohen, one of Scott’s attorneys, said in a statement. “The odds that a big insurer would ‘miss’ on an important assumption in the same way that many times in a row are too small to measure.”

According to Scott, Humana kept two sets of books for the purpose of valuing its drug plan. One was used to report the actuarial value of the Walmart Plan to CMS and “justify the award of the contract, “while the other was used to set Humana’s own internal operating budget, Scott alleged. Scott’s attorneys stated that Humana’s internal assumptions proved accurate every year while the underlying bids were “wildly off and always in Humana’s favor, benefiting the insurance company by hundreds of millions of dollars.”

Humana’s alleged illegal practice ranged from 2011 to 2017 in which the company reportedly generated $84 million in additional profit. “The Part D program depends on insurance companies paying their minimum share of drug costs. … Humana shirked its responsibility by telling the government that its plan would cover drug costs that Humana did not actually plan to cover. Our complaint detailed how the government and beneficiaries were left with paying tens of millions of dollars more than Congress intended for years, while Humana pocketed the money as ‘savings,’” Claire Sylvia, a whistleblower attorney who filed the case, said in the release.

In a statement, Humana says it “firmly believes that the actuarial assumptions in its prescription drug plan were reasonable and in full compliance with all laws and regulatory requirements, and that the plaintiff’s claims in the case are without merit. After a thorough investigation into the allegations, the US Department of Justice chose not to intervene in the case. While we are confident in our position and expected to prevail at trial, we have decided to enter into a settlement agreement without admitting any wrongdoing to avoid the uncertainty, distraction, inconvenience, and expense of a lengthy jury trial.”  

Jacob Horowitz is a contributing editor at Compliance Chief 360°

The post Humana Settles $90 Million False Claims Act Lawsuit Over Medicare Drug Plan appeared first on Compliance Chief 360.

The program offers monetary awards to those provide original information relating to financial crimes, bribery or healthcare fraud. If such information results in a forfeiture greater than $1 million, the whistleblower will be entitled to a financial award granted that the whistleblower.

“With this program we’re doubling down on a proven strategy to ferret out criminal activity that might otherwise go unreported,” said Deputy Attorney General Lisa Monaco. “Law enforcement has long offered rewards to coax tipsters to report crimes — from the “Wanted” posters of the Old West to the reforms in Dodd-Frank that created whistleblower programs at the SEC and the CFTC. Those agencies alone have received thousands of tips, paid out many hundreds of millions of dollars, and disgorged billions in ill-gotten gains from corporate bad actors.”

As outlined in the program’s guidance document, there are multiple criteria to meet in order to qualify for such an award. The whistleblower’s disclosure must be voluntary, the information must be original, the submission must be truthful and complete, including everything the individual knows about the conduct at issue and the individual must cooperate with the DOJ in the investigation, including testifying as required.

Individuals that meet these requirements will be eligible for an award, calculated based on the total proceeds forfeited. Eligible whistleblowers may receive up to 30% of the net proceeds forfeited to the DoJ For the first $100 million in net proceeds. Whistleblowers are eligible to receive up to 5% of any forfeiture between $100 and $500 million. Ultimately, this system sets a maximum award at $50 million.

In determining how much to give as an award the DoJ will consider multiple factors. These factors include the significance of the information; assistance provided by the whistleblower; participation by the whistleblower in the company’s internal compliance systems; any delay or interference in reporting; and if the individual was occupying an oversight role at the company.

The Program Faces Criticism for Implementing a Maximum Award Limit

Although this system has received praise from many of its observers, some have criticized it for its award cap. “Whistleblowers take enormous risks stepping forward, particularly in reporting the kind of wrongdoing targeted by DOJ’s new program,” said Erika Kelton, a partner at whistleblower law firm Phillips & Cohen. “By limiting the amount of an award, individuals may choose to stay silent, particularly because the larger recovery may also increase the risks.”

A Justice Department official noted that the $50 million maximum payment was established considering the history of SEC whistleblower awards, where most have been $50 million or less. According to agency data, the SEC has issued only three awards exceeding $50 million since the whistleblower program’s inception in 2011.

To file a claim for a whistleblower award, an individual must file a claim form located on the DoJ’ website. In order to be considered for an award all claim forms and required attachments must be received by the Department within 90 days of its publications of the successful forfeiture.  

Jacob Horowitz is a contributing editor at Compliance Chief 360° 

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“Protecting taxpayer dollars from fraud and abuse is of paramount importance to the Department of Justice – and these enforcement figures prove it,” said Acting Associate Attorney General Benjamin Mizer. “The False Claims Act remains one of our most important tools for rooting out fraud, ensuring that public funds are spent properly, and safeguarding critical government programs.”

The False Claims Act penalizes those who knowingly and falsely claim money from the United States or knowingly fail to pay money owed to the United States. Its purpose is to safeguard government programs and operations that provide access to medical care, support our military and first responders, protect American businesses and workers, help build and repair infrastructure, offer disaster and other emergency relief, and provide many other critical services and benefits.

“As the record-breaking number of recoveries reflects, those who seek to defraud the government will pay a high price,” said Assistant Attorney General Boynton, head of the DoJ’s Civil Division. “The American taxpayers deserve to know that their hard-earned dollars will be used to support the important government programs and operations for which they were intended.”

Of the more than $2.68 billion in False Claims Act settlements and judgments reported by the DoJ this past fiscal year, over $1.8 billion related to matters that involved the health care industry, including managed care providers, hospitals, pharmacies, laboratories, long-term acute care facilities, and physicians. The $1.8 billion only include recoveries arising from federal losses, but in many of these cases, the department was instrumental in recovering additional amounts for state Medicaid programs.

Health Care Fraud

In 2023, health care fraud remained a leading source of False Claims Act settlements and judgments. These recoveries restore funds to federal programs such as Medicare, Medicaid, and TRICARE, the health care program for service members and their families. But just as important, enforcement of the False Claims Act deters others who might try to cheat the system for their own gain, and in many cases, also protects patients from medically unnecessary or potentially harmful actions. As in years past, the act was used to pursue matters involving a wide array of health care providers, goods, and services.

In one of its largest settlements, The Cigna Group agreed to pay more than $172 million for allegations that it submitted inaccurate diagnosis codes for its Medicare Advantage Plan enrollees in order to increase its payments from Medicare. The DoJ obtained another $22.5 million from Martin’s Point Health Care for similar allegations.

The Department also received numerous settlements and judgements from companies who engaged in unnecessary services and substantial care, the opioid epidemic, and unlawful kickbacks.

Although these actions exhibit the DoJ’s focus on the healthcare industry, the recoveries in 2023 also reflect the department’s focus on key enforcement priorities, including fraud in pandemic relief programs and alleged violations of cybersecurity requirements in government contracts and grants. However, considering the trends of the past year, it is reasonable to anticipate that healthcare will continue to be a primary focus for the Department.  

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Trevor Murray, a former research analyst at UBS, sued the firm in 2012 claiming that he was fired after informing his supervisor that two leaders of the UBS trading desk were engaging in what he believed to be unethical and illegal efforts to skew his independent reporting. He originally won $903,000 in 2017 after a district court ruled in his favor however, that ruling was later overturned in 2022 by the Second Circuit court finding that fired whistleblowers suing under SOX must show that their employer acted with retaliatory intent when firing them.

Murray brough this claim under the Sarbanes-Oxley Act (SOX) which prohibits “publicly traded companies from retaliating against employees who report what they reasonably believe to be in- stances of criminal fraud or securities law violations.” The Act specifically provides that employers may not “discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of” protected whistleblowing activity.

As a result of the Court’s decision, the justices ultimately rejected the argument that a sperate finding of retaliatory intent is required for whistleblower protection under SOX. The Court has exhibited that in the context of whistleblower protection under SOX, plaintiffs merely need to demonstrate that their protected activity was a determining factor in their employer’s decision to fire them. After establishing this, the burden of proof shifts to the employers to prove that they would have taken the same action even in the absence of the employee’s protected activity.

The Court supported its decision by examining the purpose of the Whistleblower Protection. “The contributing-factor burden-shifting frame- work is meant to be plaintiff-friendly,” Justice Sotomayor said in her written opinion for the Court. “Showing that an employer acted with retaliatory animus is one way of proving that the protected activity was a contributing factor in the adverse employment action, but it is not the only way.”

“This is a huge victory for whistleblowers all across the country, not only corporate whistleblowers seeking relief under Sarbanes-Oxley, but all those seeking damages for retaliation under the dozen government and nongovernment whistleblower-protection laws structured in exactly the same way,” said Murray’s attorney Robert Herbst.

What Does This Mean for Companies Going Forward?

Now that the Supreme Court has showed that retaliatory intent is not necessary in employee whistleblower claims under SOX, the employer is no longer given the upper hand. The Court has inherently lowered the standard for all employees now that employers cannot simply provide some non-retaliatory reason for the action they took.

Due to this impactful decision, companies will now be forced to review their compliance and whistleblower protections. as they must be cautious in their treatment of employees who engage in whistleblowing activities. In essence, the ruling demonstrates that companies must prioritize dedicating additional time and resources to ensure that employees are not subjected to discrimination for engaging in whistleblower activities.  

Jacob Horowitz is a contributing editor at Compliance Chief 360°

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As Chief Ethics and Compliance Officer at Activision Blizzard, my priority is building a safe, inclusive workplace culture for all employees. But how do we do that when the ground is always shifting?

Step One: Find steady ground in policies and processes

Much like laying the foundation of a house, the bedrock of any culture is its policies and processes. At Activision, this meant auditing our existing documents and refreshing them with employee-first language full of real-world examples. Gone are the days of lawyer-speak: our focus was on building a Workplace Integrity Policy that our employees could see themselves in. It needed to feel current—and human. We applied the same approach to our Code of Conduct, which now includes scenarios and quotes from employees.

In addition to refreshing the language in policies, we also experimented with new ways of promoting policies to Activision employees. By releasing bite-sized narratives that revealed ethical dilemmas in Way2Play Stories and offering annotated PowerPoint guides and talking points for people leaders, we could start to bring our shared commitments to life.

Step Two: Create safe spaces for people to practice ethics

Once the foundation is in place, the job is to build virtual rooms of the house where employees can not only understand ethical decision making, but practice and role-play different scenarios. At Activision, we co-developed a live, interactive Workplace Integrity Training complete with common workplace situations. This gives all employees not only the chance to learn, but also the opportunity to rehearse bystander intervention in challenging moments fostering a speak-up culture.

Additionally, we empower our global group of ethics ambassadors (called Way2Play Heroes) to represent all parts of our business. They serve on the front lines of employees who might have concerns at work but aren’t yet sure what to do. To amplify the voices of all of our employees, these Way2Play Heroes champion speaking up at the grassroots level.

Along with equipping employees with practical insights about Workplace Integrity, we provide a clear list of reporting channels on our ASK List so employees know where they can raise issues. Those on the ASK List practice and gain additional skills to fulfill their roles and responsibilities when reports are made. Rather than have one singular reporting channel or escalation path, our preferred method is to share multiple ways of communicating concerns, including an anonymous hotline. By offering employees choice, they’re encouraged and empowered to select the path that makes them the most comfortable and confident in the process.

Step Three: Define a rock solid and transparent investigations process

Perhaps the most significant element of building a speak-up culture is the investigations process. Ensuring the right people, process, and technology are in place is table stakes; otherwise, employees lose faith in the system.

Over the course of a year, Activision’s Ethics and Compliance team has scaled from a few people to nearly thirty dedicated team members. Establishing the right resources and infrastructure to follow up on every elevated concern was paramount. By being as open as possible about how and when decisions are made, our Way2Play Ethics and Compliance team can follow through on our commitments to earn (and deepen) our employee community’s trust.

Step Four: Make speaking up a business imperative

In today’s competitive talent market, building a thriving workforce requires shared commitment across the business. To craft a speak-up culture, it can’t be solely a compliance, legal, or HR project. Real change comes from every member of the organization committing to speaking up and standing up for what’s right.

As part of a global company in throes of change, coordinated communication is key to enabling this speak-up culture. It also takes a shared commitment from the leaders who model day-to-day behaviors, and fully listening to people’s stories if we miss the mark.

The Heartbeat of the Organization

Your organization is likely experiencing its own version of uncertainty and state of change. We often see unethical behavior emerge during these inflection points—even when they’re positive ones. By fostering a speak-up culture, our goal is stay closer to the heartbeat of the organization, hear about the small issues before they escalate, and empower every player to be a part of creating a culture where everyone can do their best work together. We’re by no means perfect, but we’re committed to reinforcing a better and more ethical house. Brick by brick.  

Jennifer Brewer is Chief Ethics and Compliance Officer at gaming company Activision Blizzard. Anne Jacoby is CEO of Spring Street Solutions Co., a strategy consulting firm based in Los Angeles.

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According to the SEC’s order, between 2011 and 2022, as a condition of receiving separation pay, CBRE required its employees to sign a release in which employees attested that they had not filed a complaint against CBRE with any federal agency. The SEC’s order finds that by conditioning separation pay on employees’ signing the release, CBRE took action to impede potential whistleblowers from reporting complaints to the Commission.

Once the SEC informed CBRE that it had launched an investigation, the company cooperated with the SEC and took remedial action, including revising all versions of its domestic releases and similar agreements for compliance with the whistleblower protection rule. CBRE also communicated with more than 800 of its employees who had signed the release, clarifying the protections afforded to them by the rule, including their right to communicate directly with SEC staff regarding any potential violation of federal securities laws.

“It is critical that employees are able to communicate with SEC staff about potential violations of the federal securities laws without compromising their financial interests or the confidentiality protections of the SEC’s whistleblower program,” said Eric Werner, Regional Director of the SEC’s Fort Worth Office in a statement. “We commend CBRE for its swift and far-reaching remediation and for its high level of cooperation with our staff, which is reflected in the terms of the resolution.”

Without admitting or denying the SEC’s findings, CBRE consented to cease and desist from committing or causing any violations of the whistleblower protection rule in addition to the $375,000 penalty. In determining to accept CBRE’s offer of settlement, the SEC considered CBRE’s cooperation and remedial actions.  

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This is the highest award in the SEC’s whistleblower program’s history, more than doubling the $114 million SEC whistleblower award the agency issued in October 2020. The SEC did not identify the whistleblower or the case involved, consistent with its ongoing policy.

“The size of today’s award—the highest in our program’s history—not only incentivizes whistleblowers to come forward with accurate information about potential securities law violations, but also reflects the tremendous success of our whistleblower program,” said Gurbir S. Grewal, director of the SEC’s Division of Enforcement. “This success directly benefits investors, as whistleblower tips have contributed to enforcement actions resulting in orders requiring bad actors to disgorge more than $4 billion in ill-gotten gains and interest. As this award shows, there is a significant incentive for whistleblowers to come forward with accurate information about potential securities law violations.”

The payment was made to a single individual, while two other claimants related to the case were denied payment. Payments to whistleblowers are made out of an investor protection fund, established by Congress, which is financed entirely through monetary sanctions paid to the SEC by securities law violators.

SEC whistleblowers may be eligible for an award when they voluntarily provide the SEC with “original, timely, and credible information” that leads to a successful enforcement action, and adhere to filing requirements in the whistleblower rules set out in the Dodd-Frank Act. Whistleblower awards can range from 10 to 30 percent of the money collected when the monetary sanctions exceed $1 million.

“The whistleblower’s sustained assistance including multiple interviews and written submissions was critical to the success of these actions,” said Creola Kelly, chief of the SEC’s Office of the Whistleblower. “While the whistleblower’s information did not prompt the opening of the Commission’s investigation, their information expanded the scope of misconduct charged.” 

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The SEC separately has initiated litigation against Joshua Abrahams, Mattel’s former lead engagement partner, who resigned from PwC in 2019, “to determine whether he engaged in improper professional conduct and violated auditor independence rules,” the SEC said.

According to the SEC’s order, Mattel understated the tax-related valuation allowance for the third quarter of 2017 by $109 million and overstated the tax expense for the fourth quarter of 2017 by the same amount. As a result, Mattel’s third quarter and fourth quarter 2017 net loss and net loss per share were understated by 15 percent and overstated by 63 percent, respectively.

Mattel had been alerted to the alleged material misstatements in August 2019, when Mattel disclosed in a Form 8-K that it was made aware of an anonymous whistleblower letter alleging accounting errors and questioning Abrahams’s independence. An investigation by the audit committee concluded that there were material misstatements, according to the SEC order. “The audit committee also concluded (as did PwC in its own investigation) that Abrahams violated auditor independence rules,” the SEC order stated.

The SEC’s order further found that, at the time, Mattel had no internal control specifically related to calculating a valuation allowance. Until Mattel’s November 2019 restatement, the $109 million tax expense error remained uncorrected, and the lack of internal control for financial reporting related to the error remained undisclosed, according to the order. Neither Mattel’s CEO nor its audit committee were allegedly informed of the expense error.

The SEC’s order against Mattel, which neither admitted nor denied the findings, found the company violated the negligence-based antifraud provisions and the reporting, books and records, and internal controls provisions of the securities laws. In determining to accept Mattel’s settlement offer, the SEC said it considered the company’s cooperation with the investigation and its remediation measures.

‘Failure to Maintain Independence’

The SEC’s order against Abrahams alleges he violated “numerous professional standards” in the third quarter 2017 interim review and the 2017 annual audit of Mattel’s financial statements. According to the order, Abrahams failed to verify that the uncorrected $109 million error was documented, “despite knowing of it,” the SEC said. He also allegedly “failed to communicate the error to Mattel’s audit committee,” the SEC stated.

The order further alleged “Abrahams failed to maintain independence by providing prohibited human resource advice to Mattel, including suggesting to Mattel’s then-CFO which candidate would be the best fit for a senior position at the company, as well as who should not be hired.”

“An auditor’s adherence to professional standards and independence is critical to preserving investors’ trust in a company’s financial statements,” said Alka Patel, Associate Director of the SEC’s Los Angeles Regional Office. “Auditors who advise their clients on who to hire will have an interest in the success of such hires and could therefore be less critical of their effectiveness, all of which undermines the auditor’s independence.”

A public hearing before the Commission will be scheduled to decide if the Enforcement Division has proven the allegations in the order and what, if any, remedial actions are appropriate. 

Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.

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In Transparency International’s report, “Exporting Corruption 2022,” 43 signatories to the OECD Anti-Bribery Convention were assessed, along with China, India, Hong Kong SAR, and Singapore. Together, the countries analyzed account for almost 85 percent of all global exports, with OECD member countries accounting for almost two-thirds.

The report is meant to complement the OECD Working Group on Bribery’s (WGB) monitoring of country implementation of the OECD Anti-Bribery Convention in successive phases.

According to Transparency International, just two of the 47 largest exporting countries in the world—the United States and Switzerland—are “active enforcers,” meaning they investigate, charge, and impose sanctions commensurate with their share of global exports (11.8 percent in combination). However, even the United States pursued “significantly fewer cases in 2021,” Transparency International said in a blog post.

“From the inception of our categories in 2009, the percentage of global exports coming from ‘active enforcers’ had remained above 20 percent— nearly twice this year’s percentage—until it began to drop in 2020,” Transparency International said.

Two former “active” enforcers—the United Kingdom and Israel—dropped this year into “moderate” enforcement. Seven other countries whose enforcement levels declined were Italy, Brazil, Spain, Sweden, Portugal, Denmark, and Lithuania.

Most of the 47 countries analyzed have limited or no enforcement at all, while representing 40 percent of global exports. These countries include China, the world’s top exporter, as well as Japan, South Korea, Hong Kong, Russia and more.

Only two countries—Latvia and Peru—stepped up their foreign bribery enforcement efforts. That now puts Latvia in the “moderate” enforcement category, while Peru has inched up into the “limited” enforcement category.

Inadequacies persist
Transparency International’s report further highlighted inadequacies in legal frameworks and enforcement systems. “Serious inadequacies persist in laws and justice systems in every country. In many, investigative bodies have inadequate resourcing and independence,” Transparency International said.

It continued, “Whistleblowers lack key protections. Few governments publish sufficient information on pending or concluded foreign bribery cases stymying accountability to citizens, partner countries and the people harmed.”

“Even in countries that do enforce, foreign bribery continues to be treated as a victimless crime,” said Gillian Dell, head of Conventions at Transparency International and co-author of the report. “This means states whose companies commit crimes abroad fill their treasuries with multimillion dollar penalties while victims are left to bear the cost.”

“It is time to recognize victims’ rights by developing transparent and accountable mechanisms to compensate those harmed, including foreign states, business competitors and whole populations suffering from foreign bribery,” Dell added. “This is essential to achieve justice and deter future violations.” 

Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.

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After being terminated in 2019, the senior manager, who was not named in the enforcement action, filed a complaint with the Occupational Safety and Health Administration (OSHA), alleging retaliation in violation of the Sarbanes-Oxley Act’s whistleblower protection provisions. According to OSHA, the senior manager repeatedly voiced concerns to area managers and the corporate ethics line regarding conduct believed to be in violation of relevant financial laws, including wire fraud.

The senior manager expressed concerns about being “directed to falsify customer information and alleged that management was engaged in price-fixing and interest-rate collusion through exclusive dealing,” OSHA stated.

Wells Fargo initially failed to provide a reason for the termination, OSHA stated, but later alleged it terminated the manager as part of a restructuring process. “However, investigators found the removal was not consistent with Wells Fargo’s treatment of other managers removed under the initiative,” the agency stated.

“The evidence demonstrates Wells Fargo took retaliatory action against this senior manager for repeatedly expressing concerns about financial management they believed violated federal laws,” said Doug Parker, assistant secretary of Labor for Occupational Safety and Health. “The Sarbanes-Oxley Act protects employees from retaliation in these very circumstances, and the Department of Labor will not tolerate employers who violate the law and illegally terminate workers that exercise their rights under the law.”

Wells Fargo has been ordered to pay the employee back wages, interest, lost bonuses and benefits, front pay and compensatory damages, all of which totaled approximately $22 million. The order comes on the heels of charges by the Securities and Exchange Commission against Wells Fargo Advisors for failure to file at least 34 Suspicious Activity Reports (SARs) that seek to prevent money laundering.

OSHA’s Whistleblower Protection Program enforces the whistleblower provisions of the Sarbanes–Oxley Act and more than 20 whistleblower statutes. These statutes protect employees from retaliation for reporting violations of workplace safety and health, aviation safety, consumer product laws, environmental laws, financial and insurance fraud, securities and tax violations, criminal antitrust, and anti-money laundering laws; as well as for engaging in other related protected activities.

Both parties have 30 days from the receipt of OSHA’s findings to file objections and request a hearing before an administrative law judge. 

Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.

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