Principal Deputy Assistant Attorney General David Bitkower Delivers Remarks at American Bar Association Southeastern White Collar Crime Institute

Remarks as prepared for delivery

Thank you Joe [Whitley] for that kind introduction.  And thank you to the American Bar Association for inviting me to speak with you this morning at the Southeastern White Collar Crime Institute. 

Most people—judges, attorneys, victims and defendants—who interact with the Department of Justice in criminal matters do so through the U.S. Attorney’s Offices, which lead the prosecution of the great majority of federal cases.  The Criminal Division in Washington, D.C., is perhaps less well-known to the broader audience.  But in a number of areas, and especially with regard to transnational and multi-district white collar cases, the division has been a leader, both in prosecutions and in helping to establish department policy.  The more than 700 prosecutors in the Criminal Division work alongside Assistant U.S. Attorneys (AUSAs) in the courtroom every day to prosecute cases involving public corruption, money laundering, cybercrime, child exploitation, transnational organized crime, international drug trafficking and human rights violations.  Most relevant to today’s conference, two of our largest sections—the Fraud Section and the Asset Forfeiture and Money Laundering Section—are devoted to investigating and prosecuting significant white collar matters.  Additionally, our policy experts—many of them longtime trial attorneys, regulators and former AUSAs— draw on their experience to improve how we do things.  And internationally, the Criminal Division serves as the department’s prosecutorial liaison with our foreign law enforcement counterparts. 

As you can see, the Criminal Division occupies a unique position—working on cases across the nation and with U.S. Attorney’s Offices and enforcement counterparts around the globe—that gives us a national and international vantage point on the white collar crime problem.  With that vantage point, and because of the division’s subject matter—rather than geographic—focus, we have been able to develop new, broad-based and proactive approaches to emerging issues in the area of white collar crime.

Today, I am going to highlight a few of these evolving approaches in the areas of health care fraud, sophisticated financial fraud, Foreign Corrupt Practices Act (FCPA) matters and international corruption.

First, I would like to discuss the Criminal Division’s data-driven approach to prosecuting health care fraud.  Health care spending constitutes a sixth (17.5 percent) of the United States’ Gross Domestic Product, and our experience indicates that fraudulent Medicare and Medicaid claims are widespread.  Health care fraud is a systemic problem that resists mitigation through one-off prosecutions.  The problem must be approached strategically with an effort to focus on those areas—both geographic and in terms of the types of claims—where we are finding the most significant fraudulent conduct.

The heart of the Criminal Division’s health care fraud enforcement effort is the Medicare Fraud Strike Force, which was established in 2007 and now operates in nine districts across the country.  These nine geographic regions were strategically selected, as our data analysis identified them as “hot spots” for health care fraud.  Since its inception a decade ago, the Strike Force has charged almost 3,000 defendants responsible for more than $10 billion in fraudulent Medicare claims.  Two of the Strike Force’s recent accomplishments exemplify the Criminal Division’s targeted approach to combatting this type of crime.

First, this past June, the Strike Force announced the largest ever nationwide health care fraud takedown, in which approximately 300 defendants in more than 30 different federal districts were charged in connection with more than $900 million in fraudulent billings.  The defendants charged as part of the takedown included doctors, nurses, pharmacists and others accused of committing a wide range of serious offenses, including fraudulently billing Medicare and Medicaid for millions of dollars in treatments and services that were medically unnecessary or never even provided, and laundering the proceeds of the fraud through shell companies and other means.  Based in part upon data collected and analyzed by the Criminal Division’s Fraud Section and U.S. Attorney’s Offices around the country, we were able to target the most prolific offenders in those 30 districts, including right here in the Northern District of Georgia.  For example, one of the doctors charged was flagged during our data analysis as one of the nation’s top Medicare Part B billers.  Further analysis showed that his billing patterns were a significant outlier when compared to his peers in a space—home health care—that is often ripe for fraud.  These key indicators allowed us to focus our often limited resources on a worthy target in a real time and efficient manner. 

The very next month, we announced the largest single criminal health care fraud case ever brought against individuals.  In that case, we charged three individuals in South Florida who are accused of being at the center of a Miami-area fraud scheme that fraudulently billed more than $1 billion to Medicare and Medicaid.  This case was again the result of the cutting-edge data analysis developed by the Criminal Division and our partners.  The use of these sophisticated—and previously unavailable—techniques enabled investigators to analyze patient admissions data across a wide region to see that thousands of beneficiaries were being repeatedly cycled through a seemingly unconnected network of hospitals, nursing homes and assisted living facilities.  This helped law enforcement to identify the web of facilities and medical professionals involved in the fraud scheme and then to trace the reimbursement claims they made.  In short, the data analytics helped us uncover the link between the seemingly unconnected corrupt institutions.   

Although many of our prosecutions in this arena have focused on individual physicians, home health care providers, pharmacy owners and medical equipment suppliers, as we go forward, the Criminal Division will be applying the same systematic and data-driven approach to root out corporate health care fraud as well.  We have launched a number of active corporate investigations and are taking several different proactive approaches to monitor and identify corporate health care fraud.  Among these approaches is a careful review and analysis of False Claims Act lawsuits filed by qui tam relators across the country to consider whether the facts and circumstances support criminal investigation and possible prosecution. 

These data-driven techniques are not replacing old-fashioned law enforcement, but only a forward-thinking approach will allow the department to stay a step ahead of emerging fraud trends as we fight fraud in federal health care programs.

In the financial fraud arena, schemes are becoming ever more complex and are also more frequently becoming cross-border in nature.  Criminal activity that takes advantage of a global market mimics that market in its global reach, with the result that crucial evidence, or the wrongdoers themselves, may be located halfway across the globe from victims and investigators.  In order to meet the challenge of combating this transnational criminal activity, the Criminal Division is strengthening the coalitions we have formed with our international law enforcement and regulatory counterparts.

For example, last November, the Criminal Division’s Fraud Section worked with the Antitrust Division to successfully prosecute two former traders with the Dutch bank Rabobank for manipulating LIBOR interest rates.  As you know, the British Banker’s Association set the LIBOR rates based on submissions from a panel of 16 banks, including Rabobank, reflecting what those banks asserted were accurate assessments of interbank interest rates.  LIBOR was considered an objective, market-based rate and served as the primary benchmark for short term interest rates for several currencies, as well as the basis for countless financial products, including interest rate contracts, mortgages, credit cards and student loans.  The defendants and their co-conspirators figured out that by changing their rate submissions on behalf of Rabobank, they could manipulate LIBOR, thereby manufacturing false profits on LIBOR-based contracts held by the bank.  Their crime affected not only the counterparties to Rabobank’s own contracts, but also untold investors and consumers around the world with no other connection to Rabobank.  The two defendants convicted at trial, along with the others who pleaded guilty, are British; the fraud included a Japanese employee; and charges remain pending against an Australian and another Japanese national.  Thus far, the government’s continuing LIBOR investigation has yielded resolutions from banks not only in the United States and United Kingdom, but also the Netherlands, Switzerland and Germany.

Cases such as LIBOR, and the subsequent cases involving manipulation of the foreign exchange markets, reflect a natural continuation of the growing relationships between the Criminal Division and foreign law enforcement.  You should expect to see us leveraging our relationships with both U.S. and foreign regulators more and more.

These relationships have been strengthened, in part, by the department’s increased global presences and the additional resources we are bringing to the fight against international crime.  The Criminal Division has lawyers serving as eyes and ears on the ground across the world.  We have attachés in eight countries, stationed at U.S. Embassies in Bangkok, Bogota, Brussels, London, Manila, Mexico City, Paris and Rome.  We also recently placed Criminal Division prosecutors with Eurojust in The Hague and INTERPOL in France.  These lawyers work on operational matters with U.S. prosecutors and law enforcement personnel as well as with foreign authorities in their assigned countries.  In addition, we have more than 100 legal advisors stationed around the globe on a permanent or intermittent basis.  These advisors offer mentorship to their counterparts, help to improve our counterparts’ capacity to investigate and prosecute complex crimes, and cement long-term relationships among agents, prosecutors and judges.

As crimes against the United States are more frequently being committed from beyond U.S. borders, and witnesses, evidence and even defendants are more frequently located in foreign jurisdictions, it is essential that the Justice Department be able to coordinate speedily and fluently with our counterparts abroad, or a growing portion of our economy will be left exposed to the potential for fraud, corruption and abuse.

With respect to health care and financial fraud, I have discussed investigatory advances that have increased our ability to strategically address criminal threats.  I would like to now discuss another strategic initiative that has allowed us to advance our efforts—this time in the FCPA arena.  As I mentioned already, we know that criminal activity across borders can be difficult to detect, let alone investigate and successfully prosecute.  To address this, we recently announced a number of enhancements to our ability to investigate and prosecute foreign corruption cases, including additional prosecutorial and law enforcement resources dedicated to FCPA cases.  But as part of our holistic approach, we also developed a targeted pilot program to try to increase the incentive for companies to self-report these cases and aid us in ensuring that there are no safe havens for those who engage in such criminal activity.  The pilot program, launched by the Fraud Section this past April, centers around a sophisticated and realistic approach to encouraging corporations and individuals to self-disclose wrongdoing and cooperate with our investigations. 

The guidance explains the credit available to companies that voluntarily self-disclose FCPA misconduct, fully cooperate with investigations and remediate.  In recent months, the Fraud Section has also made public several declinations made under the pilot program.  This is part of our greater effort to promote both transparency and accountability, and is important for a number of reasons.

First, transparency enables the public to understand why particular results are reached in particular FCPA cases and helps to reduce any perception that our enforcement decisions may be unreasoned or inconsistent.  And second, transparency informs companies what conduct will result in what penalties and what sort of credit they can receive for self-disclosure and cooperation with an investigation.  This, in turn, enables companies to make more rational decisions when they learn of foreign corrupt activity by their agents and employees.  Companies will thus understand that in any eventual investigation, a decision not to disclose wrongdoing will result in a significantly different outcome than if the company had voluntarily disclosed the conduct to us and cooperated in our investigation.  In this way, we believe that increased transparency in our FCPA charging decisions will encourage voluntary corporate self-disclosure of overseas bribery, and thus more prosecutions of the individuals responsible for those crimes, and ultimately less crime.

This kind of testing, even on a pilot basis, of a systematic and defined approach to motivating companies to promote accountability, is squarely aligned with the department’s larger individual accountability initiative, with which I am sure you are all familiar. 

We are also bringing a systematic, metrics-oriented approach in evaluating the compliance programs of companies seeking to resolve criminal investigations.  As you know, the department has long placed emphasis when reaching corporate resolutions on the existence or lack of an effective corporate compliance program.  Over the past 20 years in particular, the role of compliance has evolved, becoming more sophisticated, industry-specific and metrics-oriented.  Many companies have tailored their compliance programs to make sense for their businesses, risk factors, geographic regions and their work.  But some have not.  And since last year, the Fraud Section has been using a compliance consultant—an attorney with extensive compliance expertise in a range of different industries—to evaluate corporate compliance programs in terms of both industry best practices and real-world efficacy, and also to make sure that companies are not passing off mere paper programs as bona fide compliance programs.

But our compliance consultant is not simply assisting the Fraud Section in analyzing the compliance programs of companies in resolution negotiations, she has also helped prosecutors improve how we approach investigations.  With the benefit of the experience of the compliance consultant, we are able to use benchmarking and other metrics to conduct more exacting interviews of compliance personnel and other witnesses, allowing us to further develop facts and leads within an investigation while also being able to probe what companies are telling us about their compliance.

The FCPA is one component of the fight against global corruption, which remains a high priority for the Justice Department.  But that fight is closely tied with the ongoing fight against money laundering, and for a simple reason: international corruption and transnational crime are big businesses, and often the best way to take on those businesses is to follow and disrupt the flow of money.  Criminal enterprises—those led by corrupt government officials, drug cartels, cybercriminal groups and all sorts of other transnational criminal organizations—rely on illicit financial networks to move the proceeds of their crime.  These networks are increasingly run by third-party money launderers—financial professionals and attorneys—who use sophisticated techniques to hide their clients’ criminal proceeds.  These means can often include the use of shell companies, nominees and other means to hide the true owner of an asset.  Tracing money and determining whether an entity is a front company takes time.  It may take years—if we succeed at all—to break through these barriers and figure out which companies are associated with the corruption or to tie them to the assets to forfeit.  The failure to establish beneficial ownership not only impedes investigations but undermines the ability of financial institutions in the United States and abroad to know which potential clients pose a risk to the financial institution or to fulfill their obligations to prevent the introduction of criminal proceeds into the U.S. economy.

There is growing awareness of this world-wide problem, and the administration and its international partners—including those in the European Union—are addressing it in a number of ways, including through recently proposed legislation that would enhance law enforcement’s ability to prevent the concealment and laundering of illegal proceeds of transnational corruption and would assist prosecutors in gathering evidence which can be used in the prosecution of those who seek to hide and move illegal funds.  But we cannot wait for legislation, and we are continuing to develop our own internal capabilities that will allow us to work through increasingly opaque and complicated webs of transactions in order to identify illegal proceeds and the wrongdoers who seek to hide them.

This effort was on display in July, when the Attorney General announced an action by the Criminal Division’s Kleptocracy Asset Recovery Initiative to seize more than $1 billion in assets that were allegedly proceeds from a massive fraud perpetrated on the people of Malaysia by officials running that country’s sovereign wealth fund.  The Kleptocracy Initiative, which was launched in 2010, is aimed at combating large-scale foreign official corruption and recovering public funds for use of the citizens of the affected country.  These prosecutors, together with federal law enforcement agencies, are applying sophisticated techniques to methodically trace assets across an often complex web of international transactions—both to investigate past corruption as well as to respond to current, ongoing events.

You are all seasoned members of the white collar defense bar, so some of what I have described may be familiar to you.  But I have chosen to highlight these areas because they demonstrate a common theme, which is that across the board—but with special clarity in the white collar arena—the Criminal Division is using its nationwide and international vantage point and deep subject matter expertise to develop unique approaches to criminal enforcement.  We are not sitting idly by and waiting for your clients—corporate or otherwise—to report crimes to us.  Rather, the department remains forward-thinking, and we will adapt, take advantage of technology and leverage our relationships to ensure that we are able to meet the challenges posed by 21^st century criminals.

It has been a privilege to speak with you this morning.  I hope you have found it informative for your practice and in your efforts to represent your clients in interactions with the Department of Justice.  Thank you for having me and I look forward to addressing any questions you might have.