On September 4, 2020, Acting Assistant Attorney General Ethan Davis issued guidance to the U.S. Department of Justice’s Civil Division on evaluating inability-to-pay claims. The memorandum, titled “Assessing an Entity’s Assertion of an Inability to Pay,” sets forth an analytical framework for evaluating an individual or company’s claim that it cannot pay a civil fine or monetary penalty because it lacks sufficient assets. This framework would apply to civil claims under the False Claims Act.
The recent guidance reinforces the Civil Division’s long-standing practice of taking under consideration an entity’s assertion that it is unable to both “pay the government and meet its ordinary and necessary business and/or living expenses.” In making an inability-to-pay argument, entities must complete the Division’s certified Financial Disclosure Form, which identifies assets and liabilities, current and anticipated income and expenses, cash flow, projections, working capital, and other relevant information. Entities must also cooperate in providing access to appropriate personnel and documentation responsive to DOJ’s inquiries, including tax returns and audited financial statements.
A specialty laboratory recently agreed to pay up to $43 million to resolve FCA claims based on allegations raised internally and later in a whistleblower complaint filed by its former Chief Medical Officer (CMO). The defendant, Genova Diagnostics Inc. (“Genova”), provides laboratory testing services focused on potential interactions between the environment and the gastrointestinal, endocrine, and immune systems. The tests are used by functional medicine specialists to help develop treatment regimens.