Private Equity Firms as FCA Targets—“The Reunion”

United States ex rel. Martino-Fleming v. South Bay Mental Health Ctr. arose from the private equity firm’s ownership of a mental health center through a portfolio company, and the health center’s allegedly false submissions to Medicaid for medical services purportedly performed by unqualified and unsupervised clinicians. Besides claiming that the mental health center and portfolio company had common officers and board members, the relator’s complaint also alleged that the portfolio company’s CEO and Board were informed about the regulatory noncompliance but had rejected recommendations to take corrective action and address the violations. As a result, the court denied the defendants’ motion to dismiss, noting that such ostrich-like behavior could constitute “sufficient participation in the claims process to trigger FCA liability.”

Source:

• Arnold & Porter: Private Equity Firms as FCA Targets—“The Reunion”