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GENERAL COUNSEL LIABILITY IN HEALTH CARE ETHICS AND COMPLIANCE OVERSIGHT.

By Greg Piche'

It is not easy being General Counsel for a health care system and growing more difficult with the advent of Corporate Integrity Agreement and Public Securities Obligations.  It is also dangerous and unwise to accept responsibility for Chief Compliance Officer as well as Chief Legal Officer. The ongoing travails of Christi R. Sulzbach, Esq. former Executive Vice President and General Counsel and Chief Compliance Officer of Tenet Healthcare Corporation is a case in point. Ms.Sulzbach, who resigned her position at Tenet in 2003, settled a case brought against her by the Securities Exchange Commission. arising out of a Tenet scheme to defraud Medicare by over reporting its costs so as to increase Medicare payments under its enhanced payment program for ?Outlier? patient conditions.  Tenet settled for 10 Million Dollars several years ago. 

The complaint against Ms. Sulzbach alleged that the Tenet over reported income to investors in 10Ks and other SEC filings and that she was substantially involved in the preparing, reading , reviewing and approving of the publicly filed documents. It also alleged that she knew or was reckless in not knowing about the strategy to aggressively increase gross charges at Tenet in order to inflate Medicare revenues to Tenet, particularly after questions were raised with her by Tenet employees. She agreed to an injunction preventing her from violating several securities fraud statutes and to the payment of a $120,000.00 civil fine. This settlement does seem relatively cheap for Ms. Sulzbach who reportedly made 7.25 Million dollars in stock options alone in the year 2001 during the go go days of Tenet stock. she was also among the highest paid corporate lawyers in the country.

She also came under the scrutiny of the chairman of the Senate Finance Committee, Senator Chuck Grassley when he announced the start of the Tenet investigation in 2003.

"Apparently, neither Tenet nor Ms. Sulzbach saw any conflict in her wearing two hats as Tenet?s general counsel and chief compliance officer. As general counsel she zealously defended Tenet against claims of ethical and legal noncompliance .  .  . while as chief compliance officer, she supposedly ensured compliance by Tenet?s officers, directors and employees.? It doesn?t take a pig farmer from Iowa to smell the stench of conflict in that arrangement."

But wait, that?s not the end of the dealing with the federal tar baby. In 2007, the government filed a lawsuit against Ms. Sulzbach in Florida asserting that she made false certifications of compliance under a Corporate Integrity Agreement.  She certified to the government that Tenet was in substantial compliance with federal regulations at the same time she was in receipt of a report from her outside law firm that Tenet was not in compliance because it was overpaying employed physicians and compensating them on the basis of referrals for laboratory tests and other ancillary services. That case, United States v. Sulzbach,, S.S. Fla.., No. 0:07-cv-61329. is set for trial on March 8, 2010. The government, never known for its restraint in these sort  of things is requesting statutory fines of $10,000.00 in damages for each of  70.000 illegal payments under Stark made to Tenet. Pretty soon that adds up to serious money. Ms. Sulzbach has appeared on continuing legal education panels dealing with corporate ethics and compliance.  This experience ought to increase the demand for her insights.

Full post as published by Healthcare Law Blog on July 09, 2009 (boomark / email).