OIG Investigations – Why Lawyers and Clients Should Both Worry (Part II)

March 5, 2018

By Dan Portnov

Last week, Sara wrote about Liff v. Office of Inspector General for the U.S. Dep’t of Labor, et al., a government contractor’s unsuccessful suit against the Department of Labor and its Office of Inspector General (OIG) for the latter’s publication of a non-public investigative report. Her exceptionally well-written analysis serves as the jumping off point for a look into an OIG’s investigations of private entities.

(For a summary of OIG investigations into federal employees, check out Sara’s 2017 post, retroactively called Part I, here. Warning: pulling back the curtain on OIG investigations will be a multi-blog post endeavor, so buckle in.)

As background, there are 73 federal Offices of Inspector General and each serves as an independent investigative arm that reports both to the head (or deputy) of the federal department (or agency) and to Congress by way of semi-annual report. While an agency may request its inspector general to conduct a specific investigation, such as Attorney General Sessions referring alleged abuses of FISA surveillance for investigation, no head of an agency may prohibit or prevent the inspector general from conducting an investigation or audit.

Guiding Principles of an IG Investigation

The Quality Standards for Investigations (QSI), last updated by the Council of Inspectors General on Integrity and Efficiency (CIGIE, pronounced “Siggy” if you’d like to sound in the know) in 2011, provides standards that are “comprehensive, relevant, and sufficiently broad” to accommodate the audits and investigations of all 73 member offices. Individual OIGs may have their own individualized policies and procedures, although not many have published theirs to the public. The OIGs that have, such as the Department of Defense (DoD), expressly adopt the QSI as a baseline.

The QSI is quite broad and, unfortunately, no requirement appears to exist for individual OIGs to publish specific investigative standards and procedures. Thus, many an IG are able to maintain a Kafka-esque secrecy[1] about their investigative process – to great effect.

Additionally, five OIGs have been provided law enforcement authority outside of the IG act: DoD, the United States Postal Service, Department of Agriculture, the Treasury IG for Tax Administration, and the Special IG for the Troubled Asset Relief Program. These OIGs are further governed by the Attorney General Guidelines for Offices of Inspector General with Statutory Law Enforcement Authority.

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The IG’s Role in Investigating Private Entities

An OIG’s investigative mandate is rooted in preventing fraud, waste and abuse in the federal agency it serves. Private entities, whose business or personal affairs involve programs funded by the agency, fall within the purview of that agency’s OIG. Certain agencies, like the Social Security Administration, have so many public-facing programs that the OIG serves as their first line of defense to crimes such as false claims, misuse of benefits and bribery, among others.

Other OIGs occasionally lend their special agents’ expertise to related criminal investigations and task forces. Recently, the OIG of Amtrak announced that its agents have been supporting the FBI-led Greater Palm Beach Health Care Fraud Task Force in its investigations into health care fraud schemes that involved fraudulent claims submitted to Amtrak’s insurance providers.

Healthcare fraud comes up often as the underlying subject matter for an OIG’s involvement in investigating private entities, as evidenced by the U.S. Department of Health and Human Services (HHS) Criminal and Civil Enforcement press release page.

On the whole, departments and agencies whose core functions involve investigations and law enforcement, e.g. Department of Justice and the Commodities Futures Trading Commission, most often rely on their OIGs to investigate internal incidents and employees, while the non-enforcement oriented SSA and Amtrak will utilize their OIGs to investigate private parties, i.e. outward-facing investigations.

Commencing an OIG Investigation

No formal procedure is required to launch an OIG investigation. The typical ways in which a matter is brought to the OIG for investigation include:

  1. Whistleblower report or hotline
  2. Periodic audit or examination
  3. News media reporting
  4. Referral from Department of Justice or other agency

A Preview of the OIG’s Investigative Tools

When it comes to federal employees, the OIG can be an overwhelming force, surprising the employee at their workplace for an interview and administering (confusing) warnings prior to the interview – such as Kalkines – that explicitly condition continued employment on full cooperation. (We’ll do a later post on OIG interview warnings; it’s a complicated topic.)

With private entities, the OIG loses the ability to threaten discipline or termination of employment, but nonetheless remains formidable.

Presently, only the DoD has testimonial subpoena power for witnesses who are not federal employees. There has been a major push by CIGIE to amend the IG Act to expand its members’ testimonial subpoena power. However, the OIG can still seek voluntary testimony from private entities, without having to provide the warnings required to federal employees.

The OIG has broad administrative subpoena authority under the IG Act, with the power to compel a private party to produce documents and records, and may be issued directly by the agency’s OIG, without any judicial review. These subpoena are subject to judicial enforcement and, since the IG Act does not provide specific penalties for failure to comply, it would be up to the enforcing court to fashion a remedy should a private entity refuse to respond. This power, coupled with the broad criteria for issuance, covered here, make challenging an OIG subpoena difficult.

In the upcoming Part III of our look into OIG Investigations, we will dive deeper into OIG subpoenas, since one of those can wreak havoc on a private company and offer critical insight into a possible investigation.

[1] One of Franz Kafka’s best-known novels, The Trial, tells a story of Josef K., a man who is suddenly prosecuted by a nameless, inaccessible authority, for an alleged crime that is never revealed. Little is told to Josef K. during his continued interactions with agents of the prosecutor, until he is finally executed. Spoiler alert: you probably read this book in high school.

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