Kan Nawaday was quoted on March 16, 2018, in Law360 in an article about Riordan Lewis & Haden Inc., the defendant, alleging Tricare fraud alongside its portfolio company, Patient Care America, which may be the first government-led, government-intervened FCA complaint to specifically target a private equity owner for the alleged false claims of a portfolio company.
Given RLH's alleged level of active control over the pharmacy's operations, the government's decision to file suit against the private equity firm as well as the pharmacy is understandable, said Mr. Nawaday.
"DOJ made a point of noting that the private equity company hired the portfolio company CEO, who's also a defendant, against the advice of an outside consultant," Nawaday said. "Also, it seems that — at least as alleged in the complaint — the private equity board members knew about the illegal kickback payments … so because of that, on the facts, it makes sense why DOJ charged the private equity company."
Even where a private equity firm has a more active role in the operations of a portfolio company, the relevant standard for FCA liability is knowing or intentional fraud, not mere negligence, Nawaday noted — likely tough for the government to prove when a firm doesn't exercise direct control of a company.