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DOJ lets companies skip paying penalties during pandemic

DOJ lets companies skip paying penalties during pandemic
© Greg Nash

The Department of Justice (DOJ) is giving a temporary pass to companies that are required to make penalty payments to the federal government, citing the financial strain of the coronavirus.

The new policy, which extends until at least June 1, affects firms that are required to pay civil penalties after entering into a legal settlement with the federal government.

The DOJ first informed its attorneys of the change in a March 31 memo that was updated Monday, and companies began being notified this week.

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While DOJ says the move is intended to “mitigate the financial impact” of the coronavirus, enforcement attorneys who have spent years going after the companies say they were shocked by the blanket policy.

“It's unprecedented in how broad it is,” said Francis Lyons, a partner with Schiff Hardin LLP who previously worked on environmental enforcement issues at the Justice Department. “I think this policy goes beyond what is necessary under the circumstances.”

The new policy isn’t just affecting a handful of businesses either.

In the last week alone, DOJ announced settlements ranging from a few million dollars to tens of millions. In Florida, a Tampa-based firm was fined $41 million for its alleged role in fraudulently charging Medicare and other government health care providers for unnecessary tests, while care providers based in Ohio and Michigan will pay a combined $14 million for allegedly charging the government for unnecessary therapy.

In another case, a South Korean company will pay $2 million after rigging a bid in order to secure an oil supply contract with the military. And in February, Wells Fargo agreed to a $3 billion settlement after bank employees were pressured to sign customers up for various banking products without their consent.

Critics argue that if companies are allowed to suspend payments because of the coronavirus, they need to show how the pandemic is creating financial hardship.

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“I think it should be a case-by-case policy. They should allow people to opt out [of making payment] if they can show the virus has affected their business. But if they can't show that I don't think they should get it,” said Joel Mintz, a former EPA enforcement attorney who later worked as a law professor at Nova Southeastern University in Florida.

“If you're still getting paid, there’s no reason why you shouldn't still pay the government the money you owe. It’s because you violated the law that you owe it.”

Companies are still permitted to submit payments if they want to. A letter sent to oil company BP said it was free to do so.

“Nonetheless, if you are prepared to pay at this time, let us know by emailing me and the DOJ attorney with whom you worked on this case,” DOJ wrote in a letter first reported by InsideEPA. “If you do nothing, the government will not seek collection of this debt until after May 2020.”

The DOJ memo is the latest broad directive from the Trump administration designed to ease regulations on businesses during the pandemic.

In late March, the Environmental Protection Agency (EPA) said companies that fail to monitor their pollution during the outbreak would not be targeted for fines or penalties.

Critics called the policy a license to pollute, while EPA argued that its employees would otherwise be overwhelmed by requests to deal with monitoring.

Under the DOJ memo, companies will still have to pay their debt in full and interest will accumulate during any pause in payments.

But Lyons said DOJ enforcement personnel already have the power to grant relief for companies that can show they are facing financial hardships, part of the reason he believes the new policy is unnecessarily broad.

It’s unclear how many companies will decide to delay payment or how much money won’t make it into government coffers while the policy is in place.

“This policy cuts off income to the federal government at a time when there's this massive spending by the federal government to keep the economy afloat, so you’d think they’d care about other funds coming in,” Mintz said.

But he’s also worried about the optics of the move.

“It kind of sends a message to these companies that you’re letting them off the hook,” he said.