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Regulatory: Can a corporation be liable for “violating” an ambiguous regulation?

Some criminal and False Claims Act allegations invoke unclear and incomplete regulations

Companies in heavily regulated industries such as healthcare, government contracting and financial services face the constantly evolving challenge of complying with complex and often incomplete regulatory schemes. With full implementation of the Affordable Care Act and the Dodd-Frank Act still to come, this challenge will only increase.

If a corporation fails to comply with key regulations that govern its business activities, the consequences can go well beyond regulatory sanctions. The corporation may also be exposed to punitive criminal and civil False Claims Act liability. In fact, it is not unusual for the Department of Justice and False Claims Act whistleblowers to rely on alleged regulatory violations to pursue criminal investigations or False Claims Act complaints against corporations. Perhaps most troubling, criminal and False Claims Act allegations sometimes invoke regulations that are unclear or incomplete and thus fail to provide corporations with adequate notice about exactly what the law requires. In such circumstances, government lawyers and whistleblowers often point to administrative agencies’ guidance statements, advisory opinions, or other informal pronouncements to support their theories. Due to the increasing pace and complexity of regulation, companies will continue to face the challenge of anticipating what the law requires in the absence of full information.

Contributing Author

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Jason Brown

Jason Brown is a partner with Ropes & Gray. For over 25 years, Jason has practiced in the areas of white-collar criminal and complex civil...

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Contributing Author

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Aaron Katz

Aaron Katz is an associate at Ropes & Gray. As an associate in Ropes & Gray’s litigation department, Aaron has represented corporate and individual clients...

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