By James P. McLoughlin, Jr. and Kristen Kenley. In December, the Department of Justice filed its first ever criminal case for price fixing of wages. DOJ indicted the owner of a physical therapist staffing company for instigating a conspiracy among physical therapy services to suppress competition and fix wages for physical therapists and physical therapy assistants. Neerha Jindal, whose former company operated in the Dallas-Fort Worth area, was indicted in the Eastern District of Texas for violation of Section 1 of the Sherman Act.
In Count One, DOJ alleges Mr. Jindal successfully encouraged his co-conspirators at other therapist staffing companies to lower therapist reimbursement rates and subsequently paid lowered rates to therapists. DOJ alleges that in the text messages and other communications Mr. Jindal and his co-conspirators agreed that their plan to lower wages would work if they were “all on the same page” and that they “should move together.” DOJ alleges also Mr. Jindal forecast to his co-conspirators the lower rates that his company would pay.
In Count Two, the indictment charges Mr. Jindal with obstruction of proceedings before the Federal Trade Commission in violation of 18 U.S.C. § 1505 for making false statements to the FTC while withholding and concealing evidence during the FTC’s investigation of the alleged conspiracy. On Count One Mr. Jindal faces a maximum penalty of ten years in prison and a $1 million (which can be increased to twice the gain derived or the loss suffered if either is greater than $1 million) and five years in prison plus a fine on Count Two.
Since 2016, DOJ has forecast its intent to enforce the Sherman Act criminally to protect wages. In April 2020, the DOJ and FTC issued a joint statement that they are monitoring employers, staffing companies, and recruiters who participate in wage-fixing activity.
Prior to this indictment, DOJ has brought civil cases, particularly in healthcare, to prevent the suppression of wages. One of the more significant of these civil cases was filed against the Arizona Hospital and Healthcare Association and the related AzHHA Service Corporation, which alleged the Association and its registry program fixed prices and other terms for per diem and traveling nursing services in violation of Section 1 of the Sherman Act. The program challenged by DOJ started with the permissible activity of setting qualification standards for per diem and traveling nurses, but DOJ alleged it ran afoul of the Sherman Act when the Association and its member hospitals required staffing agencies to negotiate exclusively with the Association on behalf of the hospitals, and in that process, set uniform wages and other terms of employment across the hospitals. That case was settled by a stipulated injunction prohibiting the infringing conduct for ten years. Predictably, DOJ’s action and the settlement led to a private class action on behalf of the nurses, Johnson v. Arizona Hospital and Healthcare Association, which ultimately resulted in a settlement, first by 36 of 65 defendant hospitals agreeing to pay $22.5 million in settlement, and subsequent settlements with other hospitals. (MVA represented a settling defendant in the Johnson action.)
It is not surprising that the first criminal case brought by DOJ for suppression of wages is in healthcare. Healthcare has been, and continues to be, a priority for DOJ. Targeting healthcare, for example, DOJ has charged seven generic drug companies and four executives, with multiple price fixing conspiracies. (Five of the seven companies agreed to deferred prosecution agreements; two continue to defend. Three executives have pleaded guilty to Sherman Act charges; one executive, Taro Pharmaceutical’s Ara Abrahamian, who did not agree to a plea, is charged also with lying to the FBI.)
DOJ has made clear its belief that one of its most effective tools for antitrust enforcement is the indictment of individuals. DOJ frequently does a sweep across an industry in which it accept non-prosecution or deferred prosecution agreements or a guilty plea from the companies it would otherwise indict, so early pleas and indictments are a warning to the industry. Notable examples include Sherman Act cases brought against four executives in the tuna industry, eleven executives currently under indictment in the chicken industry (MVA represents one of those executives indicted), and the long running series of criminal cases pursued by DOJ against twenty-one executives, including Americans and internationals, and twenty-two companies in the air transportation industry.
The confluence of DOJ’s increased emphasis on deterrence through the indictment of individuals and its ongoing interest in the healthcare industry, which has only increased as a result of COVID, means that we can expect additional investigations in healthcare to include investigations of executives regarding wages paid to essential workers.
About the Authors:
Jim McLoughlin has an extensive regulatory, litigation and arbitration track record that includes civil trials and appeals in various state and federal courts across the country, as well as criminal investigations, trials and appeals in matters from anti-terrorism to antitrust to securities fraud. He has represented clients in responding to and defending investigations by the Department of Justice, the CFTC, and many other U.S. regulators, as well as the United Kingdom FCA, the Monetary Authority of Singapore, the Hong Kong Monetary Authority, the Central Bank of Brazil, the Brazilian IRS and the Korean FTC, among others.
Kristen Kenley is an Associate in Moore & Van Allen’s Charlotte office. Kristen regularly represents major financial institutions responding to global governmental investigations. Her practice includes representing clients during internal investigations and white collar criminal defense matters. Kristen has assisted clients in matters before the DOJ (Main Justice and U.S. Attorney’s Offices), SEC, CFTC, the United Kingdom FCA, the European Commission, and the Japan Fair Trade Commission. Kristen also has experience representing clients during investigations by the DOL and civil litigation related to ERISA.
Jim McLoughlin’s extensive regulatory, litigation and arbitration track record includes civil trials and appeals in various state and federal courts across the country, as well as criminal investigations, trials and appeals in matters from anti-terrorism to antitrust to securities fraud. He has represented clients in responding to and defending investigations by the Department of Justice, the CFTC, and many other U.S. regulators, as well as the United Kingdom FCA, the Monetary Authority of Singapore, the Hong Kong Monetary Authority, the Central Bank of Brazil, the Brazilian IRS and the Korean FTC, among others. View Mr. McLoughlin’s full bio.