Phillip Zane’s Game Theory: Ten Years On

Ten years ago this spring, Zane published his definitive work on game theory which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, when, and how corporations and executive management teams should disclose white collar criminal conduct.

Phillip Zane be the only attorney whose colleagues and clients might expect to see an open book on games and strategy on his desk.

Ten years ago this spring, Zane published The Price Fixer’s Dilemma:  Applying Game Theory to the Decision of Whether to Plead Guilty to Antitrust Crimes, 48 Antitrust Bull. 1 (2003), which changed the way law-and-economics scholars and sophisticated prosecutors and defense counsel analyze whether, and when, to settle high-stakes antitrust cases.

Zane’s article strongly suggested that in a number of common situations, pleading guilty (or even seeking the protections of the corporate leniency program) is not always justified.  Zane’s article used a repeated, or iterative, version of the prisoner’s dilemma to demonstrate that pleading guilty was not always the best strategy for antitrust defendants facing criminal prosecution and civil liability in multiple proceedings or jurisdictions.

At the time, a few of the brainier Antitrust Division prosecutors breathed a sigh of relief when the defense bar did not seem to notice and they failed to incorporate Zane’s research into their negotiating strategies.

In 2007, Zane published “An Introduction to Game Theory for Antitrust Lawyers,” which he used in a unit of an antitrust class he taught at George Mason University School of Law. That paper was another milestone on the way to making game theory concepts accessible and useful to the antitrust defense bar.

Zane’s work, which now used game theory to criticize the settlement of the second Microsoft case and the Government’s approach to conscious parallelism, as well as the leniency program, was met with official grumblings within the Antitrust Division.

GeyerGorey LLP was founded on the principle that the chances for achieving the best possible outcome are maximized by having access to multiple, top-notch, cross-disciplinary legal minds that are synced together by an organizational and compensation structure that encourages sharing of ideas and information in client relationships.

As international enforcement agencies sprouted and developed criminal capabilities and as more hybrid matters included prosecutors from US enforcement agency components with sometimes overlapping jurisdictions, such as the Antitrust, Criminal, Civil and Tax Divisions of the Department of Justice, and the alphabet soup of regulatory agencies, particularly the Securities and Exchange Commission, it became apparent that Zane’s game-theoretic approach has application in almost every significant decision we could be called upon to make.  Since Zane has joined us we have been working to factor in the increased risks associated with what we call hybrid conduct (conduct that violates more than a single statute).  Our tools of analysis for identifying risks for violations of competition laws, anti-corruption laws, anti-money-laundering laws, and other prohibitions, include sophisticated game-theoretic techniques, as well as, of course, the noses of former seasoned prosecutors, taking into account, each particular client’s tolerance for risk.

To take one example, an internal investigation might show both possible price fixing and bribery of foreign government officials.  How, given the potential for multiple prosecutions, should decisions to defend or cooperate be assessed?  And how might such decisions trigger interest by the Tax Division, the SEC, the Commodities Futures Trading Commission, the Federal Energy Regulatory Commission or other regulators.  When should a corporation launch an internal investigation?  When should it make a mandatory disclosure?  What should it disclose and to which agency, in what order?  When should it seek leniency and when should it instead stand silent?  These tools are valuable in the civil context as well:  When should it abandon a proposed merger or instead oppose an enforcement agency’s challenge to a proposed deal?

These are truly the most difficult questions a lawyer advising large corporations is required to address.  We are well positioned to help answer these questions.

Competition Policy International: US: New antitrust firm GeyerGorey snags DOJ lawyers after office closures

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Competition Policy International: US: New antitrust firm GeyerGorey snags DOJ lawyers after office closures

Supervisor of $63 Million Health Care Fraud Scheme Sentenced in Florida to 10 Years in Prison

A former supervisor at defunct health provider Health Care Solutions Network Inc. (HCSN) was sentenced today in Miami to serve 10 years in prison for her central role in a fraud scheme that resulted in more than $63 million in fraudulent claims to Medicare and Florida Medicaid.

The sentence was announced by Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Michael B. Steinbach, Special Agent in Charge of the FBI’s Miami Field Office; and Special Agent in Charge Christopher B. Dennis of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Office of Investigations Miami office.

Wondera Eason, 51, of Miami, was sentenced by U.S. District Judge Cecilia M. Altonaga in the Southern District of Florida.  In addition to her prison term, Eason was sentenced to serve three years of supervised release and ordered to pay $14,985,876 in restitution.

On April 25, 2013, a federal jury found Eason guilty of conspiracy to commit health care fraud.

Eason was employed as the director of medical records at HCSN’s partial hospitalization program (PHP).  A PHP is a form of intensive treatment for severe mental illness. In Florida, HCSN operated community mental health centers at two locations. After stealing millions from Medicare and Medicaid in Florida, HCSN’s owner, Armando Gonzalez, expanded the scheme to North Carolina, opening a third HCSN location in Hendersonville, N.C.

Evidence at trial showed that at all three locations, Eason, a certified medical records technician, oversaw the alteration, fabrication and forgery of thousands of documents that purported to support the fraudulent claims HCSN submitted to Medicare and Medicaid.  Many of these medical records were created weeks or months after the patients were admitted to HCSN facilities in Florida for purported PHP treatment and were utilized to support false and fraudulent billing to government-sponsored health care benefit programs, including Medicare and Medicaid. Eason directed therapists to fabricate documents, and she also forged the signatures of therapists and others on documents that she was in charge of maintaining.  Eason interacted with Medicare and Medicaid auditors, providing them with false and fraudulent documents, while certifying the documents were accurate.

The “therapy” at HCSN oftentimes consisted of nothing more than patients watching Disney movies, playing bingo and having barbeques. Eason directed therapists to remove any references to these recreational activities in the medical records.

According to evidence at trial, Eason was aware that HCSN in Florida paid illegal kickbacks to owners and operators of Miami-Dade County assisted living facilities (ALF) in exchange for patient referral information to be used to submit false and fraudulent claims to Medicare and Medicaid.  Eason also knew that many of the ALF referral patients were ineligible for PHP services because many patients suffered from mental retardation, dementia and Alzheimer’s disease.

From 2004 through 2011, HCSN billed Medicare and the Medicaid program more than $63 million for purported mental health services.

Fifteen defendants have been charged and have pleaded guilty or been convicted by a jury for their roles in the HCSN health care fraud scheme.

This case is being investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida.  This case was prosecuted by Trial Attorney Allan J. Medina, former Special Trial Attorney William Parente and Deputy Chief Benjamin D. Singer of the Criminal Division’s Fraud Section.

Since its inception in March 2007, the Medicare Fraud Strike Force, now operating in nine cities across the country, has charged more than 1,500 defendants who have collectively billed the Medicare program for more than $5 billion.  In addition, HHS’s Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, is taking steps to increase accountability and decrease the presence of fraudulent providers.