What is a Kickback and Why is it Illegal?

This week the owner of a telemedicine company pled guilty to a conspiracy to both pay and receive health care kickbacks. A former Netflix executive was sentenced to 30 months in prison this week for receiving bribes and kickbacks from tech companies who wanted lucrative contracts from Netflix. 

Kickbacks are a crime of corruption. One party pays the other illegally to get a bigger benefit or unfair competitive advantage. Both paying and receiving kickbacks is illegal. 

There are several types of kickback schemes.

Inflated Invoices

In this scheme, a vendor inflates an invoice. Someone at the company approves the invoice knowing it’s inflated, and gets a portion of the difference in return. It is a method for defrauding the company purchasing services from the vendor. 

Foreign Corrupt Practices

Some US businesses try to get a competitive advantage by bribing foreign officials. This practice was outlawed under the Foreign Corrupt Practices Act of 1977. It also specifically forbid bribing foreign officials to do or fail to do any act in violation of their lawful duty. 

Contract Fraud

In this scheme, a person who is in a position of power to choose a particular vendor or contractor receives a gift, bribe, or favor in return for recommending that vendor or contractor to the company or government agency. This is the crime that Michael Kail of Netflix was guilty of. He got massive stock options from nine companies who he consistently chose to recommend to Netflix.  

Medical Fraud

These are agreements between medical providers to falsify information in the hopes of defrauding Medicaid, Medicare, or TRICARE and then paying one another a portion of their ill-gotten gains. 

For example, in the above-mentioned telemedicine scheme, Elizabeth Turner, the owner of a telemedicine company got kickbacks from marketers in exchange for providing signed doctor’s orders for cancer testing. They targeted Medicare and Medicaid patients. A lab called Crestar Labs then billed Medicare and Medicaid for the tests and then paid Turner a small portion of those profits. 

Why are kickbacks illegal?

One reason is they increase the cost of doing business and undermine fair competition. Another is it is a method by which fraud can be committed. A third reason is that it creates government corruption around the world. 

If you think you are being investigated for bribes or kickbacks it is vital that you take this matter seriously and work with an experienced federal white collar criminal lawyer who can help you defend yourself and your interests. You could be facing fines of up to $25,000 per violation and possible jail time of up to 5 years.

See also:

4 Mistakes to Avoid if You’re Under Investigation for White Collar Crime

How to Resolve a Federal Criminal Case Before Charges Are Filed

What Is a Target Letter?