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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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In May 2019, the U.S. Department of Justice updated its Justice Manual (Manual) to include new <a href="https://www.justice.gov/jm/jm-4-4000-commercial-litigation#4-4.112" target="_blank" rel="noopener">guidelines</a> for cooperation credit in False Claims Act (FCA) cases, which take into account voluntary disclosure, cooperation and remedial action. The new guidelines set forth at Section 4-4.112 identify factors that DOJ attorneys will consider and the credit that DOJ may provide when entities or individuals voluntarily self-disclose misconduct, take other steps to cooperate with FCA investigations and settlements, or implement adequate and effective remedial measures. Any company facing an FCA investigation or litigation should carefully consider these guidelines, which are relevant to all stages of an FCA matter.

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<a href="https://www.justice.gov/opa/pr/department-justice-issues-guidance-false-claims-act-matters-and-updates-justice-manual" target="_blank" rel="noopener">DOJ’s press release announcing the guidelines</a> identifies voluntary disclosure as “the most valuable form of cooperation,” and the guidelines highlight the significance of voluntary disclosure. The Manual states that DOJ “has a strong interest in incentivizing companies and individuals that discover false claims to voluntarily disclose them to the government.” Therefore, “[e]ntities or individuals that make proactive, timely, and voluntary self-disclosure to the Department about misconduct will receive credit during the resolution of a FCA case.”

The Manual states that in addition to voluntary disclosure, an individual or entity can earn credit by taking steps to cooperate with an ongoing government FCA investigation. It lists certain measures illustrating the types of activities that will be taken into account and states that these measures “are not mandatory and an entity or individual does not have to satisfy all of them to qualify for some cooperation credit.”

In considering the value of any voluntary disclosure or additional cooperation, DOJ will also consider:

Below is an abbreviated version of the Manual’s list of cooperation measures:

DOJ attorneys will also consider whether an entity has taken appropriate remedial actions in response to the FCA violation. The Manual states that these remedial actions may include (in summary):

The Manual notes that in addition to considering a company’s decision to implement or improve a compliance program after an alleged violation, DOJ may take into account the company’s prior compliance program in evaluating a defendant’s FCA liability. For example, DOJ may consider a compliance program’s nature and effectiveness in evaluating whether any violation of law was committed knowingly.

The Manual states that an entity or individual seeking to earn maximum credit in an FCA matter should undertake a timely self-disclosure that includes identifying all individuals substantially involved in or responsible for the misconduct, provide full cooperation with the government’s investigation, and take remedial steps designed to prevent and detect similar wrongdoing in the future.

However, even if an entity or individual does not qualify for maximum credit, they may receive partial credit for meaningfully assisting the government’s investigation. Where the conduct warrants credit, DOJ has discretion in FCA cases to reward such credit and most often, DOJ would exercise this discretion by reducing the penalties or multiplied damages sought.

The maximum credit a defendant may earn cannot exceed an amount that would result in the government receiving less than full compensation for the losses caused by the defendant’s misconduct. However, in appropriate circumstances, DOJ may consider additional avenues for awarding credit in FCA cases, including:

The Manual states that the guidelines do not change any preexisting obligation an entity or individual has under the law to report to or cooperate with the government. It also specifically notes that the Federal Acquisition Regulation requires contractors to self-disclose credible evidence of certain violations of law and significant overpayments in connection with the award or performance of a federal contract or subcontract.

Thus, the Manual implies that a disclosure under the FAR’s Mandatory Disclosure Rule, without further cooperating measures, may not be sufficient for cooperation credit. In addition, the Manual states that cooperation does not include disclosure of information required by law, such as responding to a subpoena, investigative demand or other compulsory process for information.

The Manual also states that entities and individuals “are entitled to assert their legal rights and, unless required by law, do not have to cooperate with a government investigation. Nothing about the guidelines herein changes those rights. Entities and individuals remain free to reject these options and forgo any potential credit consistent with the law.” Further, eligibility for credit for voluntary disclosure or other cooperation is not predicated on waiver of the attorney-client privilege or work product protection, and none of the guidelines requires such a waiver.

Any company facing an FCA investigation or litigation should carefully review and consider these guidelines. Cooperation, disclosures and remedial measures may be appropriate and should be considered at all stages of an FCA matter, including during litigation. DOJ’s new guidelines provide an important roadmap for defendants who choose to cooperate, make appropriate disclosures and adopt remedial measures, and may assist them in facilitating a favorable resolution of an FCA matter.

Joseph R. Berger 202.263.4193 <a href="mailto:Joseph.Berger@ThompsonHine.com">Joseph.Berger@ThompsonHine.com</a>

Sarah M. Hall 202.263.4192 <a href="mailto:Sarah.Hall@ThompsonHine.com">Sarah.Hall@ThompsonHine.com</a>

Peter Kocoras 312.998.4241 <a href="mailto:Peter.Kocoras@ThompsonHine.com">Peter.Kocoras@ThompsonHine.com</a>

Tom Mason 202.263.4168 <a href="mailto:Thomas.Mason@ThompsonHine.com">Thomas.Mason@ThompsonHine.com</a>

David A. Wilson 202.263.4161 <a href="mailto:David.Wilson@ThompsonHine.com">David.Wilson@ThompsonHine.com</a>

This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.

This document may be considered attorney advertising in some jurisdictions.

https://admin.thompsonhine.com/wp-content/uploads/2022/04/Government-Contracts-Update-DOJ-Guidelines-for-Disclosure-Cooperation-and-Remediation-in-FCA-Matters.pdf

DOJ Guidelines for Disclosure, Cooperation and Remediation in FCA Matters

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