Key Notes:
- DOJ has updated its Justice Manual with new guidelines for cooperation credit in FCA cases.
- The guidelines address voluntary disclosure, cooperation and remedial action by defendants.
- Any company facing an FCA investigation or litigation should carefully consider these guidelines.
In May 2019, the U.S. Department of Justice updated its Justice Manual (Manual) to include new guidelines 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.
Voluntary Disclosure
DOJ’s press release announcing the guidelines 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.”
Other Forms of Cooperation
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:
- the timeliness and voluntariness of the assistance;
- the truthfulness, completeness and reliability of any information or testimony provided;
- the nature and extent of the assistance; and
- the cooperation’s significance and usefulness to the government.
Below is an abbreviated version of the Manual’s list of cooperation measures:
- Identifying individuals substantially involved in or responsible for the misconduct;
- Disclosing relevant facts and identifying opportunities for the government to obtain relevant evidence not known to the government;
- Preserving, collecting, and disclosing relevant documents and information;
- Identifying individuals who are aware of relevant information or conduct, including an entity’s operations, policies and procedures;
- Making an entity’s officers and employees who possess relevant information available for meetings, interviews, examinations or depositions;
- Disclosing facts relevant to the government’s investigation gathered during the entity’s independent investigation (not to include information subject to attorney-client privilege or work product protection);
- Providing facts relevant to potential misconduct by third parties;
- Providing information in native format and facilitating review and evaluation of that information;
- Admitting liability or accepting responsibility for the wrongdoing or relevant conduct; and
- Assisting in the determination or recovery of the losses caused by the organization’s misconduct.
Remedial 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):
- demonstrating a thorough analysis of the cause of the underlying conduct and, where appropriate, remediation to address the root cause;
- implementing or improving an effective compliance program designed to ensure the misconduct or similar problem does not occur again;
- appropriately disciplining or replacing those identified by the entity as responsible for the misconduct; and
- any additional steps demonstrating recognition of the seriousness of the entity’s misconduct, acceptance of responsibility for it, and the implementation of measures to reduce the risk of repetition.
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.
Extent of Assistance Determines Credit
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:
- Notifying a relevant agency about an entity’s or individual’s disclosure, other cooperation or remediation, so that the agency in its discretion may consider such factors in evaluating its administrative options, such as suspension, debarment, exclusion or civil monetary penalty decisions;
- Publicly acknowledging the entity’s or individual’s disclosure, other cooperation or remediation; and
- Assisting the entity or individual in resolving qui tam litigation with a relator or relators.
Other Considerations
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.
FOR MORE INFORMATION
For more information, please contact:
Joseph R. Berger
202.263.4193
Joseph.Berger@ThompsonHine.com
Sarah M. Hall
202.263.4192
Sarah.Hall@ThompsonHine.com
Peter Kocoras
312.998.4241
Peter.Kocoras@ThompsonHine.com
Tom Mason
202.263.4168
Thomas.Mason@ThompsonHine.com
David A. Wilson
202.263.4161
David.Wilson@ThompsonHine.com
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