Earlier this week, the Department of Justice Civil Division announced guidelines for factors to consider and credit to be given in False Claims Act investigations and prosecutions. The guidelines broadly stressed three forms of conduct that may merit credit, including voluntary self-disclosure of misconduct, meaningful cooperation with an FCA investigation, and implementation of adequate and effective compliance and remedial measures. The policy is set out in Justice Manual Section 4-4.112.
Disclosure, Cooperation, and Remedial Action May Merit DOJ Credit Consideration
The policy starts by emphasizing DOJ’s “strong interest in incentivizing companies and individuals that discover false claims to voluntarily disclose them to the government.” Self-disclosing potential wrongdoing that is unknown to the government remains a significant factor for government consideration of credit, although the self-disclosure should be “proactive, timely, and voluntary.” Assistant Attorney General Jody Hunt called voluntary disclosure “the most valuable form of cooperation.” Self-disclosure may also include additional disclosure of misconduct that goes beyond the scope of the original government investigation.
Cooperation with a government investigation may also merit DOJ credit. Illustrative measures cited by the policy include identifying responsible or knowledgeable individuals; disclosing relevant facts from an independent investigation; making officers and employees available for interviews; preserving documents and information beyond what is legally required; facilitating the review and evaluation of information and losses to the government; and admitting liability or accepting responsibility.
Department attorneys will also consider remedial measures, which may include analyzing and remedying the root cause of the underlying conduct; implementing or improving an effective compliance program; disciplining or replacing responsible individuals; and accepting responsibility for the misconduct.
DOJ Attorneys Have Several Avenues To Credit Disclosure, Cooperation, and Remediation
For maximum credit, an entity or individual should undertake timely self-disclosure, identify the involved and responsible individuals, fully cooperate with the investigation, and take remedial steps to prevent and detect similar wrongdoing. Partial credit may also be available in the case of meaningful assistance that does not merit maximum credit.
Under the policy, credit will usually take the form of DOJ attorneys exercising discretion to reduce the penalties or the damages multiple sought by the government. The maximum credit afforded, however, “may not exceed an amount that would result in the government receiving less than full compensation for the losses caused by the defendant’s misconduct (including the government’s damages, lost interest, costs of investigation, and relator share).” Credit may also include DOJ notifying a relevant agency about the disclosure, cooperation or remediation; publicly acknowledging the disclosure, cooperation or remediation; or assisting in the resolution of qui tam litigation with a relator.
Other discretionary factors DOJ considers in resolving FCA matters under the policy include:
- the nature and seriousness of the violation;
- the scope of the violation;
- the extent of any damages;
- the defendant’s history of recidivism;
- the harm or risk of harm from the violation;
- whether the United States’ interests will be adequately served by a compromise;
- the ability of a wrongdoer to satisfy an eventual judgment; and
- litigation risks presented if the matter proceeds to trial.
The policy includes a number of caveats. The policy does not change the obligation that entities and individuals have under the law to report to or cooperate with the government, such as by disclosing information pursuant to a subpoena or other compulsory process. Cooperation also does not include disclosing information under an imminent threat of discovery or investigation. DOJ also will not award credit if there is concealment of board or senior management misconduct or some other form of bad faith.
The policy states that entities and individuals are entitled to assert all their legal rights and do not have to cooperate with the government, and that eligibility for credit is not predicated on (and does not require) a waiver of attorney-client privilege or work product protection.
As with other policies DOJ has implemented to guide the exercise of discretion in resolving cases, it will be interesting to follow how this policy on False Claims Act investigations and prosecutions will be implemented in practice.