In recent months, Relators’ qui tam complaints have been subject to increased scrutiny by criminal prosecutors. In addition to civil False Claims Act (“FCA”) liability, individuals doing business with the federal government face potential criminal liability under various criminal fraud-related statutes. Potential charges for fraudulent activities are not limited to a criminal fraud charge, but also include bribery, false statements, conspiracy to defraud, wire fraud, mail fraud, and identity theft, among others. Most of these crimes are felonies and carry substantial penalties, including fines, freezing of assets, and imprisonment. Especially in the healthcare industry and defense procurement space, many criminal investigations originate as civil qui tam filings only later adopting a criminal component. These parallel investigations typically involve the U.S. Department of Justice (“DOJ”) and may include other enforcement agencies.
Recent DOJ rhetoric encourages an increased use of such parallel investigations. In September 2014, Assistant Attorney General for the Criminal Division of the DOJ, Leslie Caldwell, announced that the Criminal Division would be “stepping up” its review to look for potential criminal liability in qui tam complaints, noting that such complaints “are a vital part of the Criminal Divisions’ future efforts.” Consistent with this message, Caldwell encouraged the Relator’s bar to notify the Criminal Division directly when a complaint is filed instead of coordinating only with the local U.S. Attorney’s Office. As part of the new process, the Criminal Division will receive and review new complaints so that prosecutors may determine the nature and extent of any criminal exposure.
When assessing civil FCA liability, companies should be mindful of this new protocol. Any evaluation of potential exposure or of a company’s risk tolerance must involve an understanding of potentially applicable criminal statutes and penalties, and how those statutes may be used to hold a company and its executives accountable for misconduct. It may also be prudent for a company to reassess existing compliance efforts to account for both civil and criminal enforcement risks.