While white collar and healthcare counsel have long known that one of the best strategies to reducing risk in defending a False Claims Act (FCA) case is cooperation and execution of compliance actions, the Department of Justice (DOJ) released formal guidance for its own FCA attorneys on May 9, 2019, that updated the DOJ’s manual on FCA cases and explains how cooperation of defendants can benefit them in settlement resolutions. This guidance follows a speech given by now-former Deputy Attorney General Rod Rosenstein on November 29, 2018 where he announced modifications to DOJ’s Departments’ Principles of Corporate Prosecution. These modifications have been seen as something of a retreat from the 2015 Yates Memorandum and an effort to return some discretion to line prosecutors handling both civil and criminal cases involving corporate entities.
The DOJ has now indicated that credit may be considered by it in resolving FCA cases for companies that engage in voluntary disclosure, generally cooperate with the investigation and DOJ’s production requests, and, perhaps most importantly for undertaking remedial measures.
Disclosure and Cooperation
One of the significant changes to the guidance in the DOJ manual is that “[e]ntities or individuals that make proactive, timely, and voluntary self-disclosure to the [DOJ] about misconduct will receive credit during the resolution of a FCA case.” (emphasis added). While voluntarily disclosing additional misconduct that is beyond the scope of the known concerns is important, other forms of cooperation to be credited are:
- Identifying individuals substantially involved in or responsible for the misconduct;
- Disclosing relevant facts and identifying opportunities for the government to obtain relevant information;
- Preserving, collecting, and disclosing relevant documents relating to their provenance beyond existing business practices or legal requirements;
- Identifying individuals who have relevant information regarding the related operations, policies, and procedures;
- Making officers and employees available to the government;
- Disclosing non-privileged facts obtained during an entity’s independent investigation attributable to specific sources and providing timely updates on the organizations internal investigation into the government’s concern;
- Providing facts relevant to potential misconduct by third-parties;
- Providing information in native format and facilitating review and evaluation of information that requires special or proprietary technologies;
- Admitting liability or accepting responsibility for wrongdoing or relevant conduct; and
- Assisting in the determination or recovery of the losses caused by the misconduct.
The DOJ has indicated that it will evaluate these efforts considering the following factors: (1) the timeliness and voluntariness of assistance; (2) the truthfulness, completeness, and reliability of information or testimony provided; (3) the nature and extent of the assistance; and (4) the significance and usefulness of the cooperation to the government.
DOJ attorneys are also directed to consider whether an entity has taken appropriate remedial actions in response to investigation of a FCA violation that may include:
- Demonstrating a thorough analysis of the cause of the underlying conduct and remediation to address the root cause;
- Implementation or improving an effective compliance program designed to ensure the misconduct or similar problem does not occur again;
- Disciplining or replacing individuals responsible for the misconduct either through direct participation or failure in oversight, as well as those with supervisory authority over the area where the misconduct occurred; and
- Any additional steps demonstrating recognition of the seriousness of misconduct, acceptance of responsibility, and implementation of measures to reduce risk of repetition of misconduct and measures to identify future risks.
Credit for Disclosure, Cooperation, and Remediation
Maximum credit can be earned in a FCA matter if a timely self-disclosure of individuals responsible for the misconduct, fully cooperation is made with the investigation, and remedial action is taken to prevent and detect similar wrongdoing in the future. Partial credit can be earned if the entity meaningfully assists the government’s investigation by engaging in conduct qualifying for cooperation credit.
The DOJ may consider additional avenues to claim credit in FCA cases that include:
- Notifying a relevant agency about an entity’s or individual’s disclosure, cooperation, or remediation, so that agency 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, cooperation, or remediation; and
- Assisting the entity or individual in resolving qui tam litigation with a relator or relators.
The DOJ has indicated that it retains discretion to award credit by agreeing to reduction of the penalties it seeks or the FCA’s damages multiplier. In recent remarks in late May of 2019 at the Compliance Week Annual Conference, Acting Associate Attorney General Claire McCusker Murray noted that new Guidance allowed DOJ to award a “substantial discount” down to single damages plus lost interest, costs of investigation, and relator share. Acting AAG McCusker also noted that DOJ “will take into account the nature and effectiveness of a company’s compliance program in evaluating whether the violation of the law was committed knowingly and therefore whether the False Claims Act is the appropriate remedy in the first instance.” While this statement is promising, it remains to be seen how frequently the DOJ will agree to exercise this option.
Other Considerations of the DOJ
Nothing in the updated guidelines changes any preexisting obligations under the law to report or cooperate with the government. Cooperation credit specifically will not be given for disclosure for information required by law, responding to a subpoena, investigation demand, or other compulsory process for information, or disclosure for information that is under an imminent threat of discovery or investigation. Moreover, the DOJ has stated that it will not award credit where an entity or individual conceals misconduct by members of senior management or the board of directors, or to an entity or individual that otherwise demonstrates a lack of good faith to the government during the course of the investigation.
Importantly, the new guidelines expressly state that entities and individuals are entitled to assert their rights, unless required by law, do not have to cooperate with the investigation, and remain free to reject the cooperation credit options consistent with the law. Eligibility for credit for voluntary disclosure or other cooperation is not predicated on waiver of the attorney-client privilege or work product protection, and the guidelines do not require such a waiver.
FCA Cases Based on Reimbursement and the New Guidelines
The new guidelines provide significant ground for reduction of risk in FCA cases based upon allegations that a provider was reimbursed for improperly billed claims due to the focus on credit that may be awarded a defendant that performs a root cause analysis to determine inception of the billing problem, quantifies and repays overpayments to federal payers, and implements proactive compliance to eliminate the possibility of future errors. While only qualified white collar defense counsel can determine when it is most appropriate for a provider to stand on legal rights, the new guidelines solidify the effectiveness that reimbursement counsel can have in performing retrospective claims analysis and developing a compliance plan as powerful weapons in reducing exposure in defending a FCA case. As the threat of FCA litigation appears to be escalating against providers, the new guidance from the DOJ is a strong reminder of the importance of proactive compliance and that the most effective defense can sometimes be good offense