DOJ Releases Guidance on Cooperation Credit in False Claims Act Cases
The U.S. Department of Justice (DOJ) released guidelines for evaluating self-disclosures and awarding cooperation credit in False Claims Act (FCA) cases. As expected, these guidelines set forth several key factors anticipated in our previous blog post, Cooperation Credit in False Claims Act Cases. The guidelines, which are codified in DOJ's Justice Manual, 4-4.11, Guidelines for Taking Disclosures, Cooperation, and Remediation into Account in False Claims Act matters (2019), provide a comprehensive list of activities and factors that may qualify for cooperation credit and identifies the types of benefits DOJ is willing to offer in exchange. In short, an entity or individual seeking to earn maximum credit should generally 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.
Voluntary Disclosure, Cooperation, and Remedial Action = Credit
Self-disclosure. DOJ specifically noted that entities 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. DOJ declined to define or provide parameters around the concept of timeliness. DOJ, however, indicated it would also award cooperation credits to entities that discover additional misconduct going beyond the scope of any known concerns and voluntarily self-disclose.
Cooperation: Aside from voluntary disclosures, DOJ confirmed that there are other steps that entities or individuals can take to earn cooperation credit during an ongoing government investigation, including:
- Identifying individuals substantially involved in or responsible for the misconduct;
- Disclosing relevant facts and identifying opportunities for the government to obtain evidence relevant to the government's investigation that is not in the possession of the entity or individual or not otherwise known to the government;
- Preserving, collecting, and disclosing relevant documents and information relating to their provenance beyond existing business practices or legal requirements;
- Identifying individuals who are aware of relevant information or conduct, including an entity's operations, policies, and procedures;
- Making available meetings, interviews, examinations, or depositions an entity's officers and employees who possess relevant information;
- 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), including attribution of facts to specific sources rather than a general narrative of facts, and providing timely updates on the organization's internal investigation into the government's concerns, including rolling disclosures of relevant information;
- Providing facts relevant to potential misconduct by third-party entities and third-party individuals;
- Providing information in native format, and facilitating review and evaluation of that information if it requires special or proprietary technology so that the information can be evaluated;
- Admitting liability or accepting responsibility for the wrongdoing or relevant conduct; and
- Assisting in the determination or recover of losses caused by the organization's misconduct.
In determining the value of any voluntary disclosure or additional cooperation, the government will consider the following factors:
- Timeliness and voluntariness of the assistance;
- Truthfulness, completeness, and reliability of any information or testimony provided;
- Nature and extent of the assistance; and
- Significance and usefulness of the cooperation to the government.
It also noted that eligibility for credit on voluntary disclosures and other forms of cooperation is not predicated on waiver of the attorney-client privilege or work-product production, as none of the guidelines require such a waiver.
Remedial Action. The government will continue to take into account whether the entity has taken appropriate remedial actions in response to the FCA violation, such as:
- 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 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 the entity's misconduct, acceptance of responsibility for it, and the implementation of measures to reduce the risk of repetition of such misconduct, including measures to identify future risks.
Cooperation = Credit
The benefit of cooperation will primarily come in the form of reducing the penalties or damages multiple sought by the Department. According to the guidelines, the maximum credit that a defendant may receive 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). Even where the entity does not qualify for the maximum credit, DOJ indicated they may receive partial credit if they have meaningfully assisted the government's investigation by engaging in conduct qualifying for cooperation credit. In appropriate circumstances, DOJ may also consider additional benefits such as:
- 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.
DOJ presented several considerations that cut against cooperation credit. DOJ indicated that cooperation does not include disclosure of information required by law. This means disclosures pursuant to the healthcare overpayment rule or the FAR mandatory disclosure rule will not qualify.
Nor is credit available for merely responding to a subpoena, investigative demand, disclosure of information that is under an imminent threat of discovery or information, or other compulsory process for information. DOJ also will not award any credit to an entity or individual that conceals involvement in the 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 its investigation.
DOJ also cautioned that not all cases are candidates for cooperation credit. It noted that in resolving FCA cases, DOJ makes several considerations, some of which may "reduce the credit available to an entity or individual, or in egregious circumstances, may render the entity or individual ineligible for any credit" including:
- 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.