United States: DOJ Issues New Guidance Regarding Cooperation In False Claims Act Investigations

Last Updated: May 27 2019
Article by Michele Sartori, Gejaa T. Gobena and Michael Theis

Continuing its recent trend of revising and issuing new white collar enforcement guidance, the U.S. Department of Justice (DOJ) on Tuesday announced a new policy1 governing when cooperation credit should be given to the targets of False Claims Act (FCA) investigations.

The new FCA guidance is similar to guidance the Department has issued in other areas of white collar enforcement, to attempt to incentivize companies to cooperate, remediate, and, perhaps most important to DOJ, self-disclose misconduct.

The guidance emphasizes that maximum cooperation credit in FCA cases will be given to individuals and entities that not only cooperate with the government and remediate the alleged misconduct, but also voluntarily self-disclose false claims to DOJ in the absence of any legal obligation to do so.  Though this may be the first time DOJ has issued a formal policy stating as much in the FCA realm, DOJ has been encouraging companies to self-disclose potential violations for years, consistent with the express provision adopted in the 1986 amendments to reward true volunteers with a lower damages multiplier.  Although this new policy promises cooperation credit for such proactive self-disclosure, the guidance notes that "[the] discretion [to give cooperation credit] will be exercised by reducing the penalties or damages multiple sought by the Department," without providing specifics on how that credit would be provided in practice. This vagueness is in sharp contrast with DOJ's Foreign Corrupt Practices Act Corporate Enforcement Policy, which provides a more specific pathway to declination or reductions in fines based on the whether a company self-discloses and the level of cooperation and remediation it provides.

The policy states that the "maximum credit that a defendant may earn 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)." In other words, even self-disclosing and cooperating to the absolute maximum extent is not a pass on making restitution.  Instead, this language suggests that maximum credit would result in a settlement for no less than single damages, plus interest, investigation costs, and relator share.  In practice, such a sum would be analogous to a damages multiplier of 1.5 or higher. 

The guidance does allow for some limited cooperation credit if a company or individual provides cooperation short of self-disclosure, and provides a non-exhaustive list of other types of efforts that DOJ should take into account when determining a whether to award cooperation credit. The list includes familiar factors, such as: identifying culpable individuals; disclosing facts and documents beyond the scope of the subpoena or civil investigative demand; identifying employees with information and making them available to DOJ; sharing the results of any internal investigation; and accepting responsibility.

The new guidance specifies that DOJ attorneys will evaluate the timeliness, completeness, extent, and significance of any self-disclosure or cooperation to determine its value to the government. DOJ will also consider whether the target of its investigation has taken appropriate remedial measures, such as:  determining and addressing the root cause; disciplining or replacing responsible individuals and supervisors; and implementing or improving its compliance program, including the implementation of risk assessment and mitigation measures designed to detect and prevent future FCA violations.

Time will tell whether this new guidance has any impact on how targets respond to FCA investigations, or how FCA cases are resolved. Certainly the new policy gives defendants facing potential FCA litigation or attempting to negotiate settlements some objective factors upon which to rely in seeking a reduction in the damages multiplier or penalties.  But it is only guidance—the concept of "cooperation credit" remains largely subjective and at the discretion of government counsel.

Footnote

1 Justice Manual, section 4-4112, available at https://www.justice.gov/jm/jm-4-4000-commercial-litigation#4-4.112.

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