DOJ Announces New Guidance to Prosecutors on FCA Investigations
On May 7, 2019, the Department of Justice (DOJ) announced the release of formal guidance to its False Claims Act (FCA) prosecutors that provides a path for leniency for defendants in FCA investigations. More specifically, the guidance which is formalized in Section 4-4.112 of the DOJ’s Justice Manual, explains the manner in which the DOJ will award credit to defendants who voluntarily self-disclose misconduct that could serve as the basis for FCA liability, take other steps to cooperate with FCA investigations, or implement adequate and effective remedial measures in the FCA context. And significantly, the guidance provides that a defendant can receive a reduction in the damages multiplier and civil penalties under the FCA, which is the typical form of “credit” described in the guidance.
In announcing the guidance, Assistant Attorney General Jody Hunt stated that DOJ “has taken important steps to incentivize companies to voluntarily disclose misconduct and cooperate with our investigations.” Hunt further stated: “False Claims Act defendants may merit a more favorable resolution by providing meaningful assistance to the Department of Justice – from voluntary disclosure, which is the most valuable form of cooperation, to various other efforts, including the sharing of information gleaned from an internal investigation and taking remedial steps through new or improved compliance programs.”
In order to receive credit for voluntary disclosure under the guidance, a defendant must either (i) disclose misconduct that was previously unknown to the DOJ or (ii) in an ongoing FCA investigation, disclose additional misconduct that is beyond the scope of the known concerns in the investigation. The guidance also notes that cooperation can be demonstrated in a number of forms, and the guidance explicitly outlines ten examples of cooperation, including identifying individuals substantially involved in or responsible for the misconduct and disclosing facts relevant to the DOJ’s investigation gathered during the defendant’s internal investigation.
DOJ will consider the following factors to determine the value of voluntary disclosure or cooperation: (1) the timeliness and voluntariness of the assistance, (2) the truthfulness, completeness, and reliability of any information or testimony provided, (3) the nature and extent of the assistance, and (4) the significance and usefulness of the cooperation. Even if a defendant does not qualify for maximum credit under these factors, a defendant may receive partial credit when meaningfully assisting the DOJ’s investigation by engaging in conduct qualifying for cooperation credit.
Where the conduct of a defendant warrants credit, the DOJ has discretion under the policy to reward such credit. Credit will typically take the form of a reduction in the damages multiplier and civil penalties under the FCA, but credit can also merit other actions by the DOJ. For example, where appropriate, the DOJ may also notify other agencies (including suspension and debarment authorities) about the company’s cooperation to allow the other agencies to take those actions into account in reaching resolutions with the defendant. Additionally, the DOJ may publicly acknowledge the defendant’s cooperation. Even where a defendant receives maximum credit, however, there is a limitation on that credit, as it cannot 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 the investigation, and a relator share).
This FCA guidance builds on prior DOJ guidance encouraging voluntary disclosure, cooperation, and remediation related to wrongdoing. In the bribery context, for example, the DOJ’s Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy provides that when a company has voluntarily self-disclosed misconduct in an FCPA matter, fully cooperated, and timely and appropriately remediated, there will be a presumption that the company will receive a declination absent aggravating circumstances involving the seriousness of the offense or the nature of the offender.
It will be interesting to see how this guidance plays out in practice, particularly in light of the recent data indicating that healthcare defendants have not been receiving cooperation credit in the FCA context.
This FCA announcement also reinforces the importance of engaging experience outside FCA counsel when considering voluntary self-disclosure, determining whether to cooperate once an FCA investigation has been opened, and, if cooperating, ensuring that a defendant obtains maximum cooperation credit.