DOJ Revises Manual Guidelines for Credit Given in FCA Cases

The Department of Justice (DOJ) recently added formal guidance in its Justice Manual regarding its assessment of cooperation in False Claims Act (FCA) matters.  The additions specify the DOJ’s credit-giving considerations in instances where individuals or entities self-disclose misconduct, cooperate with FCA investigations and settlements, or take adequate remedial steps in FCA matters.  Generally, the DOJ uses its discretion in considering various factors when determining the appropriate resolution for FCA violations, including the following: 1) the nature, seriousness, and scope of the violation; 2) the extent of damages; 3) the defendant’s history of reoffending; 4) harm or risk of harm due to the violation; 5) whether a compromise would serve the nation’s interest; 6) the defendant’s ability  to fulfill the eventual judgement; 7) litigation risk; and 8) all other appropriate factors.  The new guidance identifies specific factors that DOJ attorneys will consider in cooperative credit determinations and the types of credit that will be available to cooperative parties in FCA cases.  These factors may also serve to reduce the credit available to the entity/individual or render them ineligible for credit.

Voluntary Disclosure:

Entities or individuals that make proactive, timely, and voluntary self-disclosures will receive credit during the resolution of FCA cases.  This includes disclosures of additional misconduct found during the entity’s own internal investigation that was otherwise outside the scope of DOJ’s original concerns.

Other Cooperative Acts:

Individuals and entities can also earn credit for cooperating with the government during ongoing investigations.  The DOJ lists activities that could be considered cooperative behavior, but notes that this is not a comprehensive list.  The list includes:

• Identifying individuals mainly involved in or responsible for the improper conduct;
• Disclosing relevant facts and identifying possible evidence not in the possession of either party;
• Preserving, collecting, and disclosing relevant information and documents beyond business practices or legal requirements;
• Identifying individuals with knowledge of relevant information, entity’s conduct, and its policies and procedures;
• Disclosing specific facts and updates found during the entity’s internal investigation (excluding information subject to attorney-client privilege or work product protection);
• Providing information of potential misconduct by a third-party;
• Disclosing information in its original format and providing any special or proprietary technologies needed to review and evaluate this format;
• Admitting liability or accepting responsibility for improper conduct; and
• Assisting in the determination and gathering of losses because of the misconduct.

When evaluating the individual or entity’s cooperative actions, the DOJ will also consider the timeliness, voluntariness, nature, extent, significance, and utility of the assistance and the level of truth, completeness, and reliability of the information or testimony.

Remedial Action:

The DOJ may also provide credit to individuals or entities that take remedial measures following discovery of a possible FCA violation.  DOJ will consider remedial measures, including:

• Demonstration of a thorough analysis of the underlying cause of the misconduct and changes made to address the cause;
• The implementation, improvement, or existence of a compliance program;
• Taking disciplinary action against the entity or individual responsible for the misconduct either directly or through failure to properly oversee related activities; and
• Any additional steps that show an individual or entity understands the seriousness of the conduct and takes responsibility through remedial actions.

Credit:

An individual or entity that self-discloses, cooperates, or takes remedial action can receive up to maximum credit.  Maximum credit will never exceed the amount of the government’s losses due to the individual or entity’s misconduct, including damages, lost interest, costs of investigation, and the relator’s share.  The credit most often comes in the form of a decrease in monetary penalties or the damages multiplier.  However, the DOJ may also provide credit by: notifying relevant agencies of the individual or entity’s cooperative actions; public acknowledgement of the entity or individual’s disclosure, cooperation, or remediation; and assisting the individual or entity to resolve any qui tam action based on the same conduct.

The DOJ will not give credit to an individual or entity providing information that is required to be disclosed under the law or in response to a subpoena.  Additionally, an individual or entity will not receive credit for disclosing information in response to an investigative demand, compulsory process for information, or information under immediate threat of discovery or investigation.  Nor will the DOJ provide credit to an individual or entity that provides information but also conceals some in bad faith to protect other individuals such as the board of directors and senior management.

These guidelines do not supersede any individual or entity’s legal right to not cooperate with a government investigation unless required by law, invoke attorney-client privilege, or invoke work product protection.

The DOJ Guidelines are available at:

https://www.justice.gov/jm/jm-4-4000-commercial-litigation#4112A