The Department of Justice released formal guidelines on May 7, 2019 allowing False Claims Act defendants to receive "credit" by taking steps to cooperate with an ongoing government investigation. The goal of this guidance is to incentivize companies to provide meaningful assistance throughout a DOJ investigation, including voluntarily disclosing misconduct that may not be within the scope of any pending investigation. Although the impact of the formal guidance on False Claims Act cases is still unclear, there is some possibility that cases will resolve more quickly due to increased cooperation by defendants. More
What Counts as "Cooperation"?
The formal policy in the Justice Manual, Section 4-4.112, identifies the type of cooperation eligible for credit. Aside from voluntary disclosure, the following measures are identified as examples of the types of activities that will be taken into account.
Assisting DOJ Investigation
- Identifying individuals who were substantially involved in or responsible for the misconduct, or who are aware of relevant operations, policies, and procedures
- Disclosing relevant facts and identifying opportunities for the government to obtain additional evidence
- Preserving, collecting, and disclosing relevant documents beyond existing business practices or legal requirements
- Making officers and employees available for meetings or interviews
- Disclosing facts gathered during the entity’s independent investigation
- Providing facts relevant to potential misconduct by third-party entities and individuals
- Providing information in native format, and facilitating review and evaluation of that information if it requires special or proprietary technologies
- Admitting liability or accepting responsibility for the wrongdoing or relevant conduct
- Assisting in the determination or recovery of the losses caused by the misconduct.
Taking Corrective Action
- Analyzing and addressing the root cause of the misconduct
- Implementing measures (e.g. compliance programs) designed to ensure the misconduct does not occur again
- Disciplining or replacing those who directly participated in the misconduct or who had supervisory authority in this area
- Taking any additional steps demonstrating that the company recognizes the seriousness of the misconduct, accepts responsibility, and is implementing measures to prevent similar misconduct from happening in the future
How Will Cooperation Be Assessed?
The DOJ will assess the value of any voluntary disclosure or additional cooperation from defendants based on four factors:
- Was assistance timely and voluntary?
- Was testimony truthful and complete?
- How extensive was the assistance?
- Was the cooperation actually useful?
What "Credit" Will Cooperative Defendants Receive?
Cooperation credits with the Department of Justice will most frequently take the form of a reduction in the damages multiplier and civil penalties. The DOJ may also publicly acknowledge the company's cooperation, or work with relevant agencies that may oversee the company so that these agencies are aware of the company's cooperation when considering how to apply administrative remedies.
How Will This Change Current Practices?
Prior to this guidance, defendants were already often rewarded—albeit very informally— for cooperating with the government through a reduction in damages and penalties. It is widely known that defendants who settle with the government before trial end up paying much less than they would have to if the False Claims Act case proceeded and was decided against them.
However, previous official DOJ guidance had a stricter perspective on defendant cooperation as it pertained to identifying the individuals involved in corporate wrongdoing and holding them accountable. A September 2015 memo authored by then-Deputy Attorney General Sally Yates stated that "[t]o be eligible for any cooperation credit, corporations must provide to the Department all relevant facts about the individuals involved in corporate misconduct" (underlining in original). This contrasts with the recently issued guidance, which lists "[i]dentifying individuals substantially involved in or responsible for the misconduct" but as one of several types of cooperative activity that may earn defendants cooperation credit, not as a prerequisite. This latest guidance is in line with other recent DOJ memos issued by Michael Granston, Rachel Brand and Jeff Sessions that have taken a more conservative/lenient approach to FCA litigation, though it is possible that quantifying "cooperation credit" opportunities in this manner will help cases resolve more quickly due to increased cooperation by defendants.
If you are aware of fraud against the government, you may be eligible to blow the whistle in a False Claims Act lawsuit and may be entitled to a portion of the recovery. To find out more, contact Goldberg Kohn for a confidential consultation.