This week, the Civil Division of the U.S. Department of Justice released guidelines on cooperation credit in False Claims Act cases. The guidelines strongly emphasize voluntary disclosure, but also provide insight into other actions that could give rise to cooperation credit.
The False Claims Act (“FCA”) creates civil liability for persons that, among other actions, knowingly present or cause to be presented false or fraudulent claims to the United States government. Enacted during the Civil War amid allegations of fraud against the Union Army, the FCA now impacts a myriad of industries, with settlements and judgments reaching to billions of dollars. Assistant Attorney General Jody Hunt, when announcing the 2018 FCA statistics, warned that the DOJ has “placed a high priority on rooting out and pursuing those who cheat government programs for their own gain.” Not surprisingly, the DOJ’s Justice Manual states that “[c]ivil remedies against fraud should be vigorously enforced.”
The new guidelines are included in DOJ’s Justice Manual. Assistant Attorney General Hunt, when discussing the guidelines, noted that they reflect DOJ’s general effort to “incentivize companies to voluntarily disclose misconduct and cooperate.” Voluntary disclosure, according to Hunt, “is the most valuable form of cooperation.” The guidelines state that parties that make “proactive, timely, and voluntary self-disclosure” about misconduct will receive credit. Voluntary self-disclosure of additional misconduct discovered during the course of an internal investigation is also eligible for cooperation credit.
Forms of Cooperation Beyond Voluntary Disclosure
Voluntary disclosure, however, is not the only way a party can gain FCA cooperation credit. The guidelines provide a non-comprehensive, non-mandatory list of activities that the DOJ might consider when evaluating a party’s cooperation. This list includes actions such as identifying individuals involved in the misconduct, making available to the DOJ officers and employees with relevant information, disclosing facts with specific sources rather than in a general narrative, providing information on third-party misconduct, admitting liability or accepting responsibility, and assisting in the determination or recovery of losses. When evaluating such actions, along with voluntary disclosure, the DOJ will consider four factors.
First, whether the party’s assistance was timely and voluntary.
Second, whether the testimony or information provided is truthful, complete, and reliable.
Third, the “nature and extent” of the party’s assistance.
Finally, the “significant and usefulness of the cooperation to the government.”
The DOJ will also consider a party’s remedial measures. The guidelines provide examples of appropriate remedial actions, which might include: (1) “demonstrating a thorough analysis of the cause of the underlying conduct,” (2) implementing or improving an effective compliance program, and (3) disciplining responsible individuals.
Full Versus Partial Credit
The guidelines urge parties that desire maximum cooperation credit in a FCA matter to “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.” Under the guidelines, the maximum credit that a party 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 [whistleblower] share).” In essence, therefore, the credit will reflect a reduction of the penalties and treble damages available under the FCA.
Partial credit is available for parties that provide “meaningful” assistance to the government’s investigation. The guidelines do not define “meaningful” assistance, but do refer to the general guidelines for civil DOJ compromises, which warn that the “mere submission of legally required information, by itself, generally does not constitute meaningful assistance.” The new FCA guidelines also note that cooperation does not include “disclosure of information that is under an imminent threat of discovery or investigation.” The guidelines also emphasize a party’s responsibility to disclose information relating to individual behavior: “The Department 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.”
The guidelines clearly state that DOJ has discretion beyond the factors listed in the guidelines, and may consider other issues such as the seriousness of the violation, the extent of damages, any history of recidivism, or the ability of a wrongdoer to satisfy an eventual judgment. According to the guidelines, such issues may reduce the available credit or even remove credit eligibility altogether.