By: Sarah Wirskye, Co-Counsel, Braumiller Law Group
On May 6, 2019, the Department of Justice (DOJ) issued guidance explaining how the DOJ awards credit to defendants who cooperate during a False Claims Act investigation. The policy states that the DOJ will consider (1) voluntary disclosure of wrongdoing, (2) cooperation in an ongoing investigation, and (3) taking remedial measures in response to the violation.
The policy further lists specific conduct that it will consider as forms of cooperation and remedial measures. Examples of cooperation include the following:
- Identifying individuals substantially involved in or responsible for the misconduct;
- Disclosing relevant facts and identifying opportunities for the government to obtain relevant evidence that is not in the possession of the cooperator or not known to the government;
- Preserving, collecting, and disclosing relevant documents and information beyond existing business practices or legal requirements;
- Identifying individuals who are aware of relevant information or conduct;
- Making an entity’s officers and employees available to DOJ;
- Disclosing relevant facts gathered during the entity’s independent investigation (not to include information subject to attorney-client privilege or work product protection);
- Providing relevant facts regarding 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; and
- Assisting in the determination or recovery of the losses.
Remedial measures include (1) demonstrating an analysis of the cause and remediation to address the it; (2) implementing or improving a compliance program to prevent the problem from reoccurring; (3) appropriately disciplining or replacing the wrong-doers and supervisors; and (4) any additional steps demonstrating recognition of the seriousness of the entity’s misconduct, acceptance of responsibility, and the implementation of measures to reduce re-occurrence, including measures to identify future risks.
The above factors are not exclusive, and the policy states that the DOJ can take other factors into account including “the nature and seriousness of the violation, the scope of the violation, the extent of any damages, the defendant’s history of recidivism, the harm or risk of harm from the violation, whether the United States’ interests will be adequately served by a compromise, the ability of a wrongdoer to satisfy an eventual judgment, and litigation risks presented if the matter proceeds to trial.”
Cooperation credit will generally be a reduction in the damages multiplier and civil penalties. However, the maximum credit that a defendant may earn may not exceed 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). DOJ may also notify a relevant agency about the company’s voluntary disclosure, cooperation, or remediation so that the agency can take those actions into account in deciding how to apply administrative remedies. Finally, DOJ may publicly acknowledge the company’s cooperation and assist the entity or individual in resolving qui tam litigation with a relator(s).
This guidance is another promising step towards providing FCA defendants more clarity regarding cooperation credit. While the principles in this policy are not new, the guidance is certainly helpful. Moreover, the language stating that disclosure of relevant facts gathered in an internal investigation does not necessarily include disclosure of privileged facts is helpful to defendants as well. Only time will tell if DOJ will fully apply the credits under this policy. Doing so will be critical in encouraging cooperation by defendants in FCA cases.
See the full policy at https://www.justice.gov/jm/jm-4-4000-commercial-litigation – 4-4.112