On May 7, 2019, the Department of Justice announced the release of formal guidance on how it will credit defendants that cooperate with False Claims Act investigations. The guidance, which takes the form of an update to the Justice Manual, helps to explain how those facing FCA liability can receive credit toward a more favorable resolution.
The primary factor that the DOJ will consider is voluntary disclosure. According to the new Section 4-4.112 of the Justice Manual: “Entities or individuals that make proactive, timely, and voluntary self-disclosure to the Department about misconduct will receive credit during the resolution of a FCA case.” The guidance emphasizes that voluntary disclosure eligible for credit is not limited to issues raised by the pending FCA investigation, but may also include additional misconduct outside the scope of the initial investigation.
The guidance also included a non-comprehensive list of 10 other factors to be considered when evaluating the credit that FCA defendants can earn by cooperating with the DOJ. As set forth in the Justice Manual at Section 4-4112, a defendant may earn credit by:
When considering how much weight to give to a subject’s cooperation, the DOJ will examine the timeliness of the assistance; the truthfulness and completeness of the information provided; the nature and extent of the assistance; and the usefulness of the cooperation.
The guidance also discussed the benefits that a cooperating subject could receive in an FCA investigation. In addition to reducing penalties and damage multiples it seeks in the underlying action, the DOJ stated that it would consider taking the following steps: notifying relevant agencies about the cooperation so that agency could take the cooperation into consideration; publicly acknowledging the cooperation; and assisting the cooperator in resolving qui tam litigation.
This update is just the latest example of the government’s efforts to refine its approach to investigations under the statute as the DOJ warned FCA defendants in March that it would not simply dismiss cases merely because the litigants pursue vast discovery, which is a strategy that has seen a recent uptick, according to the DOJ.
Because the cooperation guidance is new, it is not yet clear how the DOJ will apply this cooperation credit framework in practice. The white collar team at Locke Lord will monitor settlements and provide further guidance as it becomes available.
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