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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:
- Identifying individuals substantially involved in or responsible for the misconduct;
- Disclosing relevant facts and identifying opportunities for the government to obtain evidence relevant to the government’s investigation that is not in the possession of the entity or individual or not otherwise known to the government;
- Preserving, collecting, and disclosing relevant documents and information relating to their provenance beyond existing business practices or legal requirements;
- Identifying individuals who are aware of relevant information or conduct, including an entity’s operations, policies, and procedures;
- Making available for meetings, interviews, examinations, or depositions an entity’s officers and employees who possess relevant information;
- Disclosing facts relevant to the government’s investigation gathered during the entity’s independent investigation (not to include information subject to attorney-client privilege or work product protection), including attribution of facts to specific sources rather than a general narrative of facts, and providing timely updates on the organization’s internal investigation into the government’s concerns, including rolling disclosures of relevant information;
- Providing facts relevant to potential misconduct by third-party entities and third-party individuals;
- Providing information in native format, and facilitating review and evaluation of that information if it requires special or proprietary technologies so that the information can be evaluated;
- Admitting liability or accepting responsibility for the wrongdoing or relevant conduct; and
- Assisting in the determination or recovery of the losses caused by the organization’s misconduct.
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.