DOJ Cooperation Credit Guidance: What is the Benefit of Cooperation?
The U.S. Department of Justice (DOJ) issued policy guidance on May 6, 2019, about providing credit in False Claims Act (FCA) settlements to corporations for "disclosure, cooperation, and remediation." See https://www.justice.gov/jm/jm-4-4000-commercial-litigation#4-4.112. While the guidance explains how the DOJ can award cooperation credit to corporate defendants who cooperate with the Department during an FCA investigation, a careful reading of the material in Justice Manual Section 4-4.112 does not reveal when and to what extent such credit is awarded. DOJ states the cooperation credit will be reflected in the form of reduced "penalties or damages multiple sought." The lone bright line follows: the application of credit cannot result in payment of less than the sum of federal damages, interest on that loss amount, investigative costs, and the relator's share, if applicable. Beyond that, DOJ does not specify any concrete guidelines for the quantitative reduction in "damages multiple sought" and thus retains discretion, on a case-by-case basis, about the financial value of any credit. Stated otherwise, same as it ever was.
The Justice Manual describes three areas that give FCA litigators some leeway in potential or actual false claims act situations. The first is Voluntary Disclosure; the second is Other Forms of Cooperation; and the final is Remedial Actions. Let's unpack these areas to determine real or apparent significance.
Voluntary disclosure is the proactive and timely notification to the Department about potential or actual misconduct. This approach is beneficial to the government as it enables the government to make itself whole in cases of previously unknown false claims or fraud. As a company or entity does its due diligence in determining the extent of misconduct, the company can self-disclose any additional misconduct and will receive credit from the government for these additional voluntary disclosures.
Other Forms of Cooperation are encountered when the government begins an investigation and a company or entity takes steps to cooperate. While not spelled out as to the type and extent of cooperation credit, the following non-exhaustive list are areas for potential cooperation credit:
- 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 losses caused by the organization's misconduct.
The Justice Manual points out to government counsel that they may consider the following factors: (1) the timeliness and voluntariness of the assistance; (2) the truthfulness, completeness, and reliability of any information or testimony provided; (3) the nature and extent of the assistance; and (4) the significance and usefulness of the cooperation to the government.
Once misconduct is deemed to be an FCA violation, government attorneys can take into account whether an entity has taken any of the following remedial actions:
- Demonstrating a thorough analysis of the cause of the underlying conduct, and, where appropriate, remediation to address the root cause;
- Implementing or improving an effective compliance program designed to ensure the misconduct or similar problem does not occur again;
- Appropriately disciplining or replacing those identified by the entity as responsible for the misconduct either through direct participation or failure in oversight, as well as those with supervisory authority over the area where the misconduct occurred; and
- Any additional steps demonstrating recognition of the seriousness of the entity's misconduct, acceptance of responsibility for it, and the implementation of measure to reduce the risk of repetition of such misconduct including measures to identify future risks.
Finally, the Justice Manual asserts: "The maximum credit that a defendant 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, cost of investigation, and relator share)."
In the concluding section of Section 4-4.112 government attorneys are reminded of entities' and individual's legal rights including the right to reject the above listed options and forgo any potential credit consistent with the law.
Although lacking concrete quantitative benchmarks, the Guidance outlines for corporate FCA defendants the considerations for mitigation of FCA risk. If you have questions regarding potential misconduct or FCA actions, then contact Robert today!
Read the May 7, 2019 press reguidance-false-claims-act-matters-and-updates-justice-manual