Government attorneys now have additional discretion in False Claims Act (FCA) civil cases to award cooperation credit to a corporation that meaningfully assists the government’s investigation without necessarily identifying every individual person outside of senior management involved in the alleged misconduct. To earn maximum cooperation credit, in both criminal and civil cases, a corporation will still be required to identify individuals who were substantially involved or responsible for the wrongdoing. However, in civil cases, a corporation may now earn some credit for providing meaningful assistance even if it has not provided information identifying all such individuals.

Deputy Attorney General Rod J. Rosenstein made the announcement, which has immediate effect, on November 29 during his Keynote Address at the American Conference Institute’s 35th International Conference on the Foreign Corrupt Practices Act.

Increased discretion in granting cooperation credit is one piece of a larger DOJ effort to reform FCA enforcement

With last Thursday’s announcement, Rosenstein drew a clear line between criminal and civil cases. In criminal investigations, companies must provide information on all individuals who were substantially involved in the criminal conduct at issue, regardless of level of seniority.

On the other hand, Rosenstein observed that “[c]ivil cases are different” and concluded the “all or nothing” approach has been inefficient and counterproductive to the FCA’s main goals: deterrence and the reimbursement of victims (which, in FCA cases, is the government). Notably, he underscored the importance of having DOJ policies that “work in the real world.” Because FCA cases are about pursuing fraudulently obtained government monies, DOJ now appears to realize that pursuing judgment-proof, lower-level employees is a waste of everyone’s resources.

The Yates Memo adapts to a complex world

Rosenstein preempted the recent announcement by reaffirming that the pursuit of individuals responsible for wrongdoing remains a top priority. While the new policy may not be intended as a full shift away from the strategy of the 2015 Yates Memo, it does signal a softening of how that memo’s objectives should be implemented. Issued by then-Deputy Attorney General Sally Yates, the Yates Memo announced a DOJ policy of greater scrutiny of individuals in corporate investigations. In his remarks, Rosenstein acknowledged that for allegations involving “activities throughout the company over a long period of time, it is not practical to require the company to identify every employee who played any role in the conduct.”

With the new policy, DOJ prosecutors resolving civil FCA cases may award:

• Maximum credit to corporations that identify “every individual person who was substantially involved in or responsible for the misconduct”;
• Some discretionary credit to corporations that meaningfully assist in the government’s investigation, “without the need to agree about every employee with potential individual liability”; or
• No credit to corporations that do not “identify all wrongdoing by senior officials, including members of senior management or the board of directors.”

Two other policy changes announced by Rosenstein are intended to further restore discretion to civil DOJ attorneys. Government attorneys may now negotiate civil releases for individuals who do not warrant additional investigation in corporate FCA civil settlement agreements. After the issuance of the Yates Memo and until the changes Rosenstein announced on Thursday, DOJ explicitly carved out individual civil liability in all corporate FCA resolutions, as a matter of policy, leaving individual employees open to the risk of later being sued for related conduct. We would expect a significant shift in approach given this announcement. In addition, civil DOJ attorneys are once again permitted to consider an individual’s ability to pay in deciding whether to pursue a civil judgment.

In our view

The new DOJ policy reflects the reality of modern corporate investigations, as well as a more nuanced grasp of how limited resources on both the government and defendants’ side should be deployed to resolve corporate cases. It encourages realistic cooperation efforts without compromising the DOJ’s policy of holding individuals accountable.

The announcement should come as a measure of relief to large corporations, where the task of identifying every potentially culpable individual – no matter at what level within the company – can be a challenging undertaking. The previous binary approach – full cooperation or no credit – was counterproductive to encouraging cooperation, forcing companies to analyze whether it was more economical to undergo a costly investigation or to miss out on the cooperation credit that could significantly affect the multiplier in civil cases. Rosenstein’s remarks recognize that most companies want to cooperate, and the new policy is meant to reward that instinct.

For the full text of this new policy click here.

For the full text of the announcement click here.

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