A civil investigative demand, or CID, is a powerful law enforcement tool that federal agencies such as the United States Department of Justice (DOJ) can use during the early stages of investigations into potential antitrust violations or violations of the False Claims Act. Receiving a CID is an intimidating event, and responding effectively to the demand is essential.
Dr. Nick Oberheiden and the defense lawyers at the national law firm Oberheiden P.C. have helped numerous individuals and corporations navigate these tricky legal waters and insulate their companies from legal liability.
The Department of Justice and Civil Investigative Demands
A CID is an administrative subpoena. It demands the information listed in the subpoena from the recipient and threatens the imposition of criminal contempt if the demand is not complied with. Unlike other subpoenas, though, a federal district court is not involved in the issuance of a CID. This means that civil investigative demands (CIDs) can be issued without the agency first having to show probable cause.
Not all federal law enforcement agencies have the authority to issue civil investigative demands (CIDs). The DOJ, in fact, is a federal agency that only has Congressional authority to do so in two types of cases:
Antitrust cases deal with allegedly anti-competitive business behavior, like:
- Bid rigging
- Price fixing
- Avoiding competition by apportioning regions among competitors
- Product tying
The False Claims Act, on the other hand, is violated whenever an improper claim for compensation is made against a source of government funding. This means that False Claims Act cases cover a huge variety of conduct, though it tends to focus on healthcare fraud. A few examples include:
- Submitting false claims and overbilling Medicare or Medicaid for services offered, whether intentionally or accidentally
- Self-referral strategies by doctors that violate the Stark Law or the Anti-Kickback Statute
- Federal government contractor fraud
3 Important Steps to Take if You Have Received a CID
If you or your company has received a CID from the DOJ’s Antitrust Division or in connection with False Claims Act investigations by the Department, you need to take action. Leaving the CID alone, forgetting about it, or ignoring it will not make it go away. Instead, it will lead to criminal charges for contempt of federal district court, in addition to the continued demands of the CID.
It is also critically important to not over-comply with the demands in the letter. Providing too much information or handing over documents that were not within the contemplation of the CID can lead to unnecessary legal exposure if the extraneous information turns out to be incriminating in some way.
As Dr. Nick Oberheiden, a civil investigative demand defense lawyer from Oberheiden P.C., often tells his clients, “Every defense strategy should be unique to the needs, context, and interests of your company. However, nearly all defense strategies involve the following three elements.”
Implement a Legal Hold to Preserve Documents
One of the worst things that you can do, whether on purpose or by accident, is to destroy information or files that are listed in the CID. This can lead to allegations of spoliation and obstruction of justice, as well as a strong presumption that the deleted documents would have been incriminating against you.
The problem is that, in many cases, documents listed in the CID are destroyed under the normal document retention policies of the company that received the demand letter.
By implementing a company-wide legal hold, you can delay an impending file purge and preserve the information for the DOJ.
Gather Documents to Satisfy the Demand Well Before the Deadline
Even if you are going to challenge the issuance of the CID, you still need to gather the documents listed in the demand. This is to avoid a terrible situation where you challenge the CID, lose, and find yourself with little time to gather the information, even though you still have the complete task ahead of you.
But assembling the disclosure package on the eve of the CID’s deadline is not good enough for a strong defense. You want to give yourself enough time to conduct a complete review of the information you are about to hand over to the largest law enforcement agency in the country. If you find something during this review that you do not want to disclose or that might raise suspicions at the DOJ, you have a couple of options:
- Come up with a strong argument that it does not fall within the scope of the CID
- Find a reason to justify non-disclosure, such as the attorney-client privilege
- Disclose it, but with an explanation that hopefully heads off continued scrutiny
This review is a crucially important defensive step to take during a CID investigation. You need to give your defense team time to do it.
Consider Filing a Motion to Quash or Limit the CID
There are two important aspects to CIDs that you can make use of during the investigation process:
- The subpoena has to be within the authority of the issuing agency
- It has to be relevant and material for an investigation
If either of these issues appears to be questionable, it can be wise to file a motion to quash or limit the CID.
Importantly, though, that motion would get filed with the DOJ, itself. The agency is very unlikely to agree with your claims that the CID is wrongful. The DOJ’s denial, however, can be appealed to the court system.
Once there, though, it is still an uphill fight to get the CID set aside. As one recent case from the Eastern District of California pointed out, courts will only look at three issues. They only look at whether:
- Congress authorized the agency to investigate this type of case
- The DOJ followed the proper procedure for filing a CID
- The information requested is relevant and material to an investigation
While it is extremely difficult to prevail, it is still usually worthwhile to file a motion to quash, if only to preserve your defense for the future. Not filing the motion can lead to a court ruling that you waived your defense regarding the validity of the demand.