The US Department of Justice (DOJ) issued formal guidance on May 8 on how companies can earn cooperation credit and what conduct it considers in awarding credit in False Claims Act investigations.
The DOJ released highly anticipated guidance on May 7 detailing how defendants in False Claims Act (FCA) matters can receive cooperation credit. The guidance, set forth in the Justice Manual Section 4-4.112, identifies the conduct for which a company can receive cooperation credit and the type of credit that may be awarded.
The newly issued guidance is another in a line of significant FCA pronouncements that the DOJ began rolling out in 2018. (See our prior LawFlashes on the Granston Memo, the Brand Memo, and the “No Piling-On” Policy).
Assistant Attorney General Jody Hunt’s statement on the new guidance makes clear that voluntary disclosure “is the most valuable form of cooperation.” A company seeking maximum cooperation credit in an FCA matter “should generally” undertake a fulsome and timely self-disclosure. During an investigation into government concerns, entities can also qualify for credit by self-disclosing any additional misconduct a company discovers during an internal investigation. The emphasis on the value of voluntary self-disclosure marks the latest in the DOJ’s ongoing efforts to encourage corporate disclosures and cooperation, and dovetails with the DOJ’s Foreign Corrupt Practices Act (FCPA) Corporate Enforcement Policy, which creates a presumption of non-prosecution for companies that self-report FCPA violations. (See our November 29, 2017 LawFlash). As Assistant Attorney General Hunt stated, “The Department of Justice has taken important steps to incentivize companies to voluntarily disclose misconduct and cooperate with our investigations; enforcement of the False Claims Act is no exception.”
In addition to voluntary disclosure, the new policy lists 10 other forms of cooperation that may lead to credit. The first measure identified for cooperation credit is identifying individuals “substantially involved” in or “responsible for” the misconduct at issue. The fact that this form of cooperation is at the top of the list signals the DOJ”s continuing focus on individual accountability in corporate investigations. In November 2018, Deputy Attorney General Rod Rosenstein emphasized that in every corporate investigation, the DOJ will prioritize pursuing individuals responsible for corporate wrongdoing. (See our November 30, 2018 LawFlash).
OTHER FORMS OF COOPERATION
The guidance recognizes that it is not possible to have a comprehensive list of all conduct for which DOJ will award credit. Nonetheless, it identifies nine additional measures—in addition to voluntary self-disclosures and identifying individuals involved in misconduct—that DOJ will take into account when awarding credit:
Disclosing relevant facts and identified opportunities for the government to obtain relevant evidence
Preserving and disclosing relevant documents beyond existing business practices or legal requirements
Identifying individuals with relevant information about operations, policies, and procedures
Making employees with relevant information available for meetings, interviews, or depositions
Disclosing facts gleaned during an internal investigation
Providing information on potential misconduct by third parties
Providing data in native format and assisting the government with review of data that requires specific technologies
Admitting liability or accepting responsibility
Assisting the government to determine the losses caused by the misconduct
As part of its evaluation of a company’s cooperation efforts, DOJ will evaluate the nature and extent of the assistance and whether it was useful to the government. DOJ will also assess whether the assistance was timely and voluntary and whether the information provided was true and complete.
REMEDIAL MEASURES AND AN EFFECTIVE COMPLIANCE PROGRAM
The guidance further provides that DOJ will consider how companies respond to FCA violations and whether a company has taken “appropriate remedial actions” in light of misconduct. Such measures include, among others, “implementing or improving an effective compliance program.” This continues to reflect DOJ’s focus on the importance of effective compliance programs and the role they play in ensuring that companies self-police for potential misconduct and are proactive about addressing misconduct internally and with the government. This cooperation guidance comes on the heels of the updated compliance guidance issued by the DOJ’s Fraud Section last week (see our May 1, 2019 LawFlash) regarding factors prosecutors should consider when analyzing the effectiveness of a corporate compliance program.
TYPE OF COOPERATION CREDIT DOJ MAY AWARD
Finally, the new guidance details the form that credit can take: most often, a reduction in the penalties or damages multiplier sought by the government. In some cases, the government may notify another agency of the company’s cooperation, publicly acknowledge the company’s cooperation, or assist the company in resolving pending qui tam litigation with a relator(s). These are welcome forms of credit, particularly in assisting with resolutions with other agencies and relators as those are often sticking points in any resolution of FCA matters.
The new policy provides clearer guidance from the DOJ on the steps companies can take to earn cooperation credit that could reduce liability in an FCA matter and provides a roadmap for defense and in-house counsel. The guidance, as well as numerous statements by the DOJ in recent months, highlights that a fundamental step towards reducing FCA liability (or avoiding it in the first place) is having an effective compliance program that allows companies to identify and respond to misconduct.
Read the DOJ press release.