Before filing a criminal or civil action under the False Claims Act, or FCA (31 U.S.C. § 3729), the United States Department of Justice (DOJ) can start with a civil investigative demand or CID. Similar to subpoenas, Civil Investigative Demands (CIDs) request information from the recipient, with the threat of legal action for noncompliance.
Even if you are not the target of the False Claims Act investigations, how you respond to a CID can either protect your company or expose it to some significant legal liability. Dr. Nick Oberheiden is a CID defense lawyer at the national law firm Oberheiden P.C. and has helped numerous clients navigate this tricky step during False Claims Act investigations. Here is what you need to know about CIDs, as well as a few general tips for how to respond to them.
How Do CIDs Work?
A CID is a formal request for information that is backed up by criminal contempt charges, much like a subpoena. Unlike a subpoena, though, Civil Investigative Demands (CIDs) are administrative subpoenas issued by a law enforcement agency, rather than by a court. This means that there does not need to be a probable cause showing before it is issued.
Not all federal law enforcement agencies have the authority to issue a CID, though, and the DOJ can only issue one for antitrust violations or alleged False Claims Act violations. When it comes to the FCA, federal law (31 U.S.C. § 3733) gives the DOJ the authority to issue a CID to anyone believed to have information relevant to an FCA investigation and demand:
- Documentary evidence
- Answers to written interrogatories
- Oral testimony
What is the FCA?
The False Claims Act is a federal law that punishes anyone who submits a wrongful or false claim for compensation from a federal government source of funding. It gets invoked most often in the context of healthcare fraud, where a doctor or other healthcare provider improperly bills Medicare or Medicaid. However, it also comes up in federal government contractor situations.
Importantly, the FCA has both a civil and criminal prong to it. The criminal side is, generally speaking, for conduct that involved the intent to defraud. The civil side is for conduct without that intent. This means you may undergo civil procedure and can face civil liability under the FCA for accidents, like mistakenly overbilling Medicaid.
The penalties for making false claims for compensation against the federal government are extremely high. Even civil false claims act cases carry treble damages, or three times what the bill was for, and a civil penalty for each violation.
4 Tips for Responding to a CID
If the DOJ, a federal agency, has sent you or your company a CID for a pending False Claims Act investigation, there are certain steps that you should strongly consider taking as part of your defense strategy.
1. Implement a “Legal Hold” of All Material
Something that you should do immediately after receiving a CID is to implement a legal hold of all documents and other material that may have to be disclosed to satisfy the demand. This prevents information that is within the scope of the CID from being routinely destroyed according to your company’s standard document retention policies.
Not taking this step runs the significant risk of something being destroyed, rather than handed over to investigators. Even if it was accidental, this can lead to allegations of spoliation and potentially even obstruction of justice, and it creates the legal presumption that whatever was destroyed was incriminating.
2. Figure Out Who is Under Investigation
The DOJ has the legal authority to issue Civil Investigative Demands (CIDs) whenever it “has reason to believe that any person may be in possession, custody, or control of any documentary material or information relevant to a false claims law investigation.” Note that this investigation, however, does not need to target you or your company.
In many cases, companies are hit with CIDs that target someone else, entirely.
The DOJ will rarely say whether you are the target. However, the context and the informational demands that they are making can be strong clues. While you should always take your defense seriously, how aggressively you protect your rights should depend on whether you are likely the target of the investigation or not.
3. Decide Whether to Try to Quash the CID
You can challenge the legality of a CID by filing a motion to limit or quash it. While these moves are hardly ever successful, they can still be a worthwhile endeavor as they can preserve this defense for a future federal district court case.
To quash a CID, you have to show that either the DOJ lacked the authority to issue it, or that the CID requests information that is not relevant or material to an FCA investigation. The motion to quash, however, is made to the DOJ, itself. The agency is almost guaranteed to deny it, but that denial can be appealed to the federal district court system. Going through this process is important, though, because it preserves this line of defense for a future district court case.
As Dr. Nick Oberheiden, a CID defense lawyer at Oberheiden P.C., explains, “If you do not challenge the legality of the CID at the outset, courts have decided that it means that you have waived that line of defense later on. However, there are situations where it may be unwise to try to quash the CID. Taking this aggressive line of defense can make the DOJ wonder what you are hiding.”
4. Gather Documents Well Before the Deadline for Review
CIDs are infamous for demanding lots of information and giving you very little time to provide it. Nevertheless, it is important to beat their deadline so you can review the disclosure package, first. This allows you to see if anything is incriminating or could lead to further scrutiny.
If there are such documents in the disclosure package, you may be able to justify not disclosing them. The three most common ways to hold on to them are:
- Having a persuasive argument that they are outside the scope of the CID’s demand
- They fall under a legal privilege from disclosure, like the attorney-client privilege
- Your Fifth Amendment right against self-incrimination
Pleading the Fifth, though, should be taken as a last resort. It tells the DOJ straight out that you have evidence that you committed a crime and will lead to a close investigation and likely a criminal charge.
