Disclosure, Cooperation and Remedial Action Necessary for Credit in False Claims Act Matters, DOJ Says

Disclosure, cooperation and remedial action are the three ways that entities or individuals can receive cooperation credit from the U.S. Department of Justice (DOJ) in False Claims Act (FCA) matters, according to guidelines issued by the department on May 7, 2019. The guidelines, which address credit available to entities or individuals who voluntarily self-disclose misconduct that could serve as a basis of FCA liability ₁, are consistent with the DOJ’s ongoing efforts to encourage and reward cooperation in its investigations.

Disclosure

Entities or individuals will receive credit during the resolution of an FCA case when they make “proactive, timely, and voluntary self-disclosure to the Department about misconduct[],” according to the guidelines. Further, if during an entity’s investigation into the government’s concerns additional misconduct beyond the scope of the known concerns is discovered, voluntary disclosure of that misconduct will qualify the entity for credit.

Cooperation

The guidelines provide an illustrative list of actions that could qualify an entity for cooperation credit, such as “identifying individuals substantially involved in or responsible for the misconduct” and helping to “identify[] opportunities…to obtain evidence…not in the possession of the entity or individual or not otherwise known to the government.” Bearing in mind the DOJ’s goal of making FCA investigations easier and more efficient for itself, all the proposed cooperation measures center on proactively providing information relevant to the conduct.

Remedial Measures

In assessing whether an entity qualifies for credit, the guidelines further permit DOJ attorneys to consider whether an entity has taken appropriate remedial actions in response to the FCA violation. Providing another non-exhaustive list of creditworthy remedial measures, the DOJ listed things like “demonstrating a thorough analysis of the cause of the underlying conduct and, where appropriate, remediation to address the root cause” and “implementing or improving an effective compliance program designed to ensure the misconduct or similar problem does not occur again.”

Credit Available

Eligibility for maximum credit generally requires disclosure, cooperation and remedial measures, according to the guidelines. Even if an entity does not qualify for maximum credit, however, partial credit is available if the entity “meaningfully assisted the government’s investigation by engaging in conduct qualifying for cooperation credit.”

The guidelines place an upper limit on the credit available. Maximum credit 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, costs of investigation and relator’s share). Despite this maximum, this implies that credit could potentially significantly limit the fines and punitive multiplier portion of FCA damages.

Bars To Receiving Credit

The guidelines place an important limitation on the availability of credit for those who conceal their conduct: “The Department will not award any credit to an entity or individual that conceals involvement in the misconduct by members of senior management or the board of directors, or to an entity or individual that otherwise demonstrates a lack of good faith to the government during the course of its investigation.”

Attorney-Client Privilege

While encouraging cooperation, the guidelines do not predicate the credit available on, or otherwise require, waiver of the attorney-client privilege or work-product protection.

Key Takeaway

If an entity finds that it has a potential FCA problem, it is critically important to fully investigate and understand the nature of the problem. Only then can any entity evaluate the degree to which voluntary disclosure is appropriate and methods for maximizing any cooperation credit from the DOJ.