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New DOJ Guidance Aims to Incentivize Corporate Cooperation in False Claim Act Matters

On May 7, 2019, the Department of Justice issued important guidance on the type of cooperation that is eligible for credit in False Claim Act (FCA) investigations. The guidance, formally codified in the Justice Manual Section 4-4.112, seeks to incentivize entities and individuals to voluntarily self-disclose misconduct that could serve as the basis for FCA liability and/or administrative remedies, to cooperate with FCA investigations, and to take remedial actions. With the issuance of this policy and a clearer understanding of the DOJ’s position on cooperation credit, entities will be better positioned to obtain more favorable outcomes in FCA matters.

Forms of Cooperation

The policy guidelines identify the proactive, timely, and voluntary self-disclosures of misconduct, unknown false claims, and fraud as the most valuable forms of cooperation. Disclosure significantly furthers the government’s ability to gather and preserve evidence as well as make itself whole. The DOJ identified ten additional forms of cooperation that may qualify an entity for credit. Among these measures are identifying and making available for meetings, interviews, and examinations those individuals who possess relevant information; providing facts relevant to potential misconduct by third-party entities and third-party individuals; and assisting in the determination or recovery of the losses caused by the organization’s misconduct, among other factors.

The new policy emphasizes that the cooperation examples set forth in the Justice Manual are merely illustrative of the types of activities by entities under investigation that will be taken into account. It is not a fully comprehensive list and entities are not required to satisfy all of the measures to qualify for cooperation credit. The DOJ maintains discretion to consider all appropriate actions that it deems necessary and will award credit as it sees fit.

Test for Assessing Value of Cooperation

In determining whether an entity or individual’s cooperation merits credit, the government will consider four factors: (1) the timeliness and voluntariness of the assistance; (2) the truthfulness, completeness, and reliability of any provided information or testimony; (3) the nature and extent of the assistance; and (4) the significance and usefulness of the cooperation to the government. 

Additionally, the government will take into account whether the entity has taken remedial action, such as identifying and addressing the root cause of the underlying misconduct; implementing an effective compliance program designed to prevent reoccurrence of the misconduct; appropriately disciplining or replacing the individuals who are identified by the entity as responsible for the misconduct; as well as other steps demonstrating an entity’s recognition of the gravity of its misconduct, acceptance of responsibility, and willingness to implement measures to reduce future risk of misconduct.

Importantly, although the new DOJ policy provides broad guidance, the ability to obtain cooperation credit is not without limits. The guidelines are explicit that cooperation “does not include disclosure of information required by law, or merely responding to a subpoena, investigative demand, or other compulsory process for information.”

Type of Credit Received for Cooperation

Of course, entities evaluating how best to cooperate with an FCA investigation will want to know the type of credit they would receive. In a DOJ press release issued the same day as the Justice Manual updates, the government announced cooperation credit will most often “take the form of a reduction in the damages multiplier and civil penalties.” The government may also exercise its discretion by notifying the relevant agency about an entity’s voluntary disclosure, cooperation, and remediation, so that the agency can consider those actions when it applies administrative remedies, and by publicly acknowledging the company’s cooperation.

With the expansion of the DOJ’s rules on cooperation in FCA investigations, entities may wish to reevaluate their compliance programs. The key to obtaining maximum cooperation credit is for the entity to discover and subsequently disclose any misconduct that may implicate an FCA claim before the DOJ or any third party does, which will likely produce a more favorable outcome with fewer penalties and damages. However, our experience has been that entities that choose to cooperate at any level receive generally more lenient treatment by the DOJ.

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About this Author

Jessica Abrahams Government Contracts Lawyer
Partner

Jessica C. Abrahams, chair of the firm’s Government Contracts Team, offers U.S. and international clients comprehensive counsel on issues concerning litigation, compliance, and transactions. Her clients span a variety of industries, from biodefense and health care to information technology, defense products and services, supply chain and infrastructure development. She regularly advises global government contractors, Indian nations, nonprofit organizations and small business owners on contracting best practices and risk mitigation techniques.

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Thomas Kelly Litigation Attorney Drinker Biddle
Partner

Thomas J. Kelly represents clients in white collar defense matters, including Foreign Corrupt Practices Act investigations, procurement fraud cases, and cases under the False Claims Act. He has represented corporations, directors and officers, employees, and individuals in high-profile criminal and administrative matters throughout the United States.

Much of Tom’s defense work has centered on clients who are under investigation for alleged violations of environmental criminal laws and workplace safety regulations. These clients have included corporations and individuals in energy and oil services, shipping, environmental laboratories, pharmaceuticals, banking and non-banking financial services, and government contracting.

Tom also brings a wealth of experience in international matters, having directed or conducted corporate investigations in Russia, India, Great Britain, China, France and Switzerland on behalf of businesses, financial institutions and the World Bank.

Tom has extensive administrative experience, including representing companies and executives in investigations brought by the U.S. Office of the Comptroller of Currency, the Federal Deposit Insurance Corporation and the U.S. Postal Service.

Before entering private practice, Tom served as an Assistant United States Attorney in Washington, D.C. In this role, he tried more than 35 jury trials.

Tom is actively committed to pro bono work and public service, taking on several pro bono cases each year. In 1991, he established a free legal clinic in Washington, D.C., that is now part of the District’s Bread for the City agency. Tom has served on the board of directors of both Bread for the City and the Neighborhood Legal Services Program.

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Michelle Francois Government Contracts Attorney
Associate

Michelle Y. Francois assists clients with government contracts matters such as bid protests, claims and procurement research, and federal litigation. Michelle has significant experience representing public and private clients in various stages of litigation. She drafts legal documents, represents clients in court conferences and other administrative proceedings, takes depositions, and represents clients in mediations and settlement negotiations. Michelle has represented municipalities in litigation against public and private entities in §1983, land use, and taxation...

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