The Department of Justice (“DOJ”) issued new guidance to its litigators on cooperation credit in False Claims Act cases. This new guidance, which is intended to “incentivize companies to voluntarily disclose misconduct and cooperate” with investigations, explains how the DOJ awards cooperation credits to entities.
The formal policy is included in the DOJ Justice Manual as Section 4-4.112, and is divided into subparts, as follows.
Disclosure, Cooperation and Remedial Action
In this part, the DOJ identifies voluntary disclosure as being highly desirable as it benefits the government by revealing previously unknown fraud, and because it may enable to the government to gather and preserve evidence that may otherwise have been lost. The DOJ also notes that voluntary disclosure is an ongoing opportunity, available even after the government has launched an investigation, if, during the subsequent internal investigation, the entity learns of additional misconduct beyond the scope of the known concerns, and voluntarily discloses that additional information. In each instance, the entity will quality for cooperation credit.
The DOJ also identifies other forms of cooperation that qualifies for cooperation credit, including identifying individuals involved in or responsible for misconduct; disclosing facts and identifying opportunities to obtain evidence that is otherwise unknown to the government; preserving, collecting and disclosing relevant documents and information; making officers and employees available for meetings; providing timely updates on the company’s internal investigation; providing facts relevant to potential misconduct by third-parties; facilitating review of information if requires special or proprietary technology; admitting liability or accepting responsibility for wrongdoing; and assisting in the determination or recovery of losses caused by the misconduct.
Finally, the DOJ identifies remedial measures that qualify for cooperation credit, including completing a thorough analysis of the root cause of the misconduct, and remediation to address it, and implementing or improving compliance programs designed to ensure the misconduct does not occur again, including tools to identify future risks. The DOJ also recognizes remedial measures that are directed at individuals, such as disciplining those responsible for the misconduct, whether through participation in the misconduct or through a failure of oversight, as well as disciplining those individuals who had supervisory authority over the area where the misconduct occurred. Finally, the DOJ recognizes any additional steps that demonstrate recognition of the seriousness of the misconduct.
Credit for Disclosure, Cooperation and Remediation.
Here the guidance instructs that the DOJ has the discretion in FCA cases to determine and award an appropriate credit to cooperating entities. Typically, this credit will be a reduction in the penalties or damages multiple sought by the DOJ. However, the maximum cooperation credit will not exceed the amount that would result in the government receiving less than full compensation for the losses, including damages, interest, investigation costs and relator share, due to the misconduct. In addition, the DOJ may notify other interested agencies about the entity’s cooperation to be considered in other administrative actions. The DOJ may also publicly acknowledge the entity’s cooperation, and assist the entity in resolving qui tam litigation.
The DOJ also noted that cooperation credit will not be given for disclosure of information required by law, or in response to a subpoena or investigative demand, nor will it be provided for disclosing information that is “under imminent threat of discovery or investigation.” Therefore, having a compliance program that can effectively detect misconduct and then acting on that information appropriately, is an extremely important component in earning the maximum cooperation credit in these FCA cases.02