Justice Department Releases New Guidance on Cooperation Credit

On May 6, 2019, the Justice Department issued new guidance on how False Claims Act defendants can earn leniency in return for voluntary self-disclosure, cooperation, and remediation.  The guidelines—included as section 4-4.112 of the Justice Manual—expand the Department of Justice’s efforts to encourage cooperation by setting forth factors that its attorneys should weigh in determining appropriate settlement amounts. 

Voluntary disclosure: The guidelines explain that “[e]ntities or individuals that make proactive, timely, and voluntary self-disclosure to the Department about misconduct will receive credit during the resolution of a FCA case,” and that disclosure of wrongdoing discovered during a company’s internal investigation into the government’s concerns will also “qualify the entity for credit.”

Cooperation:  The guidelines additionally explain that “an individual or entity can earn credit by taking steps to cooperate with an ongoing government investigation,” including by:

• Identifying individuals substantially involved in or responsible for the misconduct;
• Disclosing relevant facts and identifying opportunities for the government to obtain evidence relevant to the government’s investigation that is not in the possession of the entity or individual or not otherwise known to the government;
• Preserving, collecting, and disclosing relevant documents and information . . . beyond existing business practices or legal requirements; 
• Identifying individuals who are aware of relevant information or conduct . . . ;
• Making available for meetings, interviews, examinations, or depositions an entity’s officers and employees who possess relevant information;
• Disclosing facts relevant to the government’s investigation gathered during the entity’s independent investigation (not to include information subject to attorney-client privilege or work product protection), including attribution of facts to specific sources rather than a general narrative of facts, and providing timely updates on the organization’s internal investigation into the government’s concerns, including rolling disclosures of relevant information;
• Providing facts relevant to potential misconduct by third-party entities and third-party individuals;
• Providing information in native format, and facilitating review and evaluation of that information if it requires special or proprietary technologies so that the information can be evaluated;
• Admitting liability or accepting responsibility for the wrongdoing or relevant conduct; and
• Assisting in the determination or recovery of the losses caused by the organization’s misconduct.

Remediation:  The guidelines also instruct Department attorneys to “consider whether an entity has taken appropriate remedial actions in response to the FCA violation,” including:

• Demonstrating a thorough analysis of the cause of the underlying conduct and, where appropriate, remediation to address the root cause;
• Implementing or improving an effective compliance program designed to ensure the misconduct or similar problem does not occur again;
• Appropriately disciplining or replacing those identified by the entity as responsible for the misconduct . . . , as well as those with supervisory authority over the area where the misconduct occurred; and
• Any additional steps demonstrating recognition of the seriousness of the entity’s misconduct, acceptance of responsibility for it, and the implementation of measures to reduce the risk of repetition of such misconduct.

They indicate further that “the Department may take into account the prior existence of a compliance program in evaluating a defendant’s liability under the False Claims Act . . . by consider[ing] the nature and effectiveness of such a compliance program in evaluating whether any violation of law was committed knowingly.”

Reduced penalties and damages:  The guidelines explain that the Justice Department will normally reward qualifying disclosure, cooperation, and remediation by “reducing the penalties or damages multiple sought by the Department,” up to a maximum of “the government receiving . . . full compensation for the losses caused by the defendant’s misconduct.”  But the government can consider other forms of credit, including public acknowledgement of the disclosure of the cooperation, and assisting with the resolution of qui tam litigation with relators.

May 8, 2019