False Claims Act Update: DOJ Releases Guidelines For Cooperation Credit And Reduced Penalties

The U.S. Department of Justice seeks to use the potential for a reduced penalty amount and damages to encourage self-disclosure of misconduct and cooperation during FCA investigations.

On May 7, 2019, the U.S. Department of Justice ("DOJ") released guidelines that outline certain factors DOJ will consider when potentially providing credit to individuals and companies for cooperation and transparency during civil False Claims Act ("FCA") investigations. In both the guidelines and accompanying press release, DOJ expressed its intent to further incentivize companies to self-disclose possible false claims or misconduct to enable the government "to make itself whole from" previously unknown losses and preserve relevant evidence.

The guidelines list various factors that DOJ has previously considered (and recognized in the Foreign Corrupt Practices Act enforcement guidelines), but it is helpful to see them formally recognized in the FCA context. For instance, to obtain "maximum credit" in an FCA matter, the policy suggests a prompt self-disclosure (prior to an "imminent threat of discovery or investigation"), identification of individuals that were substantially involved, full cooperation with the government, and effective remedial action. A company may also qualify for credit by self-disclosing misconduct outside the scope of an existing investigation.

While DOJ will not give credit for taking actions required by law, such as responding to a subpoena, the policy sets forth other methods for cooperation DOJ would consider meaningful, including: (i) preserving relevant documents beyond existing practices or legal requirements; (ii) attributing facts to specific sources and providing rolling updates with relevant context to the government; and (iii) assisting in the determination or recovery of the losses caused by misconduct. Remedial measures could include conducting a root cause analysis, taking disciplinary action...