On May 7, the Department of Justice (“DOJ”) released an update to its previous 2017 guidance (“Updated Guidance”) outlining when the government will award cooperation credit to defendants in False Claims Act (“FCA”) investigations. Under the Updated Guidance, set forth at Justice Manual Section 4-4.112, defendants can earn cooperation credit in FCA cases in three primary ways.
First, cooperation credit may be earned by voluntarily disclosing misconduct unknown to the government. The Updated Guidance intends to incentivize companies and individuals to make proactive, timely, and voluntary self-disclosure about unknown false claims and fraud. Importantly, even if the DOJ has already started an investigation, a company may receive credit for voluntarily disclosing other misconduct outside the scope of the existing investigation.
Second, a defendant can earn cooperation credit by cooperating with an ongoing government investigation. The guidance includes a list of measures that illustrate the types of cooperation activities which will be taken into account. For instance, a company may earn credit for (i) identifying individuals substantially involved in or responsible for the misconduct, (ii) disclosing facts relevant to the government’s investigation gathered during the entity’s independent investigation, and (iii) providing facts relevant to potential misconduct by third-party entities and third-party individuals. However, a company will not earn cooperation credit for carrying out its legal duty to respond to the government’s subpoenas or requests for information.
Third, the DOJ will also consider whether to award cooperation credit based on whether the company has taken appropriate remedial actions in response to an FCA violation. Such remedial action may include (i) implementing a compliance program designed to ensure the conduct does not reoccur and (ii) disciplining or replacing individuals identified by the entity as responsible for the misconduct.
Under the Updated Guidance, the DOJ noted it would usually exercise its discretion to award cooperation credit by “reducing the penalties or damages multiple sought by the department.” However, the Updated Guidance clarifies that the “maximum credit” a defendant can earn “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 share).” The DOJ also noted that cooperation credit could take other forms, such as a public acknowledgement of the company’s assistance or an acknowledgement of assistance to an agency for consideration in potential administrative action.
Although it is not clear how the DOJ will implement this Updated Guidance in practice, it offers important guidance that FCA targets should consider after uncovering fraud or false claims or during FCA investigations.