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Financial Services Law Insights and Observations

DOJ issues False Claims Act guidance

Federal Issues DOJ False Claims Act / FIRREA Agency Rule-Making & Guidance

Federal Issues

On May 7, the DOJ (or the “Department”) announced the release of formal guidance to the Department’s False Claims Act (FCA) litigators, which explains how the DOJ awards credit to defendants who cooperate with the Department during a FCA investigation. Under the formal policy, which is located in Section 4-4.112 of the Justice Manual, cooperation credit in FCA cases may be earned by (i) voluntarily disclosing misconduct unknown to the government, which can be done even if the DOJ has already begun an investigation of other misconduct; (ii) cooperating in an ongoing investigation, such as by preserving documents beyond standard business or legal practices, identifying individuals who are aware of the relevant information or conduct, and facilitating review and evaluation of relevant data or information that requires access to special or proprietary technologies; or (iii) undertaking remedial measures in response to a violation, such as by implementing or improving an effective compliance program or appropriately disciplining or replacing those responsible for the misconduct. 

The Department has discretion in awarding credit, which will vary depending on the facts and circumstances of each case. With regard to voluntary disclosure or additional cooperation, the Department will consider (i) the timeliness and voluntariness of the assistance; (ii) the truthfulness, completeness, and reliability of any information or testimony provided; (iii) the nature and extent of the assistance; and (iv) the significance and usefulness of the cooperation to the government. Entities or individuals may quality for partial credit if they have “meaningfully assisted the government’s investigation by engaging in conduct qualifying for cooperation credit.” Most often, cooperation credit will take the form of a reduction in penalties or damages sought by the Department. However, the maximum credit that a defendant may earn may not exceed the amount that would result in the government receiving less than full compensation for the losses caused by the misconduct. In addition, the Department may consider in appropriate circumstances other forms of credit, including notifying a relevant agency about the defendant’s disclosure or other cooperation, publicly acknowledging such disclosure or cooperation, and assisting in resolving a qui tam litigation with a relator.  

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