A recent ruling by a federal district court in Indiana offered rare clues into the appropriate scope of civil investigative demands used by the Justice Department to investigate False Claims Act allegations.
On May 23, the U.S. District Court for the Southern District of Indiana granted a petition for summary enforcement of a CID, finding the testimony requested by the DOJ was relevant to the government’s FCA investigation.
The decision in United States v. Elsbury is notable in that there are relatively few cases interpreting the appropriate scope of CIDs because most disputed issues are resolved by agreement between the DOJ and the CID recipient without the need for a court’s intervention.
Coincidentally, this ruling reinforcing the DOJ’s expansive CID authority coincides with the 10-year anniversary of the Fraud Enforcement and Recovery Act (FERA) amendments to the FCA to allow for the attorney general to delegate authority to issue CIDs.
Today, all 93 U.S. attorney offices (USAOs) and the director of the Fraud Section of the Commercial Litigation Branch (Fraud Section) have the ability to utilize this powerful tool and a proliferation in the use of CIDs has had a profound impact on the way that FCA cases are investigated and litigated.
CIDs advance the government’s ability to investigate FCA cases by obtaining significant discovery before litigation has started. The government typically issues CIDs after a qui tam lawsuit has been filed under seal or after a case has been referred to the DOJ by another government agency, such as an Office of the Inspector General.
The recipient of a CID must take into account several attendant risks. The recipient should generally proceed as if there is a qui tam case under seal focused on the recipient. CID recipients should consider conducting an internal investigation based on the information requested in the CID to assess potential exposure.
Moreover, the 2009 FERA amendments made it easier for the DOJ to share information with qui tam relators so long as the information is “necessary to the investigation.” Even if the government declines to intervene in the qui tam lawsuit, the information produced to the DOJ pursuant to the CID could be turned over to relator’s counsel and used to amend the complaint, thereby increasing the chances that the complaint will clear the heightened pleading requirements of Rule 9(b) for alleging fraud which would allow the complaint to survive a motion to dismiss.
Information provided in response to the CID can also be shared with other federal, state, and local agencies which can result in additional investigations, audits, or enforcement actions.
Lastly, if there is a parallel criminal investigation, information produced pursuant to the CID could lead to exposure for the company and individuals. Relatedly, if a corporate representative invokes their Fifth Amendment protections, this can trigger adverse inferences in the civil proceeding.
Responding to a CID can be time consuming and often disruptive for a company, requiring employees to assist in identifying documents and answering questions. There are, however, certain practical steps a company can take.
For starters, companies should consult experienced outside counsel to develop a comprehensive response strategy. CIDs are typically used when the government is deciding whether to intervene in a qui tam case or file an affirmative civil enforcement action. Accordingly, a company’s response to a CID and interactions with the government can influence the government’s decision to move forward with the case which could result in cost and time savings over the long run.
Rather than treating the arrival of the CID as an exercise in one-way discovery, CID recipients should seize the opportunity to shape the narrative, with the assistance of experienced counsel, and consider the following steps:
- Conduct a parallel internal investigation to gain a substantive understanding of the issues to include interviewing witnesses and identifying key documents to understand areas of exposure and form defenses.
- Be transparent about document collection and review methodology and memorialize the process in writing in case there are any disputes down the road.
- From the outset, establish credibility by demonstrating the company’s good-faith intention to comply with the CID. Use CID-related interactions as an opportunity to engage with the DOJ attorneys, to put unhelpful documents in context, and preview defenses in an effort to convince the government not to go forward with a case or to negotiate favorable settlement terms.
In cases where an underlying qui tam complaint lacks substantial merit, companies should consider drawing upon Section 4-4.111 of the Justice Manual, which sets forth factors for DOJ attorneys to consider when deciding whether to exercise the DOJ’s statutory dismissal authority.
If companies are successful in educating the government as to why the facts of the case do not support a viable action, they might convince the government to not only decline intervention but also to move to dismiss—the brass ring for an FCA defendant.
A more in-depth Practical Guidance document on this topic by the authors is featured on Bloomberg Law.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
David B. Robbins is a partner in Crowell & Moring’s Washington, D.C., office. He ran the U.S. Air Force’s global Procurement Fraud Remedies Office and served, among other roles, as deputy general counsel (contractor responsibility). Robbins regularly conducts internal investigations, defends FCA cases, and provides general ethics and compliance advice to contractors of all sizes.
Jason M. Crawford practices in Crowell & Moring’s Washington, D.C., office and has an active litigation and counseling practice focused on FCA litigation, government investigations, mandatory and voluntary disclosures to the government, and internal investigations. He is the co-host of the Let’s Talk FCA podcast which covers legal and policy developments involving the FCA.