The U.S. Department of Justice has published its policy on the factors that prosecutors can consider when determining whether to reduce civil penalties in False Claims Act cases as a way to reward companies for being cooperative—and the white-collar defense bar is applauding.

“This is the first time that there's been formal guidance in the Justice Manual,” said Ted Kang, a partner at Alston & Bird in Washington, D.C., and a former prosecutor for the DOJ's criminal division. “It's helpful in the sense that there's formal guidance that applies across the board to all federal prosecutors.”

In the past, prosecutors might have considered certain factors in awarding cooperation credit, such as a company self-reporting a violation to the government, but ignored or missed others when determining the civil penalties in a FCA case.

Now, defendants can point to the written policy to ensure that every possible factor is on the government's radar when a case is being resolved. The new guidelines reinforce the DOJ's long-standing appreciation of companies that blow the whistle on themselves, cooperate in investigations and address the issues at the root of a violation.

“This puts it all on one page. It gives companies and individuals clearer rules of the road in terms of what will be considered,” Kang said. He added having written guidance also gives in-house counsel something tangible to take to executives when lobbying for more compliance resources.

Meredith Auten, a partner at Morgan Lewis who focuses on FCA litigation, viewed the policy as a “road map for handling these [FCA] investigations,” one that she said will help defense attorneys in “trying to come to the most favorable resolution” for their clients.

Auten noted that, under the guidelines, the DOJ is incentivizing self-disclosure not only by dangling the carrot of reduced civil penalties but also by offering to make other government agencies, including the Office of Inspector General, aware of the fact that a company is cooperating in an investigation.

“This can be very significant, because one of the major sticking points in any FCA resolution is often, 'What is the OIG going to do with this?'” she said.

Auten also appreciated that the DOJ has offered, as a credit, to help cooperating companies resolve qui tam litigation with whistleblowers.

“What is the relator looking for as far as recovery? What fees are the relator's attorneys looking for?” she said. “Those can be very significant numbers that can have an impact on a resolution.”

The DOJ's official policy on cooperation credit is clearer now. That much is certain. But what remains to be seen is whether this new clarity will spur more companies to come forward and tell the government about potential FCA violations.

“Voluntary disclosures are such a tricky and difficult decision,” she said. “It's very fact and circumstance dependent—and there are no guarantees. You see in the policy they've issued that the word 'discretion' appears repeatedly throughout the guidance.”

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