By Jacob T. Elberg
The health care industry and the white-collar defense bar have eagerly awaited guidance from the Department of Justice regarding the impact of corporate cooperation and self-disclosure on the resolution of civil False Claims Act (FCA) cases, the primary tool for government action in response to corporate misconduct in the health care industry.
Statements from DOJ officials raised anticipation over the past several months that guidance would be forthcoming. The guidance arrived on May 7, 2019, and focuses on answering the question of what conduct will constitute cooperation in the eyes of DOJ.
Unfortunately, the announcement fails to answer the question industry and the defense bar have been asking: how much credit will be given for cooperation and self-disclosure?
The DOJ guidance, “Guidelines for Taking Disclosure, Cooperation, and Remediation into Account in False Claims Act Matters,” lists actions by companies that will warrant cooperation credit. Most mimic factors previously included in various formal guidances regarding what constitutes cooperation in criminal matters. Given DOJ’s unwillingness (until recently) to even acknowledge a policy of rewarding cooperation in civil matters, the increased transparency is of course a welcome development.
However, the list of actions will be unsurprising to sophisticated defense counsel, and the announcement still leaves unaddressed the more pressing question.
Industry and the defense bar have expressed skepticism that DOJ consistently provides a meaningful benefit for cooperation in civil cases. That skepticism is well-founded and is unlikely to be cured by the guidance announcement. As I noted in my recent Bill of Health post, analysis of data from recent settlements reveals no consistent benefit for cooperation – cases where defendants cooperated were frequently not treated more leniently than cases where defendants did not cooperate. (My initial findings along with my methodology were first published on Law360 (and here, for those who don’t subscribe.) Notably, in issuing the guidance on May 7, 2019, DOJ did not state whether it represents a change in policy or simply a formalizing of policy DOJ claims has already been in action.
While the guidance indicated that, “most often,” a cooperating entity may receive credit in the form of “reducing the penalties or damages multiple sought by [DOJ],” the vague statements regarding DOJ discretion are a far cry from the calculable benefits contained within the United States Sentencing Guidelines, and even further from the detailed benefits promised by the FCPA Corporate Enforcement Policy. Industry and the defense bar still have no indication of how significant a reduction they can anticipate if they do choose to cooperate.
As importantly, DOJ has still been unwilling to provide guidance as to how damages multiples are calculated in the absence of cooperation. And data analysis makes clear that, as calculated over the past year, the mere act of settling dramatically reduced the multiplier (while the statute allows for treble damages plus penalties, the median multiplier was 2.0 and the mean multiplier was 1.75), and did so even where the settling defendant did not accept responsibility. Several of the cases resolved at or below the average multiplier were with defendants who issued press releases at the time of the settlement denying that they had engaged in any wrongdoing and stating, for example, that they were agreeing to resolve their matters “to avoid continuing legal fees.” (For that reason, the one real surprise in the list of “measures illustrat[ing] the type of activities by entities or individuals under investigation that will be taken into account” is the inclusion of “admitting liability or accepting responsibility for the wrongdoing or relevant conduct.”)
If DOJ is transparent in future settlement announcements, making clear when a defendant has cooperated, the multiplier applied in the case, and what multiplier would have been applied if not for the cooperation, over time, industry and the defense bar may be able to use precedent to predict (and advocate regarding) how DOJ will exercise its discretion in future cases. But that sort of learning will be slow in this area, where there are not large numbers of settlements and the circumstances are often too unique to make clean case to case comparisons.
Perhaps more importantly, without more structured and specific guidance as to benefits, it would be unrealistic to expect that the cooperation benefit will be applied in any consistent fashion. According to the data I have collected, 46 different U.S. Attorney’s Offices were involved in resolving FCA cases over the past year, and 60% of FCA cases resolved over the past year were handled by individual U.S. Attorney’s Offices without the involvement of DOJ’s Civil Division in Washington, D.C. Public statements from at least some of those U.S. Attorney’s Offices reflect views of the practice of resolving FCA cases which are sharply at odds with the settlement data.
If DOJ hopes to create the consistency and confidence necessary to “incentivize companies to voluntarily disclose misconduct and cooperate with [DOJ] investigations,” the recent guidance must be the beginning and not the end of increased transparency in this area.
Jacob T. Elberg is an Associate Professor at Seton Hall Law School, where he teaches in the areas of Health Law, Health Care Fraud and Abuse, Evidence, and Data Analytics. Prior to joining Seton Hall Law School, Professor Elberg served for 11 years as an Assistant U.S. Attorney at the U.S. Attorney’s Office for the District of New Jersey. As Chief of the Office’s Health Care and Government Fraud Unit for five years, Professor Elberg directed all of the Office’s criminal and civil investigations and prosecutions of health care fraud offenses. Professor Elberg received his B.A., cum laude and with honors, from Dartmouth College and his J.D., magna cum laude, from Harvard Law School.