New Justice Department Directive Underscores Focus on Individuals—and Importance of Cooperation—in False Claims Act Investigations
In a recent memorandum issued to Main Justice litigating components and United States Attorney’s offices nationwide, Deputy Attorney General Sally Quillan Yates emphasized that “fighting corporate fraud and other misconduct” remains a top priority for the Department and the Federal government’s vow to seek “individual accountability for corporate wrongdoing.” The memorandum, which appears to be designed to respond to criticism regarding the Department’s response to the 2008 financial crisis, underscores the importance of full disclosure of facts, including the specific individuals behind the fraud, as the touchstone for a corporation to receive “cooperation” credit.
For example, under the False Claims Act, corporations are subject to reduced damages when they provide to the government “full cooperation” and “all information” shortly after becoming aware of such information. 31 U.S.C. § 3729. The Yates memorandum provides that full cooperation “will be that, at a minimum, all relevant facts about responsible individuals must be provided.” (Emphasis added.) Moreover, Department attorneys should “strive to obtain from the company as much information as possible about responsible individuals before resolving the corporate case” and settlement agreements under certain instances may require “post-resolution” obligations like the disclosure of additional information about responsible individuals. Justice Department attorneys are also directed that, absent “extraordinary circumstances,” the United States “should not release claims related to the liability of individuals based on corporate settlement releases.”
Although the focus on cooperation is not particularly new, the focus on “naming names” suggests that the Justice Department may not be satisfied when a corporation merely investigates, discloses, and remedies an alleged fraud. Rather, the specific individuals responsible for the alleged fraud—employees, officers, and agents—are likely to be important not only to the investigation but also to the settlement and resolution of the investigation, including any determination of reduced damages or penalties. The directive also makes it less likely that corporate settlement agreements will comprehensively resolve a dispute. The Department appears to be have embraced, at least in word, a focus on individual actors within an alleged corporate fraud—not simply the fraud as a whole.