Deputy Associate Attorney General Stephen Cox in recent remarks offered some key insight into the Department of Justice’s enforcement principles, policies, and perspectives that guide its False Claims Act enforcement—covering everything from the Granston Memo to sub-regulatory guidance and its policy discouraging “piling on.”

At the 2019 Advanced Forum on False Claims and Qui Tam Enforcement on Jan. 28, Cox began his remarks by talking about the Granston Memo, internal guidelines issued last January by the Director of the Civil Fraud Section instructing its lawyers to consider dismissing whistleblower cases when they are not in the Department’s best interests.

Of the $2.8 billion in FCA recoveries last year, more than $2 billion was recovered in whistleblower cases. “The Department intervenes in only about one in five cases that are filed,” Cox said, “But even the other four in five cases consume Department time and resources—not only in investigating them initially, but also in terms of monitoring and participating in any ensuing litigation if the relator elects to proceed.”

Given that whistleblower cases continue to rise, this drain on resources will continue to escalate. “The Granston Memo is about our gatekeeping role,” Cox said. “Part of the reasoning behind the memo is that when qui tam cases are non-meritorious, abusive, or contrary to the interests of justice, they impose unnecessary costs on the Department, on the judiciary, and on the defendants.”

The Granston Memo is not a change in the Department’s historical position, but rather reflects what factors the Department has historically considered in deciding to dismiss an FCA case. However, the Department felt it was beneficial that all FCA litigators understand the Department’s practice “so that the authority could be used more consistently,” Cox said.

In the past, in a given year, the Department might have dismissed a few FCA cases—if any at all—but since 2017, the Department has moved to dismiss about two dozen cases, Cox said. “Our exercise of this authority will remain judicious, but we will use this tool more consistently to preserve our resources for cases that are in the United States’ interests.”

Sub-regulatory guidance

Cox also addressed the Department’s reforms concerning the issue of rulemaking by guidance. Sometimes, agencies will issue “guidance” in lieu of regulations.

While sub-regulatory guidance can be helpful in educating the public about statutes, regulations, and legal developments, “it’s improper to try to use guidance to bind the public by imposing legal obligations beyond those already enshrined in existing statutes or properly promulgated regulatory provisions,” Cox said. “Put simply, agency guidance should educate, not regulate.”

In November 2017, the Department announced it will no longer issue guidance documents that effectively bind the public without undergoing the notice-and-comment rulemaking process.

Last January, in the affirmative civil litigation context, including the FCA, then-Associate Attorney General Rachel Brand instructed Department attorneys not to use the Department’s affirmative civil enforcement authority to convert other agencies’ sub-regulatory guidance into rules that have the force or effect of law. “In other words, noncompliance with a nonbinding guidance document cannot be used to establish a violation of law,” Cox said.

This policy came to be known as the “Brand Memo.” Its principles have been codified in the Justice Manual, and they apply not only in FCA and civil enforcement cases, but also in criminal actions now.

Other matters

Cox also provided some thoughts on the Department’s policy discouraging “piling on” as it concerns FCA cases. “To avoid piling on, we are promoting coordination within the Department and with other agencies to apportion penalties and fines where appropriate,” Cox said.

“Under the same policy, we are also reminding our attorneys not to use our criminal enforcement authority for purposes unrelated to the investigation and prosecution of a possible crime,” he added. For example, the Department will not invoke the threat of criminal prosecution just to persuade a company to pay a larger settlement in an FCA case or any other civil case.

Finally, there is the matter of cooperation credit, which equally applies in the FCA context. In November 2017, the Department announced a corporate enforcement policy that takes voluntary disclosure, cooperation, and compliance into account in criminal cases. Then, in November 2018, the Deputy Attorney General announced changes to Department policies on awarding cooperation credit based on, for example, whether a company identifies the individual wrongdoers.

In announcing these changes, the Deputy Attorney General gave this FCA example: “A company might make a voluntary disclosure and provide valuable assistance that justifies some credit even if the company is either unwilling to stipulate about which non-managerial employees are culpable, or eager to resolve the case without conducting a costly investigation to identify every individual who might face civil liability in theory, but in reality would not be sued personally.” In short, the policy changes return discretion to civil lawyers to resolve each case consistent with relevant facts and circumstances.

Last June, then-Acting Associate Attorney General Jesse Panuccio made clear that FCA investigations are no exception to the Department’s policy of incentivizing cooperation. Corporate defendants can receive a more favorable resolution for cooperating with FCA investigations—from voluntary disclosure to sharing information gleaned from an internal investigation and making witnesses available.

Companies that invest in strong compliance measures will also be rewarded, Cox noted. If there’s a problem, the Department “welcomes and will reward companies that make voluntary disclosures and provide meaningful, candid assistance” in FCA investigations, he said.

The Department has significant discretion under the FCA to resolve cases in a way that “provides a material discount based on cooperation while still making the government whole. Stay tuned on this front.”