Alert

Alert: DOJ to Increase Scrutiny of False Claims Act Cases for Possible Parallel Criminal Proceedings

September 30, 2014

The Criminal Division of the U.S. Department of Justice recently announced that it would begin reviewing all new whistleblower lawsuits filed under the civil False Claims Act, to determine whether a parallel criminal investigation might be appropriate. This marks a significant departure from past practice and signals an unmistakable desire on the part of the DOJ to increase the criminal consequences for those who violate the FCA.

Although the DOJ’s Civil Division, which oversees all civil FCA cases, has always consulted with the Criminal Division and other federal prosecutors regarding cases that may merit criminal review, the decision whether to open a criminal investigation generally has been left to the discretion of individual U.S. Attorney’s Offices. On September 17, however, the Assistant Attorney General for the Criminal Division, Leslie Caldwell, announced that the Civil Division will now share all new qui tam complaints with the Criminal Division as soon as they are filed, so that the Criminal Division can quickly determine whether to open a parallel criminal investigation and, if so, how best to coordinate that with other federal offices. In her announcement, Caldwell even encouraged potential whistleblowers and their counsel to contact the Criminal Division early on in a qui tam case — even if a suit has not yet been filed — if it may have criminal implications.

The consequences of the DOJ’s change in procedure will likely be significant for defendants in qui tam cases going forward. The fact that all qui tam cases will automatically be reviewed, centrally, by the Criminal Division (and likely concurrently by individual U.S. Attorney’s offices) for possible criminal implications, means that the chances of criminal investigation and prosecution are greater — particularly because such criminal review will be occurring earlier in cases than ever before. With potential increased criminal liability come a number of possible adverse consequences for defendants, including serious possible negative criminal and regulatory penalties. This is the case both for companies and individuals such as corporate officers. The threat of such serious consequences could even play a role in the way that settlements are negotiated between defendants and relators or the government. It is clear that companies that are faced with a civil qui tam suit will need to immediately evaluate their potential criminal exposure and develop a strategy for handling both a parallel criminal investigation and a civil qui tam case.