Acting Associate Attorney General Jesse Panuccio Delivers Remarks at the American Bar Association’s 12th National Institute on the Civil False Claims Act and Qui Tam Enforcement
Washington, DC
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Thursday, June 14, 2018
Remarks as prepared for delivery
Thank you, Sara, for that kind introduction. Sara has been litigator and leader in the Civil Division for nearly twenty years. You are fortunate to be able to learn from her expertise, and we are fortunate to have her in the Department.
Nominations
Ordinarily at this time, you might be hearing from the Assistant Attorney General for the Civil Division, who has direct oversight over our False Claims Act enforcement. The President nominated a highly qualified lawyer, Jody Hunt, to serve in that position last September. Jody has served in the Department for over fifteen years, most recently as Chief of Staff to the Attorney General and, before that, in the Civil Division as the Director of the Federal Programs Branch. Jody is eminently qualified and deserves swift confirmation.
But he is still awaiting confirmation. And Jody is not alone in that wait. Of the seven litigating components in Main Justice, only two currently have Senate-confirmed leaders. This has been the case for a year and a half. Some nominees have been waiting for over a year.
While the Senate should act quickly to confirm these nominees, it is worth noting—contrary to some press reports—that these positions are not sitting vacant. Attorney General Sessions has assembled an experienced and talented leadership team, including those who are serving as acting heads of Divisions. Chad Readler has been performing that role for the Civil Division since January of 2017 and he has been instrumental in the Department’s work, including maintaining the False Claims Act and its qui tam provisions as one of the government’s most effective civil tools in protecting vital government programs from fraud schemes. I’m thrilled to report that, last week, the President nominated Mr. Readler to the Court of Appeals for the Sixth Circuit—a stellar choice, and we appreciate Chad’s continued willingness to serve.
Civil Enforcement Work
As you may know, the Associate Attorney General oversees several litigating components within DOJ, including the Civil Division.
Thus, it is a great pleasure to be here today to speak to you about the critical False Claims Act work being done to protect taxpayer funds from fraud. I am continually impressed by what the Department and its partners have achieved.
As we all know, the federal qui tam statute has long and honorable roots dating back to efforts to fight rampant and harmful fraud on the Union Army during the Civil War.
Today, the need for the Department to remain vigilant and active in its efforts to combat fraud within taxpayer-funded programs remains as strong as ever. Just this past year, the Department opened 815 new fraud matters, which includes 675 qui tam matters filed by relators. That brings the total filings by relators since the 1986 amendments to more than 11,900.
The Department’s recoveries are equally impressive. Since 1986, the Department has recovered more than $56 billion in False Claims Act matters. Relators have been awarded more than $6.6 billion in the matters they have brought to us.
Protecting the Public
So long as greed remains a human vice, fraud will persist—and even as we close down one scheme or another, fraudsters are always finding new ways to cheat the taxpayer. For example, I vividly recall that when, during my years as Florida’s labor secretary, we developed a system to quickly detect and shut down unemployment insurance fraud. It was alarming to watch, in real time, as fraudsters would shift tactics to get around each new road block we established. That’s why vigilant and rigorous anti-fraud work is so vital to good government: the fraudsters will never stop and neither can enforcement efforts.
Here at the federal level, some of our recent False Claims Act successes illustrate the startling variety and breadth of fraudulent schemes used against the government. They also demonstrate that, in many cases, fighting fraud is not just about dollars, but also is critical to ensuring public health, the safety of our men and women in uniform, and the well-being of members of the public.
For example, in the public health arena, a national electronic health records software vendor and certain of its employees paid $155 million to resolve allegations that they concealed that the company’s electronic health records software did not comply with the requirements that go to the reliability of electronic health records. The United States alleged that in order to obtain the necessary certification for the software, instead of programming the capability to retrieve any drug code from a complete database, the vendor hardcoded the only drug codes that would be used in the certifying entity’s test—essentially, the company was cheating for the test.
Likewise, in early 2017, a pharmaceutical company paid $350 million to settle federal and state False Claims Act allegations that it used kickbacks and other unlawful methods to induce clinics and physicians to use or overuse its product, which was a bioengineered human skin substitute.
Also last year, a pharmaceutical company paid $465 million to resolve False Claims Act allegations that it treated its product, which is used to treat anaphylactic shock, as a generic drug for Medicaid rebate purposes. The company’s scheme enabled it to raise its prices dramatically while avoiding paying additional rebates it owed for its product that would have insulated Medicaid from these price hikes.
In another example, the Civil Division recently filed a suit against a leading compounding pharmacy and several of its executives alleging that the pharmacy grossly inflated the price of compound medications reimbursed by TRICARE, a federally-funded health care program for military personnel and their families.
Outside of the healthcare space, the False Claims also serves a critical function. For example, in the public safety space, since 2007, body armor companies have paid the United States more than $132 million to resolve allegations that they knowingly manufactured and sold defective bulletproof vests for use by law enforcement officers. Our most recent recovery was for $66 million from a manufacturer that produced allegedly defective material in the vests.
This recovery will help purchase approximately 18,700 additional bullet-resistant vests for state, local, and tribal law enforcement officers through the Department’s Bulletproof Vest Partnership Program. According to the International Association of Chiefs of Police, in the past 30 years, over 3,000 cases have been reported where law enforcement officials survived ballistic and nonballistic incidents because they were wearing bulletproof vests. It is simply unconscionable for a company to cheat or cut corners in the production of life-saving equipment for the brave men and women of law enforcement. These cases are about saving officers’ lives and protecting our communities.
In still another context, the False Claims Act is being used to help protect and ensure fair competition for American businesses. We are actively pursuing those fraudsters who are misrepresenting their eligibility for small business contracts and denying these opportunities for legitimate small businesses. We are also using the Act to prevent companies from flouting our customs laws. Over the last five years, the Department has recovered more than $100 million in settlements involving the evasion or underpayment of import duties for a wide variety of merchandise.
Affirmative Priorities
The False Claims Act has also proven to be a vital tool in our efforts to advance important Department of Justice priorities.
One of Attorney General Sessions’ top priorities is to combat the nation’s opioid crisis. Opioid abuse has become one of country’s most pressing public health and safety crises. Indeed, we’re in the midst of one of the worst drug epidemics in our country’s history. An estimated 64,000 Americans lost their lives to drug overdoses in 2016, about two-thirds of them as a result of opioids. A new study published in the Journal of the American Medical Association found that one in five deaths among adults age 25 to 34 is opioid-related.
In addition to our criminal enforcement efforts across the country, the Department is relying on its civil remedies to combat the opioid epidemic. In April of this year, for example, the Department intervened in five lawsuits against the manufacturer of an opioid product—a sublingual spray that contains fentanyl, one of the most highly addictive and deadly opioid products available. For this reason, fentanyl is approved by the FDA only for patients with cancer who are suffering from otherwise uncontrollable pain. The Department has alleged in its complaint that the company used a variety of illegal means to increase prescriptions of its product, including paying kickbacks and lying about patients having cancer.
Let me be clear: the Department of Justice will actively employ the False Claims Act, as well as any other available civil or criminal statute, against any entities involved in the opioid distribution chain who engage in the abuse and illegal diversion of opioids—from pharmaceutical manufacturers and distributors, to pharmacies, to pain management clinics and physicians.
Another major priority for Attorney General Sessions is protecting our nation’s elders from fraud and abuse. The False Claims Act continues to play an integral role in support of that goal. For example, in November, the Department secured a False Claims Act settlement from a nursing home management company, its owner, and others for grossly substandard nursing home care. The defendants allegedly diverted Medicare and Medicaid funds from the facility in question, leaving it unable to pay for basic needs of patients like food, heat, air conditioning, pest control, and cleaning.
We also have pursued hospice companies that enroll patients who aren’t terminally ill, inducing them to prematurely abandon curative care. And we have pursued skilled rehabilitation facilities that subject elderly patients to physical therapy that’s not medically warranted in order to increase Medicare billings.
Policy Initiatives
As these and other recent matters illustrate, this Administration is committed to pursuing vigorous False Claims Act enforcement.
We are also committed to enforcement that is fair and consistent with the rule of law. Attorney General Sessions has stressed, since his first day in office, that the Department must pursue its work consistent with the plain meaning of the law, with respect for democratic accountability, and with an unwavering commitment to the first principles of our Constitution.
Accordingly, under his leadership, the Department has instituted a number of litigation policies and reform efforts. One example is the ban on certain third-party payments in settlement agreements; another is the use of our rights under the Class Action Fairness Act to object to unfair settlements of class action cases; and still another is the directive to reexamine consent decrees with local law enforcement agencies to ensure they enforce the law and promote effective, constitutional policing while respecting local control and accountability.
Several new policies and reforms relate specifically to the False Claims Act. We have many attorneys who have done great work on these policies in the Civil Division; on the Attorney General’s Advisory Committee of U.S. Attorneys; on the Corporate Enforcement and Accountability Working Group; and on the Regulatory Reform Task Force. In my office, my deputy Steve Cox, who is with us today, has taken a leading role in developing and implementing significant and just FCA enforcement policies. Let me walk through some of them now.
Qui Tam Dismissals
One important development relates to the dismissal of qui tam actions that the Department determines are not in the public interest and therefore should not proceed. The number of qui tam suits has grown considerably since 1986 and now routinely clocks in at over 600 per year. And while the Department does not have the resources to pursue every meritorious qui tam case, it is also true that the Department declines to intervene in some cases due to the lack of legal or factual support. In these circumstances, if the relator nevertheless elects to pursue the matter, the Department should consider whether the relator’s continued pursuit of the case is warranted or whether the Department should exercise its dismissal authority to advance the interests of the United States.
Nominations
Ordinarily at this time, you might be hearing from the Assistant Attorney General for the Civil Division, who has direct oversight over our False Claims Act enforcement. The President nominated a highly qualified lawyer, Jody Hunt, to serve in that position last September. Jody has served in the Department for over fifteen years, most recently as Chief of Staff to the Attorney General and, before that, in the Civil Division as the Director of the Federal Programs Branch. Jody is eminently qualified and deserves swift confirmation.
But he is still awaiting confirmation. And Jody is not alone in that wait. Of the seven litigating components in Main Justice, only two currently have Senate-confirmed leaders. This has been the case for a year and a half. Some nominees have been waiting for over a year.
While the Senate should act quickly to confirm these nominees, it is worth noting—contrary to some press reports—that these positions are not sitting vacant. Attorney General Sessions has assembled an experienced and talented leadership team, including those who are serving as acting heads of Divisions. Chad Readler has been performing that role for the Civil Division since January of 2017 and he has been instrumental in the Department’s work, including maintaining the False Claims Act and its qui tam provisions as one of the government’s most effective civil tools in protecting vital government programs from fraud schemes. I’m thrilled to report that, last week, the President nominated Mr. Readler to the Court of Appeals for the Sixth Circuit—a stellar choice, and we appreciate Chad’s continued willingness to serve.
Civil Enforcement Work
As you may know, the Associate Attorney General oversees several litigating components within DOJ, including the Civil Division.
Thus, it is a great pleasure to be here today to speak to you about the critical False Claims Act work being done to protect taxpayer funds from fraud. I am continually impressed by what the Department and its partners have achieved.
As we all know, the federal qui tam statute has long and honorable roots dating back to efforts to fight rampant and harmful fraud on the Union Army during the Civil War.
Today, the need for the Department to remain vigilant and active in its efforts to combat fraud within taxpayer-funded programs remains as strong as ever. Just this past year, the Department opened 815 new fraud matters, which includes 675 qui tam matters filed by relators. That brings the total filings by relators since the 1986 amendments to more than 11,900.
The Department’s recoveries are equally impressive. Since 1986, the Department has recovered more than $56 billion in False Claims Act matters. Relators have been awarded more than $6.6 billion in the matters they have brought to us.
Protecting the Public
So long as greed remains a human vice, fraud will persist—and even as we close down one scheme or another, fraudsters are always finding new ways to cheat the taxpayer. For example, I vividly recall that when, during my years as Florida’s labor secretary, we developed a system to quickly detect and shut down unemployment insurance fraud. It was alarming to watch, in real time, as fraudsters would shift tactics to get around each new road block we established. That’s why vigilant and rigorous anti-fraud work is so vital to good government: the fraudsters will never stop and neither can enforcement efforts.
Here at the federal level, some of our recent False Claims Act successes illustrate the startling variety and breadth of fraudulent schemes used against the government. They also demonstrate that, in many cases, fighting fraud is not just about dollars, but also is critical to ensuring public health, the safety of our men and women in uniform, and the well-being of members of the public.
For example, in the public health arena, a national electronic health records software vendor and certain of its employees paid $155 million to resolve allegations that they concealed that the company’s electronic health records software did not comply with the requirements that go to the reliability of electronic health records. The United States alleged that in order to obtain the necessary certification for the software, instead of programming the capability to retrieve any drug code from a complete database, the vendor hardcoded the only drug codes that would be used in the certifying entity’s test—essentially, the company was cheating for the test.
Likewise, in early 2017, a pharmaceutical company paid $350 million to settle federal and state False Claims Act allegations that it used kickbacks and other unlawful methods to induce clinics and physicians to use or overuse its product, which was a bioengineered human skin substitute.
Also last year, a pharmaceutical company paid $465 million to resolve False Claims Act allegations that it treated its product, which is used to treat anaphylactic shock, as a generic drug for Medicaid rebate purposes. The company’s scheme enabled it to raise its prices dramatically while avoiding paying additional rebates it owed for its product that would have insulated Medicaid from these price hikes.
In another example, the Civil Division recently filed a suit against a leading compounding pharmacy and several of its executives alleging that the pharmacy grossly inflated the price of compound medications reimbursed by TRICARE, a federally-funded health care program for military personnel and their families.
Outside of the healthcare space, the False Claims also serves a critical function. For example, in the public safety space, since 2007, body armor companies have paid the United States more than $132 million to resolve allegations that they knowingly manufactured and sold defective bulletproof vests for use by law enforcement officers. Our most recent recovery was for $66 million from a manufacturer that produced allegedly defective material in the vests.
This recovery will help purchase approximately 18,700 additional bullet-resistant vests for state, local, and tribal law enforcement officers through the Department’s Bulletproof Vest Partnership Program. According to the International Association of Chiefs of Police, in the past 30 years, over 3,000 cases have been reported where law enforcement officials survived ballistic and nonballistic incidents because they were wearing bulletproof vests. It is simply unconscionable for a company to cheat or cut corners in the production of life-saving equipment for the brave men and women of law enforcement. These cases are about saving officers’ lives and protecting our communities.
In still another context, the False Claims Act is being used to help protect and ensure fair competition for American businesses. We are actively pursuing those fraudsters who are misrepresenting their eligibility for small business contracts and denying these opportunities for legitimate small businesses. We are also using the Act to prevent companies from flouting our customs laws. Over the last five years, the Department has recovered more than $100 million in settlements involving the evasion or underpayment of import duties for a wide variety of merchandise.
Affirmative Priorities
The False Claims Act has also proven to be a vital tool in our efforts to advance important Department of Justice priorities.
One of Attorney General Sessions’ top priorities is to combat the nation’s opioid crisis. Opioid abuse has become one of country’s most pressing public health and safety crises. Indeed, we’re in the midst of one of the worst drug epidemics in our country’s history. An estimated 64,000 Americans lost their lives to drug overdoses in 2016, about two-thirds of them as a result of opioids. A new study published in the Journal of the American Medical Association found that one in five deaths among adults age 25 to 34 is opioid-related.
In addition to our criminal enforcement efforts across the country, the Department is relying on its civil remedies to combat the opioid epidemic. In April of this year, for example, the Department intervened in five lawsuits against the manufacturer of an opioid product—a sublingual spray that contains fentanyl, one of the most highly addictive and deadly opioid products available. For this reason, fentanyl is approved by the FDA only for patients with cancer who are suffering from otherwise uncontrollable pain. The Department has alleged in its complaint that the company used a variety of illegal means to increase prescriptions of its product, including paying kickbacks and lying about patients having cancer.
Let me be clear: the Department of Justice will actively employ the False Claims Act, as well as any other available civil or criminal statute, against any entities involved in the opioid distribution chain who engage in the abuse and illegal diversion of opioids—from pharmaceutical manufacturers and distributors, to pharmacies, to pain management clinics and physicians.
Another major priority for Attorney General Sessions is protecting our nation’s elders from fraud and abuse. The False Claims Act continues to play an integral role in support of that goal. For example, in November, the Department secured a False Claims Act settlement from a nursing home management company, its owner, and others for grossly substandard nursing home care. The defendants allegedly diverted Medicare and Medicaid funds from the facility in question, leaving it unable to pay for basic needs of patients like food, heat, air conditioning, pest control, and cleaning.
We also have pursued hospice companies that enroll patients who aren’t terminally ill, inducing them to prematurely abandon curative care. And we have pursued skilled rehabilitation facilities that subject elderly patients to physical therapy that’s not medically warranted in order to increase Medicare billings.
Policy Initiatives
As these and other recent matters illustrate, this Administration is committed to pursuing vigorous False Claims Act enforcement.
We are also committed to enforcement that is fair and consistent with the rule of law. Attorney General Sessions has stressed, since his first day in office, that the Department must pursue its work consistent with the plain meaning of the law, with respect for democratic accountability, and with an unwavering commitment to the first principles of our Constitution.
Accordingly, under his leadership, the Department has instituted a number of litigation policies and reform efforts. One example is the ban on certain third-party payments in settlement agreements; another is the use of our rights under the Class Action Fairness Act to object to unfair settlements of class action cases; and still another is the directive to reexamine consent decrees with local law enforcement agencies to ensure they enforce the law and promote effective, constitutional policing while respecting local control and accountability.
Several new policies and reforms relate specifically to the False Claims Act. We have many attorneys who have done great work on these policies in the Civil Division; on the Attorney General’s Advisory Committee of U.S. Attorneys; on the Corporate Enforcement and Accountability Working Group; and on the Regulatory Reform Task Force. In my office, my deputy Steve Cox, who is with us today, has taken a leading role in developing and implementing significant and just FCA enforcement policies. Let me walk through some of them now.
Qui Tam Dismissals
One important development relates to the dismissal of qui tam actions that the Department determines are not in the public interest and therefore should not proceed. The number of qui tam suits has grown considerably since 1986 and now routinely clocks in at over 600 per year. And while the Department does not have the resources to pursue every meritorious qui tam case, it is also true that the Department declines to intervene in some cases due to the lack of legal or factual support. In these circumstances, if the relator nevertheless elects to pursue the matter, the Department should consider whether the relator’s continued pursuit of the case is warranted or whether the Department should exercise its dismissal authority to advance the interests of the United States.
Let me stress here that the Department appreciates the risks that relators may take in coming forward to expose fraudulent conduct. And we understand the dedication and skill that is necessary for a successful qui tam lawyer to prevail to judgment in a declined matter. And we acknowledge that there have been matters in which that dedication and skill resulted in large recoveries for the taxpayers of this country.
But when declined cases go forward, they often require that the Department—and our client agencies—devote significant resources to monitoring them. We are often called upon to participate in such cases by responding to discovery requests or filing statements of interest to help courts get the law right. And these cases also impose substantial costs on defendants and the judiciary.
When these cases lack merit or are otherwise contrary to the interests of justice, they consume limited resources that could be used to pursue other meritorious cases and priorities. Frivolous cases can also lead to bad case law, which can undermine enforcement of the False Claims Act generally. Thus, when declining intervention, and even throughout the life of the case, we have now instructed our attorneys to consider whether moving to dismiss an action would be an appropriate exercise of the Department’s prosecutorial discretion under the False Claims Act. Although this authority has previously been used only rarely, the Department’s use of the dismissal option has a pedigree goes back to 1986. Drawing on that experience and exercising this authority more consistently, but judiciously, will free up Department resources for important matters like the ones I’ve already mentioned, and will ultimately make our efforts to fight fraud on the public fisc all the more effective.
Guidance
Another area that has been of concern across the Administration is the problem of regulation by guidance. Guidance documents can be helpful in educating the public about statutes, regulations, and legal developments. But it is improper to try to use guidance to bind those outside the Executive Branch by imposing legal obligations beyond those already enshrined in existing statutes or properly promulgated regulatory provisions. Put simply, agency guidance should educate, not regulate. Guidance should not be used to evade lawful legislative and regulatory processes, which are designed to ensure accountable and limited governance.
Attorney General Sessions announced in November that the Department will no longer issue any kind of binding sub-regulatory guidance. We hope other agencies will follow this example, and in the affirmative litigation context, we have instructed DOJ attorneys not to use our enforcement authority to convert sub-regulatory guidance into rules that have the force or effect of law.
Now, as Attorney General Sessions made clear, guidance documents can be used to simply explain existing law. Therefore, in the False Claims Act arena, where the allegations are that a party falsely certified to the government that it complied with certain laws, it is fully consistent with Department policy to use a party’s receipt of a guidance document as probative evidence of knowledge of the law that the document explains. But guidance documents that expand upon statutory or regulatory requirements should not be used by Department attorneys as the basis for contending that legal violations have occurred. That policy keeps government restrained and promotes the rule of law, fair notice, and due process.
Cooperation
Let me turn to another reform project at the Department. The Deputy Attorney General has spoken in the past about incorporating into one place Department policies that now are found scattered throughout numerous memoranda and internal guidance issued by various DOJ components. This process of formalizing our policies is now underway and, with input from stakeholders within and outside the Department, will result in modifications to past practices. Let me assure you, however, that there are certain principles from which we will not stray.
We will continue, for example, to expect and recognize genuine cooperation of corporate entities accused of wrongdoing in both civil and criminal matters. We want to create incentives for companies to help us identify the individuals responsible for wrongdoing, because we remain steadfast in our resolve to hold such individuals accountable.
I want to make perfectly clear that False Claims Act investigations are no exception to this policy on cooperation. Corporate defendants can receive a more favorable resolution for providing meaningful assistance to our False Claims Act investigations – from voluntary disclosure, which is the most valuable form of cooperation, to other efforts such as sharing information gleaned from an internal investigation and making witnesses available. Because the False Claims Act allows recovery of treble damages and civil penalties, the Department has tremendous enforcement discretion with respect to structuring settlements that make the government whole while also providing a material discount based on a defendant’s cooperation. Of course, the extent of the discount will depend on the nature of the cooperation and how helpful it is to the Department’s investigation, including our pursuit of individual wrongdoers.
Compliance
As we deter fraud by holding individuals accountable, we also want to be sure that we continue to reward companies that invest in strong compliance measures.
The challenge of corporate compliance is especially acute in large and diverse organizations. I empathize: every day at DOJ we face the challenges of an organization with 115,000 employees. Things go wrong in every organization.
When something does go wrong, however, the greatest consideration should be given to companies that do not just adopt compliance programs on paper, but incorporate them into the corporate culture.
Lawyers have an important role to play in ensuring compliance. Just as relator’s counsel in this room are important partners for us in protecting taxpayer funds, compliance counsel can be as well, by working on the front lines to provide the advice that prevents fraud in the first place and redressing it when it happens.
Competition requires a level playing field. If some businesses evade the rules, others lose out by following them. We recognize that and it motivates our False Claims Act enforcement and our partnership with all of you.
Piling On
One last policy issue I want to discuss today is the topic of multiple law enforcement and regulatory agencies pursuing a single entity for the same or substantially similar conduct. When those agencies impose unwarranted and disproportionate penalties for that conduct, some people refer to it as “piling on.”
When a company engages in wrongdoing, we should enforce the law and punish the wrongdoers. And it is also appropriate to ensure that the victim is fully compensated for its losses, including through enforcement under the False Claims Act or other available remedies.
But we also recognize that repeated and unwarranted punishment for the same conduct has the potential to undermine the spirit of fair play and the rule of law. Multiple punishments can also deprive a company, as well as its employees, customers, and investors, of the benefits of certainty and finality ordinarily available through a full and final settlement. For that reason, the Department just recently announced a new policy designed to avoid piling on by promoting coordination within the Department and with other regulators to apportion penalties and fines where appropriate, to ensure that defendants are subject to the appropriate, not just the highest, level of punishment that is available.
The same policy also reminds our attorneys not to use the Department’s criminal enforcement authority against a company for purposes unrelated to the investigation and prosecution of a possible crime. Department attorneys may not invoke the threat of criminal prosecution solely to persuade a company to pay a larger settlement in a civil case. Parallel investigations involving the False Claims Act, both within DOJ and with other enforcement agencies, may present conditions in which you will see this policy at work.
I appreciate the opportunity you have given me today to explain our views on many of the important issues that arise in the False Claims Act arena. I have no doubt that during the course of this conference, these and other issues will be debated by you and that Department attorneys in attendance will report back with suggestions on how we can better do our job. We welcome that. Indeed, that is the great value in gatherings such as these.
So let me conclude by encouraging you to take part in these discussions and by thanking you for letting me play a role in them.
Thank you.
But when declined cases go forward, they often require that the Department—and our client agencies—devote significant resources to monitoring them. We are often called upon to participate in such cases by responding to discovery requests or filing statements of interest to help courts get the law right. And these cases also impose substantial costs on defendants and the judiciary.
When these cases lack merit or are otherwise contrary to the interests of justice, they consume limited resources that could be used to pursue other meritorious cases and priorities. Frivolous cases can also lead to bad case law, which can undermine enforcement of the False Claims Act generally. Thus, when declining intervention, and even throughout the life of the case, we have now instructed our attorneys to consider whether moving to dismiss an action would be an appropriate exercise of the Department’s prosecutorial discretion under the False Claims Act. Although this authority has previously been used only rarely, the Department’s use of the dismissal option has a pedigree goes back to 1986. Drawing on that experience and exercising this authority more consistently, but judiciously, will free up Department resources for important matters like the ones I’ve already mentioned, and will ultimately make our efforts to fight fraud on the public fisc all the more effective.
Guidance
Another area that has been of concern across the Administration is the problem of regulation by guidance. Guidance documents can be helpful in educating the public about statutes, regulations, and legal developments. But it is improper to try to use guidance to bind those outside the Executive Branch by imposing legal obligations beyond those already enshrined in existing statutes or properly promulgated regulatory provisions. Put simply, agency guidance should educate, not regulate. Guidance should not be used to evade lawful legislative and regulatory processes, which are designed to ensure accountable and limited governance.
Attorney General Sessions announced in November that the Department will no longer issue any kind of binding sub-regulatory guidance. We hope other agencies will follow this example, and in the affirmative litigation context, we have instructed DOJ attorneys not to use our enforcement authority to convert sub-regulatory guidance into rules that have the force or effect of law.
Now, as Attorney General Sessions made clear, guidance documents can be used to simply explain existing law. Therefore, in the False Claims Act arena, where the allegations are that a party falsely certified to the government that it complied with certain laws, it is fully consistent with Department policy to use a party’s receipt of a guidance document as probative evidence of knowledge of the law that the document explains. But guidance documents that expand upon statutory or regulatory requirements should not be used by Department attorneys as the basis for contending that legal violations have occurred. That policy keeps government restrained and promotes the rule of law, fair notice, and due process.
Cooperation
Let me turn to another reform project at the Department. The Deputy Attorney General has spoken in the past about incorporating into one place Department policies that now are found scattered throughout numerous memoranda and internal guidance issued by various DOJ components. This process of formalizing our policies is now underway and, with input from stakeholders within and outside the Department, will result in modifications to past practices. Let me assure you, however, that there are certain principles from which we will not stray.
We will continue, for example, to expect and recognize genuine cooperation of corporate entities accused of wrongdoing in both civil and criminal matters. We want to create incentives for companies to help us identify the individuals responsible for wrongdoing, because we remain steadfast in our resolve to hold such individuals accountable.
I want to make perfectly clear that False Claims Act investigations are no exception to this policy on cooperation. Corporate defendants can receive a more favorable resolution for providing meaningful assistance to our False Claims Act investigations – from voluntary disclosure, which is the most valuable form of cooperation, to other efforts such as sharing information gleaned from an internal investigation and making witnesses available. Because the False Claims Act allows recovery of treble damages and civil penalties, the Department has tremendous enforcement discretion with respect to structuring settlements that make the government whole while also providing a material discount based on a defendant’s cooperation. Of course, the extent of the discount will depend on the nature of the cooperation and how helpful it is to the Department’s investigation, including our pursuit of individual wrongdoers.
Compliance
As we deter fraud by holding individuals accountable, we also want to be sure that we continue to reward companies that invest in strong compliance measures.
The challenge of corporate compliance is especially acute in large and diverse organizations. I empathize: every day at DOJ we face the challenges of an organization with 115,000 employees. Things go wrong in every organization.
When something does go wrong, however, the greatest consideration should be given to companies that do not just adopt compliance programs on paper, but incorporate them into the corporate culture.
Lawyers have an important role to play in ensuring compliance. Just as relator’s counsel in this room are important partners for us in protecting taxpayer funds, compliance counsel can be as well, by working on the front lines to provide the advice that prevents fraud in the first place and redressing it when it happens.
Competition requires a level playing field. If some businesses evade the rules, others lose out by following them. We recognize that and it motivates our False Claims Act enforcement and our partnership with all of you.
Piling On
One last policy issue I want to discuss today is the topic of multiple law enforcement and regulatory agencies pursuing a single entity for the same or substantially similar conduct. When those agencies impose unwarranted and disproportionate penalties for that conduct, some people refer to it as “piling on.”
When a company engages in wrongdoing, we should enforce the law and punish the wrongdoers. And it is also appropriate to ensure that the victim is fully compensated for its losses, including through enforcement under the False Claims Act or other available remedies.
But we also recognize that repeated and unwarranted punishment for the same conduct has the potential to undermine the spirit of fair play and the rule of law. Multiple punishments can also deprive a company, as well as its employees, customers, and investors, of the benefits of certainty and finality ordinarily available through a full and final settlement. For that reason, the Department just recently announced a new policy designed to avoid piling on by promoting coordination within the Department and with other regulators to apportion penalties and fines where appropriate, to ensure that defendants are subject to the appropriate, not just the highest, level of punishment that is available.
The same policy also reminds our attorneys not to use the Department’s criminal enforcement authority against a company for purposes unrelated to the investigation and prosecution of a possible crime. Department attorneys may not invoke the threat of criminal prosecution solely to persuade a company to pay a larger settlement in a civil case. Parallel investigations involving the False Claims Act, both within DOJ and with other enforcement agencies, may present conditions in which you will see this policy at work.
I appreciate the opportunity you have given me today to explain our views on many of the important issues that arise in the False Claims Act arena. I have no doubt that during the course of this conference, these and other issues will be debated by you and that Department attorneys in attendance will report back with suggestions on how we can better do our job. We welcome that. Indeed, that is the great value in gatherings such as these.
So let me conclude by encouraging you to take part in these discussions and by thanking you for letting me play a role in them.
Thank you.
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