Deputy Associate Attorney General Sheds Light on DOJ’s FCA Priorities at Annual False Claims Act Conference

“Enforcing the False Claims Act is a top priority for the Department—not just for our office,” said Deputy Associate Attorney General Stephen Cox, the Keynote Speaker for the 2020 Advanced Forum on False Claims and Qui Tam Enforcement, hosted by the American Conference Institute.  Deputy Cox reflected on FCA recoveries in 2019 and previewed DOJ’s FCA priorities for 2020.  Specifically, his keynote address on Monday, January 27 focused on: (1) enforcement; (2) cooperation credit; and (3) third-party financing.

DOJ’s Continued Enforcement Efforts

Deputy Cox emphasized that the FCA continues to be one of DOJ’s most important tools to fight healthcare, grant, financial, and government-contracting fraud.

Last fiscal year, DOJ recovered over $3 billion, $2.6 billion of which “came from suits involving the health care industry, including drug and medical device manufacturers, managed care providers, hospitals, pharmacies, hospice organizations, laboratories, and physicians.” Last year represented the tenth consecutive year that civil health care fraud settlements and judgments exceeded $2 billion.

DOJ’s heavy focus on opioid and opioid-adjacent cases resulted in some of the top recoveries in 2019. 2019 also saw increased use of 31 U.S.C. § 3730(c)(2)(A) dismissals — commonly referred to as “Granston” dismissals. In the 30 years prior to issuing the Granston Memo, DOJ identified approximately 45 cases it had dismissed pursuant to section 3730(c)(2)(A). In the past two years since issuing the Granston Memo, DOJ moved to dismiss approximately 45-50 cases. Deputy Cox identified two categories of cases exemplifying the appropriate use of the Granston dismissal:

1. DOJ sought dismissal of ten copycat cases filed by a professional relator organization against nursing home facilities because the agency was concerned that allowing the cases to proceed might undermine patient care; and
2. DOJ sought dismissal of two duplicative cases where the relator allegedly shorted the stock of the corporate defendants that he sued.

Deputy Cox said DOJ will use this tool more consistently to preserve DOJ’s resources and to rein in whistleblower overreach, but also noted that DOJ’s use of Granston dismissals has been judicious, given that approximately 1100 qui tam cases were filed in the last two years.

DOJ’s Cooperation Incentives

Deputy Cox also highlighted DOJ’s Cooperation Policy announced last May, which incentivizes corporate self-policing, cooperation, and compliance by providing for corporate defendants to earn a reduction in penalty and damages by voluntarily disclosing misconduct, taking remedial measures, and cooperating with investigators.

Deputy Cox explained that DOJ is willing to consider the nature and effectiveness of a company’s compliance system because a robust compliance program may demonstrate a lack of scienter while also noting that a “paper tiger” compliance program may demonstrate the opposite.  “As a former compliance lawyer, I hope companies will recognize that this new reform is a significant incentive to invest in compliance, to come forward when they identify significant false claims, and do the right thing in connection with our investigations,” said Deputy Cox.

Deputy Cox emphasized further: “For companies that provide maximum cooperation, we can provide substantial discount down to single damages, plus lost interest, costs of investigation, and in a qui tam case, the share that must go to the whistleblower.” In addition, DOJ “may also notify the relevant regulatory agency about the company’s cooperation so that the agency can take that into consideration in connection with administrative proceedings” and may even be “willing to publicly acknowledge the company’s cooperation or assist in resolving qui tam litigation with the relator.”

With respect to the amount of discount that DOJ would be willing to provide, Deputy Cox previewed an upcoming settlement announcement where the government expects to award the maximum discount for cooperation.

Third-Party Funding

In previewing the government’s 2020 areas of focus, Deputy Cox also revealed that DOJ is evaluating the need for disclosure of third-party litigation financing in qui tam actions. He acknowledged that DOJ has little insight into the extent that third-parties are funding qui tam cases investigated, litigated, or monitored by DOJ.

There are a few proposals for disclosure of third-party litigation funding agreements in civil litigation, including a bill sponsored by members of the Senate Judiciary Committee and a proposal considered within the Civil Rules Advisory Committee’s MDL Subcommittee.  Deputy Cox specifically highlighted one case where investors were funding the relator entity, and a relator was accused by his employer of attempting to profit from the qui tam litigation through short selling stock.  Proponents of the disclosure measures cite potential conflicts of interest, fairness in litigation, transparency, and accountability.

Read the keynote address here.