Are You Ready To Respond To A Civil Investigative Demand?
Recent changes to the federal False Claims Act (“FCA”) have enhanced the government’s ability to investigate health care and other kinds of fraud through the expanded use of Civil Investigative Demands or “CIDs”. The Fraud Enforcement Recovery Act of 2009 (“FERA”) significantly amended the FCA and not only eased the requirements for the Department of Justice ("DOJ") to issue CIDs, but now permits the sharing of information obtained pursuant to a CID with government agencies and FCA plaintiffs. CIDs are formidable investigative tools, and health care providers should understand how they are used in a government fraud investigation.
Prior to FERA, CIDs were infrequently issued. Because only the United States Attorney General could issue a CID, only the most important cases were subjected to the time consuming process of being submitted to the Attorney General for consideration. Now, FERA permits the Attorney General to delegate the authority to issue CIDs to designees. The Attorney General has so far delegated such authority to Assistant General Tony West, head of the DOJ's civil division. (It is not yet clear whether this delegation, however, extends to U.S. Attorneys also). For now, CIDs may be issued whenever the Attorney General or Mr. West has reason to believe that any person may be in possession, custody, or control of any documentary material or information relevant to a false claims law investigation. FERA has also provided substantial funding to the DOJ to hire more investigators and to pursue more investigations. Coupled with the easing of restrictions on the sharing of information, these changes are expected to result in greater use of CIDs.
CIDs are similar to subpoenas which can request documents, but more importantly, CIDs can also request answers to interrogatories and oral or written testimony. In one sense, a CID is somewhat similar to discovery in a civil case. However, there is a significant difference between discovery and a CID. Notably, discovery occurs after a FCA case has been filed and unsealed and is governed by the Federal Rules of Civil Procedure, which require notice to the defendant when discovery requests are served on a third party. CIDs are not required to be served on the target of an investigation prior to serving them on a third party. The CID does not even have to name the target of the investigation but just describe the nature of the conduct constituting the alleged violation of the FCA and the applicable provision of the FCA alleged to be violated. Therefore, it may not be clear to the recipient of a CID whether the recipient itself is being investigated, or whether the recipient is a third party in possession of information useful to a DOJ investigation.
The CID’s main use is as an investigatory tool to aid in the investigation of fraud resulting from suits filed under the FCA. It can be issued prior to the time that the plaintiff, an individual referred to as a relator, files a FCA suit, known as a qui tam suit, on behalf of the taxpayers. A CID can also be issued during the interval between the filing of a qui tam suit and the government's decision to either intervene or decline to intervene in the suit. Through use of the CID, the DOJ can more thoroughly investigate a potential fraud case than in the past. CIDs give the government an early opportunity to obtain the information needed to prosecute fraud and abuse and an advantage over the target of the investigation, who must wait until after a complaint has been served and unsealed to request information from the DOJ or the relator through discovery.
Before responding to a CID, a recipient needs to keep in mind that the DOJ may now easily share CID information with others. Prior to FERA, the DOJ was restricted to sharing CID information only with Justice Department employees, Congress, or other federal agencies. Sharing with other federal agencies required an order from a federal district court issued upon a showing that the other agency had a substantial need for the information. FERA eliminated the requirement for a court order and the substantial need standard.
Now, the DOJ can share such information with a broad array of third parties including federal, state or local government agencies and their contractors, and with qui tam relators. Such sharing may expose the recipient of the CID to liability under state law or to administrative actions by government agencies other than the DOJ. The statute provides that CID information is exempt from disclosure under FOIA and requires the DOJ to safeguard CID information. However, relators and other third party recipients of the CID information (such as state agencies) are not required to protect the confidentiality of the information. Therefore, recipients may try to take appropriate action to protect the confidentiality of CID information prior to responding to a CID.
Such sharing may erode the ability of the defendant to challenge a relator’s fraud claim. Under FERA, it is more likely that a defendant will become involved during the investigative process of a case. This puts the defendant in the difficult position of bearing the expense of responding to the CID without the benefit of knowing what a relator has alleged in the complaint.
The receipt of a CID is a serious matter whether the recipient of a CID is a target of an investigation or a third party. Targets need to be aware that a civil investigation often proceeds in tandem with a criminal investigation. When responding to a CID, a target’s rights against self-incrimination may be undermined, prejudicing the target’s ability to defend itself in a criminal proceeding. Additionally, third parties need to try to take steps to protect confidential business information provided in response to a CID. The recipient of a CID should seek advice from an attorney as to how to respond. By keeping the foregoing in mind, healthcare providers will be better prepared to respond to a CID.
About the Author
Suzanne Nolan is an associate at Frank, Haron, Weiner and Navarro, PLC. Ms. Nolan's practice focuses upon business and intellectual property transactions, including trademark, patent, and copyright licensing, e-commerce transactions, asset purchase and sales transactions, and real estate transactions for all types of entities, including healthcare providers. Ms. Nolan advises healthcare clients on HIPAA Stark, and Anti-Kickback Statute compliance and licensing matters. Additionally, Ms. Nolan counsels clients on creating, protecting and enforcing intellectual property rights.