For The Defense, October 2010 - DRI Today

False Claims Act, from page 72government, should face considerable difficultyarguing that compliance was a prerequisiteto payment if the government wasaware of the violation and continued topay the defendants’ claims. Indeed, unlessthe government exceeded its discretion,accepting payment after learning of theviolation should be a complete defense toliability in jurisdictions that strictly interpretimplied certification.Similarly, the government’s knowledgeof the underlying violation may present astrong defense even in jurisdictions thatfollow Ab-Tech’s “information critical tothe decision to pay” test: even assumingstrict compliance was not required, thegovernment could not have considered theinformation “critical” to its decision to pay,if the decision to pay was unaffected by theinformation. Ab-Tech, 31 Fed. Cl. at 431–33. Further, defendants may have strongarguments that government’s knowledgecuts off liability from that forward. As falsitydepends on implicitly certifying compliancewith a prerequisite to payment, aclaim is simply not false if the governmentaccepted claims after learning that the defendantwas allegedly violating of the statuteor regulation is at issue.Critically, these considerations applyregardless of the source of the government’sknowledge, including to informationgained through a civil or criminalinvestigation or enforcement action. Whilethe government necessarily has someknowledge of a defendant’s alleged violationsonce it begins its civil or criminalinvestigation, defendants should includepotential FCA liability into their calculuswhen determining whether, and howmuch, information to voluntarily discloseto the government. In addition to the potentialto defeat an implied certification claim,full disclosure may effectively cut off futureliability, as a company may be unable toknowingly submit false claims once it fullydiscloses all of its records regarding itsalleged misconduct. Butler, 71 F.3d at 327.Indeed, the value provided by even a partialFCA defense may be comparable to thebenefit a company receives for cooperatingunder the sentencing guidelines.Once the government is aware of thealleged violation, a company should determinewhether the government will continueto accept claims, whether there areany pending qui tam actions, and whetherthe government intends to intervene,assuming an action is pending. Whilemany high- profile cases, such as the Pfizerand Eli Lilly matters, are global resolvedwith criminal plea agreements and FCAsettlements, the government’s knowledgemay still be effective leverage at the negotiatingtable. Further, as the governmentdeclines to intervene in a majority of quitam actions, defendants may be able to usea previous resolution of a criminal or civilenforcement action to aggressively defendsubsequent qui tam cases.However, defendants must also be awarethat this defense is not absolute and thatgovernment knowledge alone is not suffi-cient to defeat FCA liability. While defendantshave successfully defeated FCAclaims based on the government’s knowledgeof an alleged violation, the cases donot follow consistent or predictable reasoning.Further, these arguments assume thata claim is rendered false solely because ofthe alleged statutory or regulatory violation;this defense is unlikely to be successfulif the alleged violation rendered thedefendant’s product or service defective orworthless. However, for those defendantshaled into court solely because they failedto comply with an applicable statute or regulation,the government’s knowledge maybe a successful way to mitigate or eliminateliability.ConclusionThough the FCA is liberally construed,companies should be aware that liabilityis not absolute. Further, as relators continueto push the boundaries of the FCA,defenses to liability become more robust.Though courts have relied on the impliedcertification doctrine to find that statutoryor regulatory violations can serve asthe basis for FCA liability, they have alsofound that the government’s knowledgemay sometimes act as a complete or partialdefense. As qui tam actions now routinelyfollow any civil or criminal enforcementaction involving a government contractor,companies should be aware that they maybe able to use their alleged civil or criminalliability to defeat a related FCA matter.Miranda, from page 68viewed, the table has been set for potentialproblems. Here are a few practicaltips for those engaging in such internalinvestigations:• Be consistent. Have a set format of whatyour warning will be. Write it down soeveryone can say it the same way to thewitness.• Keep good notes. Record the fact that theUpjohn warning was given and that anagreement was obtained from the intervieweeto go forward, and that he or sheunderstood the instruction. Withoutnotes, questions regularly arise amongthose involved about whether or not thewarning was given.82 n For The Defense n October 2010• Do not “soft pedal” the warning. Thereshould be no confusion created afteryou have given the warnings. Lawyerssometimes create issues when they supplementwarnings. If the lawyer statesthat he or she “could” also be the lawyerof the interviewee “if no conflict arises,”he or she is inviting future problems. Ifyou do decide to jointly represent theemployee, an appropriate engagementletter is recommended.• Be ready for questions. You will get questions.Commonly, you will be asked: “DoI need a lawyer?” “Am I in trouble?” “DoI have to cooperate?” or “Is this confidential?”Answers to these questionsshould be consistent among the interviewinglawyers.• Obtain separate counsel. If the matterwarrants, it is not uncommon for thecompany to pay separate counsel to representindividuals. That lawyer can createand attorney- client privilege with theindividuals, even if the company is payingtheir fees. Joint defense agreementswill then also become a consideration.• Prepare. Prior to the investigation, theteam of lawyers who will be doing theinterviews should meet and make sureeveryone is clear on exactly what theissues are and how the interviews will beconducted. This will help avoid inconsistencyin the approach.