CIDs on the rise in whistleblower investigations?

by Kurt Schulzke

United States attorneys pursuing false claims actions are using civil investigative demands (“CIDs”) more frequently than in the past in False Claims Act qui tam cases, according to panelists at a July 20, 2010 ALI-ABA False Claims Act webcast.

The CID uptick comes thanks to Section 5 of DOJ Directive No. 1-10 (full document after end of the post) which became effective March 8, 2010.  Directive No. 1-10 partially implemented new statutory authority provided by the Fraud Enforcement and Recovery Act (FERA), now at 31 U.S.C. 3733, signed into law on May 20, 2009.   Under the FERA amendments, Congress expressly authorized the U.S. Attorney General to delegate the AG’s CID powers to local U.S. Attorneys (“USAs”).

The newly delegated CID power is seen by the defense bar as a threat in part because under 31 U.S.C. 3733(a)(1) “any information obtained [via a CID] by the attorney general or a designee may be shared with any qui tam relator if the AG or designee determine it is necessary as part of any false claims act investigation.”  On a theoretical level, the layering of “any information” on top of “any relator” should concern defendants.  (Hint: They can avoid any hassle by not making false claims in the first place.)

In practical terms, however, defendants seem so far unaffected by the tandem “any” of 31 U.S.C. 3733(a)(1).  While CIDs are apparently getting more use by USAs and AUSAs (assistant U.S. attorneys), qui tam bar scuttlebutt indicates that information derived from CIDs is — to date — not being shared with relators.

Defense attorney and panelist Kathleen McDermott (Morgan Lewis & Bockius, in Washington, DC) said she “has seen” six CIDs in the last four months which she allowed was a significant increase.   McDermott also claimed that a DOJ attorney had told her that Main Justice has issued additional CID guidance, subsequent to Directive No. 1-10, but has chosen not to publicly disseminate this guidance.

Unabashedly biased defense counsel John Boese (Fried, Frank, Harris, Shriver & Jacobson, LLP, in Washington, DC) agreed that CID’s are getting more action but says they “throw a wrench” into the investigative process and are an ineffective tool used badly by inexperienced AUSAs.  The outspoken Boese (his middle name might be “verbose”) sees every qui tam case as a criminal case which — in addition to his role on the defense bar — colors his take on CIDs.

Speaking as a former prosecutor (and current defense counsel), Boese said that DOJ attorneys view the qui tam relator primarily as a key witness, not as a partner in the false claims investigation.  Therefore, they may seek to avoid tainting the relator as a witness by insulating the relator from new evidence.  While some AUSAs may take this view, others clearly do not as demonstrated in some cases by the active participation by relators in the analysis of evidence produced through discovery and, in others, by relators who get even more deeply involved in developing new evidence by wearing a wire.

Asked how relator’s counsel might encourage AUSAs to use CIDs, Jeb White (Nolan & Auerbach, P.A.) suggested that some AUSAs may need to be persuaded to take advantage of the CIDs with reference to the specific evidence the relator believes will be produced through execution of the CID.  Of course, it would be very helpful if the DOJ would publish all of its CID guidance so that practioners on both sides would have a better understanding of how the CIDs are supposed to be used at the loca level.  For interested readers, Directive No. 1-10 is so far all that we have to go on.

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