Rebirth Of The Cid?

While much attention has been focused on the new amendments to the False Claims Act as a result of FERA, most of this discussion has concentrated on the “sexy” changes implemented by the amendments–e.g., overruling Allison Engine and Totten and expanding the definitions of “claim” and “overpayment.” Less dramatic are the modifications to 31 U.S.C. 3733, which contains the FCA’s provision for Civil Investigative Demands (“CID”). Yet, from the strategic perspective–the focus of this blog–these mechanical modifications may prove as significant as the more exciting amendments.

Background of FCA CID’s

While I was serving in the Civil Fraud Section at Main Justice, the 1986 amendment process was underway. The Civil Division emphasized to Senator Grassley and others involved in considering the proposed amendments that effective FCA enforcement required that the Civil Division have a device similar to the highly effective CID’s that were available to the Antitrust Division. Emphatic promises were made that should FCA CID’s be authorized, they would be heavily used by DOJ attorneys in their fraud investigations. Based on that representation, and other considerations, Congress included what became section 3733 in the 1986 amendments.

I thought this was a wise development. I had worked for two years in the Antitrust Division and utilized CID’s in several investigations. The full panoply of investigative provisions were included in the FCA version of the CID’s. On my webpage [fcaexpert.com], under the articles section, is an extensive article I wrote on what CID’s are and how they operate. In short, DOJ fraud investigators were entitled to serve document requests, interrogatories, requests for admission, and notices of depositions in connection with an on-going investigation prior to DOJ either filing its own FCA action or intervening in a qui tam action.

While I was at DOJ, CID’s were fairly extensively utilized. I always found them exceedingly useful devices to expedite and focus an ongoing fraud investigation. The major problem we faced using CID’s was that it was a major pain to get the Attorney General to authorize them, since he or she (Ms. Reno in my tenure) had the sole ability to authorize them. Preparing a package for signature by the AG is always a major undertaking, since it must survive the review of many levels of supervision. Also, section 3733 has time schedules built in, which are very hard to calculate if you don’t know how long it will take for AG to sign off. Sometimes CID’s were authorized in a week or two; other times a month or more could elapse.

When I left DOJ in 1995, CID’s were still frequently employed by my former colleagues. However, during 13 years as a private defense counsel, I only saw two CID’s served in my cases. In a 2007 case I worked on, I noticed that the CID served was numbered [as all CID’s must be] with a very low number, 5 or 6 as I recall, even though it had been issued toward the end of the year. The trial attorney running the case informed me that hardly anyone was using CID’s at Justice for a number of reasons, the AG delay problem being prominent among them.

It is apparent that the 2009 amendments to section 3733 are designed to reinvigorate use of CID’s and to enhance their impact.

First Change: AG or AG’s Designee Can Authorize

Subsection (a)(1) allows the AG to designate a DOJ official to authorize the issuance of CID’s. It is not evident from the new language who that individual might be–the Associate AG or the AAG in charge of the Civil Division (meaning the current deputy AAG who supervised the fraud section for something like 20 years) seem the most likely candidates. The result of this change is that it will be easier and faster to get CID’s authorized. The amendment also clarifies something I don’t think needed to be clarified–DOJ can issue CID’s in a qui tam case before making its election to intervene or not intervene.

Second Change: Fruits of CID’s Can Be Shared with Relators

Subsection (a)(1) makes a major change in allowing DOJ to share CID information “with any qui tam relator if the Attorney General or designee determine[s] it is necessary as part of any false claims act investigation.” In my experience, to a certain extent, this kind of sharing was done informally at DOJ (such as during relator interviews) in any regard. This provision makes it clear that this practice is blessed and extensive sharing of CID material is being encouraged. To emphaze this point, the definition section found in 3733 (l)(8) offers one definition of “official use” as being “interviews of any qui tam relator or other witness.”

Third Change: CID Information Can be Shared with other Agencies

Congress demonstrated its desire in subsection (i)(2)(C) for wider dissemination of CID material [remember this is civil, we are not dealing with 6(e) grand jury material here] by making it explicit that DOJ can share CID information with other agencies. This was always a problem area when I was at DOJ, because the client agency rightly felt its attorneys should have access to all pertinent information in a case before making a formal recommendation to either initiate an FCA action or enter a qui tam. While there always has been some informal sharing, this amendment removes that source of potential friction. The expanded definition of “official use” also points toward Congress encouraging enhanced sharing of CID information outside DOJ itself.

Left unresolved is a major issue: can CID information be turned over to the Criminal Division? The purpose of CID’s is to facilitate civil investigations; moreover, very broad discovery-like devices (including depositions) are among the arsenal of available investigative devices. It was also a difficult situation when the Criminal Division got wind of a civil investigation in which it had an interest and requested CID material. The Civil Division was forever proposing that the AG issue regulations to govern this situation. I don’t think it ever happened. In any regard, subsection (i)(2)(B) authorizes the CID custodian to issue copies of material to “other officer or employee of the Department of Justice.” This is also an issue addressed in the definitional section where “official use” includes communications “in furtherance of a Department of Justice investigation or prosecution of a case…” Could this include criminal cases? I guess we will have to wait and see.

D. Expanded Definition of “official use

In addition to the points already discussed relative to this expanded definition, it would seem that Congress intended under some situations for CID information to be communicated to state and local government agencies, or their contractors. Various other categories of “official use” contained in subsection (l)(8) apparently expand substantially the freedom and discretion of DOJ in how it utilizes CID information. Given the extreme proprietary sensitivity of some CID info, we are probably looking at some substantial litigation to define the exact parameters of this language.

Conclusion

So are we about to enter the “age of the CID” or will things continue much as they have been?That remains to be seen. What is clear beyond dispute is that from the strategic FCA perspective, counsel need to study seriously the new and improved section 3733 because suddenly it is more likely they will encounter CID’s in their own cases.

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