Civil Investigative Demands (CIDs) & Collateral Enforcement Risks: A Review

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The government is actively using Civil Investigative Demands to investigate False Claims Act matters and cases - Liles Parker

(October 12, 2022): The False Claims Act is the primary civil enforcement tool utilized by our government today. In Fiscal Year (FY) 2021, the U.S. Department of Justice (DOJ) won or negotiated over $5.6 billion in False Claims Act (FCA)[1] settlements and judgments. Of that amount, more than $5 billion [2] resulted from matters involving the health care industry.[3] Since 1986, more than $702 billion has been recovered under the False Claims Act. In recent years, Federal prosecutors investigating False Claims Act matters and cases have increasingly relied on Civil Investigative Demands to evaluate the allegations that have been raised. This article examines the government’s use of Civil Investigative Demands in more detail and discusses issues you should consider if you and / or your practice is issued a Civil Investigative Demand in connection with a False Claims Act investigation.

I. What is a Civil Investigative Demand?

Civil Investigative Demands are used by the Department of Justice to Investigate False Claims Act Allegations - Liles Parker

The phrase “Civil Investigative Demand” is a broad phrase that is used by a number of Federal and State investigative and law enforcement agencies to describe one of the compulsory process investigative tools at their disposal when investigating civil fraud and related misconduct.[4] This article focuses solely on Civil Investigative Demands issued pursuant to alleged violations of the civil False Claims Act, 31 U.S.C. §3729. Simply stated, Civil Investigative Demands used in False Claims Act investigations are essentially subpoenas authorized under 31 U.S. Code §3733.

  • How Can a Civil Investigative Demand be Used by the DOJ?

    Under 31 U.S.C. § 3729-3733(1)(A)-(D), the government can use a Civil Investigative Demand to require a person:

    1. To produce such documentary material inspection and copying,
    2. To answer in writing written interrogatories with respect to such documentary material or information,
    3. To give oral testimony concerning such documentary material or information, or
    4. To furnish any combination of such material, answers, or testimony. (Emphasis added).

    As this list of permissible uses reflects, a Civil Investigative Demand is an invaluable discovery tool that can be used by Federal prosecutors to decide whether to file a DOJ initiated case or to interview in a False Claims Act case that has already been filed by a whistleblower.

  • Who is Authorized to Issue a Civil Investigative Demand?

    Civil Investigative Demands were legislatively authorized as part of the 1986 amendments to the False Claims Act.[5] At that time, their use an investigative tool was quite limited due to the administrative burden of having one approved for issuance. At this time, a Civil Investigative Demand could only be authorized by the Attorney General himself (or herself). For many years this tool was only used in significant False Claims Act cases.
    The Fraud Enforcement Recovery Act of 2009 (FERA) included several substantive changes to established legal principles associated with the civil False Claims Act.[6] FERA also significantly expanded the ability of the DOJ to conduct civil health care fraud investigations by allowing the delegation, and subsequent re-delegation of the authority to issue Civil Investigative Demands. As a result of that change, the Attorney General immediately delegated his authority to the Assistant Attorney General (AAG) for the Civil Division, who, in turn, re-delegated the authority to issue Civil Investigative Demands to the 93 U.S. Attorneys (there are 94 judicial districts but only 93 U.S. Attorneys – one handles two judicial districts).[7] From a practical standpoint, U.S. Attorneys have effectively further re-delegated the authority to issue Civil Investigative Demands to the Assistant U.S. Attorneys investigative False Claims Act cases in their district.

  • When Can a Civil Investigative Demand be Issued in a DOJ Initiated Matter?

    The government’s authority to issue a Civil Investigative Demand in a DOJ initiated False Claims Act investigation is limited to the point that DOJ files a lawsuit. Once the DOJ has filed suit under the False Claims Act, it is not permitted to use Civil Investigative Demands as an investigative tool.[8] If the DOJ issues a Civil Investigative Demand after a lawsuit has been filed, you should object to the Civil Investigative Demand. To be clear, there are a full range of standard post-filing civil discovery tools at the DOJ’s disposal – but a Civil Investigative Demand isn’t one of them.

  • When Can a Civil Investigative Demand be Issued by the DOJ in a Qui Tam Case?

    Once a False Claims Act case is filed, the Attorney General has a statutory obligation to investigate the False Claims Act violations that have been alleged by whistleblower.[9] Civil Investigative Demands are now commonly used by Federal prosecutors to assess the viability of a whistleblower’s case. Once the government makes an intervention decision, it may no long issue Civil Investigative Demands in a qui tam.[10] If the government decides to intervene in a case, it must rely on traditional discovery tools to build and prove its case.

  • Why Are Federal Prosecutors Increasingly Relying on Civil Investigative Demands in Health Care False Claims Act Cases?

    Since the authority to issue Civil Investigation Demands has been redelegated to U.S. Attorneys, the use of this investigative tool has greatly increased. Assistant U.S. Attorneys often rely on Civil Investigative Demands to obtain the necessary documents, testimony and information needed to decide whether the government should intervene in a qui tam. During FY 2021, a total of 801 new False Claims Act matters were opened. Of this total, 598[11] (74.6%) were filed by whistleblowers under the False Claims Act’s qui tam provisions by private persons.[12] These whistleblower-generated cases are handled by DOJ Civil Division attorneys and or Assistant U.S. Attorneys around the country. Civil Investigative Demands are often at the center of the government’s investigative efforts prior to deciding whether to intervene in a qui tam.

II. Parallel Proceedings in a False Claims Act Case:

The term “Parallel Proceedings” refers to the concurrent investigation and / or litigation of separate administrative, civil and / or criminal proceedings by the government[13] based on a common set of facts. For example, the civil Assistant U.S. Attorney in the U.S. Attorney’s Officer may pursue civil violations along one track while a criminal Assistant U.S. Attorney in the same office investigates criminal allegations. In 2012, Attorney General Holder issued a statement (Holder Memo) outlining the DOJ’s policy on coordinating parallel civil and criminal proceedings to enforce against fraud. At that time, he stated that the DOJ’s policy is as follows:

“. . . that criminal prosecutors and civil trial counsel should timely communicate, coordinate, and cooperate with one another . . . whenever an alleged offense or violation of federal law gives rise to the potential for criminal, civil, regulatory, and/or agency administrative parallel (simultaneous or successive) proceedings."[14]

To be clear, parallel proceedings aren’t new,[15] but there is no debate that their use has greatly increased in recent years. The Holder Memo further emphasized the need for cooperation between criminal and civil prosecutors. The goal of the Holder Memo was to implement policies and procedures which would allow information sharing between the civil and criminal sides of the office (to the extent that the information can legally be shared).[16] To a significant extent, this directive was again re-emphasized in a Memorandum issued by Deputy Attorney General Sally Quillian Yates in 2015 (Yates Memo).[17] The Yates Memo also emphasized the importance of holding the specific individuals who are responsible for the improper conduct accountable for their actions, rather than solely pursue an offending corporation.

• Evidence Obtained Using a Civil Investigative Demand May be Shared with a Federal Criminal Prosecutor for Use in a Possible Parallel Criminal Investigation.

Any information gathered via a Civil Investigative Demand is effectively eligible for legal use in a criminal investigation at the time it is shared with the civil attorney. Both government-initiated False Claims Act matters, and whistleblower filed False Claims Act cases are often assessed using Civil Investigative Demands. Consistent with the DOJ’s policy of cooperation, documents, answers to interrogatories and transcripts of oral testimony produced in response to a Civil Investigative Demand are often shared with criminal side of the office so that a separate evaluation of possible criminal culpability can be made. By statute, Civil Investigative Demands expressly permit the DOJ to utilize the information obtained in criminal proceedings. 31 U.S.C. §3733(i)(3) provides:

"(3) USE OF MATERIAL, ANSWERS, OR TRANSCRIPTS IN OTHER PROCEEDINGS-

Whenever any attorney of the Department of Justice has been designated to appear before any court, grand jury, or Federal agency in any case or proceeding, the custodian of any documentary material answers to interrogatories, or transcripts of oral testimony received under this section may deliver to such attorney such material, answers, or transcripts for official use in connection with any such case or proceeding as such attorney determines to be required.”

In essence, you should assume that any information you produce in response to a Civil Investigative Demand is being shared with criminal prosecutors. As an aside, regardless of whether the DOJ has issued a Civil Investigative Demand, most U.S. Attorney’s Offices automatically share a copy of all False Claims Act qui tam Complaints filed under seal with an Assistant U.S. Attorney in the office’s Criminal Division.

III. How Easy is it to Turn a Civil False Claims Act Case into a Criminal Prosecution?

As we have discussed, a Civil Investigative Demand issued pursuant to the investigation of a False Claims Act matter may be used by the DOJ to obtain relevant documents, written responses to interrogatories, and oral testimony from potential witnesses. Depending on the facts, any of these items may provide evidence to the government of criminal wrongdoing. Several areas of particular concern are discussed below.

  • Kickbacks and Improper Inducements.

    Simply stated, the Federal Anti-Kickback Statute [18] criminalizes the payment of any funds or giving something of value in an effort to induce referrals that are paid for by the Medicare or Medicaid programs. Both a party offering a kickback and the intended recipient can be held criminally liable under the Anti-Kickback Statute. A party found guilty of violating the statute can be fined up to $100,000 and imprisoned up to 10 years, or both, for each violation of the law. [19]

    Among its various provisions, the Affordable Care Act amended the Federal Anti-Kickback Statute so that a violation of the law automatically qualifies as a violation of the civil False Claims Act:

    “In addition to the penalties provided for in this section or section 1320a–7a of this title, a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of title 31.”

    A significant portion of the whistleblower cases currently filed include one or more allegations that the defendants have violated the Anti-Kickback Statute. Similarly, it isn’t uncommon for government-initiated False Claims Act investigations to include a kickback component. In both scenarios, when issuing a Civil Investigative Demand, the government would likely seek documents, answers to interrogatories and / or oral testimony exploring the kickback allegations that have been raised. To the extent that your testimony is being sought in a civil False Claims Act investigation, if you believe that your statements could expose you to criminal liability, you can assert your right to remain silent under the 5th Amendment of the Constitution.[20] Unfortunately, should you assert your 5th Amendment rights in a civil matter, a court may draw an adverse interference from your silence. [21]

  • False Statements and Misrepresentations.

    A Civil Investigative Demand seeking your testimony is a serious matter. During your questioning, should you make a false statement, conceal a material fact or make a material misrepresentation, you may be criminally prosecuted under 18 U.S.C. §1001. Don’t turn a civil matter into a criminal prosecution – consult experienced legal counsel before making statements to a government agent or prosecutor.

  • Destruction, Alteration of Falsification of Records in a Federal Investigation.

    Upon learning of a Federal investigation, or upon receipt of a Civil Investigative Demand (whichever happens first), we recommend that you take steps to ensure that no evidence is destroyed, and no records are falsified. Under 18 U.S.C. §1519:

    “Whoever knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation or proper administration of any matter within the jurisdiction of any department or agency of the United States . . shall be fined under this title, imprisoned not more than 20 years, or both.”

    As these examples illustrate, targets of False Claims Act investigations may have significant criminal exposure. There is no easy answer when addressing these risks. Should you fail to comply with the requests for production or to the answer interrogatives in a Civil Investigative Demand, the government will likely first file Motion to Comply with the court. Should you still refuse to turn over documents or answer the questions posed, you may be held in contempt by the court. Additionally, the government will likely use one of the other, more intrusive discovery tools at its disposal. More than likely, the government will ultimately prevail and will get the information it is seeking. It is therefore essential that you engage experienced health law counsel as early in the process as possible. For more information on the possible collateral consequences of responding to a Civil Investigative Demand, you may wish to review our article titled, “The Collateral Enforcement Risks of DOJ Civil Investigative Demands (CIDs) Issued in False Claims Act Matters and Cases”.

IV. Responding to a Civil Investigative Demand:

Upon receipt of a Civil Investigative Demand, you should immediately seek an experienced health law attorney to guide you in responding to the government’s subpoena. You want to ensure that this individual or firm is experienced and knowledgeable regarding Civil Investigative Demands and their use in False Claims Act investigations and cases. Questions to ask include, but are not limited to:

  • Was the attorney a former Assistant U.S. Attorney? If so, did he or she handle False Claims Act cases on behalf of the government?
  • Has the attorney handled a wide variety of Civil Investigative Demands in other False Claims Act health care matters and cases?
  • Is the attorney experienced negotiating the scope and timing of Civil Investigative Demands with DOJ prosecutors?
  • Is the attorney sensitive to the multitude of administrative, civil and criminal collateral consequences that can arise out of a False Claims Act investigation?
  • Does the attorney have a firm understanding of the fundamental requirements of medical necessity, coding and billing?
  • If kickback allegations are a component of the case, is the attorney experienced in analyzing the conduct in light of the many Safe Harbors that have been established under the Federal Anti-Kickback Statute? There are currently 11 Statutory Safe Harbors and 34 Regulatory Safe Harbors. Depending on the facts, your conduct may qualify for the protection of one of these Safe Harbors.
  • Is the attorney experienced handling complex document production projects and assisting health care providers assemble their responses to interrogatories?

If you or your practice receives a Civil Investigative Demand, you should immediately contact your legal counsel and take steps to ensure that no spoilation of the evidence takes place. It cannot be stated enough that the information gathered using this investigative tool can give rise to administrative sanctions, civil liability and / or criminal prosecution. Questions? Give us a call for a free consultation. We can be reached at: 1 (800) 475-1906.

Robert Liles represents health care providers in False Claims Act cases around the country - Liles Parker
Robert W. Liles, Esq. is Managing Partner at the health law firm, Liles Parker PLLC. He is a former Federal prosecutor and have extensive experience with the False Claims Act. We represent health care providers around the country in connection with Civil Investigative Demands and False Claims Act matters and cases. Should you have any questions, please call us for a free consultation. Robert can be reached at: 1 (800) 475-1906.
  • [1] See 31 USC §3729.
  • [2] hese recoveries were in addition to administrative impositions spearheaded by the Department of Health and Human Services, Office of Inspector General (OIG), the Centers for Medicare and Medicare Services (CMS), and the various contractors working for CMS (for example, Unified Program Integrity Contractors (UPICs) and Supplemental Medical Review Contractors (SMRCs)).
  • [3] Office of Public Affairs, Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal Year 2021 (2022). Department of Justice. https://www.justice.gov/opa/pr/justice-department-s-false-claims-act-settlements-and-judgments-exceed-56-billion-fiscal-year.
  • [4] Statutory and regulatory provisions authorizing CIDs have been implemented at both the Federal and State level. The purpose and scope of each CID varies from one to another. For example, three of the most common CID’s used by Federal law enforcement and investigators include:
    • 15 U.S.C. §57b-1 – Civil Investigative Demands. Used by attorneys and investigators employed (or representing) the Federal Trade Commission to ascertain whether a person is (or has been) engaged in any unfair or deceptive acts or practices in or affecting commerce OR in any antitrust violations.
    • 18 U.S.C. §1968 – Civil Investigative Demand. Used by Federal prosecutors to demand the production of documentary materials relevant to a racketeering investigation.
    • 31 U.S.C. §3733 – Civil Investigative Demands. Used by the Attorney General, or a designee (usually an Assistant U.S. Attorney) to obtain documentary evidence, interrogatories and / or oral testimony, in connection with the investigation of a False Claims Act matter (or case, if a qui tam has been filed by a whistleblower).
  • [5] See, Public Law 99-562, October 27, 1986.
  • [6] Among other changes, FERA largely legislatively overturned the U.S. Supreme Court’s decision in Allison Engine Co. United States ex rel. Sanders, 553 U.S. 662 (2008); and it made overpayments “obligations” thereby vastly expanding the ability of the government to bring “reverse false claims” actions.
  • [7] See: Redelegation of Authority of Assistant Attorney General, Civil Division, to Branch Directors, Heads of Offices and United States Attorneys in Civil Division Cases. Section 5. 75 Fed. Reg. 14070 (Mar. 24, 2010).
  • [8] See 31 USC §3733(a)(1). As this provision provides:

    Whenever the Attorney General, or a designee (for purposes of this section), 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, the Attorney General, or a designee, may, before commencing a civil proceeding under section 3730(a) or other false claims law, or making an election under section 3730(b), (Emphasis Added).

  • [9] See 31 USC §3730(a).
  • [10] Ibid.
  • [11] DOJ Fraud Statistics – Overview (October 1, 1986 – September 30, 2021).
  • [12] See 31 USC §3730(b)(1).
  • [13] Although we tend to think of “Parallel Proceedings” as the simultaneous pursuit of civil and criminal claims by the DOJ, that isn’t always the case. It can also involve CMS pursing administrative sanctions at the same time that the DOJ is pursuing a defendant for civil or criminal violations. It may also include situations where a State enforcement agency is pursuing a defendant for civil or criminal violations of State law at the same time that the DOJ is pursing the same defendant based on the same operative facts.
  • [14] Memorandum from Eric H. Holder, Attorney Gen., Dep't of Justice, to all US Attorneys, et al., "Coordination of Parallel Criminal, Civil, Regulatory, and Administrative Proceedings" (Jan. 30, 2012), available at: https://www.justice.gov/usam/organization-and-functions-manual-27-parallel-proceedings (Holder Memo).
  • [15] For example, there is a long history of the Internal Revenue Service (IRS) pursing administrative claims against wrongdoers at the same time that the DOJ is investigating a defendant for mail or wire fraud, based on the same operative facts.
  • [16] For example, information and evidence obtained in a criminal case pursuant to a Grand Jury Subpoena cannot be shared with civil prosecutors unless the criminal prosecutor obtains what is known as a “6(e) Waiver” from the Court. See the Federal Rules of Criminal Procedure, Rule 6(e). To avoid this, Federal criminal prosecutors may utilize an Authorized Investigative Demand (AID) rather than the Grand Jury process to obtain documents in a health care fraud case. Information obtained with an AID can readily be shared with a civil prosecutor.
  • [17] Memorandum from Sally Quillian Yates, Deputy Attorney Gen., Dep't of Justice, to all U.S. Attorneys et al., "Individual Accountability for Corp. Wrongdoing" (Sept. 9, 2015), available at: https://www.justice.gov/archives/dag/file/769036/download (Yates Memo).
  • [18] 42 U.S.C. § 1320a-7b.
  • [19] Under the Bipartisan Budget Act of 2018, Pub. L. 115-123, 132 Stat. 64(2018):
      • Under Subtitle B, Section 50412(a)(2), Criminal penalties for acts involving federal health care programs under 42 U.S.C. § 1320a–7b, including but not limited to the Anti-Kickback Statute, were increased from $25,000 to $100,000.

    Under Subtitle B, Section 50412(b)(2), Additionally, the maximum sentences for felonies involving Federal health care program fraud and abuse under 42 U.S.C. § 1320a–7b(b), including but not limited to the Anti-Kickback Statute, were increased from Five to Ten years.

  • [20] Courts have long held that the Fifth Amendment privilege “can be asserted in any proceeding, civil or criminal, administrative or judicial, investigatory or adjudicatory.” Kastigar v. United States, 406 U.S. 441, 445 (1972).
  • [21] See SEC v. Susman, 2010 WL 532060, at *5 (S.D.N.Y. Feb. 11, 2010). See also Commodity Futures Trading Comm’n v. Int’s Fin. Servs., 323 F.Supp.2d 482, 505 (S.D.N.Y.2004).