Crucially, it states that a corporation can approach the DOJ and disclose misconduct as soon as it becomes aware of any such issues involving employees, even before the misconduct is publicly reported or known to the DOJ.
Indeed, before this memo, the DOJ’s Civil Division’s Fraud Section had updated its self-disclosure and cooperation policies in May 2019. These updates underlined the significance of self-disclosure and cooperation, emphasizing that entities or individuals that proactively and voluntarily disclose misconduct will receive favorable treatment during the resolution of an FCA case.
The revision of the DOJ’s criminal policies in Fall 2022 rejuvenated the focus on self-disclosure among legal practitioners and clients. Companies, when faced with the decision to self-disclose, often deliberate its prudence.
Key Takeaways from Verizon’s Self-Disclosure
The Verizon settlement offers several valuable takeaways:
- Extent of Cooperation and Self-Disclosure: Verizon’s commitment to self-disclosure was far-reaching, involving written self-disclosures, independent investigations, compliance reviews, identifying individuals responsible for the issues, participating in damages analysis, and remediating the problems. Such thorough cooperation resulted in a 1.5 multiplier, significantly less than potential exposure under the FCA, which can reach three times the loss to the government plus penalties.
- Setting the Venue: Companies that self-disclose in a timely manner can often steer the case towards the civil realm, avoiding criminal liability. Once a company’s management becomes aware of misconduct, failing to disclose it and continuing such conduct can expose the company to civil and potentially criminal liability. By promptly disclosing misconduct, a company can choose where to disclose it, such as directly to the contracting agency or the DOJ’s civil fraud division, and potentially evade severe administrative measures like suspension or exclusion.
- Decreasing Financial Ramifications: Verizon’s self-disclosure and collaboration resulted in a relatively swift resolution, lasting under two years. This not only translated to lower legal and expert expenses but also minimized reputational costs for the company and its shareholders. Furthermore, Verizon’s proactive stance may lead to additional contracts with the GSA and other government agencies, ultimately bolstering the company’s revenue.
While the approach to alleged FCA misconduct varies depending on the specific case and facts, the Verizon settlement serves as an exemplary case of a self-disclosure executed effectively.
