A civil investigative demand (CID) is a powerful law enforcement tool that federal agencies including the U.S. Department of Justice (DOJ) use during the early stages of civil investigations into potential violations of the federal antitrust statutes and the False Claims Act (FCA). Receiving a Civil Investigative Demand issued by DOJ is a high-risk event, and responding effectively is essential for avoiding unnecessary consequences.
This includes not only unnecessary consequences related to the federal government’s investigation, but also unnecessary consequences related to the CID itself. Failing to properly respond to a CID can lead to allegations of interfering with a federal investigation and misleading federal agents—among others—in varying circumstances. As a result, even if you (or your organization) is not at risk in the underlying False Claims law investigation, you must still carefully respond to the CID. This requires experienced legal representation.
Dr. Nick Oberheiden and the defense lawyers at the national law firm Oberheiden P.C. have helped numerous individuals and corporations respond to CIDs issued by the justice department in connection with antitrust and FCA investigations. In this article, Dr. Oberheiden explains what CID recipients need to know in order to make informed and strategic decisions during (and after) the response process.
The Department of Justice’s Authority to Issue Civil Investigative Demands
A CID is a type of administrative subpoena. This means that civil investigative demands (CIDs) can be issued without the agency first having to show probable cause. Unless a CID is unenforceable for any reason (as discussed in greater detail below), the recipient must timely produce the documents identified in the subpoena. Although a federal district court is not involved in the issuance of a CID, noncompliance can still lead to criminal contempt charges—so the receipt of a CID under any circumstances is not to be taken lightly.
Not all federal law enforcement agencies have the authority to issue civil investigative demands (CIDs)—and even those that have the authority to issue CIDs can only do so in certain circumstances. The DOJ, for example, only has authority to issue CIDs in two types of cases:
Federal antitrust investigations target anti-competitive business activities. These include activities such as bid rigging, price fixing, price tying, collusion, and market division, among others. The DOJ also conducts civil antitrust investigation in cases involving large-scale mergers and acquisitions that have the potential to create noncompetitive markets, limiting consumer choice and allowing for artificial price inflation.
The False Claims Act prohibits improper claims for compensation from sources of federal government funding. Common allegations in DOJ investigations under the False Claims Act cases include:
- Submitting false claims and overbilling Medicare, Medicaid, Tricare, and other federal healthcare benefit programs;
- Unlawful referral relationships (including self-referrals) that involve compensation paid from federally reimbursed funds; and,
- Fraud under federal contracts and grant programs.
Upon receiving a CID from the DOJ, it is imperative to discern the focus of the DOJ’s investigation. Many types of organizations can be at risk for facing both antitrust and FCA investigations, and each of these types of investigations presents different risks and requires different defense strategies. Once you know what the DOJ is investigating, then you can focus on taking the steps we discuss below.
How can you discern the focus of the DOJ’s investigation? In some cases, it will be reasonably apparent from the CID itself. But, in others, it will be necessary to engage with the DOJ attorneys who drafted the demand. In either scenario, working closely with experienced defense counsel at this stage is essential for avoiding misguided assumptions and other mistakes that could lead to unnecessary consequences, including a criminal investigation.
3 Important Steps to Take Upon Receiving a CID
If you or your company has received a CID from the DOJ’s Antitrust Division or in connection with a DOJ investigation under the False Claims Act, responding appropriately and on time needs to be a priority. Ignoring a CID will not make it go away, and the DOJ is quick to take action in response to noncompliance. In time, ignoring a CID will lead to criminal charges for federal contempt—in addition to the continued (and likely additional) scrutiny from the DOJ.
It is also critically important to not over-comply with the demands in the letter. Providing too much information or handing over documents that are not within the scope of the CID can lead to unnecessary legal exposure if the extraneous information turns out to be incriminating in some way. As Dr. Nick Oberheiden, a civil investigative demand defense lawyer from Oberheiden P.C., often tells his clients, “While cooperating with the DOJ can be an effective defense strategy in some cases, CID recipients need to be extremely careful to avoid inadvertently sharing information that increases their exposure. If an investigation target shares information that the DOJ can use to pursue charges without first putting the necessary protections in place, the consequences of this mistake can be severe.”
1. Implement a Legal Hold to Preserve Relevant Documents
One of the worst mistakes CID recipients can make is to destroy information or files that are responsive to the CID. This can lead to allegations of spoliation and obstruction of justice, as well as a strong presumption that the deleted documents would have been incriminating. This is true even when documents are destroyed under the normal document retention policies of the company that received the demand.
By implementing a company-wide legal hold, CID recipients can preserve responsive records and ensure that they remain available as needed to disclose to the DOJ. This requires a careful and comprehensive approach, and is best done with the guidance and oversight of experienced legal counsel.
2. Gather Documents to Satisfy the Demand Well Before the Deadline
Even if you are going to challenge the issuance of the CID, you still need to gather the documents listed in the demand. This is to avoid a situation in which you challenge the CID, lose, and find yourself with insufficient time to gather the voluminous documents that are required for compliance.
Planning to assemble a disclosure package on the eve of the CID’s deadline is inadvisable for a variety of reasons. Among them, CID recipients must ensure that they have enough time to conduct a complete review of the documents they are preparing to disclose. This review is a crucially important defensive step to take before responding to a CID. As a general rule, inadvertent disclosures cannot be undone; and, as discussed above, they can lead to additional scrutiny and risks that could (and should) have been avoided.
3. Consider Filing a Motion to Quash or Limit the CID
While the DOJ has broad authority to issue CIDs, these investigative requests can occasionally be challenged. As a recent opinion from the U.S. District Court for the Eastern District of California explains, federal courts will generally consider the following three issues when deciding whether to quash a CID:
- Whether Congress authorized the federal agency to investigate the type of case in question;
- Whether the agency followed the proper procedures for issuing the CID; and,
- Whether the information requested in the CID is relevant and material to the investigation.
Given the limited grounds for challenging CIDs, efforts to quash CIDs in their entirety are only rarely successful. Not only will federal judges defer to the DOJ’s investigative expertise in most cases, but the DOJ’s attorneys understand the restrictions within which they need to operate. As a result, while CIDs are often extremely broad, they are also generally going to be enforceable in the vast majority of cases.
With this in mind, while it is important not to ignore the possibility of filing a motion to quash, when a submitting a compliant response to a CID is untenable, a better approach will often be to negotiate with the DOJ attorneys who issued the demand. In most cases, they will be willing to listen to recipients’ concerns—and they won’t want to have to sift through reams of records that aren’t relevant or material to the agency’s investigation. This is one area where a cooperative approach is often best: If a CID recipient makes clear that it is willing to comply but has concerns about its ability to do so, this can set the stage for productive negotiations that can also help facilitate a favorable resolution to the DOJ’s investigation.
These are just the preliminary steps involved in responding to a CID. After instituting a legal hold, identifying and gathering relevant documents, and evaluating options for challenging the demand, there are many more steps involved in providing responsive documents to the DOJ in an appropriate format and timely manner. The easier CID recipients make it for the DOJ to assess their compliance, the less likely they are to face allegations of noncompliance. Then, of course, there is the entirely separate matter of defending against the DOJ’s investigation.
