Anatomy of a Voluntary Disclosure

Transcription

1 Anatomy of a Voluntary Disclosure Association of Corporate Counsel March 15, 2011 Christopher A. Myers ( ) Chris.Myers@hklaw.com Kwamina T. Williford ( ) Kwamina.Williford@hklaw.com Copyright 2011 Holland & Knight LLP All Rights Reserved

2 Voluntary Disclosure of Wrongdoing Formal or informal process used by organizations To confess legal or regulatory violations, or other wrongdoing To a government regulatory or enforcement agency Before the government learns of the conduct from other sources or conducts its own investigation. 2

3 Basic Elements of Voluntary Disclosure Internal reporting/analysis of wrongdoing Preliminary assessment/investigation Consideration of preliminary disclosure of wrongdoing Conduct a thorough internal investigation Full disclosure of investigation results to government Cooperation in government evaluation Negotiate disclosure resolution 3

4 Internal Reporting/ Analysis of Wrongdoing Acknowledgement (?) If reporting situation, acknowledge receipt Analyze potential implications (Triage): Is it a simple overpayment issue? Does it implicate a violation of company policy? Does it implicate fraud, or a violation of criminal, civil or administrative law? Does it expose the company to significant risk of financial, legal or reputational harm? 4

5 Preliminary Assessment / Investigation Based on triage, identify who should be conducting the investigation: Human Resources Compliance Law Department Outside Counsel 5

6 Preliminary Assessment / Investigation Basic Steps Assess need to preserve documents Preliminary limited interviews of relevant personnel to assess the potential magnitude of misconduct Assess need to advise the Board 6

7 Preliminary Assessment / Investigation Is Disclosure Potentially Mandatory? Repayment is required if Overpayment by Agency Reverse False Claim: Violation of the FCA if organization fails to repay an overpayment after the overpayment was discovered (regardless of whether fraud was involved). See Fraud Enforcement and Recovery Act of 2009 ("FERA"), amending civil False Claims Act, 31 U.S.C et seq. 7

8 Preliminary Assessment / Investigation Is Disclosure Potentially Mandatory? Disclosure is required if fraud, a conflict of interest, bribery, or a violation of the False Claims Act is found in connection with a government contract. The Federal Acquisition Regulation (FAR) mandates disclosure by a Government Contractor in connection with the award, performance or closeout of a contract when credible evidence is found that a principal has committed a violation of federal criminal law involving fraud, conflicts of interest, bribery or gratuities found in Title 18 of the U.S. Code, or the civil False Claims Act. See FAR

9 Considerations of Initial Disclosure Potential Benefits of Voluntary Disclosure Reduced Penalties (HHS, DoD, DOJ, OSHA, EPA) Cost Control Control investigation scope and government response Pre-empt issuance of subpoena Control information flow to ensure full accurate picture is conveyed Demonstrates compliance commitment Forego criminal prosecution /civil False Claims Actions 9

10 Considerations of Initial Disclosure Potential Risks Uncertainty of Government Response Exposure to expenses and damage to reputation Possibility of Civil or Criminal Prosecution Possibility of Corporate Integrity Agreement Possibility of Corporate Monitor 10

11 Consideration of Initial Disclosure When to Disclose? Timing is important: The FAR requires timely disclosure after the company uncovers credible evidence that wrongdoing or violation occurred. FAR DOJ Antitrust Division will consider how early a company comes forward as a factor when determining level of leniency. DOJ Corporate Leniency Policy (Aug. 10, 1993). The False Claims Act offers mandated benefit only for disclosures made within 30 days of the date when the company first obtained the information. 31 U.S.C. 3729(a)(2). 11

12 Consideration of Initial Disclosure When to Disclose? Timing is important (cont.): CMS Voluntary Self-Referral Disclosure Protocol (Stark) requires disclosure within 60 days of when overpayment was identified or cost report due. OMB Control Number EPA Voluntary Audit Policy requires disclosure to be prompt, meaning 21 days of discovery. 65 Fed. Reg (April 11, 2000). 12

13 Consideration of Preliminary Disclosure When to Disclose? Additional Considerations: Potential for whistle blower situation When was problem first discovered Magnitude of wrongdoing and how many people know about it Whether corrective action has begun / been taken 13

14 Considerations of Initial Disclosure Disclose to Whom? Agency Contact Usually appropriate if simple mistake or overpayment Office of Inspector General for Agency Can be appropriate if civil, criminal, or administrative violations are found Department of Justice/US Attorney s Office Alternative strategy depending on circumstances State Regulatory/Enforcement Agencies Alternative strategy depending on circumstances 14

15 Conduct a Thorough Investigation Identify full scope of documents to be reviewed Ongoing assessment of preservation requirements Review relevant documents Conduct witness interviews Privilege issues Take opportunity to undertake pro-active measures to correct wrong doing 15

16 Full Disclosure: Select Agency Disclosure Protocols Department of Health and Human Service's (HHS) Provider Self-Disclosure Protocol HHS Health Reform Stark Voluntary Self Disclosure Protocol Department of Defense's voluntary disclosure program DOJ/Antitrust Division's Corporate Leniency Policy Environmental Protection Agency's Voluntary Audit Policy 16

17 Full Disclosure: What should be included? Nuts & Bolts Disclosing entity information (name, address, agency id, tax id) Designated representative Factual description of circumstances related to wrongdoing (including potential causes) Names of individuals involved in conduct Laws/regulations believed to have been violated Time Period Implicated Monetary impact / amount owed to government Certification that submission is truthful & based on good faith effort 17

18 Full Disclosure: Goals with Disclosure Educate the government about the company and the nature of your operations related to the wrongdoing -- this helps to put the wrongdoing in context. Highlight the thoroughness of the investigation done, such as the number of documents reviewed and people interviewed. Discuss the company s compliance and ethics program. 18

19 Full Disclosure: Additional Goals with Disclosure Disclose negative facts honestly which helps with credibility. Discuss pro-active measures taken by the company since the wrongdoing was discovered (i.e. people terminated, additional checks and balances implemented). 19

20 Full Disclosure: What Does Not Need To Be Included? The Government CANNOT require you to disclose attorney client communications or attorney work product, such as actual witness interview memorandum. 20

21 You Disclosed Now What? Government Verification Be prepared to cooperate Government may ask for additional documentation or to speak with particular individuals Extent of verification usually depends on quality and thoroughness of internal investigation and disclosure report 21

22 Possible Resolutions Repay improper payments/fines/penalties Future compliance & ethics measurements as a pre-requisite for settlement (Corporate Integrity Agreement) Corporate Monitor Cooperate with government s further investigation of individuals in wrongdoing Referral for criminal prosecution (rare) 22

23 Key Points to Take Away Early triage process - assess who to conduct investigation and preservation of evidence Decide whether disclosure is voluntary or mandatory Get ahead of the facts & understand scope of wrongdoing Take proactive steps internally to strengthen mechanisms for the early detection and correction of wrongdoing Disclosure should present the full picture and emphasize company s commitment to compliance Be prepared to cooperate 23

24 Questions? For more information on disclosures, please contact: Christopher A. Myers ( ) Kwamina T. Williford ( ) 24