9-42.010
Coordination of Criminal and Civil Fraud Against the Government
Cases
The United States has both statutory (e.g.,
the False Claims Act, 31 U.S.C. §§ 3729-3733) and
common law rights of action arising from fraud against the
government and from the corruption of its officials. Every report
of fraud or official corruption should be analyzed for its civil
potential before the file is closed. In the first instance, this
review should be conducted by an Assistant United States Attorney
or Departmental Trial Attorney assigned to the initial referral.
Claims of fraud against the government involving more than
$1,000,000 in single damages plus civil penalties also should be
referred to the Civil Division's Commercial Litigation Branch.
The Federal Bureau of Investigation has been directed
to furnish both the Fraud Section of the Criminal Division and the
Commercial Litigation Branch of the Civil Division with copies of
all reports in all matters involving fraud against the government,
or bribery or conflict of interest involving a public employee.
Other federal investigative agencies are required to forward
similar reports of investigation to the Branch Director or
appropriate United States Attorney.
Cases pursued criminally must also be analyzed for
civil potential. This analysis should be conducted at the earliest
possible stage. Criminal dispositions by plea bargain should not
waive or release the government's civil interests, except in return
for adequate consideration, as measured by the Department's
standards for civil settlements generally. Proposed civil
dispositions involving over $1,000,000 in single damages plus civil
penalties must be referred to the Commercial Litigation Branch for
approval. See 28 C.F.R. § 0.160,
§ 0.164, and Civil Division Directive No. 14-95, 60 Fed.
Reg. 17457 (April 6, 1995), reprinted in 28 C.F.R. Pt. 0,
Subpart Y, Appendix.
As to cases referred to it, the Commercial Litigation
Branch notifies the appropriate United States Attorney and other
interested offices within the Department of Justice of potential
civil actions that come to the Branch's attention. The Branch
coordinates its cases with the appropriate United States Attorney
to ensure the pursuit of both civil and criminal redress. Cases are
similarly coordinated within the United States Attorneys' offices.
This coordination may include the simultaneous initiation of civil
and criminal proceedings in cases in which the monetary recovery to
the government and the deterrent effect will be enhanced, giving
due consideration to the risks to the criminal case and the
availability of protective orders and stays.
The attorney from the Commercial Litigation Branch or
Assistant United States Attorney assigned to the matter follows the
investigation as it develops and, where necessary, requests, in
coordination with other interested offices of the Department of
Justice, that an investigation be conducted relating to areas such
as damages, which are particularly pertinent to civil actions. It
is the policy of the Department to coordinate jointly the
investigation of criminal and civil actions. Pursuant to this
policy, an Attorney General memorandum to the United States
Attorneys dated July 16, 1986 states that "where possible,
documents should be obtained by methods other than grand jury
subpoenas." This Attorney General memorandum encourages the use of
Inspector General subpoenas as an alternative to grand jury
subpoenas in those cases where an Inspector General has determined
that such usage is appropriate.
The Branch attorney or AUSA assigned to the matter,
should give consideration at the earliest possible date to the
initiation of civil action and advise other interested offices in
the Department or United States Attorneys' offices of any
contemplated civil action. Absent a specific, detailed statement
that there is a strong likelihood that institution of a civil
action would materially prejudice contemplated criminal prosecution
of specific subjects, the decision to institute civil action is
governed solely by the standards specified in 38 Op. Att'y Gen. 98
(1934). That is, the suit is instituted unless there is
- doubt as to collectibility
or
- doubt as to the facts or law.
Provisional relief may be sought in cases in which the
investigation warrants the conclusion that dissipation of any
substantial amounts of assets is likely, notwithstanding the degree
to which the criminal aspects of the matter have been concluded.
The Commercial Litigation Branch and/or assigned Assistant United
States Attorney should advise other interested offices of the
Department or United States Attorneys' offices of any provisional
action. Such provisional relief is sought unless there is a clear
likelihood that efforts to prevent dissipation of assets would
materially prejudice criminal prosecution of specific subjects.
Where there is a possible criminal component to the case, the
criterion for determining "substantial assets" is set at $50,000,
which is the minimum debt that must exist for the United States to
obtain discovery in connection with a request for provisional
relief under the Federal Debt Collection Procedures Act, 28 U.S.C.
§ 3015(b). In cases in which assets of $50,000 or more
may be dissipated, efforts at provisional relief to secure recovery
on behalf of a client agency should, if a conflict exists, be
resolved within the Department at the appropriate level.
The Commercial Litigation Branch and the United States
Attorneys offices are accorded significant latitude in urging
client agencies to withhold payment of claims presented by any
subject known to have engaged in fraudulent conduct. The Branch
will advise the appropriate United States Attorney's Office and
other interested offices of the Department when taking such
actions. Absent a specific, detailed statement that withholding
action would materially prejudice contemplated criminal prosecution
of specific subjects, the decision to withhold is governed by the
usual Department standards. The government's common law right to
withhold payment by setoff has been upheld by the United States
Supreme Court. United States v. Munsey Trust Co., 332 U.S.
234 (1947). Withholding is an important tool for effecting civil
redress, and in recent years the government has successfully
defended a number of cases in which client agencies have employed
this self-help remedy. See, e.g., Peterson v.
Weinberger, 508 F.2d 45 (5th Cir. 1975); Brown v. United
States, 524 F.2d 693 (Cl. Ct. 1975), as amended, (1976);
Continental Management, Inc. v. United States, 527 F.2d 613
(Cl. Ct. 1975). The negotiation of favorable settlements in
unliquidated matters also may be enhanced by the bargaining
leverage which withholding affords. Client agencies also should be
urged to withhold pay and retirement benefits to Federal employees
separated because of evidence of wrongdoing. The current
regulations regarding the withholding or setoff of backpay are
found at 4 C.F.R. § 102.3, 5 C.F.R. §§
550.805(e)(2), 845.206(b). The current regulations regarding the
withholding or setoff of retirement benefits are found at 4 C.F.R.
§ 102.4 and 5 C.F.R. §§ 179.213(a)(4),
831.1306, 831.1801, 845.206(a).
The existing delegations of authority to file suit,
settle or close civil fraud claims are set forth in 28 C.F.R.
§ 0.160, § 0.164, and Civil Division Directive No.
14-95, 60 Fed. Reg. 17457 (April 6, 1995), reprinted in 28
C.F.R. Pt. 0, Subpart Y, Appendix. They provide for redelegation of
the authority of the Civil Division's Assistant Attorney General
over fraud claims (set out in 28 C.F.R. § 0.45(d)) to the
Division's Branch Directors and United States Attorneys in certain
circumstances. Under Directive 14-95, the United States Attorneys
are authorized to file suit, close a case, or "take any other
action necessary to protect the interests of the United States,"
wherever "the gross amount of the original claim does not exceed"
$1,000,000. Directive No. 14-95, § 1(c). Agencies are
also authorized to refer matters directly to United States
Attorneys involving "[m]oney claims by the United States, except
claims involving penalties and forfeitures, where the gross amount
of the original claim does not exceed $1,000,000." Id. §
4(a)(1).
- In the following instances, cases within the monetary range
normally within the authority of the United States Attorneys shall
not be delegated and shall be submitted to the Assistant Attorney
General:
- where a proposed action "will control or adversely
influence the disposition of other claims totaling more than" the
amount within the United States Attorney's authority, id.
§ 1(e)(1);
- where "a novel question of law or a
question of policy is presented," id. § 1(e)(2);
- where the "agencies involved are opposed to the proposed
action," id. § 1(e)(3); and
- where, "for any
other reason, the proposed action should * * * receive the personal
attention of the Assistant Attorney General, Civil Division,"
id. § 1(e)(2).
- The Directive also provides that "[a]ny case involving bribery,
conflict of interest, breach of fiduciary duty, breach of
employment contract, or exploitation of public office" will
"normally" not be delegated to United States Attorneys for
handling. Id. § 4(c)(4).
- Similarly, "[a]ny fraud or False Claims Act case where the
amount of single damages, plus civil penalties, if any, exceeds
$1,000,000" will "normally" not be delegated to United States
Attorneys. Id. § 4(c)(5). Nevertheless, upon the
recommendation of the Director, Commercial Litigation Branch, "the
Assistant Attorney General, Civil Division may delegate to United
States Attorneys suit authority involving any claims or suits where
the gross amount of the original claim does not exceed $5,000,000
where the circumstances warrant such delegations." Id.
§ 4(b). Any authority exercised by the United States
Attorneys under Directive No. 14-95 may be redelegated to Assistant
United States Attorneys who supervise other Assistant United States
Attorneys handling civil litigation. Id.
§ 1(d).
- Where the matter was originally within their authority, United
States Attorneys may accept any offer in compromise where either
the gross amount of the original claim or the principal amount of
the proposed settlement does not exceed $1,000,000, id.
§§ 1(b)(2)(a) & (b). In cases where the gross amount
of the original claim is more than $1 million but less than $5
million, the United States Attorney may accept any settlement in
which "the difference between the gross amount of the original
claim and the proposed settlement does not exceed $1,000,000."
Id. § 1(b)(2)(a)(ii).
- Inquiries should be directed to: Director, Commercial
Litigation Branch, Civil Division, and Chief, Fraud Section,
Criminal Division.
Each United States Attorney's Office has an Affirmative
Civil Enforcement (ACE) coordinator, who should be consulted on
issues arising from parallel criminal and civil cases.
[cited in
USAM 9-16.040]
9-42.160
False Statements to a Federal Criminal Investigator
It is the Department's policy not to charge a Section 1001
violation in situations in which a suspect, during an
investigation, merely denies guilt in response to questioning by
the government. This policy is to be narrowly construed, however;
affirmative, discursive and voluntary statements to Federal
criminal investigators would not fall within the policy. Further,
certain false responses to questions propounded for administrative
purposes (e.g., statements to border or United States Immigration
and Naturalization Service agents during routine inquiries) are
also prosecutable, as are untruthful "no's" when the defendant
initiated contact with the government in order to obtain a benefit.
See the Criminal Resource Manual at
916 for a brief discussion of the case law.
Prior consultation with the Criminal Division is not required
before initiating prosecutions for false statements to Federal
investigators; however, the Fraud Section is available for
consultation on cases involving these principles.
[cited in
Criminal Resource Manual 916]
9-42.191
Application of Appropriate Statute
It is the policy of the Department that in those instances in
which the United States Attorney (USA) has a choice of statutes,
charges normally should be brought pursuant to the more specific
statute. In those cases in which special aggravating circumstances
exist, the USA retains the discretion to charge a violation of the
more serious general statute. See also the
Criminal Resource Manual at 920 (General
versus Specific Statutes).
9-42.420
Federal Procurement Fraud Unit
In August 1982, the Attorney General and the Secretary of
Defense established the Defense Procurement Fraud Unit in the
Criminal Division's Fraud Section to help concentrate and
coordinate the law enforcement resources of the Department in
prosecuting significant procurement fraud cases involving the
Department of Defense's ("DOD") multi-billion dollar procurement of
equipment and services. That unit is now called the Federal
Procurement Fraud Unit (Unit), and handles a variety of fraud cases
affecting both civilian and defense agency procurements, including
product substitution, false testing, cost mischarging, defective
pricing, and kickback cases. In addition to conducting major
procurement investigations, the Unit provides expertise and
guidance on procurement fraud issues to investigative agencies and
United States Attorneys' Offices that request their assistance.
9-42.430
Department of Defense Voluntary Disclosure Program
In July 1986, the Department of Defense initiated its Voluntary
Disclosure Program which is designed to encourage self-policing and
voluntary disclosure by Defense contractors of procurement-related
problems. The Fraud Section's Federal Procurement Fraud Unit (Unit)
is the contact point in the Department of Justice to oversee
voluntary disclosure matters. See the
Criminal Resource Manual at 931 for a
listing of the Unit's responsibilities and procedures.
9-42.440
Provisions for the Handling of Qui Tam Suits Filed Under the False
Claims Act
In 1986, Congress amended the False Claims Act, 31 U.S.C.
§ 3729 et seq., see generally False Claims
Act Amendments of 1986, Pub.L. 99-562, 100 Stat. 3153 (October 27,
1986), reprinted in, 10A USCCAN (December 1986). One of the
Congress's objectives in modifying the Act was to encourage the use
of qui tam actions in which citizens are authorized to bring, as
"private Attorneys General," lawsuits on behalf of the United
States alleging frauds upon the government.
When United States Attorneys receive information about a qui
tam action, they should promptly forward a copy of the complaint
and statement of evidence to the Commercial Litigation Branch of
the Civil Division, particularly because relators frequently fail
to serve the Attorney General or delay in doing so. The Commercial
Litigation Branch will contact the agency involved, the Criminal
Division, and, frequently, the Inspector General of the agency, to
determine if the allegations are known to them and to obtain an
assessment of the material evidence furnished by the relator. The
Criminal Division will, in turn, check with appropriate United
States Attorneys' offices USAOs and investigative agencies to
determine if the allegations relate to a pending criminal
investigation. Because of the 60-day deadline, it must be
emphasized that a prompt response is required to these
inquiries.
See the Criminal Resource Manual at
932 for an additional discussion of this issue.
9-42.451
Plea Bargaining in Medicare-Medicaid Frauds
A potential problem area has been identified regarding the
practice of plea bargaining as it relates to administrative
sanctions available to the Health Care Financing Administration,
United States Department of Health and Human Services (HHS), in
Medicare-Medicaid fraud cases.
Specifically, provision 229 of Pub.L. No. 92-603, enacted on
October 30, 1972, amended Sections 1862 and 1866(b) of the Social
Security Act to enable the Secretary of HHS to deny payment under
Title XVIII of the act upon determining that a provider or person
has committed fraud or abuse against the Medicare program.
Subsequent to such determinations, Section 1903(i)(2) of the act
also prohibits Federal financial participation (FFP) for payments
to these providers or persons in the Medicaid program. In addition,
the legislation (Pub.L. No. 95-142, Medicare-Medicaid Anti-Fraud
and Abuse Amendments) enacted on October 25, 1977, contains a
provision (Section 7) that requires the Secretary of HHS to suspend
program participation for a physician or individual practitioner
convicted of a criminal offense involving the Medicare or Medicaid
programs. Suspension from program participation is immediate and
applicable to both programs. The Section 7 provision is
incorporated in the Code of Federal Regulations at 42 C.F.R.
§ 405.315-2 for Title XVIII and at 42 C.F.R. § 450.85
for Title XIX.
Since the administrative sanction would generally be
effectuated after any criminal proceedings, plea bargains that
include commitments to forego or restrict administrative remedies,
which the HHS may elect to pursue under the aforementioned
provisions, should be rare and made only after obtaining prior
explicit approval from the Criminal Division.
See USAM 9-16.000 et seq. and
9-27.000 et seq. for additional guidance regarding plea
agreements.
See the Criminal Resource Manual at
933 for further discussion of the Medicaid/Medicare Programs
and statutes that can be used to prosecute fraud against these
programs. See also USAM
9-44.000 et seq. (Health Care Fraud).
[cited in
USAM 9-16.040]
9-42.500
Referral ProceduresRelationship and Coordination With the
Statutory Inspectors General
- Policy Statement of the Department of Justice on
its Relationship and Coordination with the Statutory Inspectors
General of the Various Departments and Agencies of the United
States:
The investigation and prosecution of fraud and
corruption in federal programs is a major priority of the
Department of Justice. On June 3, 1981, the Deputy Attorney General
issued a "Policy Statement of the Department of Justice on its
Relationship and Coordination with the Statutory Inspectors General
of the Various Departments and Agencies of the United States." This
statement is summarized in the Criminal
Resource Manual at 934. The statement was first announced at a
meeting of the President's Council on Integrity and Efficiency
(Inspectors General group) and was the result of a combined effort
of the Criminal Division, the Federal Bureau of Investigation (FBI)
and the Executive Office for United States Attorneys.
- The policy statement has two principal purposes: an early alert
system for prosecutors relative to ongoing investigations and
increased emphasis on coordination and cooperation between the FBI
and the Inspectors General. Several particular provisions deserve
special emphasis. Consistent with an Inspector General's obligation
to "report to the Attorney General whenever the Inspector General
has reasonable grounds to believe there has been a violation of
law," the Inspector General is to report to "the United States
Attorney in the District where the crime occurred." Simultaneously,
the Inspector General is expected to notify the appropriate FBI
field office. The FBI is committed to investigating every criminal
violation which the prosecutor determines will be prosecuted, if
proved.
- The timing of the report to the prosecutor is discussed in the
policy statement. In an ordinary investigation involving completed
events, the policy statement simply tracks the Inspector General
legislation and requires a report whenever there are reasonable
grounds, i.e., some evidence to believe that a Federal crime has
occurred. Immediate reporting is required for crimes of an ongoing
nature and organized crime allegations. Such urgent and sensitive
matters often require use of sophisticated investigative
techniques, and the Inspector General is to make an immediate
report upon receipt of the information. The policy statement
requires the FBI to advise the appropriate Inspector General when
it initiates an investigation and to keep the Inspector General
regularly informed of its progress.
- Implementation of the Policy Statement:
Since the
Department of Justice issued the June 3, 1981 policy statement,
there have been discussions over its meaning, with requests from
various Inspectors General and the FBI for further clarification of
their respective investigative responsibilities.
- The Department is concerned about the allocation of limited
investigative resources and the possibility of competitive and, at
times, redundant and unproductive relationships among law
enforcement agencies. The policy statement addresses these issues
and establishes a structure for early reporting of instances of
criminality to the prosecutor. As a further refinement, to set out
more clearly the Department's expectations regarding the use of the
limited investigative resources in both the FBI and the Offices of
individual Inspectors General, the policy statement has been
supplemented by a February 19, 1982 statement on the implementation
of the policy statement (see the Criminal
Resource Manual at 935), which allocates investigative
responsibility between the Inspectors General and the FBI with
respect to four types of crime in which both have an investigative
interest:
- bribery
- significant allegations of fraud involving
federal employees
- organized crime matters and
- fraud against
the government.
- Implementation of the policy statement requires the cooperation
and support of the USAs, the FBI, and the Inspectors General. The
Fraud Section of the Criminal Division is charged with overseeing
the operations of the policy and resolving any uncertainties or
differing interpretations which arise in its implementation. Any
questions or information should be directed to the Fraud
Section.
| 9-42.510
Social Security Fraud
Pursuant to an agreement reached between the Department of
Justice and the Social Security Administration (SSA) in April 1977,
the SSA will not refer matters in which one or more of the factors
below is present unless additional aggravating circumstances are
present:
- The suspect is 75 or more years old;
- The suspected violation did not result in improper payment.
This exception does not apply in criminal misuse cases such as
conversion by a representative payee, SSN misuse or improper
disclosure;
- There is evidence that the suspect has an illness expected to
result in his/her death in the near future; or
- The suspected violation is solely a failure to disclose an
increase in a pension amount.
The SSA has discontinued its procedure of summarizing each case
involving one or more of the aforementioned factors and
recommending against further action. The SSA will, however,
continue to take administrative action directed toward recovering
any overpayments in those cases not warranting criminal
prosecution. Matters in which the factors cited above are either
not present or not compelling will be referred with an appropriate
recommendation.
Each referral with a recommendation for prosecution contains
the name and telephone number of the SSA Regional Integrity
Specialist familiar with the facts of the case. You are invited to
contact that individual for discussion or additional
investigation.
For additional discussion of Social Security Numbers and
criminal violations involving misuse of Social Security Numbers,
see the Criminal Resource Manual at 936.
9-42.530
Department of Defense Memorandum of Understanding
In August 1984, the United States Attorney General and the
Secretary of Defense signed a Memorandum of Understanding ("MOU")
between the Departments of Justice and Defense relating to the
investigation and prosecution of certain crimes. Special attention
is directed to the treatment of investigative jurisdiction of
corruption, fraud and theft cases. The prosecutor has the
responsibility to
- concur before Department of Defense can initiate any
corruption investigation;
- confer to determine investigative jurisdiction in all fraud
and theft matters; and
- concur before the Department of Defense initiates any
administrative investigation or actions during the pendency of any
criminal investigation.
The MOU was developed with the expectation that the more
complex cases require the joint efforts of the Departments of
Defense and Justice. In this regard a repeated theme of the MOU is
the prosecutor's responsibility for coordinating and effectuating
the various interests of the United States. The Federal Procurement
Fraud Unit, Fraud Section, Criminal Division, of the Department of
Justice has developed substantial expertise in these investigations
and can assist in structuring and conducting the investigations
requiring expertise from the FBI and Department of Defense.
Questions concerning the MOU should be directed to the Justice
Department's Fraud Section, Criminal Division.
See the Criminal Resource Manual at
938 for the text of the MOU.
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