The Rise of Civil Investigative Demands in White Collar Investigations

With the Department of Justice’s newly amended policies and emphasis on combating white-collar crime, Civil Investigative Demands (“CIDs”) have emerged as a powerful tool frequently used by federal prosecutors.  Since January 2009, the Justice Department has recovered more than $26.7 billion through False Claims Act cases, with more than $16.8 billion of that amount recovered in cases involving fraud against health care programs.[1]  The Middle District of Florida has been particularly recognized as a hot spot, where U.S. Attorney Lee Bentley and his team have recovered over $500 million over the last two years.[2]

CIDs frequently are used to initiate these investigations.  Receipt of a CID triggers immediate and often broad discovery obligations, including a duty to preserve information, the complete production of documents, and possible deposition discovery, absent a valid claim of privilege or narrowing by the recipient.  Hence, corporate officers, executives and in house counsel must understand the contours of CIDs and should seek experienced legal counsel to help ensure a proper response.

Until recently, only the Attorney General could authorize the issuance of a CID.  With the 2009 passage of the Federal Enforcement and Recovery Act, the Assistant Attorney General for the Civil Division and individual U.S. Attorneys all now have the power to issue CIDs.[3]  This expansion of authority within the DOJ has coincided with changes in CID authority among the states.  For example, state attorneys in Florida have been granted the authority to issue CIDs after the Attorney General has consented in writing.[4]

The government has greater flexibility in requesting the production of information pursuant to CIDs than via criminal grand jury subpoena.  Prosecutors use this to the government’s advantage in deciding whether civil enforcement or criminal prosecution is more appropriate.

CIDs can be served only before a civil or criminal action is instituted.  While CIDs may not be used to investigate violations that impose solely criminal penalties, they can be used to determine whether the suspected conduct violates criminal law.  In those cases where criminal prosecution is more appropriate, further investigation should proceed by the federal grand jury process.

The False Claims Act empowers the Justice Department to issue a CID where there exists “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 . . . .”[5]  CIDs may be served on any natural or juridical person, including suspected violators, potentially injured persons, witnesses, and record custodians.  Additionally, a valid CID must contain several items to assist the recipient of a CID to prepare an adequate response and production:

  • a reasonable description of the materials or testimony to be produced with such a definiteness and certainty as to permit such material to be fairly identified;
  • a return date for producing the documents or providing the testimony; and
  • the identification of the specific custodians to whom the materials will be made available or who will conduct the deposition.[6]

In the Eleventh Circuit, which includes federal  districts in Florida, Georgia and Alabama, the courts have made it clear that the government must have more than mere intuition that illegal activity is afoot before issuing a CID.  In other words, the government is prohibited from conducting baseless investigations.  Although the Eleventh Circuit does not require absolute proof of a violation prior to commencing an investigation, Florida law and the Fourth Amendment do require the government to have “reason to believe” a violation has occurred.[7]  Hence, there are valid defenses available to CID recipients which, if asserted, could ultimately limit the scope and overall costs of responding to a CID.

 

[1] See Department of Justice Press Release, 21st Century Oncology To Pay $19.75 Million To Settle Alleged False Claims For Unnecessary Laboratory Tests, December 18, 2015, available at http://www.justice.gov/usao-mdfl/pr/21st-century-oncology-pay-1975-million-settle-alleged-false-claims-unnecessary.

[2] See Department of Justice Press Release, U.S. Attorney’s Office Collects More Than $136 Million For U.S. Taxpayers in Fiscal Year 2015. December 4, 2015, available at http://www.justice.gov/usao-mdfl/pr/us-attorney-s-office-collects-more-136-million-us-taxpayers-fiscal-year-2015.  See also Department of Justice Press Release,  U.S. Attorney’s Office Collects More Than $367 Million In Civil and Criminal Actions For U.S. Taxpayers In Fiscal Year 2014, November 19, 2014, available at http://www.justice.gov/usao-mdfl/pr/us-attorney-s-office-collects-more-367-million-civil-and-criminal-actions-us-taxpayers.

[3] Geoff Murphy, Civil Investigative Demands Part I: What Are They and Why Do I Care, Prime: Government Contracting Law Blog, January 5, 2015, available at http://www.primewatchgovernmentcontracting.com/civil-investigative-demands-part-one/.

[4] Fla. Stat. § 542.28(1).

[5]  31 U.S.C. § 3733(a)(1).

[6]  12 C.F.R. § 1080.2.

[7] See Major League Baseball v. Crist, 331 F.3d 1177 (11th Cir. May 27, 2003) (limited the scope of Attorney General’s authority to issue investigative demands by holding that the Florida Attorney General’s investigation of professional baseball association, which was based solely upon the proposed contraction of number of teams in leagues, violated Fourth Amendment and Florida law because such investigation was baseless).

 

About the Author(s):
Robert S. Griscti is Of Counsel in Dean Mead’s Gainesville office and a member of the Litigation department.  Mr. Griscti practices in cases involving corporate compliance and integrity, government investigations, white collar law, criminal defense, asset forfeiture, appeals, regulatory and administrative law, and related civil matters. He represents clients in proceedings before the Florida Bar, the Florida Board of Medicine, and other professional licensing agencies and has appeared on behalf of administrators, faculty and students in disciplinary, career, tenure, and related matters at universities, colleges and schools. He also assists clients with expungement, sealing, and record correction issues that affect employment, academic standing and professional reputation. He may be reached at rgriscti@deanmead.com.

Jake Huxtable is the law clerk for Robert S. Griscti in Dean Mead’s Gainesville office assisting in the areas of criminal and civil white collar litigation and compliance. He is a third year law student at the University of Florida, graduating May 2016. He may be reached at jhuxtable@deanmead.com.

Featured Attorneys