Refusing to Comply with Civil Investigative Demands Lawfully Issued by the Department of Justice: A Very Bad Idea

By: Martin Bienstock

In a landmark decision by Judge Elizabeth K. Dillon in the United States District Court for the Western District of Virginia, corporations have been given a stern warning: resisting Civil Investigative Demands (CIDs) issued under the False Claims Act (FCA) is a misguided strategy that not only fails to protect sensitive information but also inevitably leads to the public disclosure of the investigation and compels compliance.

The case at hand, United States of America v. Sentara Healthcare et al., Case No. 3:23-mc-00007, serves as a prime example of the pitfalls associated with non-compliance. Sentara Healthcare was under scrutiny by the United States Attorney’s Office and the Department of Justice for potentially making materially false statements in health insurance rate filings for the ACA marketplace in Virginia. As part of this investigation, the government issued CIDs to Sentara for documents and oral testimony, which Sentara partially resisted. It effectively told DOJ that enough was enough, asserting that ““[t]he Department has more than sufficient information in its possession to make [a] decision . . . and it should do so without any more delay or expense to the subjects of this investigation.” The refusal sparked a legal showdown over compliance and the sealing of case documents.

Judge Dillon’s ruling sheds light on several key issues that should concern any corporation under FCA investigation:

  1. **Compliance is Non-negotiable**: The court’s decision to enforce the CIDs underscores the fact that compliance with such demands is not optional. The investigative powers granted under the FCA are broad and designed to uncover fraud against the government. Refusing to comply does not shield companies from investigation; it merely delays the inevitable and can worsen their position in any legal proceedings.
  2. **Public Disclosure is Likely**: Sentara’s attempts to seal court documents and keep the investigation under wraps were largely unsuccessful. While the court agreed to seal some documents, it also mandated the unsealing of others, including the petition for enforcement of the CIDs, making the fact of the investigation public. This serves as a cautionary tale that efforts to prevent public disclosure through non-compliance or legal maneuvers may ultimately fail, especially given the judiciary’s presumption in favor of openness and transparency.
  3. **Strategic Missteps Can Lead to Additional Scrutiny**: The additional documents Sentara produced after initially claiming compliance led to further scrutiny and requests for testimony. This not only highlights the importance of thorough compliance from the outset but also illustrates how attempts to limit the scope of information provided can backfire, drawing more attention to the areas the corporation sought to obscure.

The Sentara Healthcare case is a clear signal to corporations that resisting CIDs issued under the FCA is counterproductive. Not only does it lead to legal battles that can result in the forced disclosure of the information sought, but it also brings the fact of the investigation into the public eye, potentially harming the corporation’s reputation more than compliance would have. The lesson is clear: when faced with a CID under the FCA, the wisest course of action is to comply and engage constructively with the investigation, under the guidance of experienced legal counsel. This approach not only aligns with legal obligations but also positions the corporation to manage the investigation’s impact more effectively.

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