Nearly every in-house counsel has dealt with a subpoena at one time or another. But less well known is an increasingly common tool used by the government: the civil investigative demand (CID). Several federal and state statutes grant the government authority to issue CID authority. For example, at the federal level, CIDs can be issued by DOJ when investigating antitrust violations and civil racketeering. Other agencies have similar power, such as the FTC in deceptive trade practices investigations and the newly created Consumer Financial Protection Bureau in financial services investigations as authorized by § 1052 the Dodd-Frank Act.

The most common type, however, is associated with the civil False Claims Act (FCA), which grants broad CID powers. The power and frequency of FCA CIDs has grown in conjunction with DOJ’s current use of the FCA as its chief weapon against civil fraud.

Since its enactment in 1863, the FCA’s scope has grown significantly, as has prosecutors’ aggressive theories for what constitutes a “false claim.” The statute underwent a major overhaul in 1986, which increased its penalties and first granted CID authority in FCA investigations. That authority, however, was severely limited because only the Attorney General could approve issuance of CIDs. Because of the bureaucratic difficulty of obtaining such approval, line prosecutors used CIDs sparingly.

That changed in 2009 with the passage of the Fraud Enforcement and Recovery Act, which enabled the Attorney General to delegate to U.S. attorneys the power to issue CIDs. Since then, use of CIDs has increased significantly, as has DOJ’s recoveries under the FCA. In 2012 alone, DOJ recovered a record-breaking $4.9 billion in FCA settlements and judgments, while it has recovered over $13 billion since 2009.

What is a CID?

A CID is like beefed-up subpoena. While a subpoena duces tecum will only call for production of documents, a CID can require the recipient to produce documents, as well as answer interrogatories or give oral testimony under oath. Moreover, the authority to issue a CID is quite broad. The issuing prosecutor merely must have “reason to believe that any person may be in possession, custody, or control of documentary material or information relevant to a false claims law investigation.” The potential breadth of a CID and the ability to compel sworn testimony raise critical issues for recipients, particularly those who may be under a concurrent criminal investigation. And unlike interrogatories or depositions in a civil case, CIDs are an investigative, not discovery, tool, so only the government gets to use them.

Some notable features

Although they are investigative tools, CIDs are similar to various types of discovery requests in civil litigation. There are, however, some notable features of the CID statute, as well as some yet unresolved ambiguities:

  • Persons present at oral examinations: Section 3733(h)(2) addresses who may be present at the oral examination of a witness. Of particular note for corporate counsel, this includes the “attorney and any other representative” of the witness (emphasis added). This suggests that when a witness is testifying as a corporate representative, a company representative can be present in addition to the witness’s lawyer.
  • Transcripts: Several sections in the statute address transcripts. Every witness has the right to examine and make changes to the transcript before signing. Likewise, witnesses are entitled to a copy of transcript, except where the “Attorney General, the Deputy Attorney General, or an Assistant Attorney General” limits access for good cause. That should be a high hurdle, and practitioners faced with such a claim should insist on a clear record of which enumerated official made the determination and the basis for the good cause.
  • Future use: The CID statue is clear that, although its authority derives from the FCA, the material produced can be used in other proceedings, including criminal ones. In fact, any DOJ attorney who is appearing before any court, grand jury, or federal agency in any proceeding can receive the material, answers, or transcripts obtained via a CID. In this sense, a CID allows greater latitude to prosecutors than a grand jury subpoena because material obtained through a CID does not have the use restrictions that grand jury material does. As noted, this has particularly critical effect on companies or individuals who may also be subject to a parallel criminal investigation, and counsel will want to carefully consider the 5th Amendment implications that can arise.

With no signs of FCA enforcement abating, counsel for companies in regulated areas – especially health care, financial services, and government contractors of all types – are likely to see even more use of the FCA CIDs in years to come.