False Claims Act Investigations: The Critical Role of Outside Counsel in FCPA Compliance

Legal experts are increasingly advocating for early involvement of specialized outside counsel when companies face potential False Claims Act (FCA) allegations, according to insights shared by experienced attorney Arthur Gollwitzer of Jackson Walker.

In a detailed discussion with compliance expert Tom Fox, Gollwitzer emphasized that the complex nature of FCA cases demands a strategic approach that many companies underestimate. “When the government comes knocking with potential FCA concerns, bringing in specialized investigative counsel immediately can fundamentally alter the trajectory of a case,” Gollwitzer explained.

False Claims Act cases, which involve allegations of fraud against government programs, have seen a steady increase in recent years. According to Department of Justice data, settlements and judgments from FCA cases exceeded $5.6 billion in 2021 alone, underscoring the significant financial risk companies face.

Gollwitzer highlighted that one of the most common pitfalls for organizations is attempting to handle initial investigations with internal resources or general counsel who may lack specific experience in this niche area. “The initial response often shapes how the government perceives a company’s commitment to compliance and cooperation,” he noted.

The credibility of the investigative process emerged as a central theme in Gollwitzer’s analysis. He emphasized that when outside counsel conducts an investigation with integrity and transparency, government agencies are more likely to consider findings legitimate. “Credibility cannot be manufactured after the fact,” Gollwitzer stated. “It must be established from the beginning through methodical, thorough, and unbiased investigative practices.”

This approach aligns with the Department of Justice’s recent emphasis on corporate compliance programs. The DOJ’s updated guidance specifically references the value of independent investigations when evaluating corporate cooperation credit during enforcement actions.

The conversation also touched on emerging regulatory challenges, particularly in the artificial intelligence sector. Texas has recently introduced significant AI legislation, which Gollwitzer suggests will create new compliance obligations for companies operating in the state. “We’re seeing a regulatory framework developing around AI that will require proactive compliance strategies,” he observed.

Drawing from his experience as a former Assistant U.S. Attorney in the Southern District of New York, Gollwitzer offered unique perspectives on how government prosecutors approach FCA investigations. “Having represented the United States in court provides insight into what factors influence prosecutorial decision-making,” he explained. “This experience informs how I now guide clients through government investigations.”

Industry experts note that this insider perspective can be invaluable for companies navigating the increasingly complex regulatory landscape. According to compliance consultancy firm Baker Tilly, companies with experienced outside counsel typically see more favorable outcomes in government investigations, with potential reductions in penalties averaging 30-40% compared to those without specialized representation.

The healthcare and defense sectors continue to be primary targets for FCA enforcement, accounting for approximately 75% of all recoveries. However, Gollwitzer noted that technology companies face growing scrutiny as government contracts in this sector expand.

For companies concerned about potential FCA exposure, Gollwitzer recommends regular compliance audits focused specifically on government contracting procedures. “Proactive identification of issues, coupled with voluntary disclosure when appropriate, remains the best strategy for minimizing risk,” he advised.

The discussion concluded with reflections on the honor of representing the United States in legal proceedings and the responsibility that comes with ensuring justice is properly served, whether as a prosecutor or defense counsel.

Resources mentioned during the discussion included Jackson Walker’s recent analysis of Texas AI legislation and Fox’s new book on implementing AI in compliance programs, reflecting the growing intersection of technology and regulatory compliance challenges facing modern corporations.