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April 28, 2016

Focus on compliance to fix False Claims Act, says former U.S. Deputy AG Thompson

As a former U.S. Attorney, deputy U.S. Attorney General, law professor, and general counsel for a major corporation, Larry D. Thompson knows a thing or two about corporate compliance and enforcement.

This week, he brought this unique public and private sector experience to Capitol Hill to testify in a House Judiciary Subcommittee on the Constitution and Civil Justice oversight hearing on the False Claims Act (FCA).

The purpose of the hearing was to explore problems with the FCA and examine a path forward for reform.

Currently the John A. Sibley Professor in Corporate and Business Law at the University of Georgia Law School, Thompson acknowledged the FCA’s importance, but also its flaws.

“Over the course of my career, I have had the opportunity to work on False Claims Act matters from the perspective of both the government and private sector,” said Thompson in prepared testimony.”

“I left the (U.S. Justice) Department convinced of the importance of the False Claims Act, but also well aware that the FCA is not without its flaws, as it can lead sometimes to unfair and arbitrary results, and its provisions afford the government tremendous (and perhaps undue) leverage against private companies and individuals,” he added.

One of the key problems with the current enforcement regime, said Thompson, is that it has become “unduly adversarial.” This is due to the government’s reliance on post-hoc enforcement, “leveraging significant penalties largely irrespective of a company’s investment in compliance and prevention on the front end.”

Instead, he suggested, the government should move toward a system in which prevention and “incentivizing in compliance” by corporations is the norm.

Thompson pointed to a report (funded by the U.S. Chamber Institute for Legal Reform), released this week by the Ethics and Compliance Initiative (ECI), entitled, “Principles & Practices of High-Quality Ethics & Compliance Programs.”

This report is the first of its kind to provide a comprehensive framework for corporations to create ethics and compliance programs “that are of high quality and go beyond basic regulatory requirements.”

Thompson served on the Blue Ribbon Panel of ethics and compliance practitioners, academics, corporate attorneys, and former enforcement officials that issued the report.

“My work with ECI and the Blue Ribbon Panel confirmed that companies can and should build first class compliance and ethics programs,” said Thompson. “The report may also assist this Subcommittee in your oversight of the False Claims Act, by providing us with a way to identify and incentivize high quality ethics and compliance programs.”

He also referenced a 2013 report issued by ILR, “Fixing the False Claims Act: The Case for Compliance-Focused Reforms.”

Specifically, said Thompson, that report highlights “providing the right incentives” in which “companies that achieve and maintain first class compliance programs could obtain reductions in penalties or other consequences when inevitable wrongdoing does occur.”

Calling the ILR proposal “creative”, he said that “when it is combined perhaps with a requirement for self-disclosure of identified concerns, responded to the challenges in this area and so is worthy of consideration.”

Hammering home the importance of a focus on corporate compliance, Thompson closed his testimony by noting “we are much closer today than we ever have been to identifying what constitutes a high quality ethics and compliance program.”

“So we should also be much closer to certainty in the government’s response to companies with such a program.”

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