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Federal Investigation

Here’s Everything You Need to Know about Civil Investigative Demands

Federal investigations targeting public and private companies, financial institutions, investment firms, health care providers, and other entities and individuals have become commonplace in today’s litigious environment. With allegations ranging from antitrust and public disclosure violations to unlawful marketing of opioid medications and abuse of federal benefit programs, when facing a federal investigation, one of the first steps is simply to discern the specific allegations involved.

One way to do this is by examining the source and form of the government’s request for information. Many federal investigations start with the issuance of a “civil investigative demand.” A civil investigative demand is a unique investigative tool used by agencies including the Consumer Financial Protection Board (CFPB), Department of Justice (DOJ), and Federal Trade Commission (FTC) to obtain evidence from targets and witnesses in cases involving a broad range of civil allegations.

What do you need to know if you have been served with a civil investigative demand? Find out from federal defense attorney Dr. Nick Oberheiden.

For individuals and organizations targeted in federal investigations, it is critical to understand the scope of authority underlying civil investigative demands as well as the limitations and protections that apply. Here are 10 key facts about civil investigative demands issued by the CFPB, DOJ, and FTC:

1. A Federal Investigation is Underway.

If you have been served with a civil investigative demand, this means that a federal investigation is already underway. Federal authorities have already begun gathering evidence, and they believe that you or your organization may have additional information pointing to the commission of a federal offense (or, more likely, multiple federal offenses).

Federal agencies including the CFPB, DOJ, and FTC use civil investigative demands to target individuals and organizations for a broad range of offenses. This includes offenses directly affecting consumers and patients as well as offenses resulting in financial losses for the federal government. Some of the types of charges that most-commonly result from civil federal investigations include:

  • Antitrust violations
  • Consumer fraud
  • Health care fraud (including Medicare, Medicaid, and Tricare fraud)
  • Securities fraud
  • Unfair and deceptive trade practices

2. The Investigation is Currently Civil in Nature.

Although it may be obvious, it is worth clarifying that if you have been served with a civil investigative demand, this means that the government’s investigation is currently civil in nature. This is significant insofar as it means that: (i) the burden of proof to establish liability is lower than it is in a criminal case; and, (ii) the potential penalties at stake do not include federal imprisonment.

In a civil case, the burden of proof is a “preponderance of the evidence.” This means that, if the case were to go to a jury, the jurors would only need to be 51% certain that the defendant was liable in order to find in favor of the prosecution. While this is a low bar in comparison to the “beyond a reasonable doubt” standard that applies in criminal cases, there are still numerous potential defenses to civil allegations in federal court.

While the government’s burden of proof is reduced in a civil case – and this is absolutely something that needs to be considered when building and executing a defense strategy – facing a civil investigation means that there is no risk for federal imprisonment. This, combined with the government’s challenges in even meeting the civil burden of proof, means that it will generally be in a target’s best interests to try to keep the investigation civil in nature.

3. Civil Investigative Demands are Legally-Binding.

When you receive a civil investigative demand, you have a legal obligation to respond. Unlike “interview” requests and other informal inquiries from federal agents, you cannot simply refuse to comply with a civil investigative demand. If you fail to respond – or if you submit an incomplete response without negotiating the scope of the demand with federal agents or prosecutors – you can face charges for civil contempt regardless of whether the investigation itself is misguided.

4. The Government’s Power to Obtain Information through a Civil Investigative Demand is Not Absolute.

While you have an obligation to respond, this does not necessarily mean providing all of the information sought in the demand. Civil investigative demands tend to be extraordinarily broad in scope, often seeking voluminous records spanning several years of companies’ operations. There are legitimate grounds to challenge the scope of civil investigative demands, and recipients of civil investigative demands are entitled to assert the attorney-client privilege and other protections in limiting the scope of their response as well.

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However, before submitting less than a complete response, it is absolutely critical to ensure that you have a sound legal basis for doing so. Generally, this means either (i) negotiating the scope of the demand before submitting your response, or (ii) submitting a formal challenge to the civil investigative demand within the prescribed deadline.

5. Civil Investigative Demands are Subject to Short (and Strict) Deadlines.

Speaking of deadlines, the deadlines for responding to civil investigative demands are short, particularly when taking into consideration the volume of documentation and amount of effort required to submit a fully-compliant response. Along with the deadline to produce responsive documents, civil investigative demands may also include deadlines to (i) meet and confer with agency personnel to discuss the scope of the demand, and (ii) formally challenge the demand through administrative or judicial channels. If the deadline to submit a formal challenge is missed, then the recipient will be deemed to have “waived” its right to challenge the demand, and it may be obligated to fully comply regardless of the existence of one or more substantive grounds to challenge the demand.

6. The CFPB, DOJ, and FTC Serve Civil Investigative Demands on Targets and Witnesses.

Importantly, if you have been served with a civil investigative demand, this does not necessarily mean that you, your business, or your practice is the target of the government’s investigation. While you may be a target, at this point you could also be classified as a non-party witness. While you must respond to the civil investigative demand either way (and, regardless, you must be careful to avoid mistakes that could lead to prosecution), knowing whether you are a target or a witness is crucial to assessing your potential exposure and your next steps as a result of the government’s investigation.

7. Witnesses Can Easily Become Targets.

Even if you are currently being treated as a non-party witness in the government’s investigation, it is possible that any information you supply (or that any other entity supplies) could result in you becoming a target. As a result, you need to be extremely careful to avoid unnecessarily disclosing damaging information or compromising your attorney-client privilege. As a target or a non-party witness, before submitting any documents in response to the government’s civil investigative demand, it is essential to:

  • Determine whether you have grounds to challenge the scope of the civil investigative demand;
  • Review all potentially-responsive documents with legal counsel to determine their relevance and whether they contain any potentially-harmful information that is not subject to disclosure; and,
  • Review the entire document production to ensure preservation of the attorney-client privilege.

8. Civil Investigations Can Become Criminal in Nature.

Just as a witness can become a target in a civil investigation, a civil investigation can also become criminal in nature. This is yet another critical reason not to disclose any more information than is absolutely necessary. If federal authorities find evidence of a federal offense, and if they find evidence to suggest that the offense was committed intentionally, then prosecutors may decide to seek a grand jury indictment and pursue criminal charges in federal district court. Antitrust; consumer, health care, and securities fraud; unfair and deceptive trade practices; and various other federal offenses can all be charged civilly or criminally depending upon the circumstances involved.

9. Mistakes Can Prove Costly.

As the foregoing discussion suggests, mistakes when responding to a civil investigative demand can prove extremely costly. To recap, three of the biggest risks facing individuals and organizations served with civil investigative demands are:

  • Facing civil contempt charges for failing to timely and fully comply with a civil investigative demand;
  • Facing substantive civil charges based upon information disclosed pursuant to the civil investigative demand; and,
  • Facing criminal charges if federal authorities find evidence of intent to commit a federal offense.

These risks are present for targets and witnesses; and, when an investigation leads to charges, it is not unusual for prosecutors to pursue multiple counts of multiple offenses. Along with facing charges for the substantive offense underlying the investigation (such as antitrust violations or health care fraud), targets will often be charged with attempt, conspiracy, mail fraud, wire fraud, money laundering, tax evasion, and other offenses as well.

10. The Outcome of the Government’s Investigation is Far from Certain.

Despite these risks, the outcome of the government’s investigation is far from certain. While the investigation could lead to civil or criminal charges, it could also end without charges being filed. In order to mitigate any potential exposure, individuals and organizations served with civil investigative demands must defend themselves effectively, and they should discuss their circumstances with an experienced federal defense attorney as soon as possible.

Dr. Nick Oberheiden is a federal defense attorney and founder of Oberheiden, P.C., a federal defense law firm headquartered in Dallas, Texas that represents clients in civil investigations nationwide. The firm can be reached online or by phone at 888-519-4897.

Cathy Carter