Civil Investigative Demand (CID) - Federal Lawyer

Civil Investigative Demand (CID)

Served with a Federal Civil Investigative Demand? We Can Defend You. Here’s What You Need to Know

A Civil Investigative Demand (CID) is an administrative subpoena that allows federal government agencies to request extraordinary amounts of information from private entities without going through any formal court procedures. If you have been served with a CID, you must respond promptly and appropriately in order to avoid unnecessary (and potentially severe) consequences.

From the U.S. Department of Justice (DOJ) and the U.S. Attorney’s Office to the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB), various federal agencies use tools known as Civil Investigative Demands (CIDs) to gather information during law enforcement investigations. Although these agencies issue CIDs in connection with civil investigations, a finding of civil liability can lead to substantial financial penalties, and the discovery of evidence of intent can quickly turn the investigation criminal.

As administrative subpoenas, CIDs are not subject to court approval. The DOJ, FTC, CFPB, and other agencies can issue CIDs at their discretion, and they can do so before initiating formal litigation proceedings. The grounds for challenging CIDs are very limited; and, as a result, individuals and business organizations often face extraordinary compliance obligations while having little to no information about what the federal government is investigating.

Typically, CIDs request the production of documents – lots of documents. In fact, for CIDs targeting healthcare providers and other businesses, it is not unusual for hundreds of thousands of paper and electronic records to be at issue. With response deadlines measured in days and weeks, not months, CID recipients must begin working to identify, collect, and prepare their responsive documents immediately.

Why Have I Been Served with an FTC CID?

For most practitioners and business owners, their first question upon receiving a Civil Investigative Demand is, “Why?” Federal civil investigations almost always come as a surprise; and, at this stage, the federal government holds all of the cards.

When preparing a response to an FTC CID, it is important to determine your (or your business’s or practice’s role) in the investigation. Are you a witness, a suspect, or a target? At this stage, each of these options has an equal probability; and, while you must comply regardless of your posture in the investigation, knowing whether you are presently at risk of prosecution is critical to making informed and strategic decisions.

Regarding the substance of the investigation, the list of possibilities is much longer. While your business or practice may signal the purpose of the investigation (i.e. if you are a healthcare provider, the investigation may target allegations of Medicare, Medicaid, Tricare, DOL, or VA fraud, or related to the false claims act), you cannot afford to make any assumptions about the government’s motives. Examples of the types of allegations commonly investigated through the issuance of CIDs include:

What Do I Need to Do in Order to Appropriately Respond to the CID?

With these risks in mind, efforts to appropriately respond must be swift and deliberate, and they must be undertaken with the advice and guidance of highly experienced federal defense attorneys. At Oberheiden, P.C., we represent clients across the country who are facing federal investigations as witnesses, suspects, and targets. As your defense counsel, we will assist you with all aspects and phases of your CID response. This includes:

  • Noting All Deadlines. A single CID can have multiple deadlines. We will note all deadlines and structure a response plan to ensure that you timely meet your federal obligations.
  • Instituting a Legal Hold. Instituting a “legal hold” is critical to ensuring that it preserves all responsive documents. Failing to preserve responsive documents can lead to a finding of contempt, and it may be viewed as an intentional attempt to conceal information from the government.
  • Preparing to “Meet and Confer.” If your CID includes a deadline to “meet and confer” with agents from the issuing agency, we will schedule the appointment and prepare to meet with the agents with you or on your behalf.
  • Compiling Responsive Documents. As soon as possible, we will meet with you and your key personnel to identify and compile all responsive documents. Depending on the volume of records requested, this can be an extremely time-consuming process, so it is important to get started as soon as possible.
  • Assessing Potential Challenges and Strategies. Concurrently with compiling appropriate records, we will also assess and pursue all relevant grounds for challenging the CID. While it limits the grounds, sometimes it will be possible to significantly reduce the scope of a CID.
  • Negotiating the Scope of the CID or Filing a Motion to Quash. Oftentimes, negotiating with the issuing agency can be the most-effective way to limit a CID recipient’s compliance obligations (and seek an extension, if necessary). If this is not an option and the CID exceeds the issuing agency’s authority, then we can formally challenge the CID in court
  • Preserving the Attorney-Client Privilege. Prior to disclosing any records to the federal government, it is absolutely essential to ensure that all privileged communications have been redacted. We can handle this for you while also determining if you have any other legal grounds to withhold responsive information.
  • Preparing and Submitting Your Response. Once all of the other necessary steps have been completed, we will prepare your response and submit it to the issuing agency on your behalf. From there, we will represent you in any and all follow-up and additional proceedings related to the government’s investigation.

What are the Risks of Complying (and Not Complying) with a CFPB CID or DOJ CID?

Although compliance with a CID is mandatory (subject to any modifications your defense attorneys can negotiate with the issuing agency or secure through a motion filed in federal district court), it can also be risky. From unnecessarily disclosing information to failing to preserve the attorney-client privilege, there are several ways that DOJ Civil Investigative Demand recipients can expose themselves to avoidable risk during the response process.

Ultimately, the biggest risk with compliance is that the CFPB Civil Investigative Demand recipient will disclose information that the government is subsequently able to use against it in a civil or criminal enforcement proceeding. However, within this broader concern, there are several discrete risks of which CID recipients need to be aware as well. For example, compliant disclosure in response to a general records request could result in tipping off the government to issues that were not previously on its radar. Likewise, if you are currently being treated as a witness, there are various considerations you may need to address in order to avoid placing yourself at the center of the government’s investigation.

What if you don’t comply with the CID? Or, what if you only selectively disclose information in your response? Even though a CFPB CID – or any other type of Civil Investigative Demand – is an admin subpoena (rather than a court-issued subpoena), failure to comply still constitutes civil contempt. If federal agents discover that you have withheld information (either intentionally or unintentionally) through other sources, then you could face a contempt charge even if you are simply a witness and are not otherwise at risk for facing charges because of the investigation.

10 Key Facts about Federal Civil Investigative Demands

These are important questions, and they do not have easy answers. If you are being forced to confront a civil investigative demand, here are 10 key facts you need to know.

1. Receiving a CID Might Mean You Are Under Federal Investigation.

Receiving a civil investigative demand might mean that you are being targeted in a federal investigation. Or, it might not. Federal law enforcement authorities can issue CIDs to any individuals or entities that they have reason to believe might have information pertinent to a federal investigation.

Of course, if you have been contacted by a federal agency such as the DOJ, you cannot simply assume that the investigation is focused on another target. You need to find out why you have received the demand, and you need to tailor your responsive action accordingly.

2. The DOJ, FTC, CFPB, and Other Federal Agencies Have Broad Authority to Compel Disclosure of Information Through Civil Investigative Demands.

The DOJ, FTC, CFPB and other federal agencies can seek far more information through a civil investigative demand than they can through judicial means. While companies can have grounds to challenge the breadth of CIDs under certain circumstances (more on this below), oftentimes, companies will have little choice but to comply. A CID will commonly include requests for documents, written answers, and oral testimony – and it is not uncommon for large-scale investigations to request several years’ worth of “potentially relevant” documentation.

Due to the breadth of most of these demands, companies need to be clear on what is and isn’t required to be disclosed. This is a task that is often easier than it sounds. While companies generally should not voluntarily disclose more information than is legally required (except on the advice of counsel), failing to fully comply  can have severe consequences as well.

3. Strict Timelines Apply, and Failing to Object to a Civil Investigative Demand Can Result in the Waiver of Your Rights.

Once an individual or organization has been properly served with a CFPB CID, the clock starts ticking. Strict deadlines apply; and, upon receiving a demand, preparing an appropriate response needs to become the recipient’s top priority. For example, if you receive a CFPB Civil Investigative Demand from the CFPB, you will need to prepare the relevant personnel to meet with CFPB attorneys within 10 days. And you only have 20 days within which to decide whether to file a petition to modify or set aside the demand. If you fail to raise certain issues during the initial “meet and confer” process, or if you let the 20-day objection deadline pass, you will likely be deemed to have “waived” your right to challenge the CID. Extensions are rare, and companies should not expect leniency if they miss a deadline – no matter how onerous the federal government’s demands may be.

4. If You Have Received a DOJ CID, You Need to Institute a “Legal Hold.”

Upon receiving a DOJ Civil Investigative Demand, one of the recipient’s first steps should be to institute a “legal hold.” This is an internal, company-wide effort to preserve any documents (hardcopy or electronic) that could possibly be responsive to the government’s demand. Record custodians should be advised of the types of records that need to be retained, and all employees should be provided with clear instructions not to delete or destroy any records that may need to be disclosed. The legal hold should cover both day-to-day practices (such as deleting emails and files in the course of business) and automatic or regularly-scheduled purges.

5. “Records” Is a Broader Term than Most People (and Companies) Realize.

When most people think of “records” retention, they think of emails, computer files, and records in paper storage. While these certainly make up the bulk of most companies’ records, when it comes to responding to a civil investigative demand, companies may need to pull additional types of records as well. For example, in a CFPB investigation involving consumer financial transactions, a company may be required to provide copies of recorded phone calls (including calls recorded for “quality assurance” purposes), and potentially even social media communications with current or prospective customers.

6. You Will Need to Assemble a Team in Order to Assemble Your Response.

Responding to a civil investigative demand is a task that necessarily requires a team approach. From executives and managers to IT personnel and subject matter experts, different personnel are likely to have different information that is subject to disclosure. Certain personnel (including in-house counsel) may not even be aware that responsive information exists in certain areas. When federal authorities assert that you have failed to fully comply with their demands for information, ignorance is not an excuse. Complying requires a concerted effort with active participation from all relevant personnel.

7. With the Right Approach, You Can Negotiate with Federal Authorities.

As with most legal issues, a negotiated resolution is often the best way to address an overly-burdensome civil investigative demand. With the right approach, you can negotiate with federal authorities – and knowing both (i) what can be negotiated, and (ii) who has the authority to make decisions at the federal level is critical to achieving a positive outcome.

At Oberheiden, P.C., several of our defense lawyers are former federal government attorneys. We can help you understand what options are – and aren’t – on the table, and we can use our past federal government experience to open up a dialogue with the goal of mitigating your disclosure obligations.

8. Challenging a CID is Difficult, and May or May Not Be in Your Best Interests.

Due to the broad authority granted to federal agencies to obtain records and information through a civil investigative demand, challenging one of these demands can be an uphill battle. Generally speaking, petitions to challenge CIDs must be filed at the agency level (with the agency issuing the demand), and federal courts typically give deference to agency decision makers in such administrative matters. The limited grounds for challenging include:

  • Undue burden
  • Requesting irrelevant information
  • Requesting information already within the investigating agency’s possession
  • Abuse of the judicial process

Even if you arguably have grounds to challenge a demand, filing a petition may or may not be in your best interest. Instead – as previously stated – pursuing a negotiated resolution often produces the best results with the least animosity. However, it is important not to simply dismiss challenging your CID as an impossibility. Like all other issues pertaining to the demand, this is a matter to discuss with your defense team.

9. A Civil Investigative Demand Is Very Different from a Discovery Request in Civil Litigation.

If you are familiar with routine civil litigation, you may see that responding to a CID is a very different prospect than responding to discovery requests in civil litigation. In civil litigation, laws, rules, and regulations place substantially greater limits on the information that can be requested, and litigants have far more options for challenging one another’s use (or misuse) of the discovery process.

If you have received a CID, as in discovery, you will have to provide information and records to the agency that issued the demand. For objecting to it, the question is which part (if any) of the demand to challenge.

10. Hiring Experienced Legal Representation Is Critical to Protecting Yourself During a Federal Investigation.

With all of these considerations in mind, and with the potential consequences of facing a federal investigation, your first step after receiving a civil investigative demand should be to engage experienced legal counsel. At Oberheiden, P.C., we bring decades of federal government experience to protecting our clients, and every engagement starts with a free and confidential case assessment.

Civil Investigative Demands: Antitrust

Antitrust is a complex and constantly evolving area of the law that few companies fully grasp, but which can lead to significant civil liability (and even criminal prosecution) in the event of a substantial violation. At the federal level, antitrust cases are investigated by the Antitrust Division of the U.S. DOJ and the Federal Trade Commission (FTC), often with other state and federal law enforcement agencies. Like other federal authorities, the Antitrust Division and the FTC have broad jurisdiction over businesses that operate in the United States, and they have extensive powers that facilitate their investigation of companies suspected of engaging in federal antitrust violations.

One of powers is the ability to issue a CID. According to the Antitrust Division Manual, the Antitrust Division will initiate an investigation only if:

  • “[T]here is reason to believe that an antitrust violation may have been committed.”
  • Commerce has been substantially affected.
  • Allocating resources from the Antitrust Division, “fits within the needs and priorities of the Division.”

When Can the Antitrust Division Issue a Civil Investigative Demand?

The provisions governing CIDs in federal antitrust investigations are set forth in 15 U.S.C. Section 1312. Pursuant to subpart (a):

“Whenever the . . . Antitrust Division . . . has reason to believe that any person may be in possession, custody, or control of any documentary material, or may have any information, relevant to a civil antitrust investigation . . . [it] may, prior to the institution of a civil or criminal proceeding by the United States thereon, issue in writing, and cause to be served upon such person, a civil investigative demand . . . .”

The Antitrust Division can issue a CID to any entity that it believes may have records that apply to an investigation – even if that entity itself is not under investigation. That said, companies that frequently get CIDs from the Antitrust Division are being targeted in investigations; and, if someone within your organization has received one (whether from the Antitrust Division or the FTC), your top priority needs to be to determine why you are being contacted by the antitrust arm of the DOJ.

What Types of Information Can Be Requested through a CID?

Under 15 U.S.C. Section 1312(a), the Antitrust Division can require companies to:

(i) produce documents for inspection, copying, or reproduction;

(ii) answer written interrogatories;

(iii) provide oral testimony regarding documents or information; or

(iv) any combination thereof.

The FTC CID should provide sufficient specificity to identify the type (or types) of information requested and the manner in which it is to be disclosed. The FTC has similar powers under the Section 9 of the Federal Trade Commission Act, including the power to, “require by subpoena the attendance and testimony of witnesses and the production of all . . . documentary evidence relating to any matter under investigation.”

Are Companies Required to Disclose Confidential Information in Response to a DOJ Civil Investigative Demand?

Potentially, yes. Although the Antitrust Division’s admin subpoena powers are not absolute, they are very broad. Regarding limits on information that can be requested, the law states:

“No [civil investigative] demand shall require the production of any documentary material, the submission of any answers to written interrogatories, or the giving of any oral testimony, if such material, answers, or testimony would be protected from disclosure under—(A) the standards applicable to subpoenas or subpoenas duces tecum issued by a court of the United States in aid of a grand jury investigation, or (B) the standards applicable to discovery requests under the Federal Rules of Civil Procedure, to the extent that the application of such standards to any such demand is appropriate and consistent with the provisions and purposes of this chapter.”

If confidential information is not excluded from production pursuant to a DOJ CID under the plain language of the law, companies may be able to seek to protect their information from public disclosure. However, even in these circumstances, the Antitrust Division will not guarantee protection. A standard response letter available on the DOJ’s website states:

“In your letter of [Date] you requested additional assurances of confidentiality beyond those provided in the Civil Investigative Demand (“CID”) statute, 15 U.S.C. §§ 1311-1314, and the Freedom of Information Act (“FOIA”), 5 U.S.C. §552, for documents called for by the CID recently served upon [Company Name].

“I cannot promise to notify you in advance if a document [Company Name] provided will be used in a CID deposition of a witness not affiliated with your client. The Division is authorized to use CID material without the consent of the producing party in “connection with the taking of oral testimony.” It is, however, rare that we disclose a document in such a manner . . . [and] the Division has an interest in seeing that competitors do not receive access to each other’s confidential information, is sensitive to confidentiality concerns, and does not unnecessarily reveal such information.

“You have also represented that [Company Name] considers certain information requested in the CID to be proprietary and confidential. . . . It is the Department’s policy not to use confidential business information in complaints and accompanying court papers unnecessarily. The Department, however, cannot provide assurance that confidential business information will not be used in such papers, and cannot assure [Company Name] of advance notification of the filing of a complaint or its contents.”

Is it Possible to Challenge a Civil Investigative Demand from the Antitrust Division or the FTC?

Yes, it can be challenged through the filing of a petition to limit, modify, or set aside (“quash,” in legal terms) the demand. However, there are strict timing and substantive limits on filing petitions to challenge CIDs. Challenges to a civil investigative demand are initially considered at the agency level; and, for federal agencies’ broad investigative authority, federal courts are deferential to agency-level decisions regarding the propriety of CIDs.

That said, companies should not simply assume that they are required to fully comply with a civil investigative demand from the Antitrust Division or the FTC. The costs and burdens of compliance can be substantial, and it may be possible to negotiate a more-limited disclosure obligation depending upon the scope and status of the investigation. Upon being served, a company’s executives or in-house counsel should promptly begin crafting an appropriate response with the help of outside federal defense attorneys.

What are the Potential Consequences of a Federal Antitrust Investigation?

There are multiple examples of federal antitrust violations that can lead to severe civil and criminal penalties. These penalties can include millions of dollars in fines, administrative remedies, and even federal incarceration. Companies charged with antitrust violations will frequently face charges for mail fraud, wire fraud, and other federal offenses as well – and these each carry the potential for substantial additional penalties.

FAQs: Responding to a Civil Investigative Demand

Q: The government is seeking an extraordinary volume of records in my CID. Am I really required to give them everything?

 

Potentially, yes. State and federal authorities have broad power when issuing civil investigative demands, and CIDs will frequently seek to compel disclosure of “potentially relevant” documents spanning a multi-year time period. If the CID meets the limited legal standards for enforceability, you are under an obligation to comply – even if that means taking on an extremely onerous burden.

That said, most times, it may be possible to negotiate a CID recipient’s disclosure obligations. Often, the agency that issues a CID will not initially understand the volume of records implicated by a request, and narrowing the focus of the government’s inquiry can be beneficial to both parties. However, CID recipients cannot selectively choose to comply with investigative requests, and a limited disclosure should be made only after conferring with the relevant government authority and on the advice of the best federal defense legal counsel.

Q: Is it possible to challenge a civil investigative demand?

 

Yes, but only under limited circumstances. As a form of administrative subpoena, the courts defer to agency powers regarding the scope and enforceability of CIDs, and filing a successful challenge in court requires clear evidence that an agency has overstepped its bounds in issuing a CID. At the federal level, the courts will only consider challenges to a civil investigative demand on four specific grounds.

  • The demand creates an “undue burden” for the recipient considering the scope and nature of the investigation and the volume of information being requested.
  • The demand seeks the production of information that is irrelevant to the agency’s investigation.
  • The demand seeks the production of information that is already within the investigating agency’s possession.
  • The investigating agency has engaged in abuse of the judicial process.

As you can see, these are not strict legal standards, but subjective borders that are open to interpretation. As a result, challenging a CID is a challenge. Recipients of CIDs will often have other more-effective and less-costly methods of limiting their disclosure obligations (even if a court challenge is successful, the most likely result is that the CID would be modified rather than quashed entirely).

Q: What are my obligations once I have been served with a civil investigative demand?

 

Once you receive a CID, you have two primary obligations: (i) to produce the requested information within the applicable time frame (subject to negotiating a limited disclosure obligation or filing a successful challenge in court), and (ii) to implement an effective “legal hold” in order to prevent the deletion or destruction of “potentially relevant” information.

The “legal hold” is a critical step, and one that needs to be taken quickly in order to avoid potential negative ramifications. This involves taking adequate measures to ensure that any records that might be responsive to the government’s request – both hard copy and electronic – are preserved as long as necessary. Companies that have regularly-scheduled purges and back-up tape re-writes will need to halt their standard operating procedures, and the appropriate IT personnel and records custodians should be notified promptly with clear instructions on what is required in order to meet the company’s legal obligations.

Q: What are some of the most common reasons that state and federal authorities issue civil investigative demands?

 

While civil investigative demands are used in a variety of types of civil investigations, some of the types of cases in which we most-commonly see the use of CIDs include:

  • Antitrust violations – The FTC and the Antitrust Division of the DOJ both routinely use CIDs in the course of antitrust investigations.
  • CFPB investigations – The CFPB is the federal agency responsible for enforcing the laws that protect consumers in financial product and service transactions.
  • Medicaid fraud – Both state and federal authorities use CIDs to investigate cases of suspected Medicaid fraud.
  • Medicare fraud – Allegations that a healthcare provider has submitted “false or fraudulent” claims for Medicare reimbursement can lead to substantial liability in civil cases.

Q: How can I protect myself (and my company) after receiving a civil investigative demand?

 

An important way that you can protect yourself and your company after receiving a civil investigative demand is by seeking legal representation. Regardless of whether you are the target of the government’s investigation, you need to take the CID seriously; and, due to the complex and varied legal issues involved, you should seek out the best federal defense attorney to advise you regarding appropriate courses of action. Other steps you can take to protect yourself after receiving a CID include:

  • Make sure you know the deadlines that apply.
  • Make sure you understand what you are (and aren’t) required to disclose.
  • Make informed decisions about whether to negotiate or challenge the scope of your CID.
  • Promptly institute a compliant legal hold.
  • Begin preparing your response, and do not assume that your disclosure obligations will change (unless otherwise advised by your legal counsel).
  • Ensure that your means of responding comply with the requirements set forth in the CID.
  • Determine whether you, your company, or a third party is the target of the government’s investigation.

Q: Why would I receive a civil investigative demand if I am not being targeted in a government investigation?

 

State and federal authorities use civil investigative demands to collect information from multiple sources, not just the targets of their investigations. If you have received a CID and you are not currently under investigation, this generally means that the investigating agency believes you have information that could help to establish a third party’s civil liability. However, it is also possible for an entity that is not being targeted to become the target of an investigation as a result of its disclosure of information in response to a CID, and this is yet another reason why it is critical to hire the best legal counsel to advise you in all aspects of your CID response.

Q: Where can I find more information about what to do after receiving a civil investigative demand?

 

If you have been served with a CID, we strongly encourage you to seek legal representation. We offer free initial case assessments, and our defense attorneys are happy to meet with you in confidence to develop an action plan for moving forward. In addition, we would encourage you to read 10 Key Facts about Federal Civil Investigative Demands, prepared by our attorneys.


Legal Representation for Responding to a CID

At Oberheiden, P.C., we have significant experience representing clients in all aspects of civil investigations. From allegations of Medicare and Medicaid fraud to antitrust investigations involving the Federal Trade Commission (FTC), our attorneys represent our clients with the goal that civil investigative demands do not lead to state or federal charges. If you (or someone within your business or practice) has been served with a CID, you need to prepare your response immediately. Whether you have grounds to challenge the demand or it is in your best interests to fully comply, we can help you make informed decisions and execute a defense strategy to address the potential of civil liability.

We Handle All State and Federal Civil Investigative Demands

Oberheiden, P.C. attorneys represent healthcare providers, practitioners, company executives, and a broad range of other clients who have been served with CIDs. Our practice includes representing clients in both state and federal matters, including those involving:

  • U.S. DOJ – DOJ CIDs investigating healthcare fraud, antitrust violations, and other civil matters
  • Federal Trade Commission (FTC) – FTC CIDs investigating antitrust violations
  • Consumer Financial Protection Bureau (CFPB) – CFPB CIDs investigating suspected “unfair, deceptive, or abusive” trade practices affecting consumers
  • State Offices of the Attorney General (OAG) – CIDs investigating Medicaid fraud and other civil matters

Legal requirements at the state and federal levels vary, and each agency has its own unique rules, protocols, processes, and procedures as well. With extensive experience as both state and federal prosecutors, our former government attorneys represent clients in CID matters at both levels of government.

Free Consultation With Skilled CID Attorneys

To speak with one of our civil investigative demand lawyers about your CID, please contact our offices to arrange a free initial case assessment. We are available 24/7. You can reach us by phone at 888-680-1745, or contact us online and a member of our team will be in touch as soon as possible.

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