On March 7, 2024, Deputy Attorney General (“DAG”) Lisa Monaco announced that DOJ is embarking on a “90-day sprint” to develop and implement a pilot program that will provide whistleblowers the chance to receive a monetary award in exchange for new information about “significant corporate or financial misconduct.”
The “sprint” took longer than 90 days – rather approximately 150 days – but as most runners know, longer sprint times can happen.
Earlier today, the DOJ launched a Corporate Whistleblower Awards Pilot Program. (See here, see here for 14 pages of guidance, and see here for the 4 page fact sheet).
In a speech, Deputy Attorney General Lisa Monaco provided the following background for the program.
“With this program we’re doubling down on a proven strategy to ferret out criminal activity that might otherwise go unreported. Law enforcement has long offered rewards to coax tipsters to report crimes — from the “Wanted” posters of the Old West to the reforms in Dodd-Frank that created whistleblower programs at the SEC and the CFTC. Those agencies alone have received thousands of tips, paid out many hundreds of millions of dollars, and disgorged billions in ill-gotten gains from corporate bad actors.
But those programs — by their very nature — are limited in scope. They only cover misconduct within those agencies’ jurisdictions. The same is true for similar programs run by the IRS and FinCEN. And qui tam actions, which offer their own whistleblowing incentives, are available only for fraud against the government.
While these programs have proven indispensable, they don’t address the full range of corporate and financial misconduct that the Justice Department prosecutes. That’s why I asked the leaders at the Criminal Division to design a program that would fill the gaps in this patchwork.”
Monaco continued:
“Our corporate enforcement program is rooted in the use of both carrots and sticks, and today’s announcement builds on our other efforts to incentivize reporting of corporate misconduct to the government.
When a company discovers misconduct within its ranks, we want that company to come forward, so we can gather the evidence necessary to prosecute the individuals responsible. We’ve been clear about the benefits to companies that do engage in such voluntary self-disclosure. But any company that hesitates to report voluntarily should remember that we have other tools to uncover that misconduct. Thanks to the whistleblower program announced today, we now have a new investigative tool — and a powerful one at that.
There’s a synergy to these disclosure programs: together, they create a multiplier effect that encourages both companies and individuals to tell us what they know — and to tell us as soon as they know it.
Because, remember: to be eligible for the most significant benefits under these disclosure programs — both our corporate voluntary self-disclosure programs and the whistleblower initiative we’re announcing today — you have to tell us something we didn’t already know. With very few exceptions, you need to be first in the door.
And when everyone needs to be first in the door, no one wants to be second. Suddenly everyone is racing up the front steps, all hoping they’re the first to knock.
The result: these tips from whistleblowers won’t just help us build the strongest criminal cases against the most culpable wrongdoers; they’ll also help us impose the most significant penalties on those who most deserve it. And as the costs of corporate crime go up, so do the benefits for companies that invest in effective compliance programs.
As with any new Department initiative, we will be regularly assessing whether and what refinements may be needed. And while we may ultimately determine that additional statutory authorities are needed to run this program effectively, we’re excited to move forward with the authorities Congress has already given us to strengthen corporate accountability, promote fairness, and protect the American people.”
In a speech, Principal Deputy Assistant Attorney General Nicole Argentieri discussed the “four areas of corporate crime” covered by the Corporate Whistleblower Awards Pilot Program including “foreign corruption.” She stated:
“Some foreign corruption cases are covered by the Securities and Exchange Commission’s (SEC) whistleblower program, but many of the foreign corruption cases we prosecute are not. Take our cases involving bribery at international commodity trading companies, which resulted in six corporate resolutions, convictions of 20 individuals, and over $1.7 billion in financial penalties including forfeiture. None of those companies issued securities in the United States, so none of them was covered by the SEC’s program. Our whistleblower program would reach that type of foreign corruption and help ensure accountability for corporate wrongdoers. This effort is all the more important given the recent enactment of the Foreign Extortion Prevention Act—which we plan to vigorously enforce …”.
Argentieri also stated:
“Through our Pilot Program, we are incentivizing individuals to come forward and report corporate crime in each of these four areas. We are also incentivizing companies to invest in strong internal reporting structures and to report crime when they learn about it. Alongside our Pilot Program, we are also announcing today an amendment to our Corporate Enforcement and Voluntary Self-Disclosure Policy. Under that amendment, where a company receives an internal report from a whistleblower, if the company comes forward and reports the misconduct to the department within 120 days and before the department reaches out to the company, the company will be eligible for the greatest benefit under our policy—a presumption of a declination—so long as they fully cooperate and remediate.
With today’s announcements, we are telling employees: if you are aware of criminal misconduct at your company, now is the time to come forward to the Criminal Division. And our message to company executives and leadership is also clear: we are using more tools than ever before to identify corporate misconduct, so now is the time to make the necessary compliance investments to help prevent, detect, and remediate misconduct. And when misconduct does occur and companies are considering whether to make a self-report, remember this simple message: call us before we call you.”
As stated in this “fact sheet”:
“Starting August 1, 2024, whistleblowers can submit original information to DOJ’s Criminal Division about certain types of corporate crime by visiting www.justice.gov/CorporateWhistleblower. If DOJ’s prosecution results in asset forfeiture, the whistleblower may be eligible for a portion of that forfeiture.”
Filling important gaps in existing federal whistleblower programs. DOJ’s pilot program is modeled on successful whistleblower programs run by the SEC, CFTC, and FinCEN, and seeks original information about corporate misconduct not covered by those programs. DOJ’s program is focused initially on four areas: (1) certain crimes involving financial institutions and their employees; (2) foreign corruption involving privately held companies and others that are not issuers of U.S. securities; (3) domestic corruption involving companies; and (4) health care fraud schemes targeting private insurers not subject to qui tam recovery under the False Claims Act. (Pilot Program Guidance § II.3.)
Supercharging DOJ’s corporate investigations and prosecutions. DOJ’s Criminal Division will review whistleblower submissions and consult with the FBI on whether to open an investigation. If the resulting investigation and prosecution lead to a forfeiture greater than $1 million, the whistleblower may be eligible in DOJ’s discretion to receive a monetary award, provided the whistleblower meets certain eligibility criteria. (Program Guidance §§ II.1, II.7.)
Awarding whistleblowers based on a percentage of “net proceeds forfeited.” DOJ will calculate potential awards based on the “net proceeds forfeited”—the value of any assets DOJ forfeits after compensating eligible individual victims and paying other costs associated with the forfeiture. Whistleblowers may receive up to 30 percent of the first $100 million in net proceeds forfeited, and up to 5 percent of any net proceeds forfeited between $100 million and $500 million. DOJ will assess what percentage to pay the whistleblower based on various factors, including the usefulness of the whistleblower’s information and the level of assistance provided, with any awards made in DOJ’s discretion. (Program Guidance § III.1.)
A footnote states:
For the first $10 million in net proceeds forfeited, the Department will apply a presumption in favor of awarding a whistleblower the maximum 30 percent of such proceeds, where the Department determines in its sole discretion that an award is appropriate and that none of the considerations described in the Program Guidance that may decrease an award are present (e.g., culpability, unreasonable delay, interference with internal reporting systems, or the whistleblower exercising management oversight of the misconduct, as described in Guidance § III.3.b). This presumption is modeled on a similar policy adopted by the SEC Whistleblower Program in September 2020.
Protecting whistleblowers’ confidentiality. Many whistleblowers fear retaliation for coming forward, and DOJ is committed to protecting the confidentiality of those who submit information through the pilot program. In addition, if DOJ learns that any person or entity takes action to prevent a whistleblower from sharing information about potential crimes, DOJ will take all appropriate steps to address such acts, including, where appropriate, by opening a criminal investigation into obstruction of justice. (Program Guidance § IV.)
Ensuring criminals don’t profit from whistleblowing. The SEC, CFTC, and FinCEN whistleblower programs prohibit award payments to individuals who directed, planned, initiated, or were convicted of the misconduct they reported. The DOJ program goes a step further, prohibiting payments to any whistleblower who meaningfully participated in the criminal activity they report. (For individuals seeking to report previously undetected corporate misconduct who face criminal liability for their actions, several DOJ offices are piloting programs that offer a different, nonmonetary incentive: the possibility of a non prosecution agreement, subject to certain conditions.) (Program Guidance § II.1.e; see also CRM Pilot Program on Voluntary Self-Disclosures for Individuals (I-VSD Program).)
Strengthening DOJ’s other tools for corporate accountability. The pilot program also complements and strengthens DOJ’s existing “voluntary self-disclosure” (VSD) programs, which offer companies and individuals potential benefits when they self report their misconduct, remediate the harm, identify responsible individuals, and fully cooperate with the government’s investigation. How? Because the more ways that people can report corporate misconduct, the greater the incentive for companies and individuals to report wrongdoing as soon as they learn of it. (See CRM Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP); I-VSD Program.)
Promoting companies’ internal reporting systems. DOJ recognizes the value of companies’ internal compliance programs and has designed the pilot program to encourage employees to report misconduct internally before submitting information to DOJ. For example, under the pilot program, an employee who reports misconduct through internal company systems can still seek and obtain a whistleblower award from DOJ, provided that the person submits the information to DOJ within 120 days of their initial internal report to the company, and internal reports may be a factor that increases an award. (Program Guidance §§ II.2.d, III.3.a.iii, III.3.b.iii.)
A footnote states:
To encourage prompt reporting, the Pilot Program creates a narrow window for both whistleblowers and companies to report the same misconduct and remain eligible for potential benefits. In addition to the timelines above, if a company receives a whistleblower’s internal report and then self-discloses the allegations to DOJ’s Criminal Division within 120 days (and before DOJ reaches out to the company), the company remains eligible for the Division’s VSD program, even if the whistleblower has already submitted the information to DOJ. (See CEP, August 1, 2024 Amendment.)
Regularly evaluating the pilot, with an eye to potential legislation. As part of the pilot program, DOJ plans to regularly evaluate the initiative and determine whether any refinements are necessary. Longer term, DOJ may benefit from additional legislation to expand the program beyond forfeiture. DOJ intends to solicit feedback from a broad range of stakeholders throughout the pilot.
