DOJ Announces Corporate Whistleblower Program

Key Points

• Deputy Attorney General Lisa Monaco recently announced the launch of a three-year Corporate Whistleblower Awards Pilot Program that will offer whistleblowers the chance to receive monetary awards for providing information about certain types of corporate crime to the DOJ’s Criminal Division.
• The pilot program is modeled on existing whistleblower programs run by the SEC, the CFTC and FinCEN, and is intended to fill gaps in those programs by targeting certain forms of foreign corruption, domestic corruption, crimes involving financial institutions and health care fraud schemes. Violations of the Foreign Corrupt Practices Act by companies that do not issue securities in the United States, for example, are not covered by the SEC program, but will fall within the DOJ pilot program.
• DOJ hopes the pilot program will “supercharge” its corporate investigations and prosecutions, strengthen its other tools for corporate accountability and promote companies’ internal compliance programs.

Key Takeaways

• Although the pilot program will likely strengthen DOJ’s corporate criminal enforcement to some extent, the program’s complexity, the amount of discretion reserved by the government and its lack of a mandate to pay awards could well result in a more muted impact.
• In the meantime, to prepare for a potential increase in DOJ investigations, companies should ensure that they have well-crafted compliance programs for identifying complaints, responding appropriately and deciding whether to self-report.

Background

On August 1, 2024, Deputy Attorney General (DAG) Lisa Monaco announced the launch of the U.S. Department of Justice (DOJ or the Department) Criminal Division’s Corporate Whistleblower Awards Pilot Program. The pilot program is the culmination of a 90-day policy “sprint” to develop and implement a new DOJ corporate whistleblower rewards program that DAG Monaco previewed in March 2024.

DOJ’s new whistleblower program is intended to fill gaps in existing programs run by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission, the Financial Crimes Enforcement Network, as well as DOJ’s False Claims Act qui tam program. DOJ’s new program focuses on four areas:

• Foreign corruption involving companies that are not issuers of U.S. securities (and therefore not covered by the SEC’s program) and violations of the Foreign Extortion Prevention Act, which criminalizes a foreign official’s solicitation or receipt of bribes.
• Certain crimes involving financial institutions, including schemes involving money laundering and anti-money laundering compliance violations.
• Domestic corruption involving companies.
• Health care fraud schemes targeting private insurers not subject to qui tam recovery under the False Claims Act.

According to DAG Monaco, by launching this whistleblower program, the DOJ is “doubling down on a proven strategy to ferret out criminal activity that might otherwise go unreported.”

Program Eligibility

The program guidance consists of approximately 14 pages of program eligibility requirements and limitations on potential whistleblower awards.

Key Requirements:

• The program is open to individuals who voluntarily provide “original information” to the Department.
• The whistleblower must provide information that is “truthful and complete,” “non-public” and “previously not known to the Department.”
• The information must lead to at least $1 million in criminal or civil forfeiture in connection with a prosecution, corporate criminal resolution or civil forfeiture action.
• The information must relate to (i) foreign corruption and bribery, (ii) domestic corruption involving companies, (iii) crimes involving financial institutions or (iv) certain types of health care fraud.
• The whistleblower must “cooperate” with the Department in its investigation of related conduct and criminal or civil actions.

Notable Limitations:

• The whistleblower cannot have “meaningfully participated” in the criminal activity.
• The whistleblower cannot be eligible for an award through another U.S. government whistleblower program, meaning an SEC whistleblower, for example, cannot double recover, although whistleblowers may still report to both agencies where jurisdiction overlaps.
• The whistleblower will not receive any reward until all identifiable victims have been fully compensated.

Takeaways

120 Days to Report. The DOJ’s new whistleblower program is part of its longstanding effort to incentivize companies and individuals to self-disclose potential violations of corporate crime to the government. A core component of this effort is the Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) which, among other things, describes the benefits a company can expect to receive when it voluntarily self-discloses misconduct to the Department.

Following DAG Monaco’s announcement, Principal Deputy Assistant Attorney General (PDAAG) of the Criminal Division, Nicole Argentieri, announced a simultaneous amendment to the CEP making clear that a company is still able to receive a presumption of a declination when it self-discloses misconduct to the DOJ within 120 days of receiving a whistleblower complaint, so long as the company makes the self-disclosure before the Department reaches out to the company.

This amendment appears intended to incentivize companies to more quickly disclose suspected misconduct reported by whistleblowers. Companies should ensure that their compliance and legal departments are appropriately resourced to quickly investigate internal whistleblower reports and make informed decisions about whether to self-disclose to DOJ. Given the complexity of some matters, particularly those involving foreign conduct or information, the best approach may be to make an initial disclosure to DOJ about the general contours of the allegations, along with a message that the company will be in a better position to provide more detailed information upon further investigation.

Continued Focus on Compliance. In remarks announcing the new whistleblower program, DAG Monaco and PDAAG Argentieri both emphasized the benefits to companies that invest in compliance. In line with these sentiments, the new whistleblower program appears designed to avoid undermining compliance departments. For example, it enables whistleblowers to report internally and then report to the DOJ within 120 days. The amount of an award can also be increased if the whistleblower first reports the misconduct internally. The message from DOJ is clear—when appropriate, whistleblowers should report to their companies’ compliance departments before coming to the DOJ.

Given this backdrop, companies should not assume that whistleblowers who report internally will not later report to DOJ.

Whistleblower Protection. DOJ’s guidance states that it will take appropriate steps to prevent retaliation against whistleblowers, including by opening a criminal investigation into obstruction of justice.

Companies should take care to ensure that any actions taken in response to whistleblower reports are appropriate and reasonable.

Limitations on the Size of Awards. DOJ’s whistleblower program limits whistleblower awards to 30% of the first $100 million in net proceeds forfeited and up to 5% of any net proceeds forfeited between $100 to $500 million, for a maximum amount of $50 million. Although the maximum DOJ whistleblower award is substantially lower than what may be recovered by SEC whistleblowers, the sums are still substantial and, as a practical matter, there have been relatively few reported SEC whistleblower awards above these thresholds.

The program also gives significant discretion to the Department to decide whether to increase or decrease the amount of any award. The Department will consider factors such as the “significance of the information,” the “assistance provided by the whistleblower,” whether the whistleblower reported to compliance, the culpability of the whistleblower and whether the whistleblower was “unreasonably delayed” in reporting to DOJ. In addition, the whistleblower will not receive any payment until all qualifying individual victims are compensated fully.

The discretionary nature of these criteria—and the requirement that forfeited funds are used to compensate victims fully before any whistleblower payment can be made—has caused some whistleblower counsel to criticize the program and question its viability.

Contrast with SDNY Whistleblower Program. In February 2024, the U.S. Attorney’s Office for the Southern District of New York (SDNY) launched a whistleblower pilot program offering non-prosecution agreements (NPAs) to individuals who voluntarily report to SDNY their involvement in (i) corporate criminal conduct involving fraud or corporate control failures or affecting market integrity or (ii) criminal conduct involving state or local bribery or fraud relating to federal, state or local funds. Unlike the DOJ whistleblower program, the SDNY whistleblower program does not offer monetary rewards to individuals who provide information about misconduct; instead, it encourages individuals to report misconduct in exchange for an agreement that they will not be prosecuted.

DOJ’s Criminal Division unveiled a similar NPA pilot program in April 2024. If an individual whistleblower who reports to the Criminal Division is deemed ineligible for a monetary award because they “meaningfully participated” in the misconduct, they can still seek and receive an NPA.

Uncertain Long-term Impact. DOJ’s new whistleblower program will almost certainly strengthen its corporate criminal enforcement to some extent. The long-term success of the program and its ultimate impact on the corporate criminal enforcement landscape will depend on whether whistleblowers are willing to come forward based on the hope that the government will exercise its discretion to offer them awards and that there will be available funds to pay the awards after victims are fully compensated.

In the meantime, companies should take DOJ’s new whistleblower program seriously by investing in strong compliance programs, ensuring that internal whistleblowers have functioning reporting channels and quickly investigating any reports of misconduct in a manner that allows the company to quickly determine (within 120 days) whether there is merit to the allegation, while also protecting whistleblower confidentiality and limiting the risks of actual or perceived retaliation. This will put companies in strong positions to make informed decisions about whether to self-disclose to the DOJ.

This fall, Akin will be hosting a webinar to discuss the wider framework of government whistleblower programs, how they intersect and interact, and what steps companies should take when confronted with whistleblower-related challenges. We will share additional information in the upcoming weeks.