On August 1, 2024, the Department of Justice's (DOJ) Criminal Division unveiled the details of its previously announced Corporate Whistleblower Awards Pilot Program. The three-year initiative, which is effective immediately, seeks to incentivize individuals to report corporate misconduct and enhance the DOJ's ability to uncover and prosecute corporate crime.
The DOJ views the pilot program, which was previewed by Deputy Attorney General Lisa Monaco in March 2024, as one that fills gaps in existing federal whistleblower programs, incentivizes corporate investment in compliance programs and reporting procedures, and strengthens the DOJ's other corporate accountability tools.
Corporate Whistleblower Awards Pilot Program Details
Under the pilot program, whistleblowers may be eligible for an award when they provide original, truthful information about criminal misconduct relating to one or more designated program areas to the DOJ through their newly established intake form and whistleblower email. The whistleblower's information must lead to forfeiture exceeding $1 million in net proceeds, cannot be publicly available, and must be accompanied by full cooperation from the whistleblower.
The whistleblower's information must relate to one of the following subject areas:
- certain crimes involving financial institutions, from traditional banks to cryptocurrency businesses;
- foreign corruption involving misconduct by companies;
- domestic corruption involving misconduct by companies; or
- healthcare fraud schemes involving private insurers (i.e., healthcare fraud that is not covered by the False Claims Act).
But, whistleblowers are not eligible for a reward if they:
- are meaningfully involved in the misconduct at issue;
- have obtained the information through their work as a compliance officer or auditor of the company;
- are employed by the DOJ or are an immediate family member of a DOJ employee;
- have received the information from an ineligible person or otherwise with intent to bypass any provision of the pilot program;
- are an elected or appointed foreign government official; or
- would be eligible for an award through another whistleblower program.
Rewards under the pilot program can be lucrative, although the amount of an award is in the sole discretion of the DOJ. The pilot program provides that a whistleblower may receive up to 30% of the first $100 million in net proceeds forfeited, an award of up to 5% of any net proceeds forfeited between $100 million and $500 million, and no award on net proceeds forfeited above $500 million. There is a presumption that the DOJ will award a whistleblower the maximum 30% of the first $10 million in net proceeds forfeited.
The pilot program also warns employers that it will consider any alleged retaliation in assessing whether the company cooperated with the DOJ or obstructed an investigation. Along those lines, the pilot program directs whistleblowers to advise the DOJ if someone attempts to prevent communications with the DOJ. Such conduct could adversely affect a company's cooperation and remediation of the at-issue misconduct.
Impact on Corporate Enforcement and Voluntary Self-Disclosure Policy
The pilot program imposes an important 120-day period on both whistleblowers and companies. A whistleblower may be eligible for an award even if they first report the information through their employer's internal reporting process; however, the whistleblower must also report the same information to the DOJ within 120 days of the internal report.
Alongside the pilot program, the DOJ announced that it was "temporarily" amending the Corporate Enforcement and Voluntary Self-Disclosure Policy. The amendment will allow companies to qualify for a presumption of a declination if they self-disclose within 120 days of an internal whistleblower report, even if the whistleblower already disclosed the misconduct to the DOJ. Companies are still required to meet all other voluntary self-disclosure requirements, including full cooperation and engaging in remediation. This amendment eliminates a potential race between employee and employer to the DOJ to reap the benefits of these competing self-disclosure policies. While it provides a safe harbor for companies, pressure is still placed on companies to swiftly make the decision to self-disclose.
Conclusion
The pilot program's official announcement marks the conclusion of the DOJ's previously described "sprint" towards implementing the pilot program. This new pilot program, coupled with the DOJ's revamped enforcement and voluntary self-disclosure policies, solidifies the DOJ's approach to early cooperation with the U.S. government and self-reporting of corporate criminal misconduct from companies in return for leniency. The substantial financial incentives increase the likelihood that individuals with information regarding criminal misconduct will approach the DOJ.
However, there are unresolved questions about the DOJ Criminal and Civil Division working together to determine an individual's eligibility for their respective whistleblower program, and whether the DOJ, in an attempt to recover full restitution, will seek forfeiture of funds that satisfy both the full amount of losses and compensation of the whistleblower, thereby penalizing the company even further.
Financial institutions, healthcare companies, and those operating internationally should continue to invest in robust compliance programs and internal reporting processes to address corporate misconduct before being escalated to the DOJ by individual employees. Still, the 120-day safe harbor is a critical date for companies to maintain their presumption of a declination.
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