On August 1, 2024, the US Department of Justice ("DOJ" or "Department") released highly anticipated details of its new Corporate Whistleblower Awards Pilot Program ("Pilot Program"), with Principal Deputy Assistant Attorney General Nicole M. Argentieri announcing: "Our tip line is open, so if you see something, say something." This follows a 90-day "policy sprint" announced earlier this year, which the Department used to gather information, consult with stakeholders, and consider requirements for program eligibility and monetary thresholds while designing the nuts and bolts of the new Pilot Program.
Addressing priority gaps in existing federal whistleblower programs.
The program, sponsored by the Department's Criminal Division and administered by its Money Laundering and Asset Recovery (MLARS) Section, aims to encourage whistleblowers to report evidence of high-priority white-collar crimes while addressing gaps not covered by existing whistleblower programs run by the US Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Financial Crimes Enforcement Network, and the Department's own False Claims Act qui tam program. Specifically, and largely consistent with earlier announcements, the Pilot Program is focused on four core areas of corporate crime, each a top priority for Criminal Division prosecutors and not currently covered by existing federal whistleblower programs:
- Certain criminal abuses involving US financial institutions and their employees;
- Foreign corruption cases outside the jurisdiction of the SEC,
including:
- Foreign Corrupt Practices Act violations by non-issuers over which DOJ has jurisdiction (e.g., private "domestic concern" companies that are incorporated or headquartered in the United States or purely foreign companies that take some action in furtherance of a corrupt scheme while in the territory of the United States); and
- Violations of the recently enacted Foreign Extortion Prevention Act, which targets foreign officials on the "demand" side of foreign bribery cases;
- Domestic corruption cases involving companies, especially involving illegal corporate payments to US government officials; and
- Health care fraud schemes targeting private insurers not subject to qui tam recovery under the False Claims Act.
DOJ issues detailed guidance for prospective whistleblowers.
Starting August 1, 2024, whistleblowers who submit original, truthful information to DOJ's Criminal Division relating to one of those areas that results in a DOJ prosecution may be eligible for a portion of any net proceeds of an asset forfeiture exceeding $1 million. Notably, whistleblowers may receive a percentage of only the forfeiture component of a corporate resolution—not the criminal penalty portion of it, which can often be substantially larger than the forfeiture amount.
Eligible whistleblowers must be individuals, not entities, and cannot be employees of law enforcement agencies or more than minimally involved in the reported criminal activities. Detailed eligibility criteria are set out in the Department's newly released program guidance note.
Particularly notable aspects of the newly released program guidance include:
- No guarantees: Entirely discretionary awards, based on a percentage of "net proceeds forfeited." The determination of whether an individual is eligible for an award and the amount of an award is at the sole discretion of the Department and subject to a number of payment considerations set out in the newly released program guidance. It remains to be seen whether the purely discretionary nature of program awards will have an impact on the program's success in comparison to the highly successful mandatory whistleblower awards established under the Dodd-Frank and False Claims Act programs.
Awards are paid from net proceeds after compensating victims and covering forfeiture-related costs, after which they can reach up to 30% of the first $100 million in forfeited assets, decreasing to 5% for amounts between $100 million and $500 million. Claims for awards must be filed within 90 days of DOJ's publication of successful forfeitures. In determining the percentage to pay a whistleblower, DOJ may consider various factors, including the significance and timeliness of the whistleblower's information, their cooperation level, and any personal hardships faced due to reporting.
- No blanket exclusion for minimally culpable whistleblowers in criminal matters. In prior announcements, DOJ had indicated its intention to exclude from a potential financial award any persons who may have had some involvement in the criminal activity. This approach would have presented a marked point of difference with the Dodd-Frank and False Claims Act programs, both of which have been very successful in a civil context at using potential monetary awards to induce persons to turn over information regarding their former associates' misconduct.
In a notable shift from those earlier announcements, the DOJ program will now only prohibit payments to any whistleblower who meaningfully participated in the reported criminal activity, while leaving open the possibility of financial awards for minimal participants provided such individuals are "plainly among the least culpable of those involved in the conduct of a group." The level of involvement in each case is a fact-based determination based on the totality of the circumstances. Potentially complicating the risk calculus for potential reporters, one key factor indicative of a minimal role is the person's lack of knowledge or understanding of the scope and structure of the scheme—while, on the other hand, it is an individual's ability to provide significant (i.e. detailed, credible) information and assistance to the Department that is a key factor in determining the amount of any potential award.
In any case, if the Department determines that an individual is ineligible for the Pilot Program due to their culpability in a reported scheme, different, non-monetary incentives may still be available, including the possibility of a non-prosecution agreement through the Individual Voluntary Self-Disclosure (VSD) Program.
- 120 days: DOJ defines timely reporting for individuals and companies. To encourage prompt reporting, alongside the Pilot Program, DOJ simultaneously announced an amendment to its Corporate Enforcement and VSD Policy, defining 120 days as the limit for timely, voluntary disclosure by individuals and companies in order to be eligible for the greatest potential benefits. Under the Pilot Program, an employee who reports misconduct through internal company systems within this narrow window can still seek and obtain a whistleblower award from DOJ provided they submit relevant information to DOJ within 120 days of their initial internal report to the company.
In the same vein, if the company receiving that whistleblower's internal report comes forward and self-discloses the allegations to DOJ's Criminal Division within 120 days (and before DOJ reaches out to the company), the company will itself be eligible for the greatest benefit under DOJ policy—a presumption of a declination—provided that it then fully cooperates and remediates and that certain aggravating circumstances (such as recidivism or high-level executive involvement) are not present.
- Anonymous reporting only with attorney representation. The different posture of criminal, as opposed to civil, proceedings will also impact key considerations around the protection of whistleblower information and anonymity. For example, anonymous reporting to DOJ is available only for whistleblowers represented by an attorney in connection with the submission of information and claim for an award. Further, DOJ whistleblowers who do choose to identify themselves in the hope of receiving a financial award may not be assured anonymity in any criminal case in the same way as the SEC program offers.
- Reporting misconduct internally is a factor that may increase awards. Significantly, and in a welcome addition for corporate compliance teams, if an employee's submission to the Department leads to an award payment, one of the considerations that could potentially increase the payment is whether the employee first engaged with their employer's internal compliance and reporting system. Any attempt by a company to interfere with a whistleblower's ability to report to the Department may be taken into account in assessing the company's cooperation credit and compliance program.
Next Steps
Although following the highly successful precedents of other agencies, a DOJ-specific program of this kind will bring its own challenges, a number of which are highlighted above. The Pilot Program in its current form will run as a three-year initiative administered by MLARS, after which the Department will determine whether the program will be extended in duration or modified in any way. As DOJ continues to evaluate the program's effectiveness and make necessary adjustments, and as more information becomes publicly available on the volume of reports to DOJ, and award amounts, companies will be well-served to continue to invest in testing and enhancing their compliance programs and internal reporting structures.
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