DOJ Expands Its Enforcement Toolbox With The Announcement Of A New Whistleblower Rewards Program And Amendment To Its Corporate Voluntary Self-Disclosure Policy

On August 1, 2024, the U.S. Department of Justice (DOJ) launched the Corporate Whistleblower Awards Pilot Program, a new rewards program designed to incentivize individuals to report criminal misconduct. This three-year pilot program aims to bridge gaps in current whistleblower programs, such as those overseen by other government agencies, by offering awards that those current programs do not cover.

DOJ simultaneously announced an amendment to its Corporate Enforcement and Voluntary Self-Disclosure Policy (VSD). Under this amendment, companies that received a complaint of misconduct from a whistleblower and report to DOJ within 120 days will be eligible for a presumption of declination.

With these twin announcements, DOJ is sending a clear message to both individuals and companies. To the former, if you see something, say something; to the latter, the government will potentially reward proactive self-reporting.¹ We will address the details of the rewards program and VSD amendment, and key implications for companies below.

DOJ's Four Areas of Focus for New Rewards Program

DOJ's new rewards program is focused on four areas:

• Financial Institutions
  • Violations by financial institutions, their insiders, or agents, including schemes involving money laundering, anti-money laundering compliance violations, registration of money transmitting businesses, and fraud statutes, and fraud against or non-compliance with financial institution regulators.
• Foreign Corruption & Bribery Involving Privately Held Companies
  • Violations related to foreign corruption and bribery by, through, or related to companies, including violations of the Foreign Corrupt Practices Act, violations of the Foreign Extortion Prevention Act, and violations of the money laundering statutes.
• Domestic Corruption
  • Violations committed by or through companies related to the payment of bribes or kickbacks to domestic public officials, including but not limited to federal, state, territorial, or local elected or appointed officials and officers or employees of any government department or agency.
• Health Care Fraud Involving Private Insurers
  • Violations related to (a) federal health care offenses and related crimes involving private or other non-public health care benefit programs, where the overwhelming majority of claims are submitted to private or other non-public health care benefit programs, (b) fraud against patients, investors, and other non-governmental entities in the health care industry, where the overwhelming majority of the actual or intended loss was to patients, investors, and other non-governmental entities, and (c) any other federal violations involving conduct related to health care not covered by the False Claims Act (FCA).

These four areas cover misconduct not previously covered by whistleblower programs maintained by the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN), and DOJ's Civil Division's False Claims Act qui tam program. The focus on these four areas reemphasizes the fact that DOJ wants a "race" to its proverbial doorstep when it comes to reporting misconduct.²

Additional Eligibility Criteria & Exclusions

DOJ guidance details several additional eligibility criteria, in addition to falling under one of the four areas of focus outlined above:

• The reporter must submit "original information," which must be new, non-public information not previously known to DOJ or information that materially adds to information DOJ already possesses.
  • This can include information initially reported through a company's internal channels and subsequently communicated to DOJ within 120 days.
  • Critically, while this provision aims to promote companies' internal reporting systems, DOJ did not go so far as to require whistleblowers to report to the company first. Whistleblowers can still opt to report straight to DOJ. DOJ may consider prior internal reporting as a factor to increase the total award amount.
• The information must be also be reported voluntarily, meaning: (1) it must be before any request related to the subject matter of the report is directed to the individual; (2) the individual must have no preexisting obligation to report the information to DOJ, any DOJ component, or any federal law enforcement or civil enforcement agency; and (3) it must be reported before the threat of any government investigation or imminent disclosure to the government.
• The information must be truthful and complete, meaning that a reporter must provide all knowledge relating to any misconduct.
• Finally, a reporter must cooperate with DOJ in its investigation, which can include providing testimony or evidence, producing documents, or working with law enforcement officers.

Some exclusions apply. For example, individuals who learn of criminal wrongdoing because of their senior oversight role within the company, such as officers and directors, or those who are otherwise involved in compliance or audit functions are not considered to have "original" information.

Program Compensation

For compensation under DOJ's program, the information provided must lead to a successful forfeiture exceeding $1,000,000 in connection with a prosecution, corporate criminal resolution, or civil forfeiture action. DOJ considers a forfeiture successful when it secures a final order of forfeiture, a civil judgment of forfeiture, or an administrative declaration of forfeiture related to assets derived from an individual's submission.

If DOJ secures a successful forfeiture, the whistleblower may receive an award of up to (i) 30% of the first $100 million in net proceeds forfeited (ii) up to 5% of net proceeds forfeited between $100 million and $500 million, (iii) and no award provided for proceeds above $500 million. DOJ will assess what percentage to pay a whistleblower based on a myriad of factors, including the significance of the information provided and the extent of assistance to DOJ's investigation. Awards are issued in DOJ's sole discretion.

Significantly, an individual is not eligible for payment if they meaningfully participated in the criminal act, including directing, planning, initiating or knowingly profiting from the criminal activity. However, at its discretion, DOJ can deem a reporter eligible so long as the conduct was "sufficiently limited," and DOJ can describe the individual's conduct as the least culpable.

Finally, DOJ messaged in its Fact Sheet that if anyone takes action to impede a reporter from communicating with DOJ about possible criminal wrongdoing, including enforcing or threatening to enforce a confidentiality agreement, DOJ may consider legal action, including obstruction charges.

Program Review

DOJ intends to conduct ongoing evaluations of the program's efficacy and design over the course of its implementation. DOJ will communicate any modifications to the rewards program, including alterations to eligibility criteria or pertinent subject matters, through announcements on its website. At the end of the three-year pilot period, DOJ will decide whether to extend or alter the program based on its findings and even suggested pursuing additional legislation to expand the program beyond forfeiture.

VSD Amendment

Turning to the VSD amendment, for companies that voluntarily self-report within 120 days of receiving an internal whistleblower report, and before DOJ reaches out to the company, will be eligible for presumption of a declination from DOJ.

However, companies may have to report before 120 days, because the company must reach out before a whistleblower, who has initially used the company's internal channels, contacts DOJ. This follows DOJ's focus over the past few years on creating a combination of incentives and deterrents to "make the business case for responsible corporate behavior."³

Key Takeaways for Companies

• Race to Report. This new rewards program is another tool in the government's enforcement toolbox that will incentivize whistleblowers to report misconduct where none existed before. Because this will necessarily create more investigation and enforcement risk, particularly for private companies, companies should make certain they understand the new program and implement a comprehensive approach to investigate reports in these new four areas.
• Declination Time Clock. To be eligible for the presumption of a declination, companies must report within 120 days and, critically, before DOJ reaches out to them. This timeclock puts pressure on companies, even where they have not had time to complete an investigation and thus may be operating on an incomplete set of facts.⁴ This further complicates companies' exercise of its business judgement in deciding whether or when to disclose matters to the government.
• Whistleblowers Need Not Report Internally. The rewards program encourages internal reporting at companies but did not go so far as to require it. That said, whistleblowers who report internally may be eligible for an increased award. Time will tell how exactly DOJ will credit internal reporting first versus no internal reporting.
• Whistleblower Protections. DOJ's reference to obstruction charges, including potentially enforcing a confidentiality agreement, is significant and mirrors an SEC provision that permits civil enforcement actions against companies that impede communication. Companies should closely review existing language in relevant agreements and policies to make sure they do not run afoul of these new requirements given the continued cross-agency focus in this area.
• Targeting Private Insurance Programs. For health care companies, DOJ's focus on private health care insurance programs is a potentially significant expansion to its already extensive enforcement tools – including the FCA and Anti-Kickback Statute. While the new rewards program will focus its attention on private insurers, nothing in the program's language prevents the Criminal Division from sharing information with other government agencies.