[co-author: Madeleine McNally]

On March 7, 2024, US Deputy Attorney General Lisa Monaco announced a new program that will financially reward whistleblowers who notify the Department of Justice (DOJ) of “significant” corporate misconduct. This announcement served as the kickoff of a 90-day “sprint” to develop a pilot program. The formal program launch will follow later this year.

According to Monaco, the DOJ’s whistleblower program aims to fill gaps in the existing enforcement framework, incentivize individuals to report misconduct, and encourage companies to invest in their internal reporting and compliance programs. While the mechanics of the program remain to be seen, with the recent uptick in whistleblower tips in other federal programs, corporate leadership and compliance officers should take note that this program may result in increased whistleblower activity, and they should carefully evaluate any internal whistleblower and employment complaints.

A new tool for corporate enforcement

Though current law authorizes the US attorney general to reward individuals who share information that leads to civil or criminal forfeiture of assets, this authority historically has been exercised on an ad hoc basis. By establishing this new program, the DOJ aims to systemically expand its use of this authority to target alleged corporate misconduct.

Put plainly, if a whistleblower shares information that assists in the discovery of “significant corporate or financial misconduct” that is “otherwise unknown” to the DOJ, that individual could be entitled to receive some portion of the resulting forfeiture. Although further details about the program are in the works, Monaco shared initial parameters.

First, any victims must be compensated before the whistleblower. Second, the whistleblower must not be personally involved in the alleged misconduct. Third, the program only applies in cases without other financial disclosure incentives (e.g., existing federal whistleblower programs or qui tam actions under the False Claims Act). Fourth, and critically, the whistleblower must report truthful information relating to misconduct that is unknown to the DOJ. In related remarks on March 8, 2024, Acting Assistant Attorney General Nicole Argentieri further explained that such information must be “provided voluntarily and not in response to any government inquiry, preexisting reporting obligation, or imminent threat of disclosure.” Argentieri also noted that there likely would be a monetary threshold of some kind (similar to other federal whistleblower programs, which limit rewards to cases where sanctions are at least $1 million).

Monaco stressed the importance of the requirement that whistleblowers provide information otherwise unknown to the DOJ, noting it as a common feature of all whistleblower programs and, critically, the DOJ’s voluntary self-disclosure programs. According to the DOJ, the requirement of being “first in the door” helps incentivize individuals and companies to share information about misconduct as soon as it’s known, creating a “multiplier effect.” As Monaco put it: “When everyone needs to be first in the door, no one wants to be second.”

So, what sort of information will pique the DOJ’s interest? Monaco made clear that the DOJ welcomes information related to violations of any federal law, but is particularly interested in criminal abuses of US financial systems, domestic corruption, and foreign corruption outside of Securities and Exchange Commission (SEC) jurisdiction – such as violations of the Foreign Corrupt Practices Act or the new Foreign Extortion Prevention Act.

Filling enforcement gaps

According to Monaco, this DOJ-run program will help fill enforcement gaps by incentivizing whistleblowers to share information about wide-ranging misconduct that falls outside the scope of existing federal whistleblower programs. Unlike other programs that are limited to the jurisdictional scope of individual agencies, the DOJ’s program will cover “the full range of corporate and financial misconduct that the [DOJ] prosecutes.”

The DOJ’s program will join those run by the SEC and the Commodity Futures Trading Commission, which have received “thousands of tips, paid out many hundreds of millions of dollars, and disgorged billions in ill-gotten gains” since their inception. Indeed, in fiscal year 2023, the SEC received 18,000 whistleblower tips and issued whistleblower awards of almost $600 million – both of which were all-time highs. Other existing programs include those overseen by the Internal Revenue Service and Financial Crimes Enforcement Network, as well as qui tam actions under the False Claims Act. The DOJ collected approximately $2.7 billion through False Claims Act settlements and judgments in fiscal year 2023 alone.

Other DOJ priorities

In addition to the new whistleblower program, Monaco highlighted other DOJ priorities, including pursuing individual accountability, penalizing corporate recidivism, promoting voluntary self-disclosure and monitoring disruptive technologies, particularly artificial intelligence (AI).

Individual accountability

The DOJ’s “first priority” continues to be pursuing individual accountability. Monaco cautioned that the DOJ recently has been taking more cases to trial, in part because it is “bringing serious charges, with significant penalties, against senior executives.”

Corporate recidivism

Monaco also warned that the DOJ will be “demanding stiffer penalties” for repeat corporate offenders, reaffirming that “penalties exist, in part, to deter future misconduct.” Monaco cautioned that companies with a history of misconduct should invest in compliance programs to mitigate the risk of new or repeat claims that threaten to bring increased penalties.

Voluntary self-disclosure

In addition, Monaco highlighted the DOJ’s efforts to incentivize corporations to voluntarily self-disclose misconduct, emphasizing that “no matter how good a company’s cooperation, a resolution will always be more favorable with voluntary self-disclosure. ”The DOJ announced multiple new voluntary self-disclosure programs last year, including a safe harbor specific to corporate mergers & acquisitions and a directive to US Attorney’s Offices nationwide to implement voluntary self-disclosure policies. The US Attorney’s Offices for the Southern District of New York and the Northern District of California have launched pilot initiatives that Monaco described as “in essence, voluntary self-disclosure programs for individuals” – offering non-prosecution agreements to qualifying individuals who self-disclose misconduct and cooperate with investigations into “more culpable targets.”

AI

Finally, Monaco revisited a topic she addressed in February 2024 in remarks at Oxford University – AI and its “supercharged” promise and risks. Monaco again emphasized that though AI is “the ultimate disruptive technology,” the underlying criminal conduct committed via AI is remains the same and will be prosecuted accordingly – in other words, “[f]raud using AI is still fraud.” Further, stiffer sentences will be sought for white collar crimes made substantially more serious through the deliberate misuse of AI. Monaco also announced that going forward, “prosecutors will assess a company’s ability to manage AI-related risks as part of its overall compliance efforts.” To that end, she has directed the DOJ’s Criminal Division to include the assessment of disruptive technologies (including AI) in its guidance on Evaluation of Corporate Compliance Programs.

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