Key Takeaways
- Within the past two weeks, seven U.S. Attorneys’ Offices launched whistleblower non-prosecution pilot programs (Whistleblower Programs) geared toward encouraging individuals involved in certain corporate criminal misconduct to report the misconduct to the government in exchange for non-prosecution agreements (NPAs).
- These programs are similar to the whistleblower non-prosecution pilot programs launched by other U.S. Attorney’s Offices, including the Southern District of New York (SDNY) and the Criminal Division earlier this year, and also come amid a broader effort by the Department of Justice (DOJ) to entice would-be whistleblowers who were not involved in the criminal conduct to report information in exchange for financial awards.
- The Whistleblower Programs and the DOJ’s continued emphasis on corporate compliance and voluntary self-disclosure further the need for companies to maintain effective compliance programs with robust protocols for internal reporting and investigations.
Background
There was a flurry of DOJ whistleblower program activity over the last two weeks as the U.S. Attorneys’ Offices for the Eastern District of New York (EDNY Program), District of New Jersey (DNJ Program), Southern District of Florida (SDFL Program), Eastern District of Virginia (EDVA Program), District of Columbia (DDC Program), Southern District of Texas (SDTX Program), and Northern District of Illinois (NDIL Program) each announced Whistleblower Programs. Like those of the SDNY, the Criminal Division and other programs that came before them, the stated purposes of these Whistleblower Programs are to encourage early, voluntary self-disclosure and cooperation with the government by individuals who participated in certain nonviolent offenses and face criminal liability in exchange for an NPA when specific conditions are met. Although the programs have differences, they all broadly incentivize whistleblowing in various areas of white collar crime, such as healthcare and financial fraud, securities violations, and public corruption. Note that these NPA pilot programs are distinct from the DOJ Corporate Whistleblower Awards Pilot Program, under which individuals who did not meaningfully participate in criminal activity and provide original and truthful information related to certain criminal conduct may qualify for monetary awards.
Each of the Whistleblower Programs is styled as a “pilot” program, which means that at some point in the future, they will be reevaluated by the issuing prosecutor’s office. Only the NDIL Program has a specific sunset provision: March 15, 2025. According to that program’s terms, it could be extended permanently depending on its success.
Whistleblower Program Requirements
Qualifications for the Whistleblower Programs rest on several criteria. First, the programs only apply to reports of certain types of crimes. For example, except for the NDIL Program, which does not specifically state the criminal conduct covered, each program expressly includes criminal conduct related to (1) fraud or corporate control failures, (2) the integrity of financial markets and (3) state or local bribery. The EDNY, SDFL, EDVA, DDC and SDTX Programs also expressly cover fraud relating to federal, state, or local funds, with the EDNY Program additionally covering intellectual property theft and related violations, obstruction of justice, perjury or false statements, healthcare fraud, and money laundering. The DNJ Program also covers crimes by healthcare providers and is the only program to specifically include civil rights violations.
Each of the Whistleblower Programs also excludes crimes that implicate other components and policies of the DOJ and/or for which the particular U.S. Attorney’s Office has restricted authority to investigate and charge. For example, as the DOJ Tax Division has its own voluntary self-disclosure policy, some of the Whistleblower Programs specifically exclude tax offenses. In addition, except for the EDNY Program, each program specifically excludes violations of the Foreign Corrupt Practices Act. Rather than carving out specific crimes, the EDNY Program states that it “may not apply to individuals who provide information regarding violations subject to approval requirements by other DOJ components under rules, regulations, or procedures.”
Second, certain individuals are excluded from the Whistleblower Programs. Each program excludes elected officials, members of federal law enforcement, and the highest-ranking person within the organization where the misconduct occurred (e.g., the CEO) or individuals who can exercise primary control over the organization’s operations regardless of title. In addition, the EDNY Program excludes the “head of a public agency or entity,” the DDC Program excludes members of state or local law enforcement, and the SDTX Program excludes individuals who are, or are expected to become, “of major public interest.”
The Whistleblower Programs also contain criteria for excluding individuals based on the level of participation in the criminal conduct or type of misconduct in which they engaged. For example, most of the programs exclude the leaders or organizers of the illegal activity in question. The EDVA Program also excludes individuals who disclosed “classified or other sensitive national security information.” In addition, certain prior criminal offenses, including crimes of violence and crimes with national security implications, will disqualify individuals from participating in these programs.
Other than in the NDIL Program, which appears to be completely discretionary, individuals who meet the above criteria will qualify for NPAs if they also fulfill certain disclosure and cooperation requirements, which include:
- Truly voluntary disclosures. Disclosures cannot be in response to a government inquiry or imminent threat of government investigation or required under preexisting government reporting obligations.
- Original, truthful and complete disclosures. Individuals must truthfully disclose all criminal conduct in which the individual has participated or of which the individual is aware, and the information cannot be public or already known to the government.
- Substantial assistance. Individuals must provide substantial assistance in the investigation and prosecution of one or more individuals or entities that are equally or more culpable, and they must be prepared to cooperate fully with the prosecuting office.
- Forfeiture/disgorgement/restitution. Individuals must agree to forfeiture or disgorgement of any criminal proceeds and payment of restitution to victims.
Even if a whistleblower does not meet the above criteria, these prosecuting offices have the discretion to offer the individual an NPA consistent with existing cooperation policy. Factors that prosecuting offices look at to make this determination include (1) the extent to which the criminal conduct was known to the government; (2) whether the disclosure was voluntary, truthful, and complete; (3) whether the whistleblower provided substantial assistance; (4) the culpability of the individual; (5) whether the individual occupies any leadership position or position of trust; (6) the adequacy of noncriminal sanctions, including remedies imposed by civil regulators; and (7) the whistleblower’s criminal history. Notably, the EDNY Program also assesses whether the individual (1) is located outside the U.S. and is likely to remain there; (2) has information about individuals or entities located outside the U.S. and could provide substantial assistance against them; and (3) has information about criminal conduct of a federally elected or appointed official or a senior officer or board member of a public company. The DNJ Program also takes into account the culpability of the individual.
Under the NDIL Program, NPAs are issued on a case-by-case basis to qualified individuals based on factors such as the individual’s truthfulness, willingness and ability to assist law enforcement, extent of participation in the wrongdoing, timeliness of the reporting, position within the organization, and criminal history.
Implications and Best Practices
The DOJ’s focus on self-disclosure and cooperation, and incentivizing those with information to come forward, is increasing. With the launch of these seven whistleblower NPA programs on top of the existing programs and recently launched whistleblower financial awards program, there has never been an environment more encouraging for employees to report misconduct to the DOJ. It can be expected that more U.S. Attorneys’ Offices will follow suit and announce similar whistleblower programs. Inevitably, these programs will lead to an uptick in DOJ inquiries and investigations directed at companies.
Companies should adjust to this new wave of DOJ whistleblowing programs by ensuring that their compliance programs are robust and effective in deterring and detecting criminal conduct. In particular, companies should ensure they have policies that encourage employees to internally report potential misconduct without fear of retaliation and procedures to promptly and thoroughly investigate any reported misconduct. This is especially important in light of this week’s revision to the DOJ’s Evaluation of Corporate Compliance Programs, which includes assessment of whether companies encourage and incentivize reporting of potential misconduct or, conversely, employ practices that chill reporting, and are committed to anti-retaliation. It is also critical that companies consult with outside counsel as to whether to self-report criminal misconduct as soon as it is detected in order to qualify for their own NPA or cooperation credit, as these Whistleblower Programs significantly increase the likelihood that the DOJ has been or will be informed of the conduct under investigation.
The authors acknowledge with thanks the assistance of Associate Jimmy Nguyen in preparing this alert.
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