- As foreshadowed by Deputy Attorney General Lisa Monaco during the ABA White Collar Crime conference last March,[1] on August 1, 2024. the Department of Justice’s (DOJ or Department) Criminal Division launched the Corporate Whistleblower Awards Pilot Program (Pilot Program). Under this three-year Pilot Program, an eligible whistleblower who provides the Criminal Division with original and truthful information about certain corporate misconduct that results in a civil or criminal forfeiture in excess of $1 million may be eligible for a significant share of the forfeited proceeds. Awards are entirely discretionary and are not guaranteed.
- DOJ structured the Pilot Program to support the internal reporting of violations through a company’s internal compliance program by making it clear that employees who report misconduct internally remain eligible to receive an award as long as they submit information to DOJ within 120 days of the initial internal report to the company. The Pilot Program also provides that a whistleblower’s participation in internal compliance systems by reporting the issue first may be a factor that increases an award.
- Importantly for companies, DOJ temporarily amended the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy (Corporate Enforcement Policy), allowing qualifying companies to receive the benefits of traditional self-disclosure, including a presumption of declination, even where an employee has made a whistleblower report to DOJ, so long as the company self-reports that conduct to DOJ within 120 days and DOJ has not contacted the company first.
DOJ has introduced the new three-year Pilot Program, managed by the Criminal Division’s Money Laundering and Asset Recovery Section, effective August 1. Under this Pilot Program, whistleblowers meeting certain criteria may be eligible for an award for providing original, truthful information about criminal misconduct relating to one or more designated program areas that leads to at least $1 million in forfeiture net proceeds.[2] Although DOJ has successfully used information procured from existing whistleblower awards programs run by other agencies such as the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Financial Crimes Enforcement Network to advance its criminal investigations and prosecutions, it implemented this Pilot Program ostensibly to fill gaps in the coverage of other whistleblower programs to provide whistleblowers incentives related to the full scope of corporate misconduct that DOJ investigates.
Eligible Tips Must Relate to Certain Crimes
The Pilot Program will initially focus on four areas: (1) certain crimes involving financial institutions, their insiders or agents, including schemes involving money laundering, anti-money laundering compliance violations, the registration of money-transmitting businesses and fraud violations; (2) foreign corruption by, through or related to companies, including violations of the Foreign Corrupt Practices Act, the Foreign Extortion Prevention Act and money laundering statutes; (3) domestic corruption and kickback violations involving companies; and (4) healthcare fraud schemes that target private insurers or nonpublic healthcare benefit programs or that defraud patients, investors or nongovernmental entities in the healthcare industry and that are not subject to qui tam recovery under the False Claims Act. According to DOJ, the Pilot Program is intended to incentivize those with information about corporate criminal wrongdoing to report original information that might otherwise go undetected and motivate companies to create more robust compliance programs designed to detect and deter criminal conduct and strengthen internal reporting systems. The Department in particular is seeking to encourage whistleblowers to come forward with information that could lead to criminal or civil asset forfeiture, which the Department characterized as “an essential component” in its efforts to prosecute the most sophisticated criminal actors and organizations.[3] Individuals can expect that their submissions to the Department will be confidential, and whistleblowers may also submit information anonymously through an attorney representative.
Award and Eligibility Requirements
Any award under this Pilot Program is subject to specific payment considerations, and awards are issued at the sole discretion of the Department. Awards can be up to 30 percent of the first $100 million forfeited and 5 percent of proceeds between $100 million and $500 million. Whistleblowers will not receive a share of any proceeds exceeding $500 million. Original information is defined as information that is derived from the individual’s independent knowledge or independent analysis of information in the individual’s possession that is not derived from public sources. The original information must be nonpublic and not previously known to the government. However, “even if the Department already has information about a matter from other sources at the time an individual makes a submission, the Department will consider an individual an original source of any information they provide that materially adds to the information the Department already possesses, if they meet the other criteria for original information.”
Individuals will not be eligible for an award if they are eligible for an award under another U.S. government whistleblower, qui tam or similar program had they reported the same information.[4] In addition to requiring that the information be original, truthful and complete, DOJ also requires that the individual’s submission be voluntary. To qualify as a voluntary disclosure, the individual submission must occur before any request, inquiry or demand for information by the Department relating to the subject matter of the submission; the individual must not have a preexisting obligation under an agreement in connection with a criminal prosecution or civil enforcement action to report the information to the government; and the disclosure must be in the absence of any government investigation or threat of imminent disclosure to the government or the public.
When deciding the amount of the award, the Department will consider the significance of the information provided by the whistleblower for the success of the prosecution or resolution; the assistance provided by the whistleblower and whether it was ongoing, extensive and timely; and whether the whistleblower participated in internal compliance systems or internal reporting. DOJ requires that the individual submit information to the Department within 120 days of providing it to an internal company compliance or reporting system. The Department will refuse or decrease an award if the individual has any meaningful culpability in the criminal activity or had a management role over the offices or personnel involved in the misconduct. Additionally, unreasonable delays in reporting the violations or interference with internal compliance and reporting systems by the whistleblower will decrease an award.
Significantly, DOJ also temporarily amended the Criminal Division’s Corporate Enforcement Policy pursuant to the Pilot Program. With the amendment, companies remain eligible for voluntary self-disclosure credit under the Corporate Enforcement Policy, including potentially a presumption of declination, when an employee has made both an internal report and a whistleblower submission to DOJ, so long as the company self-reports that conduct to DOJ within 120 days and DOJ has not contacted the company first.[5]
The Department intends to regularly evaluate the Pilot Program and solicit feedback from a range of stakeholders, with an eye to potential legislation.
Key Takeaways
While it remains unclear how successful the three-year Pilot Program will be or the level of awards that will be made, DOJ and companies are highly likely to see an increase in whistleblower activity in the “designated program areas.” Accordingly, companies should continue to assess and strengthen their internal compliance and reporting systems in light of the new Pilot Program. Given the creation of the 120-day deadline for reporting whistleblower complaints to DOJ in order to preserve the ability to benefit from the corporate self-disclosure incentives in the Corporate Enforcement Policy, it will be critical for companies to quickly and effectively assess and investigate allegations received in order to mitigate liability and avoid criminal exposure. Companies should examine and, if necessary, redesign their compliance programs’ internal reporting structures and investigative processes to ensure that their programs enable them to identify, triage, investigate and remediate complaints thoroughly and expeditiously to meet the 120-day deadline. Although the Pilot Program allows and to some extent incentivizes potential whistleblower award applicants to report misconduct through internal corporate compliance program channels, there is no requirement that potential whistleblowers utilize this framework. Accordingly, a strong corporate compliance program finely tuned to detect and remediate misconduct remains critical. Now is a good time for companies to consult with outside counsel to ensure their compliance programs, internal reporting structures and investigative protocols are suitably robust.
The BakerHostetler White Collar, Investigations and Securities Enforcement and Litigation team is composed of dozens of practitioners and attorneys with extensive experience in regulatory investigations, litigation and compliance counseling. Many of the members of our team are former Department of Justice prosecutors. Please feel free to contact any of our experienced professionals if you have questions about this alert.
[1] Deputy Attorney General Lisa Monaco Delivers Keynote Remarks at the American Bar Association’s 39th National Institute on White Collar Crime (March 7, 2024) https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-monaco-delivers-keynote-remarks-american-bar-associations.
[2] Department of Justice Corporate Whistleblower Awards Pilot Program Guidance (Aug. 1, 2024) https://www.justice.gov/criminal/media/1362321/dl?inline.
[3] U.S. Department of Justice Corporate Whistleblower Awards Pilot Program Fact Sheet https://www.justice.gov/criminal/media/1362326/dl?inline.
[4] The Department advises that if an individual is unsure of whether they qualify for another U.S. government program or may qualify for the Pilot Program, they should submit information to both programs so that the Department can assess the information and determine whether the individual qualifies for the Pilot Program. Department of Justice Corporate Whistleblower Awards Pilot Program Guidance (Aug. 1, 2024) https://www.justice.gov/criminal/media/1362321/dl?inline.
[5] See Temporary Amendment to the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy (Aug. 1, 2024) https://www.justice.gov/criminal/media/1362316/dl?inline and U.S. Department of Justice Corporate Whistleblower Awards Pilot Program Fact Sheet, FN 1, https://www.justice.gov/criminal/media/1362326/dl?inline.
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