In March of 2024, Deputy Attorney General Lisa Monaco, on behalf of the Department of Justice (“DOJ”), announced a new, three-year Corporate Whistleblower Award Pilot Program (the “Pilot Program”), designed to incentivize and reward certain individuals who report corporate wrongdoing. This is the DOJ’s first whistleblower reward program.
The Pilot Program took effect on August 1, 2024, and will be managed by the Criminal Division’s Money Launder and Asset Recovery Section. In a program overview published by the DOJ, the Department explained that, while it regularly uses information from other whistleblower programs—such as its own False Claims Act qui tam program, as well as whistleblower programs from the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Financial Crimes Enforcement Network—in many cases, “other agencies’ whistleblower programs do not cover the full scope of corporate crime the Department investigates and prosecutes, leaving gaps that the Department now seeks to fill.” In addition to incentivizing individuals with information about corporate criminal wrongdoing to report what they know, it was also hoped that providing such incentives to individuals would also “motivate corporations to create more robust compliance programs” to detect and deter the criminal conduct in the first instance.
To be eligible for a whistleblower award under the Pilot Program, an individual must voluntarily provide the DOJ with original information (in writing and consistent with the terms of the program), and that information must lead to a criminal or civil forfeiture exceeding $1 million in net proceeds forfeited in connection with a successful resolution (prosecution, settlement, etc.) related to corporate criminal conduct in one of the areas covered by the program. Joint submissions are permissible, but the whistleblower must be an individual, not a company or other type of entity. A whistleblower is also permitted to make an anonymous submission, provided they are presented by counsel.
There are several exclusions from the program. In addition to standard exclusions for DOJ employees/contractors, elected officials, and participants in the criminal conduct, an individual is also ineligible if they would be eligible for an award through another whistleblower or qui tam program if they reported the same scheme there instead of the pilot program. This would seem to be an attempt to narrow the scope of submissions received under the Pilot Program to only that conduct which would otherwise fall through the gaps of the existing programs. This makes it all the more important to carefully review your reporting options before making a submission to the DOJ or any other agency. The program is also not retrospective, and only information provided to the DOJ after the August 1, 2024, program start date will be eligible for any award.
To qualify as “original information,” the whistleblower can provide either information derived from their independent knowledge (i.e. not from publicly available sources) or from their independent analysis (i.e. an examination of public information which reveals information that is not generally known or available to the public). Original information cannot be previously known to the Department, and must “materially” add to the Department’s existing information. If a whistleblower reports internally, through an entity’s legal or compliance procedures, they must also report to the Department within 120 days of reporting internally in order to be eligible. Information is not “original” if it is, inter alia, obtained through privileged conversations; obtained through an individual’s role as an officer, director, or trustee (in certain circumstances); obtained by an employee with compliance or internal audit responsibilities, a third party retained to perform compliance or internal audit functions, or otherwise retained by the company to investigate possible legal violations; or obtained by an employee of a public accounting firm retained by the company.
The Pilot Program also requires that information pertain to specific subject matter areas, summarized as follows:
- Violations by financial institutions (or their insiders/agents) for schemes involving money laundering, AML compliance violations, fraud statutes, and non-compliance with or fraud against regulators.
- Violations related to foreign corruption and bribery, including violations of the FCPA, FEPA, and AML statutes.
- Violations related to the payment of bribes or kickbacks to domestic public officials.
- Violations related to:
- Federal health care offenses related to private health care benefit programs;
- Fraud against patients, investors, and other non-governmental entities in the health care industry; and
- Other federal violations related to health care but not covered by the federal FCA.
After submitting a tip to the DOJ, the whistleblower must continue to cooperate with the Department in its investigation. This might include, among other things, participating in interviews, producing documents, or providing testimony to a grand jury or at trial.
Unlike the SEC and CFTC programs, which provide an award-percentage floor, whistleblower awards in the Pilot Program are discretionary and not guaranteed. The program does impose caps on awards as follows: up to 30% of the first $100 million in net proceeds forfeited and up to 5% of net proceeds forfeited between $100 million and $500 million. If net proceeds forfeited exceed $500 million, there is no further award.
While the award percentage is discretionary, the DOJ has identified certain factors which may increase or decrease the amount of the award. Positive factors include the significance of the information provided by the whistleblower; the assistance provided by the whistleblower to the Department (including, inter alia, whether or not the whistleblower provided ongoing assistance, the timeliness of the report, and any unique hardships faced by the whistleblower as a result of the reporting); and participation in internal compliance systems. Negative factors include culpability in the reported conduct, unreasonable delay in reporting, interference with internal compliance systems, and playing a management or oversight role of individuals involved in the misconduct.
Finally, it is worth noting that the Pilot Program is not the only initiative to improve reporting that the DOJ has introduced. In addition to the long-running False Claims Act qui tam program, which incentivize whistleblowers to report fraud in government programs, in April 2024 the DOJ also announced a new Pilot Program on Voluntary Self-Disclosures for Individuals, which was designed to encourage voluntary self-disclosure disclosure “by individual participants in certain types of criminal conduct involving corporations.” Where certain conditions are met, and in exchange for self-reporting, cooperating with authorities, and paying any applicable monies owed (forfeiture, restitution, etc.), the Department will enter into a non-prosecution agreement with the reporting individual.
If you have any questions about these programs, or are thinking about becoming a whistleblower, please contact Alexandra Douglas at [email protected].