DOJ to Pay Whistleblowers

On March 7, 2024, during her keynote remarks at the American Bar Association’s 39th National Institute on White Collar Crime, Deputy Attorney General Lisa Monaco announced a new Department of Justice (DOJ) Criminal Division whistleblower pilot program (Pilot Program). The Pilot Program provides financial incentives for individuals to report allegations of corporate wrongdoing to DOJ. The next day, Acting Assistant Attorney General Nicole Argentieri provided additional details about the Pilot Program during her own keynote address, as detailed below.

Key Takeaways

• The Pilot Program will not immediately go into effect. DOJ will undertake a “90-day policy sprint” to gather information, consult with stakeholders, and design the whistleblower Pilot Program before the program is made effective later this year. DOJ’s Criminal Division, and in particular its Money Laundering and Asset Recovery Section (MLARS), will lead this information gathering effort.
• Although DOJ has not determined the precise eligibility guidelines, the Pilot Program is expected to require, at the very least, that whistleblowers voluntarily provide original, non-public, truthful information not already known to the public or to DOJ.
• The Pilot Program will provide another avenue for individuals to report corporate wrongdoing directly to the government and will add to the complex landscape of corporate self-reporting. Because companies receive self-reporting credit only for conduct that is not previously known to DOJ, companies must assess the risk that an employee will use the Pilot Program to report conduct to DOJ before the company does so or even is able to do so, based on the need to engage in fact-finding before self-reporting any potential wrongdoing. Companies should also evaluate their own whistleblower programs to ensure that those programs are up to date, are well known to employees, and properly incentivize internal reporting. At the same time, companies should ensure that their policies and procedures do not improperly interfere with a whistleblower’s ability to communicate with DOJ, which could be seen as obstructive conduct.

The Pilot Program

Monaco announced that DOJ would establish a whistleblower Pilot Program pursuant to its authority to pay awards for “information or assistance leading to civil or criminal forfeitures.” See 28 U.S.C. § 524 (c)(1)(C). Several of DOJ’s enforcement partners, including the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), have had award programs for some time, but those programs have focused on unlawful conduct within each agencies’ specialized scope. According to Monaco, DOJ’s Pilot Program is designed to “fill gaps” by offering financial incentives to disclose misconduct in areas in which no other incentives currently exist. Monaco noted that DOJ is particularly interested in reports relating to certain crimes, including criminal abuse of the U.S. financial system, FCPA cases outside the jurisdiction of the SEC, and domestic corruption cases. DOJ believes that the financial incentives created by the Pilot Program will encourage both companies and individuals to come forward more quickly in reporting allegations of malfeasance.

During the 90-day period following Monaco’s announcement, DOJ, led by MLARS, will design the details of the Pilot Program, working closely with stakeholders, including United States Attorneys’ Offices, the FBI, and other components of DOJ. While DOJ still is formulating the requirements of the Pilot Program, certain eligibility requirements are already clear. First, DOJ plans to offer compensation only to whistleblowers who provide original, non-public, truthful information that is not already known to DOJ, and only when that information is provided voluntarily (in other words, not in response to any government inquiry, preexisting reporting obligation, or imminent threat of disclosure). Second, DOJ will not make payments to anyone involved in the criminal activity. Lastly, payments will be made from forfeiture funds (not criminal penalties), and only after all victims have been paid full restitution. Argentieri indicated that DOJ will likely establish a monetary threshold, limiting rewards to cases in which penalties exceed a certain amount, to focus resources on what DOJ views as the most significant cases. DOJ will determine that threshold during the “policy sprint.”

Comparison to the SDNY Pilot Program

Although a detailed comparison is premature, it is readily apparent that there will be key differences between DOJ Criminal Division’s and SDNY’s Pilot Programs. Most notably, while DOJ’s Pilot Program seeks to encourage reporting by offering financial compensation to reporting parties that were not involved in the alleged misconduct, the SDNY Pilot Program seeks to encourage reporting by participants in alleged wrongdoing by offering them the opportunity to enter into a non-prosecution agreement (NPA). Both programs require disclosures to be “voluntary” and “not in response to a government inquiry or obligation to report misconduct,” but the SDNY Pilot Program further requires that reporting individuals fully cooperate, including by providing “substantial assistance in the investigation and prosecution of one or more” individuals.

While the SDNY Pilot Program excludes violations of the FCPA and bribery of federal officials, among other crimes, Monaco and Argentieri highlighted those areas as ones of particular interest to DOJ under its Pilot Program. The SDNY Pilot Program also does not apply to CEOs, CFOs, individuals with a duty to report misconduct, any “federal, state, or local elected or appointed and confirmed official,” or any “official or agent of a federal investigative or federal law enforcement agency.” The similarities and differences between the two pilot programs will come into sharper focus once DOJ’s Pilot Program is made effective following its “90-day policy sprint.”

Conclusion

DOJ’s Pilot Program will likely provide a substantial financial incentive for whistleblowers to report allegations of misconduct directly to DOJ. While a number of questions remain regarding how the program will be administered, the financial incentive for whistleblowers created by the Pilot Program places companies at greater risk of government scrutiny and further complicates already difficult and fraught self-reporting decisions. The Pilot Program provides companies an additional reminder that they should evaluate their own whistleblower and compliance programs to ensure that they encourage internal reporting and facilitate identifying alleged wrongdoing before it is directly reported to DOJ.