August 08, 2024
and Natasha Nicholson Gaviria
Earlier this year, as described in a previous client alert, the Department of Justice (“DOJ”) Criminal Division announced a landmark pilot program to pay monetary awards to whistleblowers (the “Program”). At that time, Deputy Attorney General (“DAG”) Lisa Monaco and Principal Deputy Assistant Attorney General (“PDAAG”) Nicole Argentieri highlighted the success of similar programs offering financial incentives at the DOJ and elsewhere and tasked the Money Laundering and Asset Recovery Section to develop a formal policy.
On August 1, 2024, the Criminal Division delivered on its promise, unveiling the details of the now-effective Program, including a website with additional information for whistleblowers and companies and formal program guidance.[1]
Significantly, the Criminal Division also amended the Voluntary Self-Disclosure Policy to offer a presumed declination if a company receives an internal report and discloses it to the DOJ within 120 days, provided the DOJ has not contacted the company before its self-disclosure. The Program also provides incentives for whistleblowers to report allegations first using a company’s internal reporting channels.
In further remarks about the Program, DAG Monaco and PDAAG Argentieri shared their expectation that the Program would cause both individual whistleblowers and companies to “rac[e] up the front steps,” leading to stronger enforcement against both individual wrongdoers and companies.[2] But they also highlighted the advantages of corporate “compliance investments” to reduce the likelihood of violations and increase the ability to detect any potential misconduct before a whistleblower reports to the DOJ.[3]
In an effort to target criminal misconduct in areas not otherwise covered by another agency’s whistleblower program, the Program is focused on potential violations of law in four subject areas: financial crime, foreign bribery, domestic bribery, and healthcare fraud.
General Requirements: A whistleblower who provides information that leads to a successful criminal prosecution and related asset forfeiture of at least $1 million may be eligible for 30% of the first $100 million subject to forfeiture (and a smaller percentage of forfeitures in excess of $100 million). Similar to other programs, the whistleblower must come forward voluntarily with information not already known to the DOJ and considered original—i.e., independently obtained information not subject to attorney-client privilege or received as part of a compliance or audit function, and not otherwise from an illegal or ineligible source. A whistleblower may remain anonymous if represented by counsel.
Limited Awards: Whistleblowers can collect awards based only on amounts recovered by the DOJ through criminal or civil forfeiture proceedings and as long as the recovery was “related to corporate criminal conduct” in one of the four substantive areas within the scope of the Program. Additionally, individual victims must be made whole before a whistleblower may collect an award. Because the Program allows recoveries only from asset forfeiture proceeds and not every corporate resolution includes a forfeiture action, recovery may not be possible in some cases. DOJ already uses criminal or civil forfeiture in cases against financial institutions. For this reason, at least in the short term, whistleblowers are most likely to receive an award in cases involving financial institutions.
Impact of Internal Reporting and Culpability: An individual who reports misconduct internally remains eligible for awards under the Program, provided the individual reports to the Criminal Division within 120 days of the internal report. In fact, a whistleblower who submits an internal report first (i.e., before, or at least contemporaneously, reporting under the Program) and then assists the company’s internal investigation may receive an increased award. The Criminal Division also will consider the extent to which a whistleblower assisted with the company’s investigation as a positive factor in determining the appropriate award percentage.
On the other hand, if the Criminal Division determines that the whistleblower interfered with or undermined the company’s internal investigation, it may decrease the award. The Criminal Division also will consider a whistleblower’s unreasonable delay in reporting, interference with internal compliance procedures and systems (such as making false statements to reduce the likelihood of detection), and seniority (including creating a culture of noncompliance and failing to respond to indications of misconduct) as negative factors in determining the appropriate award percentage.
Finally, a whistleblower who was involved in the alleged misconduct to some extent is not automatically ineligible to receive an award, provided the Criminal Division determines the individual was no more than a “minimal participant” as defined in the U.S. Sentencing Guidelines.[10]
Over the past several years, several corporate enforcement policies expanded eligibility for a presumed declination under certain circumstances. The Criminal Division continues this trend, providing for a presumed declination if a company reports internal allegations to the Criminal Division within 120 days of receipt of those allegations—and before the Criminal Division contacts the company.
A whistleblower seeking the maximum possible award under the Program arguably now has an incentive to report internally, wait a sufficient period of time to allow the company’s internal investigation to progress (and cooperate and otherwise assist with that investigation), and then report to the Criminal Division. In turn, a company seeking the maximum possible benefit (a presumed declination) has an incentive to report to the Criminal Division immediately upon receiving the allegations or as soon as practicable thereafter. Companies uncertain about a whistleblower’s intent to report under the Program risk losing this benefit if they do not make a prompt disclosure decision or complete initial steps, such as interviewing the whistleblower where possible and attempting to corroborate preliminary facts, in a timely manner.
With the Program, the Criminal Division joins several other federal prosecutors that have announced new incentives for whistleblowers. Earlier this year, the U.S. Attorney’s Offices for the Southern District of New York (“SDNY”) and Northern District of California (“NDCA”) announced their own pilot whistleblower programs. Please refer to our client alerts for a more fulsome analysis of the whistleblower leniency programs for SDNY and NDCA.
An individual who comes forward to these offices with original information may qualify for a non-prosecution agreement. Under the Program, if the individual has no more than limited involvement in the misconduct, the individual may avoid prosecution and receive a financial award for coming forward.
Also, the Program encourages whistleblowers to report to all appropriate regulators and agencies. The Program will have no impact on existing incentive programs offering compensation from fines and other recoveries. Therefore, in cases where a whistleblower’s information leads to multiple enforcement actions for distinct offenses, the Program may allow whistleblowers to augment their total recovery. Other programs offering financial incentives and, in most cases, anti-retaliation provisions and other protections to whistleblowers, include the following:
Paul Hastings will be hosting a webinar in September to discuss further observations about the landscape of government whistleblower programs and the impact on corporate compliance efforts. We will share information about this upcoming webinar shortly.
[1] U.S. Dep’t of Just., Criminal Division Corporate Whistleblower Awards Pilot Program (Aug. 1, 2024), https://www.justice.gov/criminal/criminal-division-corporate-whistleblower-awards-pilot-program.
[2] Lisa Monaco, U.S. Dep’t of Just., Deputy Attorney General Lisa Monaco Delivers Remarks on New Corporate Whistleblower Awards Pilot Program (Aug. 1, 2024), https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-monaco-delivers-remarks-new-corporate-whistleblower-awards; Nicole M. Argentieri, U.S. Dep’t of Just., Principal Deputy Assistant Attorney General Nicole M. Argentieri Delivers Remarks on New Corporate Whistleblower Awards Pilot Program (Aug. 1, 2024), https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-nicole-m-argentieri-delivers-remarks-new.
[3] See id.
[4] U.S. Dep’t of Just., Principal Deputy Assistant Attorney General Nicole M. Argentieri Delivers Remarks on New Corporate Whistleblower Awards Pilot Program (Aug. 1, 2024), https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-nicole-m-argentieri-delivers-remarks-new.
[5] U.S. Dep’t of Just., Acting Assistant Attorney General Nicole M. Argentieri Delivers Keynote Speech at the American Bar Association’s 39th National Institute on White Collar Crime (Mar. 8, 2024), https://www.justice.gov/opa/speech/acting-assistant-attorney-general-nicole-m-argentieri-delivers-keynote-speech-american.
[6] U.S. Dep’t of Treas., Kleptocracy Asset Recovery Rewards Program (Jan. 1, 2024), https://home.treasury.gov/about/offices/terrorism-and-financial-intelligence/terrorist-financing-and-financial-crimes/kleptocracy-asset-recovery-rewards-program.
[7] 18 U.S.C. § 201.
[8] 31 U.S.C. § 3730.
[9] U.S. Dep’t of Just., Department of Justice Corporate Whistleblower Awards Pilot Program (Aug. 1, 2024), https://www.justice.gov/criminal/media/1362321/dl?inline.
[10] U.S. Sentencing Guidelines § 3B1.2(a), Cmt. 4 (defining “minimal participant” as one who is “plainly among the least culpable of those involved in the conduct of a group”).
[11] Secs. & Exch. Comm’n Office of the Whistleblower, Annual Report to Congress for Fiscal Year 2023 (Nov. 14, 2023), at 5, https://www.sec.gov/files/fy23-annual-report.pdf.
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