In Short

The Development: On August 1, 2024, the Department of Justice’s (“DOJ”) Criminal Division announced its Corporate Whistleblower Awards Pilot Program (“Pilot Program”), designed to reward whistleblowers who report information about corporate misconduct that results in a successful forfeiture, as well as a corresponding amendment to the Corporate Enforcement and Voluntary Self-Disclosure (“VSD”) Policy.

The Background: The Pilot Program follows similar programs by the Securities and Exchange Commission (“SEC”), Commodity Futures Trading Commission (“CFTC”), and Financial Crimes Enforcement Network (“FinCEN”). It is designed to “fill the gaps” left by these programs by focusing on four areas: (i) certain crimes involving financial institutions; (ii) foreign corruption; (iii) domestic corruption; and (iv) health care fraud schemes targeting private insurers not subject to qui tam recovery under the False Claims Act.

Looking Ahead: The increased incentives for persons to report wrongdoing to the DOJ further underscore the need for companies to have robust internal compliance programs and procedures that encourage internal reporting by employees and to promptly investigate allegations of wrongdoing when received.

Enforcement Agency Whistleblower Programs

On August 1, 2024, the DOJ’s Criminal Division announced its Corporate Whistleblower Awards Pilot Program. This program is designed to “fill the gaps” left by similar programs enacted by the SEC and the CFTC following the passage of the Dodd-Frank Act, as well as by FinCEN earlier this year.

The potential for large whistleblower awards from these programs has led to a dramatic increase in reporting and payouts since their inception. Under the CFTC’s whistleblower program, tips have increased from 58 in 2012 to 1,530 in 2023. Since the inception of its program in 2010, the CFTC has issued 41 final orders granting awards totaling almost $350 million. Similarly, since the inception of the SEC’s whistleblower program in 2011, tips have steadily risen: from 3,000 tips in 2012 to 18,354 in 2023. In total, the SEC has awarded more than $1.9 billion to 397 individual whistleblowers, with nearly $600 million of that paid in fiscal year 2023—the highest dollar total in the program’s history. The FinCEN program, started earlier this year, is in its early stages, but potential awards have increased from a maximum of $150,000 to between 10% and 30% of all penalties collected.

The Pilot Program: How It Works

The Pilot Program is a three-year initiative managed by the Criminal Division’s Money Laundering and Asset Recovery Section. Effective August 1, 2024, the program authorizes awards for whistleblowers who “provide original, truthful information about criminal misconduct … that leads to forfeiture exceeding $1,000,000 in net proceeds.” The whistleblower must also cooperate with the government throughout its investigation of the conduct and any criminal or civil actions that follow.

Principal Deputy Assistant Attorney General Nicole M. Argentieri described the key areas of focus for the Pilot Program, each of which correspond to different units in the Criminal Division, including the Foreign Corrupt Practices Act (“FCPA”) Unit, Market Integrity and Major Frauds Unit, Public Integrity Section, and Health Care Fraud Unit.

  • Foreign corruption. Whistleblowers may provide information pertaining to foreign corruption and bribery, including violations of the FCPA, violations of the Foreign Extortion Prevent Act (“FEPA”), and violations of money laundering statutes. Argentieri highlighted cases involving the issuance of securities outside the United States, and therefore not covered by whistleblower programs enacted by the SEC, the CFTC, and FinCEN. Argentieri also highlighted the Pilot Program’s potential for working closely with the newly enacted FEPA, which criminalizes the “demand side” of foreign bribery.
  • Financial institutions. While misconduct involving many financial institutions will be covered by existing whistleblower programs at other agencies, the Pilot Program also extends to certain violations involving financial institutions—including money laundering, anti-money laundering compliance violations, registration of money transmitting businesses, and fraud—and fraud against or noncompliance with financial institution regulators. In particular, Argentieri noted the DOJ’s ability to bring proceedings against financial companies, including cryptocurrency exchanges that operate within the United States but fail to register with financial regulators or comply with U.S. law.
  • Domestic corruption. The Pilot Program also seeks information related to the payment of bribes or kickbacks to domestic public officials, including federal, state, territorial, or local elected or appointed officials and officers or employees of any government department or agency. Argentieri emphasized that this is an area where the DOJ is seeking to expand enforcement, similar to the expansion that occurred in FCPA enforcement roughly two decades ago.
  • Health care fraud involving private insurers. Finally, the Pilot Program covers information relating to (i) federal health care-related offenses and related crimes involving private or other non-public health care benefit programs; (ii) fraud against patients, investors, and other non-governmental entities in the health care industry; and (iii) any other federal violations not covered by the Civil Division’s qui tam  enforcement program.

Under the Pilot Program, the whistleblower must provide “original” information, as defined by the DOJ. The DOJ retains discretion as to whether to grant the whistleblower an award and may increase that award based on the significance of the information and the level of assistance provided. Additionally, in an effort to address concerns that whistleblower programs undermine internal compliance programs, awards may also be increased through participation in internal compliance systems or internal reporting. Any interference with internal compliance and reporting systems, however, will decrease the award. Among other limiting criteria, whistleblowers will not be eligible for any awards if they (i) meaningfully participated in the misconduct; (ii) would be eligible for an award through another U.S. government or statutory whistleblower, qui tam, or similar program; or (iii) obtained the information because they were employed in a compliance or internal audit position.

As part of the Pilot Program, the DOJ also announced an amendment to the DOJ’s VSD Policy. Pursuant to this amendment, when a whistleblower reports conduct through internal compliance systems, companies remain eligible for the VSD Program provided the company self-discloses the allegation to the DOJ no later than 120 days after first receiving the information and prior to any DOJ outreach. Self-reporting conduct also ensures eligibility for the presumption of a declination under the VSD Program. As Deputy Attorney General Lisa Monaco stated, the DOJ wants to promote a culture of “racing up the front steps” to report any misconduct.

Whistleblowers who make internal reports to their companies remain eligible for awards provided they report the information to the DOJ within 120 days of their initial internal report to the company. Any retaliation against the whistleblower by the company could result in the company being barred from receiving cooperation credit, as well as potential obstruction of justice charges.

Next Steps

The Pilot Program is part of a continued effort by the DOJ to encourage voluntary reporting of corporate misconduct. Unlike the Criminal Division’s VSD Program, however, the new program encourages employees, as opposed to companies, to report potential wrongdoing to the DOJ related to its key enforcement priorities.

Notably, the Pilot Program provides employees with a strong incentive to report potential wrongdoing to the government first, or at least very soon after making a report within the company. In an effort to balance this incentive and promote companies’ internal reporting systems, the DOJ emphasized whistleblowers’ ability to still seek and obtain an award provided that person submits the information to the DOJ within 120 days of their initial internal report, and noted that such internal reporting may increase the award amount. Accordingly, companies need to ensure that they have adequate internal reporting channels that encourage timely internal reporting and allow them to quickly identify and elevate internal whistleblower complaints. Given the 120-day deadline for making a self-report under the VSD Program following a whistleblower complaint, companies also need to ensure that they promptly investigate and address allegations of wrongdoing reported by employees.

Three Key Takeaways

  1. The DOJ continues to implement new avenues to incentivize disclosure of corporate misconduct, particularly with respect to information related to key enforcement priorities. The Pilot Program gives it a tool that has proven to be successful in this regard for other enforcement agencies.
  2. Companies should ensure their compliance programs are updated, as necessary, to address the four key areas identified by the DOJ, which were not previously covered by other agency whistleblower programs. Given the 120-day deadline to receive benefits under the VSD Program, companies should also ensure compliance programs are equipped to promptly identify, investigate, and respond to any internal reports, as well as prevent any retaliatory measures against employees making either internal or external reports.
  3. Companies should also work to promote a culture that encourages internal reporting, given the strong incentive for employees to report potential wrongdoing to the government first or shortly after making an internal report. However, companies should not deter employees from reporting information to the government and seeking whistleblower protection.