In Continuing Efforts to Incentivize Self-Disclosures and Cooperation, DOJ Announces Pilot Program to Pay Criminal Whistleblowers

Over the last few years, the U.S. Department of Justice (“DOJ”) has continuously announced significant policies and programs directed at encouraging and rewarding the timely reporting of corporate wrongdoing, incentivizing compliance, and holding culpable individuals personally accountable. In a speech on March 7, 2024, Deputy Attorney General Lisa O. Monaco announced a new pilot program to financially compensate individual whistleblowers who report evidence of white collar crimes. The announcement was made during the American Bar Association’s Annual Institute on White Collar Crime in San Francisco (“ABA White Collar Conference”). The Deputy Attorney General’s speech was accompanied by conference addresses by other senior DOJ officials – including Attorney General Merrick B. Garland – all of which underscored the DOJ’s focus on motivating individuals and companies to report misconduct and assist with U.S. government investigations, including those involving what DOJ considers emerging threats such as those posed the misuse of disruptive technologies such as artificial intelligence (“AI”).

The DOJ Whistleblower Pilot Program

As Deputy Attorney General (“DAG”) Monaco stated, the premise of DOJ’s new whistleblower program is simple: “if an individual helps DOJ discover significant corporate or financial misconduct” that is otherwise unknown to DOJ “then the individual could qualify to receive a portion of the resulting forfeiture” of ill-gotten assets from the scheme. The Deputy Attorney General announced a 90-day “policy sprint” to develop the details of and implement the pilot program, which will formally begin later this year. Although the contours of DOJ’s whistleblower program are therefore yet to be determined, DAG Monaco detailed in her speech what she referred to as “preliminary guardrails,” stating that individual whistleblowers would only be eligible for a potential monetary reward where:

• All victims of the criminal activity at issue have been properly compensated;
• The whistleblower was not involved in the wrongdoing itself;
• The information is truthful and not already known to the DOJ; and
• There is not an existing financial disclosure incentive available, including qui tam or other federal whistleblower programs.

In addition, while the Deputy Attorney General indicated that the DOJ will always accept information about violations of any federal law, DAG Monaco announced that the DOJ is particularly interested in whistleblower information about:

• Criminal abuses of the U.S. financial system;
• Foreign corruption cases outside the jurisdiction of the U.S. Securities and Exchange Commission (“SEC”), including (a) Foreign Corrupt Practices Act (“FCPA”) violations by non-issuers of U.S. securities and (b) violations of the newly-enacted Foreign Extortion Prevention Act (“FEPA”), which criminalizes the “demand” side of foreign bribery by making it illegal for foreign government officials to demand or receive a bribe from U.S. citizens, companies or residents (detailed in an earlier client alert); and
• Domestic corruption cases, especially those involving illegal corporate payments to government officials.

Acting Assistant Attorney General (“AAG”) for the DOJ’s Criminal Division, Nicole M. Argentieri, further detailed the DOJ whistleblower program during a speech to the conference on March 8, 2024. Referring to DAG Monaco’s remarks, AAG Argentieri said that the DOJ’s developing program would be designed to fill in gaps not covered by whistleblower programs at the SEC, the Commodities Futures Trading Commission (“CFTC”) and the Financial Crimes Enforcement Network (“FinCEN”), among other agencies. While such agencies have robust programs, they are by their nature limited to their agencies’ specific purviews, and qui tam actions are limited to fraud against the government; as AAG Argentieri noted, the DOJ believes it can “make the greatest impact by offering financial incentives to disclose misconduct in areas where no such incentives currently exist,” such as FCPA violations by non-issuers. AAG Argentieri further stated that the DOJ Criminal Division’s Money Laundering and Asset Recovery Section (“MLARS”) would be at the forefront of DOJ’s efforts in designing and implementing the whistleblower program, as the statutory authority for paying such awards is tied to the DOJ’s forfeiture program. AAG Argentieri noted that the Criminal Division would be working with U.S. Attorney’s Offices, the Federal Bureau of Investigation and other stakeholders in developing the program, and DOJ will also draw from its experience working in parallel with regulators with similar programs such as the SEC and FinCEN. Moreover, AAG Argentieri noted that, like the SEC and CFTC whistleblower programs, the DOJ program will allow whistleblower payments only in matters involving penalties above a certain monetary threshold, but that threshold has not yet been determined.

Persistent Focus on Incentives for Voluntary Disclosures and Cooperation, and Emphasis on Emerging Threats

The roll out of the DOJ whistleblower pilot program tracks previously announced policies and programs designed to incentivize the timely reporting of corporate misconduct, motivate compliance and encourage cooperation with the DOJ. As detailed in previous client alerts, last year alone the DOJ announced: a Voluntary Self-Disclosure (“VSD”) Policy, which standardizes how DOJ defines corporate voluntary self-disclosure and offers significant benefits to companies meeting its criteria; updates to its Evaluation of Corporate Compliance Programs (“ECCP”) guidance to encourage companies to reward compliance behavior and punish misconduct through compensation plans; as well was a “safe harbor” policy for companies that voluntarily self-disclose wrongdoing uncovered during the merger & acquisition process. U.S. Attorney’s Offices in the Northen District of California and the Southern District of New York, have more recently announced their own whistleblower programs to encourage self-disclosure by individuals involved in certain non-violent offenses like fraud, public corruption and intellectual property crimes, by offering paths to non-prosecution agreements, rather than financial incentives.

Law enforcement in European jurisdictions may develop whistleblower regimes similar to DOJ’s as well. Indeed, the U.K. Serious Fraud Office (“SFO”) is considering such a program based on financial incentives. In a speech on February 13, 2024, Nick Ephgrave, the SFO’s new director. stated that he believed that the SFO should pay whistleblowers, noting the success U.S. prosecutors and regulators have had in securing recoveries based on whistleblower information.

The DOJ’s emphasis on disclosure and cooperation in national security-focused cases was also underscored in AAG for the National Security Division (“NSD”) Matthew G. Olsen’s address to the ABA White Collar Conference. AAG Olsen emphasized that the DOJ has “sharpened its focus” and increased its resources in the “enforcement of sanctions and export controls; disrupting malicious cyber activity and foreign malign influence; and reviewing the risks of foreign investment in U.S. companies – especially those that are developing sensitive technology and hold vast U.S. data.” Noting that “corporations are on the front lines when it comes to enforcing critical national security tools” such as sanctions and export controls, AAG Olsen stated that the DOJ relies on “financial institutions and technology companies to be gatekeepers and to build strong compliance programs” and to self-disclose violations, highlighting that in the week prior to his remarks “two major, multinational companies came to NSD to report significant violations they have discovered.”

DOJ leadership also highlighted efforts to combat emerging threats, such as those posed by the misuse of AI, which Deputy Attorney General Monaco referred to as “the ultimate disruptive technology.” DAG Monaco said that the DOJ would utilize sentencing enhancements against individuals or corporations where the DOJ determined that AI was used to commit crime, to account for the serious risks the newly emerging technology could pose when abused, just as the DOJ does when it seeks increased penalties for aggravating factors such as the use of dangerous weapons in criminal activity. Moreover, DAG Monaco announced that the DOJ would – in the assessment of a company’s corporate compliance program in connection with corporate resolutions – consider the company’s ability to manage AI-related risks. To that end, the Deputy Attorney General announced that she had directed the Criminal Division “to incorporate assessment of disruptive technology risks – including risks associated with AI” into the ECCP guidance.

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The DOJ’s newly-announced whistleblower program is the latest in a series of policy and program announcements aimed at combating corporate crime, by encouraging companies and individuals to self-disclose wrongdoing and cooperate with government investigations through incentives such as financial rewards and the potential of more favorable resolutions. The DOJ’s pilot program adds to the variety of whistleblower and self-disclosure regimes promulgated by law enforcement and regulators across industries and jurisdictions, with some degree of tension among them. While the new DOJ program’s more granular details remain to be developed, it is clear that, in addition to maintaining effective compliance programs and investigating any allegations of potential wrongdoing, companies need to do so not only thoughtfully but quickly. “When everyone needs to be first in the door, no one wants to be second,” DAG Monaco said. “With these announcements, our message to whistleblowers is clear: the Department of Justice wants to hear from you. And to those considering a voluntary self-disclosure, our message is equally clear: knock on our door before we knock on yours.”

 

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee a similar outcome.