U.S. Attorney for SDNY Announces Groundbreaking Program Modifying Traditional Approach for Cooperating on Corporate Crime

On January 10, 2024, Damian Williams, the U.S. Attorney for the Southern District of New York (SDNY), announced the initiation of a Whistleblower Pilot Program (the Program) designed to uncover corporate crime proactively. The Program provides a path for participants in corporate criminal activity to avoid criminal charges by receiving a non-prosecution agreement from the U.S. Attorney’s Office for the SDNY (the U.S. Attorney’s Office) in exchange for disclosing crimes previously unknown to the government and cooperating in the prosecution of those crimes.

The Program represents a significant departure from the U.S. Attorney’s Office’s longstanding policy of requiring criminal participants seeking favorable treatment through cooperation to plead guilty to all federal crimes they have committed in exchange for being eligible to receive credit at sentencing for substantial assistance provided in the prosecution of others. By making a non-prosecution disposition available, the Program raises the possibility of much more favorable outcomes for cooperating participants in corporate crime than were traditionally available. This new policy of restraint signals the willingness of the U.S. Attorney’s Office to make significant concessions to potential wrongdoers in exchange for disclosures about corporate crime because the result may be that the government has to rely upon more impeachable witnesses in the prosecution of such crimes. It also highlights the challenges that the Department of Justice (DOJ) faces in independently identifying corporate crimes.

The Program specifically applies to crimes “undertaken by or through public or private companies, exchanges, financial institutions, investment advisers, or investment funds” that involve “fraud or corporate control failures or affecting market integrity, or criminal conduct involving state or local bribery or fraud relating to federal, state, or local funds.” The Program applies only to crimes that can be charged federally and does not apply to individuals who provide information regarding violations of the Foreign Corrupt Practices Act, federal or state campaign finance laws, federal patronage crimes, corruption of the electoral process, or bribery of federal officials. Charging decisions involving these excluded offenses require the U.S. Attorney’s Office to obtain authorization from, or to consult with, DOJ in Washington, D.C.

The Program has other specific requirements. The information disclosed must be original information — in other words, it cannot be public or already known to the U.S. Attorney’s Office. The disclosure must be voluntary and not made in response to a government inquiry, subpoena request, or disclosure obligation. The disclosing individual must provide substantial assistance in the investigation or prosecution of others who are equally or more culpable (“cooperating up”) and must be prepared to cooperate fully in those matters. The individual must also disclose all criminal conduct that the individual participated in and about which the individual is aware, regardless of who was involved.

The U.S. Attorney’s Office excludes a number of categories of individuals from participating in the Program. Disclosing individuals cannot have engaged in the use of force or violence, any sex offense involving fraud, force, coercion of a minor, or any offense involving terrorism or implicating national security. They cannot have a previous felony conviction or a conviction of any kind for conduct involving fraud or dishonesty. Also excluded are elected or appointed and confirmed officials, federal law enforcement officials and agents, and any person “who is of major public interest.” The latter category of individuals is excluded presumably because the U.S. Attorney’s Office wants to avoid the negative blowback that might arise from cutting a non-prosecution deal with an individual who will receive significant media attention. Finally, and perhaps most intriguing, is the fact that the Program specifically excludes chief executive officers, chief financial officers, and the equivalent, presumably because the U.S. Attorney’s Office views the corporate leadership responsibilities of these individuals as too substantial to warrant such leniency.

Individuals who do not meet all of the requirements of the program are not necessarily excluded from receiving a non-prosecution agreement under the program. The Program, by its terms, specifically allows for prosecutors to consider exercising discretion to extend a non-prosecution agreement to individuals who do not otherwise qualify for the program, provided supervisory approval is obtained and the result is consistent with the principles set forth in DOJ’s Justice Manual. In this regard, the Program includes a list of considerations for prosecutors seeking to exercise such discretion.

The Program applies only to the U.S. Attorney’s Office for the SDNY and is presented in the form of an internal guidance memorandum. The memo specifically states that it is not intended to “create any substantive or procedural rights, privileges, or benefits enforceable in any administrative, criminal, or civil matter” and reserves to the U.S. Attorney’s Office the discretion to apply the program, notwithstanding the fact that the memo contains assertive language stating that, where the conditions of the Program are met, the office “will” enter into a non-prosecution agreement in exchange for an individual’s cooperation.

It is unclear whether the Program will result in an increase in self-disclosures and resulting corporate criminal investigations conducted by the U.S. Attorney’s Office, but the program announcement highlights for companies both the continued importance of considering the risk that government agencies will learn about company internal compliance challenges and the value of investing in corporate compliance programs. It will be interesting, however, to see how the Program may affect the quality of witnesses the government relies on in the prosecution of corporate crime. Because witnesses who qualify for the program will not have to plead guilty and accept responsibility for their crimes, skilled defense counsel will be able to pursue a line of cross-examination focused on the leniency that these witnesses received in exchange for implicating others, which can be used to impeach their credibility and portray their testimony as bought rather than genuine. This may have little effect on the prosecution of companies as company resolutions are often negotiated short of trial, but it may have a significant impact on the strength of criminal cases the government brings against other individuals who allegedly participated in the reported corporate crimes. It will also be interesting to see if this policy causes culpable whistleblowers to favor disclosing corporate crimes to the Office of the U.S. Attorney for the SDNY instead of other components of DOJ and other agencies, such as the Securities and Exchange Commission, which could trigger a competition for self-disclosures.

The announcement of the Whistleblower Pilot Program by the U.S. Attorney for the SDNY and the memorandum outlining the program are available here.