Whistleblowers ‘Wanted’: U.S. DOJ Launches Anticipated Whistleblower Awards Pilot Program

Following through on an announcement made by Deputy Attorney General (DAG) Lisa Monaco in March 2024, the U.S. Department of Justice (DOJ) officially launched its Corporate Whistleblower Awards Pilot Program on August 1, 2024 (the Whistleblower Program). The Whistleblower Program is a three-year initiative that creates an opportunity for whistleblowers who provide original information regarding certain types of corporate crime to be eligible for a portion of a financial award should the DOJ successfully bring an enforcement action with a monetary forfeiture greater than $1 million. Alongside the Whistleblower Program, the DOJ announced an amendment to its existing Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP), which now allows companies that receive an internal whistleblower complaint to qualify for the presumption of a declination if they self-report to the DOJ within 120 days, even if a whistleblower already reported the misconduct to the DOJ.

This alert summarizes the new Whistleblower Program and its potential impact on companies’ existing internal compliance reporting channels, as well as other key topics highlighted in the remarks of DAG Monaco and Principal Deputy Assistant Attorney General (PDAAG) Nicole M. Argentieri on August 1, 2024.

I. The Pilot Program Incentivizes New Whistleblowers by “Filling the Gaps” of the Government’s Patchwork of Whistleblower Programs

Modeled after whistleblower programs run by other agencies, the Whistleblower Program incentivizes individuals to report truthful, voluntary, nonpublic, original information about certain types of corporate crime — specifically (1) certain crimes involving financial institutions, from traditional banks to cryptocurrency businesses; (2) foreign corruption involving misconduct by companies; (3) domestic corruption involving misconduct by companies; and (4) healthcare fraud schemes involving private insurance plans. DAG Monaco stated that if the DOJ then brings a prosecution based on information provided by a whistleblower that results in the successful forfeiture of more than $1 million in net proceeds, the whistleblower may be eligible to receive a portion of that forfeiture as a monetary award: up to (1) 30% of the first $100 million in net proceeds forfeited and (2) 5% of any net proceeds forfeited between $100 million and $500 million but (3) no award on net proceeds forfeited above $500 million.

The DOJ made clear, however, that payments of any award are subject to the DOJ’s discretion and consideration of several criteria. For example, according to the new guidelines, individuals are not eligible for payment if they “meaningfully participated” in the criminal activity they report, including by “directing, planning, initiating, or knowingly profiting from that criminal activity.” Notwithstanding this requirement, the DOJ has discretion to maintain an individual’s eligibility for an award if it determines that the individual was only a “minimal participant” in the scheme and was “plainly among the least culpable of those involved in the conduct of a group.”

Taking inspiration from the “Wanted” posters of the Old West as well as “the reforms in Dodd-Frank [Wall Street Reform and Consumer Protection Act] that created whistleblower programs at the [Securities and Exchange Commission (SEC)] and the [Commodities Futures Trading Commission (CFTC)],” DAG Monaco stated that with this Whistleblower Program, the DOJ is “doubling down” to “ferret out criminal activity that might otherwise go unreported.” DAG Monaco also added that the SEC and the CFTC alone have historically “received thousands of tips, paid out many hundreds of millions of dollars, and disgorged billions in ill-gotten gains from corporate bad actors.” The DOJ intends the new Whistleblower Program to help to “fill the gap[]” where those agencies and others do not have jurisdiction or the expertise that the DOJ has in prosecuting a more fulsome range of corporate and financial misconduct.

In remarks made on the day of the Whistleblower Program launch, DAG Monaco announced that whistleblowers could now visit the Corporate Division Corporate Whistleblower Awards Pilot Program website to report corporate crimes. The page contains the following image summarizing the whistleblower process in an effort to make the reporting process as user-friendly as possible for potential whistleblowers.

II. Impact on Companies

a. A Reminder of the DOJ’s Continued Focus on Corporate Crime

In announcing the program, DAG Monaco explained that under the Biden administration, the DOJ has been dedicating its “full energy” to holding the most serious individual and corporate wrongdoers accountable. According to DAG Monaco, this new Whistleblower Program is rooted “in the use of both carrots and sticks” and aims to “remind[] every CEO and board member in America why they need to invest in compliance and build a culture of responsible corporate citizenship.” She added that whistleblower tips are meant to both “build the strongest criminal cases against the most culpable wrongdoers” and “help us impose the most significant penalties on those who most deserve it.”

b. A Warning to Companies That Hesitate to Self-Report

DAG Monaco further emphasized that the DOJ wants companies to voluntarily self-disclose any misconduct. She issued a warning that “any company that hesitates to report voluntarily should remember” that the DOJ now has a “new investigative tool [i.e., the Whistleblower Program] — and a powerful one at that” to uncover the misconduct (emphasis in original remarks). DAG Monaco stated that she hopes that this disclosure program will create a “rac[e] up the front steps” to be “first in the door” because to be eligible for benefits under DOJ’s disclosure programs — for either companies or individuals — the information must be something that DOJ did not already know. PDAAG Argentieri made clear in her remarks that DOJ is issuing a “simple message” to company executives: “Call us before we call you.”

III. Company Compliance Programs Are Now More Important Than Ever

Notwithstanding the strong warnings issued, DOJ implemented other changes (summarized below) intended to address concerns that the Whistleblower Program will completely undermine internal company compliance programs. These changes are meant to serve as incentives for companies to continue to promote their internal compliance programs.

a. Self-Reporting Credit Still Available Under the DOJ Criminal Division CEP

One such change announced by PDAAG Argentieri is that the DOJ will allow companies that receive a whistleblower’s report internally to qualify for the presumption of a declination under the CEP where the company

1. self-reports the conduct to the DOJ within 120 days of receiving the whistleblower’s allegation, even if the whistleblower reports to the DOJ before the company does
2. self-reports to the DOJ before the DOJ reaches out to the company
3. meets the other requirements for voluntary self-disclosure and presumption of a declination under the CEP

As a result of this amendment, companies wishing to qualify for the presumption of a declination now have a period of time — up to 120 days if the DOJ does not reach out to the company first — to determine whether to self-report an issue reported internally by a whistleblower. This amendment in theory allows companies time to assess internally reported issues without losing the benefit of self-reporting to the DOJ, thereby encouraging companies to continue to invest in their compliance programs. Given the potential implications of self-reporting to the DOJ and the obvious time pressure at issue, companies should consult with experienced outside counsel when confronted with decisions to self-report.

b. The DOJ’s Other Attempts to Promote Internal Reporting Systems

Other changes intended to empower corporate compliance programs include considering a whistleblower’s participation in internal compliance programs as a factor that can increase an award, which clearly encourages internal reporting before reporting to the DOJ.¹ In addition, the Whistleblower Program allows a whistleblower to qualify for an award based on the timing of an initial report of an issue through internal company systems if the whistleblower then reports to the DOJ within 120 days. This eliminates any time pressure a whistleblower may feel to report a matter directly to the DOJ in circumvention of an internal compliance program. As a result of these efforts to empower compliance programs and to encourage internal reporting, companies should continue to actively promote their compliance hotlines so that whistleblowers report allegations internally first instead of going directly to the DOJ or other regulators that are offering potential financial incentives. 

¹See Program Guidance § III.3.a.iii (“Participation in internal compliance systems or internal reporting [is a] consideration that increases an award”).