DOJ Debuts Pilot Corporate Whistleblower Awards Program

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This article was authored by Luke Cass, Claire Rauscher, Michael Clark, and Ting-Yu Huang.

The U.S. Department of Justice’s (“DOJ”) Criminal Division announced its new Corporate Whistleblower Awards Pilot Program on August 1, 2024. The Pilot Program incentivizes whistleblowers to provide information to the DOJ so that it can better investigate a variety of corporate misconduct. The program also aims to fill gaps that have not been addressed by whistleblower programs of other agencies such as those operated by the SEC, CFTC, the False Claims Act, the IRS and FinCEN.

Under this three-year Pilot Program, individuals who voluntarily provide DOJ with original, truthful information about criminal misconduct regarding specific subject areas that leads to a prosecution and results in a forfeiture may be eligible to share in the award. The relevant conditions may be modified and published by DOJ during the three-year period.

Notably, the new program imposes an important 120-day period on both whistleblowers and companies. Coinciding with the Pilot Program’s launch, DOJ amended its Corporate Enforcement and Voluntary Self-Disclosure Policy. According to the amendment, a company that receives an internal whistleblower report, notifies DOJ within 120 days, cooperates with the investigation, and rectifies the misconduct will qualify for a presumption of a declination.

The goals of the new program are not only to provide individuals with incentives to report corporate crime but also to motivate corporations to create more robust compliance programs that detect and deter criminal conduct, including by encouraging internal reporting of complaints.

Whistleblower Award Eligibility Criteria

Individual Qualification

To qualify, a whistleblower must be an individual, either acting alone or jointly with others. Corporations or any other types of entities are ineligible. If an individual is eligible for an award through another U.S. government or statutory whistleblower program for reporting the same scheme, they cannot receive an award under this program. Current or former officials, employees, or contractors of DOJ or any law enforcement organization and their immediate family members are likewise ineligible.

Additionally, individuals who meaningfully participated in the reported criminal activity or knowingly provided false information are disqualified. However, individuals with minimal roles in the reported scheme may be eligible if deemed the least culpable at DOJ’s discretion. Individuals ineligible for an award may still benefit by qualifying for a Non-Prosecution Agreement through the Voluntary Self-Disclosure Program.

Voluntary

To qualify as being voluntary, the submission must not be made in response to a request or demand from DOJ, federal law enforcement, or a civil enforcement agency regarding the same misconduct. The individual must have no preexisting obligation to report the information and the submission must occur without any ongoing government investigation or imminent threat of disclose to the government or public.

Original Information

The information provided by the whistleblower must be in writing and come from the individual’s independent knowledge or analysis, meaning it is based on their own experiences and evaluation rather than publicly available sources. The information must be non-public, and previously unknown to DOJ. Even if DOJ has information on a matter from other sources, however, the individual’s submission will be considered original if it materially enhances DOJ’s knowledge. Whistleblowers may also be eligible for an award if they report the information to DOJ within 120 days after an internal report to their companies.

Truthful and Complete

An individual must disclose all information they know related to any misconduct, including misconduct they participated in or are aware of, the full extent of their own role in the misconduct, and any other matters that DOJ may inquire about. To make a report, the individual must use DOJ’s intake form and declare, under penalty of perjury, that the information is true and correct.

Subject Areas

Not all tips are treated equally. The DOJ is only interested in certain types of misconduct. Namely:

1. Violations by financial institutions or their insiders and agents, such as money laundering, anti-money laundering compliance violations, and fraud against or non-compliance with financial institution regulators; 
2. Violations related to foreign corruption and bribery involving companies, including breaches of the Foreign Corrupt Practices Act and the Foreign Extortion Prevention Act; 
3. Violations involving the payment of bribes or kickbacks to domestic public officials at various government levels; 
4. Federal health care offenses and related crimes involving private health care benefit programs, fraud against patients and investors in the health care industry, and 
5. Other federal violations related to health care not covered by the False Claims Act.

Cooperation

An individual must cooperate fully with DOJ’s investigation, including, for example, providing testimony or evidence, producing documents, or working with law enforcement officers proactively.

Leading to Forfeiture

An individual’s information must lead to successful forfeiture exceeding $1 million in net profits forfeited in connection with a prosecution, corporate criminal resolution, or civil forfeiture action related to the corporate misconduct. No award will be available without a successful forfeiture.

Payment of Award

The determination of the eligibility for an award and the amount of the award is solely at DOJ’s discretion. If multiple whistleblowers are eligible in the same matter, DOJ will assign individual percentage awards without exceeding the total limit.

If a successful forfeiture occurs, a whistleblower may receive: (1) up to 30 percent of the first $100 million in net proceeds forfeited, (2) up to 5 percent of net proceeds between $100 million and $500 million, and (3) no award for proceeds above $500 million. In the case of multiple whistleblowers awarded in the same matter, they will receive a percentage of the total award. A maximum of 30 percent for the first $10 million in net proceeds forfeited will be awarded.

In considering the increase of an award’s amount, DOJ will assess the significance of the information and level of cooperation provided by the whistleblower as well as his/her participation in the internal compliance systems.

Submission Guidelines for Whistleblowers

DOJ ensures the confidentiality of whistleblowers, avoiding public disclosure of any information that could reveal their identity, except as required by law, DOJ policy, or in judicial or administrative proceedings. Therefore, non-disclosure is not guaranteed.

While attorney representation is not required, anonymous submissions may be made through legal counsel only. More importantly, DOJ may require the whistleblower’s identity to be disclosed at any time, if necessary, including before awarding any payment. Directors, officers, members, agents, or employees of an entity with legal representation can communicate directly with DOJ about possible criminal violations without the consent of the entity’s counsel.

If an award payment exceeds $500,000, DOJ must notify Congress, as mandated by 28 U.S.C. §524 (c)(2), without revealing the whistleblower’s identity unless deemed necessary by DOJ.

Takeaways

• Companies’ 120-Day Self-Reporting Deadlines: Companies must report internal whistleblower tips to DOJ within 120 days to qualify for a presumption of declination. This requires a swift internal investigation to validate allegations and assess whether reporting to the DOJ is more beneficial than the potential risks and cost of DOJ scrutiny. Companies should also be mindful that whistleblowers may be eligible for an award even if they report the information to DOJ within 120 days after an internal report to their companies. This provides a greater incentive for companies to voluntarily disclose misconduct. 
   
• Internal Reporting System: Although the new program does not mandate that whistleblowers report internally before contacting DOJ, companies should implement a robust internal reporting system that allows employees to report potential misconduct comfortably and confidentially. Effectively responding to internal complaints can deter whistleblowers from bypassing the company’s reporting system and provides the company with a documented response to present to the DOJ if necessary. 
  
  Companies must be aware that obstructing employees from reporting to DOJ or retaliating against whistleblowers can lead to obstruction of justice charges and enforcement actions. Clear policies should be in place to prevent any perceived retaliation, obstruction, or hinderance. 
   
• “Piling-On” & Multi-Front Investigations: In 2018, the DOJ announced a policy that discouraged “piling on” and that instructed Department components to appropriately coordinate with one another and with other enforcement agencies in imposing multiple penalties on a company in relation to investigations of the same misconduct. The new pilot whistleblower program may have the opposite effect. Given the incentives, DOJ will likely receive tips simultaneously with other agency whistleblower programs. Absent clear coordination and direction, this could lead to companies having to confront investigations by several agencies simultaneously or in succession, resulting in forcing companies and their counsel to make complex decisions far more quickly. 
   
• Effective Compliance Program: The DOJ aims to ensure that companies maintain effective compliance programs to prevent misconduct. Companies should regularly evaluate and tailor their compliance programs and reporting mechanisms to their specific risk profiles. Encouraging employees to use internal reporting systems and ensuring their complaints are taken seriously and investigated thoroughly is crucial. 
   
• Risks & Uncertainty: DOJ has piloted a creative approach to ferreting out specific types of offenses that would otherwise escape oversight. However, potential whistleblowers who simply believe that they may report information and wait to collect an award misapprehend the rigors and requirements of the program. Payment is not guaranteed, proactive cooperation may be required, and a whistleblower’s identity may be revealed at DOJ’s discretion. In addition, the misuse of Artificial Intelligence (“AI”) by employees may complicate the use of whistleblower information by the DOJ. 

Womble Bond Dickinson (US) LLP’s White Collar Defense, Investigations, and Regulatory Enforcement Team navigates domestic and international clients in all manner of white collar, regulatory, corporate and congressional investigations. The White Collar and Antitrust Teams work together to assist clients facing antitrust investigations across a wide range of sectors of the economy. Our team includes a distinguished roster of veteran defense attorneys, former federal prosecutors and U.S. Attorneys who served at the highest levels of the Department of Justice and at leading United States Attorneys’ Offices. Our team also includes Chambers Ranked (Band 1) lawyers and alumni of the White House, the SEC’s Enforcement Division, the U.S. Senate, and House of Representatives.