In brief

On August 1, 2024, the US Department of Justice Criminal Division launched a Corporate Whistleblower Awards Pilot Program (“Program“). The announcement was previewed in remarks by DOJ officials in March, and follows the rollout of the DOJ’s Individual Voluntary Self-Disclosure Program in April 2024 and similar programs implemented in the Southern District of New York (SDNY) and the Northern District of California (NDCA), in February and March. Under the Program certain individuals who provide original and truthful information about corporate misconduct may be eligible to receive an award if the information results in successful criminal prosecution and criminal or civil asset forfeiture. The Program targets corporate misconduct not covered by existing whistleblower incentive programs and focuses on crimes involving financial institutions and cryptocurrency businesses, companies involved in corruption schemes, and health care fraud schemes involving private insurance plans.

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Contents

1. Highlights
2. In detail
3. Takeaways

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Highlights

• The Program aims to uncover and prosecute corporate crime by rewarding whistleblowers who provide original and truthful information about crimes that would otherwise be difficult to detect or prove.
• Whistleblowers can receive awards based on a percentage of the net assets the government seizes through criminal and civil forfeiture proceedings. The ultimate award amount is within the DOJ’s sole discretion and dependent on various factors including the nature and extent of the whistleblower’s cooperation, the significance of the information provided, and any hardships the whistleblower endured by reporting the corporate misconduct.
• The Program is intended to complement existing government and statutory whistleblower programs by covering a broader scope of corporate crime. Indeed, the Program permits individuals to self-report corporate misconduct through the Program even if they have already disclosed the information through a company’s internal whistleblower or compliance program.
• Information provided to the government is subject to strict confidential treatment and potential whistleblowers may submit information anonymously if they are represented by an attorney through the process. The DOJ, however, must verify the identity of a whistleblower before paying an award under the Program.
• Companies are ineligible to receive awards under the Program, though a company that reports corporate misconduct discovered through internal compliance or whistleblowing reporting may avoid criminal prosecution by promptly self-disclosing the misconduct to the DOJ.
• Simultaneously with the announcement of the Program, the DOJ also announced a temporary amendment to its Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) so that companies may still qualify for a presumption of a declination even after a whistleblower reported wrongdoing to the DOJ if they self-disclose within 120 days after receiving an internal report and before the DOJ reaches out to them. 

In detail

The Program is a three-year initiative, which became effective on August 1, 2024 and is managed by the DOJ Criminal Division’s Money Laundering and Asset Recovery Section.

The Program provides potential monetary rewards for whistleblowers who provide information to the DOJ leading to a successful prosecution, or corporate resolution, and forfeiture. This serves as a powerful incentive for individuals to report wrongdoing and supports the DOJ’s efforts to combat corporate crime.

The Program is subject to modification during the initial three-year pilot period. Such modifications will be published on the Program website. After the three-year period, the DOJ will determine whether to extend or modify the Program.

Whistleblower award eligibility

A qualifying whistleblower must be an individual. The individual may be eligible for a whistleblower award if they provide the DOJ with original information in writing that leads to criminal or civil forfeiture exceeding USD 1 million in net proceeds forfeited in connection with a successful prosecution, corporate resolution, or civil forfeiture action related to certain corporate criminal conduct. Multiple whistleblowers may be eligible and share an award jointly.

Whistleblowers may not receive an award through the Program if they would be eligible to receive awards through other government or statutory whistleblower programs (i.e., SEC whistleblower programs, qui tam actions, etc.). The DOJ, however, advises that if an individual is unsure of whether they qualify for another US government program, they should submit information to both programs so that the DOJ can assess the information and determine their eligibility for an award.

Additionally, any individual who has meaningfully participated in the criminal activity they report are ineligible to receive an award under the Program, but the DOJ retains discretion to determine the eligibility of individuals who were mere minimal participants in the reported misconduct.

Although companies are not eligible to receive benefits under the Program, as provided for in amendments to the CEP, a company may be eligible for a presumption that the DOJ will not prosecute the company for misconduct uncovered through internal whistleblower reports and discloses to the DOJ through the CEP within 120 days of receiving the information. If an individual blows the whistle by reporting misconduct internally, they may still be eligible for an award under the Program so long as they also report their information to the DOJ within 120 days of having reported the potential misconduct internally. Some nuances as to how exactly the Program will interact with benefits available to companies under the CEP (e.g., whether the company still qualifies for a declination if at the time of the disclosure it was aware that the whistleblower has also reported the potential misconduct to the DOJ) are unclear and will likely be decided on a case by case basis.

Award amounts

The DOJ has sole discretion in determining whether an individual is eligible for an award and the amount of the award, i.e., whistleblowers are not granted an enforceable legal right to an award. The award amount is dependent on net proceeds derived from the DOJ’s successful civil or criminal forfeiture actions stemming from the whistleblower’s information. Generally, however, an individual may be eligible for an award following successful forfeiture proceedings based on the following calculations.

• An award of up to 30% of the first USD 100 million in net proceeds forfeited.
• An award of up to 5% of any net proceeds forfeited from USD 100 million up to USD 500 million.

The DOJ will consider various factors when determining the award amount, including: (i) the significance of the information provided by the whistleblower in furthering an investigation or leading to a successful enforcement action; (ii) the level of assistance offered by the whistleblower, including cooperation with the investigation; (iii) if the whistleblower was involved in the misconduct; and (iv) the whistleblower’s risk and potential hardship endured as a result of reporting the information. Notably, if a whistleblower also reports the relevant information through internal company reporting channels, the DOJ will consider this a factor that may increase their award under the Program.

Whistleblowers must cooperate and provide truthful, complete and original information

Under the DOJ’s guidance, whistleblowers are incentivized to come forward voluntarily with “original information,” which is a cornerstone of the Program. Original information refers to data or knowledge that is not already known by the DOJ and is derived from the whistleblower’s independent knowledge or analysis of information that may be public, but reveals information that is not generally known or available to the public. The information must be substantive enough to assist the DOJ in furthering an investigation or contributing to a successful enforcement action.

The DOJ provided a five-page, 26-question (excluding subparts) submission form for individuals reporting under the Program to complete and submit. Among other information, the intake form asks for a brief description of the misconduct being reported, the names of companies and individuals involved, whether the misconduct was reported internally, and whether the individual believes they were prevented from or subjected to retaliation for reporting. Notably, the intake form further asks if any of the information provided was from an attorney or in a communication where an attorney was present, and whether the individual believes that an exception exists under the applicable state attorney conduct rules allowing them to share this information. Thus, similar to other whistleblower programs, information obtained through a communication that was subject to the attorney-client privilege, unless an exception applies, does not constitute “original” information.

Additionally, a whistleblower’s information is not “original” if they learned about the wrongdoing as an employee whose principal duties involved compliance or internal audit responsibilities. This limitation on “original information” also applies to officers, directors, or trustees of a company to whom potential violations of law are disclosed as part of an entity’s investigation, compliance, and reporting process.

To maintain eligibility for an award under the Program, whistleblower must meet various stringent cooperation obligations. Whistleblowers must provide complete and truthful information to the best of their abilities. This means disclosing all known relevant facts without omission or misrepresentation. The information provided should be detailed and backed by evidence whenever possible, to substantiate the claims made. Additionally, whistleblowers’ cooperation obligations include providing testimony, documents, or other information and, if requested, working proactively under the supervision of law enforcement agents.

Whistleblower protections

The DOJ provides several mechanisms to ensure the safety and anonymity of potential whistleblowers. First, the DOJ upholds strict confidentiality protocols to protect the identities of whistleblowers. The information whistleblowers submit to the DOJ is kept private and is not disclosed publicly unless mandated by legal proceedings or if it serves a legitimate law enforcement purpose. In certain cases, the DOJ may share information with other law enforcement agencies, provided they adhere to equivalent confidentiality agreements.

Second, individuals may also submit information anonymously if represented by an attorney. Anonymity, however, is forfeited upon claiming any monetary award which requires identity verification.

Subject area limitations

The Program is intended to target specific areas that cover a broad range of financial and ethical misconduct and can significantly impact public trust and the integrity of various institutions. The original information that whistleblowers provide under the Program must pertain to the following types of federal criminal offenses:

1. Violations by financial institutions, including money laundering and anti-money laundering compliance, and fraud.
2. Foreign corruption and bribery cases involving companies, with specific reference to the Foreign Corrupt Practices Act, Foreign Extortion Prevention Act, and related money laundering laws.
3. Domestic bribery and kickback incidents involving public officials at federal, state, or local levels.
4. Health care-related offenses, particularly those involving private health care programs, fraud against patients or investors, and violations not covered by the Federal False Claims Act.

Takeaways

• This Program represents a key development in the landscape of corporate compliance and federal criminal enforcement, particularly for companies not already subject to SEC and other whistleblower programs. It underscores the DOJ’s commitment to deterring corporate misconduct not only by providing monetary awards to whistleblowers, but also by making clear that it will seek to deprive companies of ill-gotten proceeds through civil and criminal forfeiture actions.
• The Program, along with concurrent changes made to the CEP and similar whistleblower pilot programs recently announced in the Northern District of California and Southern District of New York, as well as the DOJ’s Individual Voluntary Self-Disclosures Program, puts companies under increased pressure to promptly investigate corporate misconduct reported through internal compliance or whistleblowing channels and decide whether a voluntary self-disclosure is appropriate. Under the CEP, companies who self-report potential misconduct to the DOJ within 120 days after receiving a whistleblower report internally still may avoid criminal prosecution. Concluding an internal investigation within 120 days, however, may not always be possible which could result in companies facing a difficult choice between disclosing a potential violation without knowing all of the facts and deciding not to disclose while potentially missing out on voluntary self-disclosure benefits.
• In addition, with increased incentives for individual whistleblowers to report the potential misconduct to the DOJ, companies run the risk that information included in their self-disclosure is already known to the authorities which limits the incentives available under the CEP.
• Given the significant monetary incentives the Program provides, this may result in an increase in government investigations in the focus areas of the Program. At the same time, the broad discretion reserved by the DOJ in determining award eligibility of whistleblowers, particularly those complicit in the misconduct, may deter many individuals with credible information about potential misconduct from blowing the whistle.
• The subject areas covered by the Program overlap to some extent with subject areas of whistleblower programs of other agencies, such as whistleblower programs of the SEC and other federal agencies. The Program may thus incentivize whistleblowers to the SEC or other civil agencies to also report the conduct to the DOJ. This increases the likelihood of criminal interest in certain matters of the SEC and other civil enforcement agencies.
• Companies may need to update their whistleblower and compliance policies to ensure that employees can detect, deter, and report criminal conduct internally. Employee training reassuring them of the effectiveness of company’s compliance reporting channels and internal investigation procedures should be considered as well. It is crucial for companies to refrain from taking any action that the government may view as obstructing or interfering with an individual’s ability to report the conduct to the authorities. Similarly, it is important for companies investigating conduct, particularly that took place overseas, to maintain all applicable legal privileges.