On August 1, 2024, the Department of Justice (“DOJ”) released a Corporate Whistleblower Awards Pilot Program (the “Pilot”), creating new opportunities for plaintiffs and areas of potential exposure for companies. Criminal Division Corporate Whistleblower Awards Pilot Program (Aug. 1, 2024), https://www.justice.gov/criminal/criminal-division-corporate-whistleblower-awards-pilot-program. The Pilot’s core purpose and mechanism are simple: generate more investigatory leads for DOJ by offering financial rewards to those who provide information that results in successful enforcement actions. More specifically, the Pilot incentivizes individuals to report four categories of corporate misconduct—(1) financial institution-related crimes, (2) foreign corruption, (3) domestic corruption, and (4) health care fraud on private parties—by offering successful whistleblowers a potential cut of subsequent forfeiture proceeds.
The Pilot reflects DOJ’s effort to fill gaps left by other, preexisting whistleblower regimes—including programs offered by the SEC, Commodity Futures Trading Commission (“CFTC”), and the Financial Crimes Enforcement Network (“FinCEN”)—in order to cover the “full range of corporate and financial misconduct that the [DOJ] prosecutes.” L. Monaco, Keynote Remarks at the American Bar Association’s 39th National Institute on White Collar Crime (Mar. 7, 2024), https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-monaco-delivers-keynote-remarks-american-bar-associations. By offering financial incentives to those who report misconduct, the Pilot places companies at increased risk of being targeted by would-be whistleblowers. And government officials are already crowing about the Pilot’s impact, claiming that DOJ has “received tips from over 100 individuals, with more coming in every day.” N. Argentieri, Remarks at the Society of Corporate Compliance and Ethics 23rd Annual Compliance & Ethics Institute (Sept. 23, 2024), https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-nicole-m-argentieri-delivers-remarks-society. But the Pilot has also been criticized, including by whistleblower attorneys who claim its incentives are insufficient. Ultimately, whatever its merits, companies must be aware of the Pilot’s core contours and the risks it presents.
The Pilot—What It Seeks, What It Offers
The Pilot incentivizes individuals to report original, truthful information about corporate misconduct—not covered by other whistleblower programs—in four designated areas:
- Financial crimes related to financial institutions (from traditional banks to cryptocurrency exchanges), their insiders, or agents, involving money laundering, anti-money laundering compliance violations, registration of money-transmitting businesses, fraud statutes, and fraud against or non-compliance with financial institution regulators.
- Foreign corruption/bribery, including violations of the Foreign Corrupt Practices Act, Foreign Extortion Prevention Act, and money laundering statutes.
- Domestic corruption/bribery involving payment of bribes or kickbacks to domestic officials, including federal, state, territorial, or local leaders (whether elected or appointed), as well as officers or employees of any government department or agency.
- Health care fraud involving schemes targeting private parties (e.g., insurers) that are not subject to qui tam recovery under the False Claims Act.
The Pilot incentivizes reporting by offering a bounty: qualifying whistleblowers are eligible for a reward if information they provide results in criminal or civil forfeiture greater than $1M. The bounty can be substantial: up to 30% of forfeitures between $1–$100M; and up to 5% of forfeitures between $100–$500M.
The Pilot also encourages corporations to self-report misconduct by their employees. It does so by making a whistleblower’s good faith participation in available corporate compliance systems a “consideration” in determining an ultimate reward—provided the whistleblower also makes a disclosure to DOJ within 120 days of any internal report. That 120-day clock has special significance for companies because DOJ—in conjunction with announcing the Pilot—also amended its pre-existing Corporate Enforcement and Voluntary Self-Disclosure Policy to make clear that companies who receive a whistleblower complaint may avoid prosecution for their crimes if they self-report to DOJ within 120 days of receiving that complaint (and otherwise meet the requirements for a “declination” under DOJ policy). Temporary Amendment to the Crim. Div. Corporate Enforcement and Voluntary Self-Disclosure Policy (Aug 1, 2024), https://www.justice.gov/criminal/media/1362316/dl?inline.
The Pilot’s Limitations
Although the Pilot provides the potential for substantial rewards, it also includes limitations about who can be a whistleblower, how much they can recover, and what their obligations are. Several stand out. First, DOJ’s decision of whether to grant a whistleblower award is discretionary—meaning a DOJ whistleblower has no enforceable right to any recovery, even if her truthful tip indisputably leads to a massive forfeiture. That is different than the SEC’s whistleblower policy, which includes an enforceable right to recovery. Second, assuming an award is granted, the Pilot has no floor and imposes a cap—that, too, is different than the SEC’s policy, which has a floor and no cap. Third, a Pilot whistleblower’s bounty is drawn from DOJ’s “net proceeds” of forfeiture—meaning whatever forfeited assets remain after compensating eligible victims and covering other associated costs. In some cases, there might not be much left after those costs are covered—and the Pilot currently provides no mechanism for DOJ to compensate whistleblowers through other means, such as granting a percentage of criminal fines collected. Fourth, the Pilot precludes whistleblowers from receiving an award if they “meaningfully participated” in the criminal activity reported. Although the term “meaningfully participated” is undefined, it potentially includes—and thus bars recovery for—a broader range of persons than do SEC, CFTC, and FinCEN whistleblower programs, which preclude awards to those who “directed, planned, initiated, or were convicted of the misconduct they reported.” Fifth, the Pilot requires whistleblowers to cooperate fully and completely with DOJ in any resulting investigation and prosecution—a process that can be incredibly demanding and last years.
The Pilot: Looking Ahead
DOJ is bullish on the Pilot’s prospects and has already claimed that it is providing a steady stream of tips. And there is reason to believe the Pilot will lead some people to report crimes who otherwise might not have done so, given the potential rewards that may follow. Consider, for example, DOJ’s recent string of FCPA prosecutions related to commodities trading in Latin America and elsewhere—there, DOJ reached resolutions with six businesses that yielded over $1.7B in total payouts, including substantial forfeitures. Had those cases been initiated by tips pursuant to the Pilot, whistleblowers could have been richly rewarded—and the prospect of such recoveries seems likely to entice others.
But plaintiffs’ lawyers have criticized the Pilot for its limitations, several of which are discussed above. Critics claim these limitations dilute the prospects of a meaningful recovery so much that the juice simply is not worth the squeeze, given the costs that come with being a whistleblower. Put simply, while a DOJ whistleblower is virtually guaranteed to face substantial personal and professional burdens after making a tip, the Pilot provides no guarantee of a resulting benefit, even if the tip bears fruit.
That said, DOJ has the ability to change the Pilot to address those concerns and others. During its scheduled three-year run, DOJ will evaluate the Pilot, potentially revise it, and ultimately determine whether to extend or modify it. But for now, the Pilot is a reminder to corporations that they should commit resources to developing comprehensive compliance processes designed to prevent, remediate, and—if appropriate—self-report misconduct.