DOJ Announces It Is Designing Whistleblower Rewards Program | JD Supra

In early March 2024 at the American Bar Association’s 39th National Institute on White Collar Crime, keynote remarks by Assistant Attorney General (DAG) Lisa Monaco foreshadowed the development of significant new policy initiatives by the Department of Justice (DOJ or Department). His speech re-emphasized many of the DOJ’s key issues throughout the current administration, including:

  • individual responsibility,
  • the importance of strong corporate compliance programs,
  • encourage voluntary self-disclosure of misconduct, i
  • adapt to keep up with disruptive technologies like artificial intelligence.

DAG Monaco’s statements indicate that the Department will continue in 2024 to focus on the development of policies and guidance that enhance its objectives related to corporate enforcement.

The Whistleblower Rewards Program

The most notable update from DAG Monaco’s speech is the DOJ’s development of a new Whistleblower Rewards and Incentives Program. DAG Monaco noted that whistleblowing programs used by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), among others, have successfully led to billions in payouts from bad corporate actors. However, these programs only cover misconduct within the limited jurisdiction of their agencies. Besides, who tam False Claims Act cases only apply to fraud against the government. While these whistleblowing mechanisms have proven indispensable, DAG Monaco likened them to a “scrapbook” that does not address the full range of economic and financial conduct pursued by the DOJ.

Accordingly, DOJ intends to design and implement a Department-led whistleblower reward program. Under the new program, when a person helps the DOJ uncover significant corporate or financial misconduct that the DOJ is not already aware of, the person may qualify to receive a portion of the resulting forfeiture.

The DOJ will announce specific details about this initiative in the coming months, but DAG Monaco highlighted some basic principles of the new program:

  • payments will only be offered to whistleblowers after all victims have been properly compensated;
  • payments will only be offered to those who submit truthful information not already known to the government;
  • whistleblowers involved in the reported criminal activity cannot receive an award; i
  • payments will only be provided where there is no existing financial disclosure incentive, such as who tam actions and other federal whistleblower programs.

In a later speech, Acting Assistant Attorney General (AAAG) Nicole M. Argentieri provided additional context on the program. He emphasized that the goal is to fill the gaps and reiterated DOJ’s intent to offer awards only in areas where financial incentives for disclosure no longer exist. AAAG Argentieri noted that, like the SEC and CFTC’s whistleblower programs that limit rewards to cases that result in penalties of $1 million or more, the DOJ hopes to establish a monetary threshold for the program. He did not provide an anticipated threshold amount and stated that the DOJ expects to receive input on the issue.

Although the DOJ intends to accept information about violations of any federal law, DAG Monaco reported that criminal abuses of the US financial system, foreign corruption cases outside the SEC’s jurisdiction, and corruption cases national are of particular interest to the Department.

The connection to the DOJ’s voluntary self-disclosure initiatives

The Whistleblower Rewards Program is also intended to reinforce DOJ’s 2023 policy efforts that encourage voluntary self-disclosure of misconduct. Although recent DOJ policies are intended to provide tangible benefits to companies willing to voluntarily disclose, many companies may find that the risks of self-reporting outweigh the potential reward.

However, the whistleblower reward program adds additional layers of risk that companies must consider, each of which aims to make voluntary self-disclosure a more attractive option. First, the availability of a monetary reward for whistleblowers will increase the likelihood that the government will become aware of wrongdoing. In addition, the whistleblower reward program may affect how quickly a company must move to self-disclose, if it is to preserve the benefits associated with doing so, and before any whistleblower. According to DAG Monaco, the competitive incentives offered by the DOJ (ie a monetary award to the whistleblower and a disclaimer to the company) are intended to “create a multiplier effect”, encouraging both companies. i people who tell the DOJ “what they know as soon as they know it.” In other words, companies may now have to compete against their own employees to get the first foot in the DOJ’s door.

Although companies potentially vulnerable to False Claims Act liability have likely conducted risk assessments in the past, the whistleblower reward program is expected to have a material impact on self-disclosure considerations about potential violations of other statutes that provide significant settlement figures, such as the Foreign Corrupt Practices Act.

Whether or not the whistleblower rewards program will require employees to disclose potential wrongdoing within the company before reporting it to the government will be a key aspect of the initiative. DAG Monaco repeatedly emphasized in its comments the importance of properly investing in corporate compliance programs. However, if whistleblowers are incentivized to disclose misconduct to the DOJ before the company’s compliance function becomes aware of this misconduct, it can undermine the company’s ability to make the right decision on its own. A system focused on rewards can also create perverse incentives, where employees are motivated by monetary gain rather than truly fostering a culture of compliance.

next steps

DAG Monaco stated that a “90-day sprint” will be conducted to develop and implement a DOJ-led whistleblower reward program pilot. AAAG Argentieri further explained that the DOJ’s Money Laundering and Asset Recovery Section will play a leading role in the design of the pilot program and will work closely with US Attorneys, the Federal Bureau of Investigation and other offices of the DOJ when considering eligibility requirements.

DAG Monaco also indicated that additional guidance may be developed regarding voluntary self-disclosure. He noted that at least two U.S. attorneys’ offices have pushed initiatives “that are, in essence, voluntary self-disclosure programs for individuals.” These initiatives offer incentives, such as nonprosecution agreements, to guilty individuals who self-disclose wrongdoing and cooperate against more culpable targets. DAG Monaco explained that the Department intends to evaluate the results of these pilot programs “and determine[e] what’s coming at the end of the year.”

The specific rules adopted by the DOJ in the coming months will be critical. But one conclusion is already clear: The DOJ is focused on encouraging those with knowledge of corporate misconduct to come forward as quickly as possible and report what they know.

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