The Department of Justice (DOJ) Criminal Division's Whistleblower Awards Pilot Program, effective August 1, 2024, represents a significant step in the government's efforts to combat corporate crime. This three-year initiative encourages individuals to report original, truthful information about corporate misconduct that leads to substantial asset forfeitures.
By incentivizing whistleblowers to disclose critical information, the program aims to expose financial crimes that often remain hidden while deterring future wrongdoing.
At the same time, this program introduces higher risks to individuals and corporations who could be implicated in corporate wrongdoing by a whistleblower, whether or not any wrongdoing actually took place.
This DOJ Whistleblower Pilot Program uses financial rewards to incentivize whistleblowers to report corporate misconduct to the Department.
Under this program, individuals are eligible to receive a monetary award when they provide to DOJ original and truthful information about criminal misconduct if that information is not already covered by another federal whistleblower program or statutory initiative, falls within a designated subject area, and leads to a successful criminal or civil asset forfeiture exceeding $1 million in net proceeds.
The Whistleblower Pilot Program has several notable features, such as gap-filling among existing whistleblower programs. This program is intended to supplement, not supplant, reporting avenues provided by existing federal whistleblower programs, such as those of the:
- Securities and Exchange Commission (SEC),
- Commodity Futures Trading Commission ("FTC), or
- Financial Crimes Enforcement Network (FinCEN), or
- Statutory initiatives, such as qui tam actions under the False Claims Act.
As a result, a whistleblower report must not be covered by another whistleblower program to be eligible for an award under the Whistleblower Pilot Program. The DOJ encourages whistleblowers unsure about qualification under the Whistleblower Pilot Program to submit information to multiple programs.
What is the Purpose of the Pilot Program?
As noted, the Whistleblower Awards Pilot Program seeks to address gaps in existing whistleblower efforts, such as those under the False Claims Act and programs led by other agencies, like the Securities and Exchange Commission (SEC).
Many corporate misconduct cases fall outside the jurisdiction of these programs, leaving certain types of financial crimes unreported and inadequately addressed. By providing financial awards tied to successful asset forfeitures, the DOJ hopes to bring previously undetected corporate schemes to light.
Whistleblowers who report original information that leads to forfeiture exceeding $1,000,000 in net proceeds may be eligible for financial incentives. The program covers a wide range of misconduct, from bribery and foreign corruption to fraud within financial institutions.
The prospect of monetary rewards is intended to encourage reporting and motivate companies to establish stronger compliance mechanisms to reduce their exposure to criminal liability.
How Does the Program Work?
To start, whistleblowers must submit their information in writing using the DOJ's designated intake form, swearing under penalty of perjury that the information is truthful and accurate.
Submissions can be made anonymously, although individuals who opt for anonymity must file through an attorney. The information provided must be:
- Voluntary: The whistleblower must provide it without a legal obligation, such as a subpoena.
- Original: The information cannot be publicly known or already in the possession of the DOJ unless the whistleblower is the source.
- Credible: It must provide sufficient detail to support actionable leads in a criminal investigation.
Once the DOJ evaluates a submission, it determines whether it leads to successful asset forfeiture. Whistleblowers who submit information that directly contributes to investigating, prosecuting, and resolving corporate misconduct may become eligible for a portion of the forfeited assets.
Awards are calculated at the DOJ's discretion and may reach up to 30% of the first $100 million in net proceeds, decreasing considerably for amounts above that threshold.
What are the Eligibility Requirements?
To be eligible for an award, the whistleblower must provide original information derived from their independent knowledge or analysis.
This information must materially contribute to successful forfeitures exceeding $1,000,000 in cases tied to corporate crime. Key exclusions apply, however. A whistleblower may not be:
- A government employee.
- A foreign official.
- Someone who significantly participated in the reported misconduct; or
- A company/corporation. (Only individuals qualify as whistleblowers under the pilot program.)
In addition, whistleblowers cannot base their claims on evidence obtained unlawfully, such as through a breach of attorney-client privilege or illegal means, as information obtained in such a manner becomes inadmissible in court.
To be eligible for an award under the Whistleblower Pilot Program, a whistleblower's information must be related to at least one of the following areas of corporate crime:
- Violations by financial institutions and their employees and abuse of the financial system not covered by the FinCEN whistleblower program.
- Corporate foreign corruption schemes not covered by the SEC whistleblower program, including violations of the Foreign Corrupt Practices Act, the Foreign Extortion Prevention Act, and money laundering statutes.
- Corporate domestic corruption schemes, including bribe or kickback payments to domestic public officials.
- Federal healthcare offenses not covered by the federal False Claims Act, including crimes against private insurers and fraud against patients.
While the Whistleblower Pilot Program does not require whistleblowers to report misconduct internally before reporting it to the DOJ, the program does encourage internal reporting by considering a whistleblower's internal reporting prior to government reporting as a plus factor in calculating the whistleblower award.
To be eligible for a financial award, whistleblowers who first report misconduct internally must report it to the DOJ within 120 days of the internal report.
What are the Possible Repercussions for Those Implicated by Whistleblowers?
This program introduces significant challenges and risks for potential defendants. The whistleblower's role in exposing misconduct means individuals and companies may face scrutiny from law enforcement, resulting in criminal prosecution, asset forfeiture, or other penalties.
The DOJ's focus on asset forfeiture adds another layer of complexity. Notably, even if charges are never formally brought, assets tied to the alleged misconduct may be seized, which can substantially impact a corporation's financial standing.
Corporations named by whistleblowers must be prepared to cooperate fully with investigations. Those who obstruct inquiries or retaliate against whistleblowers can face additional penalties.
On the other hand, there are also mechanisms in place by which companies may avoid criminal prosecution by voluntarily self-disclosing violations after receiving an internal whistleblower report, provided they are willing to pay the appropriate forfeiture and/or restitution and self-report before the DOJ contacts them about the issue.
Legal counsel should play a central role in corporations navigating these challenges. Understanding how the DOJ evaluates whistleblower claims and preparing for potential liability will be critical as the pilot program unfolds.
By taking proactive steps by hiring an experienced federal criminal defense attorney, companies can mitigate risks and better withstand the scrutiny that this initiative is likely to bring. For more information, contact Eisner Gorin LLP, a federal criminal defense law firm based in Los Angeles, California.
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