Deputy Attorney General Lisa Monaco has announced a new Department of Justice (“DOJ”) program that will provide corporate whistleblowers with financial rewards. The pilot program, to be implemented later this year on a yet-to-be-announced date, will be designed to further incentivize the immediate report of corporate misconduct to the DOJ by providing whistleblowers with a portion of forfeitures resulting from their complaints.

The pilot program is another step by the DOJ to encourage companies to invest in a culture of compliance and to report misconduct as soon as it is brought to the company’s attention. One year ago, the Deputy Attorney General announced a focus on building robust Voluntary Self-Disclosure (“VSD”) programs designed to encourage corporations to immediately report misconduct, and has now turned to incentivizing individuals to come forward through the new pilot program. The DOJ has “recognized there’s another way we can encourage individuals to report misconduct: by rewarding whistleblowers. And how do we do that? Money,” said Monaco in a speech on Thursday.

Highlights of the New DOJ Whistleblower Rewards Pilot Program

As Monaco discussed in her speech, the US Securities and Exchange Commission (“SEC”) and the Commodities Futures Trading Commission (“CFTC”) already have programs, created by the Dodd-Frank Act, that reward whistleblowers financially. The agencies have received thousands of tips through these programs and paid out hundreds of millions of dollars in rewards in response. However, the programs are limited in scope by the respective jurisdictions of the SEC and CFTC, which do not encompass the entire enforcement authority of DOJ. Monaco described the SEC and CFTC programs as a “patchwork quilt that doesn’t cover the whole bed.”

Now, the DOJ will have a comparable program to help fill the jurisdictional gaps. The agency will undergo a 90 day effort to develop and implement a pilot program to financially reward individuals who submit tips to the DOJ. The program will be implemented later this year on a yet-to-be-announced date. The premise, Monaco said, is simple: “if an individual helps DOJ discover significant corporate or financial misconduct — otherwise unknown to us — then the individual could qualify to receive a portion of the resulting forfeiture.”

The DOJ wants to specifically encourage whistleblowers to report:

1. Criminal abuses of the U.S. financial system;
2. Foreign corruption cases outside the jurisdiction of the SEC, including FCPA violations by non-issuers and violations of the recently enacted Foreign Extortion Prevention Act; and
3. Domestic corruption cases, especially involving illegal corporate payments to government officials.

The DOJ’s pilot program will have clear-cut limitations on issuing payments to whistleblowers. Payment will be given only after all victims have been properly compensated, only to those not involved in the criminal activity itself, and only in cases where there is not already an existing financial disclosure incentive (e.g., another federal whistleblower program). Finally, payment will only be available to those who submit truthful information not already known to the government. 

This last point is critical. The DOJ’s whistleblower program is designed to incentivize individuals to report misconduct as soon as it comes to their attention. “To be eligible for a reward, you have to tell us something we didn’t already know. You have to be the first in the door,” Monaco emphasized.

Building on VSD Programs

VSD programs similarly require participating companies to be first in the door. Monaco advised companies last year that “where your company discovers criminal misconduct, the pathway to the best resolution will involve prompt voluntary self-disclosure to the Department of Justice.” The DOJ revised its policies last year to provide clearer assurances and increased incentives to companies that self-report. Last year, it also required all US Attorneys’ Offices to adopt consistent policies for their VSD programs that are “operative, predictable, and transparent.”

Key Takeaways

1. The announcement of the new whistleblower program is another step taken by DOJ to incentivize a culture of corporate compliance, and, significantly, of reporting wrongdoing immediately and before the government initiates an investigation of its own accord. “With these announcements, our message to whistleblowers is clear: the Department of Justice wants to hear from you. And to those considering a voluntary self-disclosure, our message is equally clear: knock on our door before we knock on yours.”
2. The new Whistleblower Program has significant implications for non-public companies. The SEC’s whistleblower program is limited to companies under its purview, and the SEC does not have jurisdiction to take action on information outside the scope of federal securities laws. What the SEC offers to whistleblowers is now offered by DOJ, even for non-public companies. Consequently, even companies not traded on the New York Stock Exchange now face the risk of internal Whistleblowers who stand to profit substantially from tipping off the US Government to alleged corporate misconduct.

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