On August 1, 2024, the U.S. Department of Justice (DOJ) rolled out its new Corporate Whistleblower Awards Pilot Program and related documentation, including a program guidance document, a fact sheet, frequently asked questions (FAQs), and a dedicated website. DOJ simultaneously announced related revisions to the Criminal Division's Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP). The whistleblower program and related CEP "temporary amendments" were announced at a press conference in Washington, DC, featuring Deputy Attorney General (DAG) Lisa Monaco and Principal Deputy Assistant Attorney General (DAAG) Nicole M. Argentieri, with DAAG Argentieri delivering remarks on the new pilot program. The program will run for three years under its current terms and will be administered by the Criminal Division's Money Laundering and Asset Recovery Section (MLARS). This alert provides key elements of the new program and the important revisions to the CEP, analysis on what the program might mean for internal reporting systems administered by legal and compliance personnel, and more generally commentary on what the program may mean for targeted companies. 

In summary, the new pilot program potentially will reward "individuals... [who] provide the [DOJ] with original information in writing [under certain conditions] that... leads to criminal or civil forfeiture exceeding $1,000,000 in net proceeds forfeited in connection with a successful prosecution, corporate criminal resolution, or civil forfeiture action related to corporate criminal conduct in" one of the enforcement priority areas established by the guidance: foreign corruption, domestic bribery, crimes involving financial institutions, and healthcare fraud related to private insurance. 

The DOJ program is using existing statutory authority (under 28 U.S.C. §524(c)) that allows the Attorney General to "pay 'awards for information or assistance leading to a civil or criminal forfeiture.'" The program guidance notes in several places that payment of any reward is subject to the complete discretion of the DOJ and thus not subject to any appeal or other recourse. Many of the basic concepts of the DOJ policy mirror or are very similar to concepts and definitions established in previously existing whistleblower reward programs, such as the Securities and Exchange Commission's (SEC) program. 

The pilot program offers some support for continued employee use of corporate internal reporting systems – for example, by making prior reporting to such systems a factor that can increase an award's amount. However, the primary incentive – which allows an employee to be eligible for an award if they report to the DOJ within 120 days of making an internal report – also significantly (and deliberately) increases the pressure on a company to self-report within that timeframe as well. The CEP's temporary amendment allows the presumption of declination to remain in place for a company if the company self-discloses an issue to the DOJ within 120 days of receiving the internal report of allegations.

DAG Monaco initially announced that the DOJ was working on the pilot program in early March 2024 and then-Acting Assistant Attorney General Nicole Argentieri later stated that the DOJ had a goal of issuing the formal program in early June. The policymaking process was delayed in part by concerns raised by some stakeholders and commentators regarding whether the program would undermine corporate compliance programs. Whether the DOJ's attempts to address these concerns are effective depends on how DOJ executes the program in actual cases. 

Coverage 

Consistent with DAG Monaco's March speech, the rewards program only applies to information disclosed to the DOJ related to:

• "Certain crimes involving financial institutions and their employees" including money laundering and fraud
• "Foreign corruption [including violations of the FCPA, the Foreign Extortion Prevention Act (FEPA), and anti-money laundering laws] involving privately held companies and others that are not issuers of U.S. securities" 
• "Domestic corruption involving [payments by] companies" of "bribes or kickbacks" to U.S. federal, state, and local officials
• "Healthcare fraud schemes targeting private insurers not subject to qui tam recovery under the False Claims Act"

In announcing the program, DAAG Argentieri emphasized the importance of fighting foreign corruption and using the DOJ program to compliment the SEC's program, stating that "many of the foreign corruption cases we prosecute are not" covered by the SEC program, pointing to the recent cases involving commodity trading firms where seven companies paid a total of $1.7 billion in fines. She also stated that financial institutions "are the first defense against illicit finance" and the DOJ wants to receive reports of abuses whether the issues arise at traditional financial institutions or cryptocurrency exchanges, noting that the program also "includes efforts [from non-U.S. financial institutions] to access services from U.S. financial institutions through fraud," including Danske Bank as an example. Finally, DAAG Argentieri identified domestic corruption and private-insurance healthcare fraud as two other areas where DOJ was looking to expand corporate enforcement efforts through the whistleblower program. 

Who Is Eligible?

Individuals Only. The guidance states that any individual (not a company) who provides the type of information covered in the program can be eligible for a reward, unless they meet any number of exceptions. This preliminary point that only individuals can be eligible means that (a) companies cannot submit information regarding competitors, although employees from those companies could still participate in their individual capacity, and (b) law firms cannot report allegations on behalf of clients to maintain confidentiality for the entirety of the process (as they can for the SEC whistleblower program), although the DOJ does allow whistleblowers to submit allegations initially through law firms before requiring direct engagement if and when the allegation turns into an enforcement action. 

Various Disqualifications. Individuals are disqualified for an award under various "exceptions," including where the individual qualifies for an award under another applicable whistleblower or qui tam program (though the FAQs encourage reporting to both the DOJ and other agency if there is doubt), is affiliated with the DOJ or other law enforcement organization (including family members), has foreign official status, sources information from an excluded person, or "knowingly and willingly" makes false statements or withholds relevant information. 

Meaningful vs. Minimal Involvement. Per the DOJ's fact sheet, the program "prohibit[s] payments to any whistleblower who meaningfully participated in the criminal activity they report." The fact sheet notes that this prohibition is broader than similar restrictions under other existing whistleblower award programs, such as those administered by the SEC and Commodity Futures Trading Commission (CFTC). On the other hand, someone can be still be eligible for an award if they had only a "minimal role" in the misconduct, which the DOJ defines as someone who "could be described as 'plainly among the least culpable of those involved in the conduct of a group,'" citing the U.S. Sentencing Guidelines' definition for "minimal participant." 

As reported in our FCPA Summer Review 2024, the DOJ launched another pilot program in April 2024 that makes available certain benefits to such persons, including potential non-prosecution agreements (NPAs). The fact sheet notes the existence of that program and the DOJ states that someone involved in any misconduct does not need to make two submissions –  they will be considered for an NPA as part of the whistleblower pilot program process as well. 

Company Personnel and Consultants Involved in Processes to Address Violations of Law. The guidance states that individuals who obtain information due to their roles as company directors, officers, or other fiduciaries, have "principal duties [that] involve compliance or internal audit responsibilities" (including as outside firm/expert personnel), are employed at a public accounting firm, or are connected to any organization retained to investigate potential legal violations are not eligible for a reward, although certain facts and circumstances can make such a person eligible. 

Those personnel may be eligible for an award if the company – specifically, the audit committee, chief legal officer (CLO), or chief compliance officer (CCO) – has had the information for 120 days and has not acted on it (with some nuanced details depending on the specific fact pattern). These restrictions and exceptions appear inspired by similar SEC provisions regarding original information. 

None of these restrictions apply if there is a reasonable basis that immediate disclosure is "necessary to prevent the relevant individual or entity from engaging in criminal conduct that is likely to harm national security, result in crimes of violence, result in imminent harm to patients in connection with health care, or cause imminent financial or physical harm to others." Similarly, none of these restrictions apply if there is "a reasonable basis to believe that the relevant individual or entity is engaging in conduct that will impede an investigation of the misconduct." 

What Information Is Rewarded?

To be eligible, the information provided by the whistleblower to the DOJ must be:

• "Derived from the individual's independent knowledge or independent analysis" – the former cannot be from public sources, while the latter can use public sources but must result in "information that is not generally known or available to the public"
• "Non-public and previously not known to the" DOJ, even if an open DOJ investigation already exists
• "Materially adds to the information that the [DOJ] already possesses"

Most of this language can also be found in the relevant SEC whistleblower reward program's regulations and interpretive guidance. For example, in September 2020, the SEC issued guidance on the definition of "independent analysis" similar to the DOJ language. 

Information derived from attorney-client communications or activities related to legal representation of the relevant company, court, or official reports, or through illegal methods is excluded from eligibility under most circumstances.

Monetary Threshold and Other Requirements

The guidance states that a whistleblower's information "must lead to successful forfeiture exceeding $1,000,000 in net proceeds forfeited by the [DOJ] in connection with a prosecution, corporate criminal resolution, or civil forfeiture action" in the relevant areas of enforcement focus (emphasis added). The guidance sets out various factors for DOJ prosecutors to weigh whether the information "led" to the forfeiture paid by a company – much of which is similar to SEC guidance. 

In addition, the whistleblower's submission of information to the DOJ must be "voluntary" and therefore not subject to any preexisting disclosure obligation, any existing DOJ inquiry, and not about to be disclosed to the government or public. The information must be "truthful and complete," and the whistleblower must cooperate with the relevant investigation, including giving grand jury or trial testimony and, "if requested, working in a proactive manner under the supervision of, and in compliance with, United States law enforcement officers and agents." Such cooperation can be a considerable burden as to time, expense, and other potential negative ramifications to any whistleblower. 

The guidance notes that the whistleblower's identity will be protected (though only up to a point and with DOJ discretion) and that whistleblowers can retain counsel to represent them in the DOJ process. Importantly, the DOJ states that the whistleblower must be willing to cooperate, which "includes but is not limited to providing truthful and complete testimony and evidence, whether in interviews, before a grand jury, or at any trial or other court proceeding." There are also various instances where the DOJ reserves the right to disclose a whistleblower's identity, whether in reports to Congress (if the amount exceeds a certain threshold) or in disclosures to defense counsel for parties facing charges from the DOJ. 

How Much Is a Reward?

The DOJ has a sliding scale for its award system. The award can only be paid as a percentage of forfeiture, so any criminal fines are not included in these award calculations. The fact sheet states that "[w]histleblowers may receive up to 30 percent of the first $100 million in net proceeds forfeited, and up to 5 percent of any net proceeds forfeited between $100 million and $500 million." A footnote further establishes a presumption of awarding a "maximum of 30 percent" of the first $10 million in net proceeds, which is generally consistent with the SEC whistleblower program, though the relevant rule applies only to awards up to $5 million. If there are multiple eligible whistleblowers, the FAQs state, "the total amount paid to all whistleblowers cannot exceed these total percentages."

According to the fact sheet and the formal guidance, the DOJ "will assess what percentage to pay the whistleblower based on various factors, including":

• "Significance" or "usefulness" of the information provided
• "Assistance" by the whistleblower in the investigation
• "Culpability" of the whistleblower in the relevant issues
• "Unreasonable delay" in reporting
• "Management role" in the company

All of these factors have analogues in the SEC regulations that apply to its reward program. 

Another key factor brings into focus the tension between a whistleblower using company reporting systems to identify and redress issues versus going straight to the DOJ (or other agencies) – "[p]articipation in internal compliance systems or internal reporting." The DOJ states that whistleblowers using internal reporting systems first may receive an increased award. Thus, the DOJ aims to incentivize whistleblowers to report internally first, then to the DOJ within 120 days of the initial report within the company. 

Voluntary Disclosure Grace Period under Temporary Revisions to the CEP

In the materials released with the pilot whistleblower program, the DOJ included elements designed to encourage individuals to report allegations internally and then to the DOJ within 120 days, although individuals are also welcome to report to the DOJ directly without any internal report. The whistleblower gets credit for original information provided by a company if it responds to an internal report by investigating an issue and disclosing it to the DOJ, and the whistleblower is offered the prospect of a higher award by reporting internally first. 

These incentives to encourage internal reporting are designed in part to address concerns from companies that this program may weaken internal reporting systems and make it harder to identify and remediate misconduct using company resources, but it remains to be seen whether these inducements carry much significance in comparison to the gravitational pull of the DOJ's offer for awards. DAAG Argentieri summarized the program in this way, which does not include internal reporting: "With today's announcements, we are telling employees: If you are aware of criminal misconduct at your company, now is the time to come forward to the Criminal Division." 

The DOJ also temporarily amended the CEP to state that any disclosures by a company within 120 days of receiving a report will still be considered voluntary and timely, and therefore the company can still be entitled to a presumption of a declination, even if the whistleblower shared the relevant information with the DOJ prior to the company's disclosure. Thus, there is a 120-day grace period in which a company can disclose something reported internally and still pursue a declination, even if the company is not first in the door. This grace period is not fixed, however. The DOJ may decide to reach out to the company prior to the 120-day window closing, in which case the company may not claim voluntary self-disclosure credit. 

How Might This Program Impact Company Internal Reporting Systems?

The DOJ pilot program states that it supports companies' internal reporting systems, though in a manner that increases the pressure on companies to self-disclose to the DOJ. First, an employee can provide information internally, then report to the DOJ within 120 days, and receive credit via the DOJ based on the date of the initial internal report. This approach, including the 120-day timeline, mirrors the SEC's own approach to whistleblowers. Second, the company can also receive voluntary disclosure credit if it reports to the DOJ in this 120-day window, even if the whistleblower shares the information with the DOJ before the company self-reports. Certain categories of personnel become eligible to participate and receive awards under this program if companies do not act within a 120-day window. 

The 120-day window is a deliberate and acknowledged effort by the DOJ to incentivize companies to self-disclose – as the fact sheet notes, "[t]o encourage prompt reporting, the Pilot Program creates a narrow window for both whistleblowers and companies to report the same misconduct and remain eligible for potential benefits" (emphasis added). 

In addition, the pilot program establishes that using internal reporting systems can be a factor that increases an award payout amount. The guidance states that, in deciding on a potential increase, the DOJ will review "whether the whistleblower [and any legal representative thereof] participated in internal compliance systems," the timing of the internal disclosure and the disclosure to DOJ, "[w]hether, and the extent to which, a whistleblower assisted any internal investigation or inquiry," and "whether the entity has adequate and available channels for internal reporting." The DOJ can decrease an award amount if "the whistleblower undermined the integrity of... internal compliance and reporting systems," such as by "interfer[ing] with an entity's established legal, compliance, or audit procedures to prevent or delay detection of the reported criminal violation" or providing false or misleading information to company investigators. The available public materials do not provide information as to the potential quantum of these potential increases or decreases on an overall award and the standards will have to be applied on a case-by-case basis. 

Finally, the guidance notes that the DOJ will take potential retaliation against any whistleblower seriously, and that company efforts "to impede an individual from communicating directly with the [DOJ] about a possible criminal violation in the enumerated programmatic areas, including enforcing, or threatening to enforce, a confidentiality agreement," could impact a company's cooperation credit or even be viewed as potential obstruction of justice. 

Effect on Companies

Overall, it will be difficult to assess this pilot program for some time – at least for foreign corruption enforcement – because (a) the program has a three-year timeline and applies for information submitted after August 1, 2024, and (b) FCPA enforcement cases usually have extended timelines from an initial tip or other investigative lead to final resolution and payment of any forfeiture funds. Thus, it is possible that the number of awards related to foreign corruption will be limited by the time the initial period concludes, thereby reducing awareness for the program.  

Nonetheless, the pilot program does increase pressure on companies – especially private companies based in the U.S. operating internationally, other large companies with ties to the U.S. generally, and financial institutions not already covered by the SEC program – to disclose confirmed or even potential violations. The primary effect on companies is the further definition of what the DOJ might consider to be a timely self-disclosure – a key aspect to obtaining a potential declination under the CEP. The 120-day grace period established by the new pilot program could be seen as clarifying earlier public statements by DOJ officials that suggested, for example, that a company has "weeks" to make a timely disclosure. However, that period is shorter than the 180 days established by the DOJ's Mergers & Acquisitions (M&A) Safe Harbor Policy and by other public statements by DOJ officials suggesting that most disclosures within six months have been considered timely. The CEP retains key language stating that timeliness is determined on a case-by-case basis and that companies have the burden to establish that factor. 

Whether the new DOJ program will undermine company internal reporting systems is a question that will require time and experience to answer. The data on the effect of the SEC's whistleblower award program is mixed. There is an argument that the DOJ's intensive cooperation requirements (which can be more burdensome on the whistleblower in a criminal context than in a similar SEC civil or administrative proceeding), the various caveats and limitations on confidentiality for the whistleblowers, the relatively smaller pool of funds that may be available via forfeiture, and the DOJ's stricter rules for who is eligible could limit the DOJ program's impact. On the other hand, the DOJ's fact sheet suggests that this program will "supercharg[e] [DOJ] corporate prosecutions and enforcement." It is possible that the DOJ may receive new investigative leads through the program during this initial phase, but whistleblowers ultimately do not qualify for awards or they qualify for awards that do not justify their extensive efforts and personal exposure (for example, being called to testify in a trial), in which case there is a short-term burst for the DOJ but the program eventually withers. Only time will tell. 

To manage the risks from the new DOJ program, affected companies should consider:

• Analyzing their existing internal reporting and response processes to determine whether the new risk of their employees or other related individuals going to the DOJ is appropriately managed
• Accounting for the 120-day grace period established in the amended CEP in their planning processes for making decisions on self-disclosure to the DOJ and thoroughly assessing the potential presence of whistleblowers within their organization and the likelihood of such persons going to the DOJ, whether they might actually qualify for program rewards or not
• Ensuring that internal reporters are given timely and appropriate responses that signal that their allegations are being taken seriously and investigated in a timely manner
• Assessing their internal investigation/whistleblower response processes to ensure they are able to produce actionable information that can allow company decisionmakers and advisors to be able to assess the risks and benefits of a self-disclosure to the DOJ within 120 days
• Examining anti-retaliation policies, updating related training, and considering whether any corporate policies or practices related to confidentiality or non-disclosure agreements might be questioned by the DOJ as potential issues with the company's compliance program or – worse – potential avenues for allegations of obstruction of justice

For more information, please contact:

John E. Davis, jdavis@milchev.com, 202-626-5913

Daniel Patrick Wendt, dwendt@milchev.com, 202-626-5898

Andrew T. Wise, awise@milchev.com, 202-626-5818

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