Department of Justice Criminal Division Launches Corporate Whistleblower Awards Pilot Program
On August 1, 2024, the Department of Justice (DOJ) Criminal Division launched its anticipated Corporate Criminal Forfeiture Whistleblower Pilot Program. This program is intended to incentivize individuals to report original information about certain categories of corporate criminal misconduct in order to deter criminal conduct, divest criminals of the proceeds of their actions, and attempt to make victims whole.
The program will look to fill gaps in current enforcement schemes under other whistleblower programs, including under the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Financial Crimes Enforcement Network, as well as enforcement actions brought as a result of qui tam actions under the False Claims Act. As Deputy Attorney General Lisa Monaco stated in her remarks on the program, “While these programs have proven indispensable, they don’t address the full range of corporate and financial misconduct that the Justice Department prosecutes. That’s why I asked the leaders at the Criminal Division to design a program that would fill the gaps in this patchwork.”
The guidelines issued by the DOJ explain that a whistleblower is eligible for an award “if, alone or jointly with other individuals, they provide the Department with original information…and that information 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 four major subject matter areas:
1) Violations by financial institutions, their insiders, or agents, including schemes involving money laundering, anti-money laundering compliance violations, registration of money transmitting businesses, and fraud statutes, and fraud against or non-compliance with financial institution regulators.
2) Violations related to foreign corruption and bribery by, through, or related to companies, including violations of the Foreign Corrupt Practices Act, violations of the Foreign Extortion Prevention Act, and violations of the money laundering statutes.
3) Violations committed by or through companies related to the payment of bribes or kickbacks to domestic public officials, including but not limited to federal, state, territorial, or local elected or appointed officials and officers or employees of any government department or agency.
4) Violations related to (a) federal health care offenses and related crimes involving private or other non-public health care benefit programs, where the overwhelming majority of claims are submitted to private or other non-public health care benefit programs, (b) fraud against patients, investors, and other non-governmental entities in the health care industry, where the overwhelming majority of the actual or intended loss was to patients, investors, and other non-governmental entities, and (c) any other federal violations involving conduct related to health care not covered by the Federal False Claims Act, 31 U.S.C. § 3729, et seq.
The guidelines define “original information” as independent knowledge or analysis that materially adds information not previously known to the government. Whistleblowers would not qualify for an award if they, among other things, were eligible for an award under any other program, worked for or were the family member of someone who worked for the DOJ, or “meaningfully participated” in the conduct reported, or were employed in an audit capacity.
The guidelines give the DOJ broad discretion to give an award under the program. Awards are given solely at the discretion of the DOJ and there is no minimum award percentage, although DOJ notes there will be a “presumption” of the award including the maximum 30% on the first $10 million when no aggravating factors are present. Whistleblowers may receive up to 30% of up to $100 million of recovered assets, up to 5% of between $100 million and $500 million, and no percentage above $500 million. Owners, lienholders, and individual victims will be compensated first, before a whistleblower award would be available.
The DOJ detailed the criteria for determining the amount of the whistleblower award. Factors which may increase the amount of an award include how significant the information is that the whistleblower provides and how much it contributed to the success of the action, the assistance provided by the whistleblower during the government’s investigation and how timely they reported the conduct, and participation in the target company’s internal compliance program. Considerations that may decrease the amount of an award include culpability in the criminal conduct, delay in reporting the conduct, interference with internal compliance programs, and having a managerial role within the target company that oversaw the conduct.
While there is no guarantee of confidentiality, there are provisions protecting the confidentiality of whistleblower identities to the extent possible given the criminal nature of the conduct at issue, and whistleblowers may report anonymously through an attorney when submitting, though no attorney representation is required. However, DOJ expects ongoing “cooperation” from whistleblowers as needed in any investigation it opens, which could include testimony before a grand jury or in a trial. There are also provisions explaining that the DOJ will take into account retaliation or efforts to impede reporting when considering an entity’s cooperation credit or individual culpability.
In order to receive an award under the program, a whistleblower must submit their tip through the website. Similar to the SEC and other financial fraud whistleblower programs, the DOJ will publish information about successful corporate criminal forfeitures on the website, and whistleblowers who have submitted a tip they believe is related to that successful action will file a claim form within 90 days. The DOJ has sole discretion in making awards, and the determination is not appealable or subject to judicial review.
Additional efforts to fight corporate fraud and recover stolen assets should be welcomed and praised. That being said, DOJ has made clear that this 3-year pilot program is mutable, and they are open to working with stakeholders on improvements going forward. For instance, it is clear from the success of other whistleblower programs and the False Claims Act, that a minimum guaranteed award is one of the greatest incentives for whistleblowers to come forward and risk their livelihoods, and sometimes even their lives, to report dangerous criminals committing massive frauds. You will hear more from TAF Coalition as this program develops.
Jacklyn DeMar is the President & CEO of The Anti-Fraud Coalition.
