DOJ Announces Pilot Program to Pay Monetary Rewards to Whistleblowers

During the American Bar Association's 39th National Institute on White Collar Crime, Deputy Attorney General (DAG) Lisa Monaco announced the launch of the U.S. Department of Justice's (DOJ or the Department) pilot program to use financial rewards to incentivize whistleblowers to report corporate and financial misconduct to the Department.¹ Acting Assistant Attorney General Nicole Argentieri added additional color regarding the planned design and implementation of the pilot program.

DAG Monaco said the Department was undertaking a 90-day "policy sprint" during which it will gather information and consult with relevant stakeholders to design a pilot program to pay monetary rewards to whistleblowers under defined circumstances. The pilot program is grounded in the Attorney General's authority under Title 28 of the US Code to pay awards for "information or assistance leading to civil or criminal forfeiture." The Department's Money Laundering and Asset Recovery Section (MLARS) will lead the DOJ's efforts to define and develop the pilot program eligibility requirements. Together, DAG Monaco and AAG Argentieri explained that eligibility requirements to pay financial rewards to whistleblowers are likely to include the following:

• The whistleblower discloses original, non-public truthful information not already known to the Department (i.e., information not previously reported to the DOJ by another individual or entity or otherwise discovered by the DOJ);
• The whistleblower provides the information voluntarily (i.e., not in response to a government inquiry, reporting obligation, or imminent threat of disclosure);
• The whistleblower is not involved in the reported criminal activity;²
• No other financial disclosure incentive applies to the reporting (e.g., other federal whistleblower incentive programs); and
• All victims of the misconduct have been compensated.

AAG Argentieri further indicated that, like other US enforcement authorities with whistleblower reward programs, the DOJ anticipates limiting rewards to cases that exceed a yet-to-be-defined monetary threshold to focus the Department's limited resources on the most significant cases in terms of value.

While other federal whistleblower incentive programs already exist, DAG Monaco observed that "they resemble a patchwork quilt that doesn't cover the whole bed. They simply don't address the full range of corporate and financial misconduct that the Department prosecutes." The pilot program is intended to fill those gaps. While the DOJ will welcome information about potential violations of any federal law, DAG Monaco noted that the Department is particularly interested in:

• Criminal activity within the US financial system;
• Foreign corruption cases outside of the SEC's jurisdiction (e.g., Foreign Corrupt Practices Act (FCPA) violations by non-issuers or violations of the recently enacted Foreign Extortion Prevention Act (FEPA)); and
• Domestic corruption cases (e.g., improper corporate payments to US government officials).

In emphasizing the key requirement for whistleblowers to be "first in the door" to be eligible for a reward, DAG Monaco noted that the same criterion applied to the Department's Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP). In drawing this parallel, DAG Monaco said: "When everyone needs to be first in the door, no one wants to be second—regardless of whether they're an innocent whistleblower, a potential defendant looking to minimize criminal exposure, or the audit committee of a company where the misconduct took place. These incentives reinforce each other and create a multiplier effect, encouraging both companies and individuals to tell us what they know as soon as they know it." In many cases, however, affected companies learn of potential misconduct from whistleblowers through their reporting hotlines and cannot voluntarily self-disclose misconduct of which they are not yet aware. It remains to be seen in light of the eventual design of the pilot program whether and to what extent whistleblowers opt to report potential misconduct to the DOJ rather than to report such concerns internally at the affected company. To the extent the eventual pilot program incentivizes whistleblowers to report first to the Department, it risks depriving companies of the opportunity to address concerns in the first instance and equally overwhelming Department resources.

If, however, like the SEC's whistleblower program,³ the Department's pilot program does not dis-incentivize whistleblowers from reporting concerns internally at the affected company before reporting the concerns to the Department, data suggests that most whistleblowers will seek to report concerns internally first.⁴ In that case, it will be more important than ever for companies to evaluate and update as appropriate their internal reporting procedures, training, and messaging to ensure that both employees and managers are aware of reporting policies and reporting procedures and can make and handle internal reports promptly and appropriately, and consider whether to self-disclose conduct to the Department.

_{1 Deputy Attorney General Lisa Monaco Delivers Keynote Remarks at the American Bar Association’s 39th National Institute on White Collar Crime; Acting Assistant Attorney General Nicole M. Argentieri Delivers Keynote Speech at the American Bar Association’s 39th National Institute on White Collar Crime.  
2 By way of comparison, the SEC’s whistleblower rules provide that whistleblowers are not eligible to be considered for an award if, among other things, the whistleblower is convicted of a crime related to the SEC’s action or to a related action (e.g., a parallel action by the DOJ) for which s/he otherwise would be eligible to receive an award.  76 F.R. 34363 § 240.21F-8(c)(3). That said, short of a conviction, a whistleblower’s culpable involvement in the conduct giving rise to the action does not preclude him or her from receiving an award, although such award may be reduced based on the culpable conduct. § 240.21F-6(b)(1).  
3 Under the SEC’s program, whistleblowers who report internally, and then to the SEC within 120 days of making the internal report, are eligible for an award, and also benefit from the results of any investigation the affected company may conduct and self-report to the SEC.  In connection with awards over $5 million, the SEC further considers as a positive factor in determining the award amount whether the whistleblower reported concerns internally before or at the same time as s/he reported the concerns to the SEC.  See SEC Office of the Whistleblower, FAQs (available at https://www.sec.gov/whistleblower/frequently-asked-questions).  
4 The SEC’s 2021 Annual Whistleblower Program Report to Congress revealed that of the approximately 60% of the award recipients that year who were current or former “insiders” of the entity that was the subject of the report to SEC, over 75% reported concerns internally before reporting them to the SEC.}

Dhruv Kumar (Law Clerk, White & Case, Los Angeles) contributed to the development of this publication.

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