DOJ Offers Cash “Carrot” to Whistleblowers; Foreshadows “Stick” of More Corporate Enforcement

On March 7, 2024, Deputy Attorney General (DAG) Lisa Monaco delivered remarks at the American Bar Association’s 39th National Institute on White Collar Crime announcing a new Department of Justice (DOJ) pilot program that incentivizes whistleblowers to report corporate misconduct by offering monetary rewards.  Likening the program to “the days of ‘Wanted’ posters across the Old West,” DAG Monaco explained that individuals who help DOJ discover otherwise unknown, “significant” corporate or financial crime could receive a portion of the resulting forfeiture.  This program will encourage whistleblowers to report a broad range of criminal activity by bridging the divide between DOJ’s priorities and other whistleblower mechanisms such as the False Claims Act’s qui tam provision (which is only available for fraud against the government), and programs at the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and other federal agencies (which only cover misconduct within their respective jurisdictions).  By placing a bounty on corporate actors, this DOJ pilot program—which will be developed by the Department’s Money Laundering and Asset Recovery Section (MLARS)—underscores the need for companies to take stock of their compliance programs and enhance their internal reporting infrastructure.    

DOJ’s Focus on Financial Crime and Corruption

Although the Attorney General was already authorized to pay awards for information or assistance that lead to civil or criminal forfeitures—and did so on occasion—the sharpening of this tool as part of a targeted program demonstrates DOJ’s continued effort to crack down on corporate misconduct.  Notably, DAG Monaco made clear that foreign and domestic corruption and financial crimes are particular focus areas, and highlighted that DOJ is especially interested in receiving information about:

• Criminal abuses of the U.S. financial system;
• Financial 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
• Domestic corruption cases, especially involving illegal corporate payments to government officials.

Pilot Program Guardrails: Key Parameters and More Information to Come

Under the pilot program, individuals who come forward with truthful information about  “significant corporate or financial misconduct” may be offered cash payments, but only where there is no competing financial disclosure incentive (i.e., by other federal whistleblower program or qui tam), and only if the individual was not involved in the criminal activity itself.  Further, the information must not have been previously known to the government and must be provided voluntarily—meaning, not in response to any government inquiry, preexisting reporting obligation, or imminent threat of disclosure.  Whistleblowers are also second in line to victims, who must be properly compensated before any rewards are paid. 

DOJ also expects to provide rewards to whistleblowers only in cases involving penalties above a certain monetary threshold.  Though that threshold is yet to be determined, in subsequent but complementary remarks Acting Assistant Attorney General (AAG) Nicole Argentieri signaled that DOJ welcomed input on the appropriate threshold amount, and noted—as a datapoint—that both the SEC and CFTC limit rewards to cases involving sanctions of at least $1 million.

Key Takeaway: Investment in Compliance is a Priority

In the wake of this announcement, companies should carefully examine their internal compliance and reporting structures to ensure that they encourage the reporting of wrongdoing through internal channels.  At a minimum, this compliance health-check should consider the following:

• Gauging the degree to which organization-wide training, communication, and other educational efforts drive awareness of reporting mechanisms and anti-retaliation policy;
• Assessing (and updating, as appropriate) the company’s whistleblower investigation policies, protocols, and training on same to ensure completeness and consistency across business functions;
• Identifying concerns that are raised through all channels (i.e., exit interviews, cultural surveys, 360 reviews)—not only those raised via formal reporting pathways;
• Tracking report response and resolution times, as well as any remedial efforts;
• Monitoring additional key metrics related to whistleblower investigations—i.e., volume of reports, patterns of reports, whether reported issues are substantiated or unsubstantiated, whether reports are raised anonymously or not—and assessing those results at the business unit level; and
• Identifying whether complainants indicate a fear of retaliation, and if so, whether those fears are concentrated in a particular business unit.

Further, this new incentive for whistleblowers heightens the pressure on companies to carefully weigh whether to make use of DOJ’s voluntary self-disclosure mechanisms.  In DAG Monaco’s own words: “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.”