DOJ Continues Focus on Corporate Crime with New Whistleblower Program

DAG Monaco explained that the new program is intended to fill a gap in the current “patchwork” of whistleblower reward programs. Programs administered by the US Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Internal Revenue Service (IRS), and Financial Crimes Enforcement Network (FinCEN) only cover civil misconduct within the agencies’ respective jurisdictions, and qui tam actions are limited to actions alleging fraud against the government. DAG Monaco noted that the DOJ will be particularly interested in tips about criminal abuses of the US financial system, Foreign Corrupt Practices Act (FCPA) violations by private companies, violations by foreign public officials of the recently enacted Foreign Extortion Prevention Act (FEPA), and domestic corruption.

Although the DOJ will develop the pilot program in the next three months and it will officially begin later this year, DAG Monaco provided a general framework for how it will work. For example, the program will not offer immunity to individuals who have participated in the violations they disclose to the department, and it will only apply in cases that are not covered by existing whistleblower programs. In addition, whistleblowers will only receive rewards after victims of the crime have been compensated. In separate remarks, US Acting Assistant Attorney General (AAAG) Nicole Argentieri added that, similar to SEC and CFTC programs, whistleblowers are only eligible for rewards if they submit original, non-public, truthful information that is not already known to DOJ. The information must be provided on a voluntary basis and not in response to any government inquiry, preexisting reporting obligation, or imminent threat of disclosure. AAAG Argentieri also stated that she envisions a monetary threshold for cases in which rewards may be granted, similar to the SEC and CFTC’s requirement that rewards are limited to matters where fines and penalties of $1 million or more are ordered.

The DOJ’s new whistleblower program is the latest in its efforts to create incentives for companies and individuals to take corporate compliance seriously. We’ve previously written about the DOJ’s mergers and acquisition safe harbor policy that protects companies that disclose misconduct at entities that they acquire, and remediate the misconduct, from DOJ prosecution. Last year, the DOJ announced a pilot program requiring companies entering criminal resolutions to implement compliance-related criteria in their compensation and bonus systems that allow them recoup compensation from culpable directors and employees. In DAG Monaco’s words, these programs are designed “to encourage companies to take responsibility for misconduct within their organizations” and to provide general counsels and compliance officers tools to create a business case for compliance.

As the DOJ develops the new whistleblower program, companies should assess whether they have implemented sufficient internal reporting hotline mechanisms to incentivize employees to bring potential misconduct to the company’s attention, rather than make external reports. Importantly, companies should also have policies and procedures in place protecting reporters from retaliation and to ensure any internal reports are expeditiously reviewed and investigated.

The ArentFox Schiff team has extensive experience advising on, and even building, internal reporting hotlines and can assist you in developing tools that will help avoid whistleblower reports.

A link to DAG Monaco’s speech can be found here, and a link to AAAG Argentieri’s speech can be found here.