Thursday, August 1st, the Justice Department rolled out its corporate whisatleblower awards program, launching justice.gov/CorporateWhistleblower for the reporting of information about certain types of corporate crime. If the Justice Department brings a prosecution that results in the forfeiture of criminal proceeds, the whistleblower may be eligible to receive a portion of that forfeiture as a monetary award.
"With this program we’re doubling down on a proven strategy to ferret out criminal activity that might otherwise go unreported," said Deputy Attorney General Lisa Monaco.
"Law enforcement has long offered rewards to coax tipsters to report crimes — from the “Wanted” posters of the Old West to the reforms in Dodd-Frank that created whistleblower programs at the SEC and the CFTC.
"But those programs — by their very nature — are limited in scope. They only cover misconduct within those agencies’ jurisdictions. The same is true for similar programs run by the IRS and FinCEN. And qui tam actions, which offer their own whistleblowing incentives, are available only for fraud against the government.
"Our corporate enforcement program is rooted in the use of both carrots and sticks, and today’s announcement builds on our other efforts to incentivize reporting of corporate misconduct to the government.
"When a company discovers misconduct within its ranks, we want that company to come forward, so we can gather the evidence necessary to prosecute the individuals responsible. We’ve been clear about the benefits to companies that do engage in such voluntary self-disclosure. But any company that hesitates to report voluntarily should remember that we have other tools to uncover that misconduct. Thanks to the whistleblower program announced today, we now have a new investigative tool — and a powerful one at that.
Principal Deputy Assistant Attorney General Nicole M. Argentieri provided some details on the new program.
The Pilot Program covers four areas of corporate crime.
First, foreign corruption. "Some foreign corruption cases are covered by the Securities and Exchange Commission’s (SEC) whistleblower program, but many of the foreign corruption cases we prosecute are not," she said.
"Take our cases involving bribery at international commodity trading companies, which resulted in six corporate resolutions, convictions of 20 individuals, and over $1.7 billion in financial penalties including forfeiture. None of those companies issued securities in the United States, so none of them was covered by the SEC’s program.
This effort is all the more important given the recent enactment of the Foreign Extortion Prevention Act—which we plan to vigorously enforce, especially now that the President signed a bill earlier this week that will make it easier for us to proceed with successful prosecutions.
Second, crimes involving financial institutions. Financial institutions are the first defense against illicit finance, and we want whistleblowers to report abuses of the financial system that are not covered by existing whistleblower programs. This includes cases involving obstruction or defrauding financial regulators. And it includes efforts to access services from U.S. financial institutions through fraud.
Our whistleblower program will also target two areas where we are looking to expand our corporate enforcement efforts: Corrupt conduct here in the United States—such as where a company bribes a government official to win a contract—and health care fraud involving private insurers.
Fraud on federal health care benefit programs is already covered by the Civil Division’s qui tam program—and we have no intention of interfering with that highly successful program. But there is no comparable whistleblower program for fraud involving private insurers, even though estimates show tens of billions of dollars in fraud each year.
Through our Pilot Program, we are incentivizing individuals to come forward and report corporate crime in each of these four areas. We are also incentivizing companies to invest in strong internal reporting structures and to report crime when they learn about it. Alongside our Pilot Program, we are also announcing today an amendment to our Corporate Enforcement and Voluntary Self-Disclosure Policy. Under that amendment, where a company receives an internal report from a whistleblower, if the company comes forward and reports the misconduct to the department within 120 days and before the department reaches out to the company, the company will be eligible for the greatest benefit under our policy—a presumption of a declination—so long as they fully cooperate and remediate.
Some in the employment law bar see shortcomings in the new program. Concerns include the program’s funding source and anonymity protections, the absence of a minimum percentage payout, and unease about giving more discretion over the award process to the Justice Department.
The Wall Street Journal quotes attorneys noting the $50 million award cap may discourage some from coming forward. A more credible concern is that the program's scope and eligibility is hard for the lay whistleblower to grasp. “It covers a broad swath of companies but on narrow subject matter areas,” Jane Norberg, of Arnold & Porter and a former chief of the SEC’s whistleblower program told the paper.
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