DOJ Unveils the Corporate Whistleblower Awards Pilot Program

Earlier this month, the US Department of Justice (DOJ) officially launched its new three-year Corporate Whistleblower Awards Pilot Program (Pilot Program). The focus of the Pilot Program is to incentivize the reporting of misconduct—specifically misconduct within financial institutions, foreign and domestic corruption and bribery, and health care fraud—in order to “fill the gaps” in other federal whistleblower programs. DOJ first announced its plan to create the Pilot Program in March at the American Bar Association’s 39^th National Institute on White Collar Crime (as discussed in our blog post here).

Notably, the Pilot Program creates further incentives for companies to build robust compliance programs. It also creates a 120-day countdown for companies to self-report misconduct reported by whistleblowers in order to still qualify for a presumption of declination under the DOJ’s Corporate Enforcement and Voluntary Self-Disclosure Policy.

Specifics of the DOJ Pilot Program

To be eligible under the Pilot Program, a whistleblower must make a submission to DOJ that (i) relates to a specific, enumerated subject matter (see below), (ii) is truthful and complete, (iii) contains “original” information, (iv) is “voluntary,” and (v) results in DOJ collecting over $1 million in net proceeds. 

A whistleblower is not eligible for an award through the Pilot Program if the whistleblower would be eligible for an award through another U.S. government or statutory whistleblower program, e.g., qui tam. Whistleblowers also are ineligible for rewards if DOJ determines that the whistleblower meaningfully participated in the criminal activity.

• Subject Matter. The DOJ Pilot Program focuses on the following subject-matter areas: 
  • Violations by financial institutions, their insiders, or agents, including schemes involving money laundering and fraud against or non-compliance with financial institution regulators;
  • Violations related to foreign corruption and bribery by, through, or related to companies, including violations of the Foreign Corrupt Practices Act and the Foreign Extortion Prevention Act;
  • Violations committed by or through companies related to the payment of bribes or kickbacks to domestic public officials;
  • Violations involving conduct related to health care not covered by the Federal False Claims Act. 
• Truthful and complete. Whistleblowers must share all available information regarding the misconduct, including any involvement of their own. Whistleblowers are further encouraged to “cooperate” to provide “assistance” to DOJ, and to work “in a proactive manner under the supervision of” DOJ; such assistance is evaluated and considered by DOJ as one of the criteria for determining the ultimate amount of the award. 

The Pilot Program creates incentives for whistleblowers to engage “in good faith” with the corporation’s internal reporting mechanisms first and rewards those who do. Specifically, when calculating the whistleblower reward, the new policy states that DOJ will take into account whether the whistleblower made an internal report, the extent and timing of the report, and the extent to which the whistleblower cooperated in the internal inquiry. 

• Original Information. Original information includes non-public information not previously known to DOJ and information that “materially” adds to the information DOJ already has. Awards therefore will be available to whistleblowers who provide “material” contributions to already active DOJ investigations. 
• Voluntary Submission. A whistleblower must make a “voluntary” submission before a DOJ request or inquiry is directed to the individual, where the individual has no pre-existing obligation to report the information to DOJ, and in the absence of an actual or imminent government investigation. 

The Program also incentivizes companies to make their own voluntary disclosures. Pursuant to the Pilot Program, DOJ amended the DOJ’s Corporate Enforcement and Voluntary Self-Disclosure Policy to offer a presumption of a declination if a company voluntarily self-reports within 120 days of receiving an internal whistleblower report (and the company meets the other requirements under the original policy).

• Award Amount. If the whistleblower’s information results in a forfeiture of over $1 million, the whistleblower may be eligible for an award. While the amount of the award is at the sole discretion of DOJ, there is a presumption of awarding the maximum 30% of the first $10 million of the net proceeds forfeited in the absence of whistleblower culpability, delay, investigative interference, or role in management.

Key Takeaways

Overall, the new Pilot Program signals DOJ’s continued focus on corporate misconduct and desire to incentivize self-disclosure. This Pilot Program follows several other federal whistleblower programs, including the SDNY Whistleblower Pilot Program which we discussed here. With the growing emphasis on corporate self-disclosures, companies may wish to consider the following takeaways.

• Increased focus by regulators on direct reporting. There has been a growing trend in whistleblowers reporting directly to authorities rather than using internal reporting structures, which we wrote about here. Going forward, companies may wish to keep in mind that globally, regulators are increasingly providing additional incentives for whistleblowers to come forward and offering whistleblowers greater protection and monetary rewards for doing so (for further discussion, see here).  As has always been true, a robust and effective compliance program that is reinforced and supported by the company’s most senior stakeholders will best position the company for avoiding and ferreting out misconduct.
• Evaluate and enhance internal capabilities. Given the 120-day window to self-report, companies may wish to evaluate their systems and ensure that their teams have sufficient resource to handle reports of misconduct in a timely manner. Additionally, it is possible that companies may receive an influx of internal whistleblower reports—both credible and not—as a result of the Pilot Program incentives, which may strain compliance resources, particularly those that are leanly resourced.

Companies should also be aware that with the introduction of this Pilot Program, there may be an uptick in DOJ inquiries. It may therefore be a good time to review risk management plans and establish playbooks to ensure that the company is prepared to address such inquiries.

• Test reporting channels. The Pilot Program notes that DOJ will examine the adequacy and availability of channels for reporting misconduct and balance this against whistleblower actions. Companies may therefore wish to ensure that hotlines are operational and available to all employees, and that appropriate procedures are in place to review and investigate reports of misconduct.