Justice Department Announces New Corporate Whistleblower Reward Program

On March 7, 2024, at the American Bar Association’s National Institute on White Collar Crime, Deputy Attorney General Lisa O. Monaco announced that the Department of Justice (“DOJ”) kicked off a “90-day sprint” to implement a new whistleblower reward program for individuals who report criminal misconduct at public or private companies, noting DOJ will be particularly interested in reported violations of the Foreign Corrupt Practices Act (“FCPA”) and the recently enacted Foreign Extortion Prevention Act (“FEPA”). The following day, Acting Assistant Attorney General Nicole Argentieri provided additional details, explaining that the program is intended to replicate the success of existing whistleblower incentive programs across the Department’s broader enforcement portfolio. Their remarks also addressed the Department’s current priorities in corporate criminal enforcement, including encouraging voluntary self-disclosure, and new initiatives around Artificial Intelligence (“AI”).

Whistleblower Reward Program

Over the next 90 days, DOJ will launch a new program that provides monetary rewards to whistleblowers who report corporate misconduct. DOJ believes the program complements its voluntary self-disclosure policy: the latter encourages companies to walk in criminal misconduct, while the new whistleblower program incentivizes individuals to do the same. According to Monaco, “when everyone needs to be first in the door [to receive a monetary benefit], no one wants to be second.”

Monaco noted in her speech that other federal enforcement agencies, including the SEC, CFTC, IRS, and FinCEN, already have whistleblower reward programs that have proven successful, but that those programs are limited in scope and do not “address the full range of corporate and financial misconduct that the Department prosecutes.” Argentieri stated that the pilot program is intended to “fill gaps” in existing federal whistleblower programs by providing financial incentives to disclose misconduct where no such financial incentives currently exist. According to Monaco, DOJ will be particularly interested in “foreign corruption cases outside of the jurisdiction of the SEC, including [FCPA] violations by non-issuers and violations of the recently enacted [FEPA]” along with “criminal abuses of the U.S. financial system” and “domestic corruption cases, especially involving illegal corporate payments to government officials.” 

The development of the whistleblower reward program will be led by the Criminal Division’s Money Laundering and Asset Recovery Section (“MLARS”), as the statutory authority for the reward program is the same that DOJ relies on for the asset forfeiture program MLARS administers. 

DOJ has already instituted some “basic guardrails” for this new program, including:

1. compensation will be available only to individuals who provide truthful information the government was not previously aware of and who were not themselves involved in the criminal activity;
2. a reward will only be provided after all victims of the reported misconduct have been properly compensated;
3. an informant may receive a reward only where there was not an existing financial incentive to disclose, such as through a qui tam action or under another federal whistleblower program;
4. a reward will be available only where the monetary sanction imposed for the reported misconduct exceeds a specific threshold. This threshold has not been announced, but Argentieri in her address pointed to SEC and CFTC programs, which limit rewards to cases in which the agency orders sanctions of $1 million or more, as examples that DOJ is reviewing. She noted that DOJ is open to “receiving input about what the proper threshold should be.”

Existing Initiatives to Incentivize Disclosure of Corporate Misconduct

In her remarks, Monaco also discussed existing programs to incentivize disclosure to build “an enforcement framework that promotes good corporate citizenship.” She highlighted DOJ’s twin priorities of “holding individuals accountable for corporate misconduct” and “imposing stiffer penalties on corporate recidivists,” and emphasized that DOJ would employ a “mix of carrots and sticks” to encourage companies to build stronger compliance cultures that pro-actively address and bring issues to DOJ’s attention.

Monaco emphasized that “a resolution will always be more favorable with voluntary self-disclosure” and referenced new pilot programs in the Southern District of New York and the Northern District of California that extend the benefits of corporate self-disclosure to culpable individuals who report new information to DOJ and agree to cooperate against other culpable individuals. She also pointed to the Mergers & Acquisitions Safe Harbor Policy, announced in October 2023 and since codified in the Justice Manual, which is designed to incentivize companies to come forward with evidence of wrongdoing they identify within six months of acquiring another company in a bona fide arm’s-length transaction by offering a presumptive declination of charges.

In addition to self-disclosure credit, there are other ways that companies can earn credit when resolving criminal misconduct with the Department. For instance, the Department’s Compensation Incentives and Clawbacks Pilot Program results in a dollar-for-dollar reduction of monetary penalties and ensures that individual wrongdoers do not reap monetary rewards for directly engaging in misconduct. Companies are also encouraged to remediate and continually invest in their compliance programs, and finally to cooperate in government investigations.

In contrast to these incentives, Monaco highlighted recent cases where DOJ had imposed significant and novel penalties on corporate recidivists to punish a perceived failure to invest in compliance after previous enforcement actions. For example, DOJ required telecommunications firm Ericsson to plead guilty to FCPA violations in 2023 after it breached a 2019 deferred prosecution agreement. Prosecutors also sought and were granted the novel remedy of specific performance against pharmaceutical manufacturer Teva, requiring Teva to divest itself of a product line as part of a 2023 investigation into an alleged price fixing scheme that arose after Teva had previously entered into a deferred prosecution agreement for FCPA violations in 2016.

As with the whistleblower reward program, Monaco emphasized that the goal motivating all of these efforts is to “encourage companies to step up and own up and report misconduct to the government” using a “first-in-the-door strategy” intended to communicate that “neither companies nor individuals can afford to sit on evidence of wrongdoing.”

Combatting Threats from AI

Monaco closed her remarks by discussing DOJ’s efforts to address the threats posed by AI, announcing initiatives that DOJ is undertaking to address situations in which AI enables or exacerbates wrongdoing. First, prosecutors will be seeking stiffer sentences where individual or corporate defendants deliberately misuse AI to make white-collar crime “significantly more serious,” analogizing AI to dangerous weapons that trigger sentencing enhancements. Second, when assessing the effectiveness of corporate compliance programs, DOJ will now consider how well the program mitigates risks relating to AI. Finally, Monaco announced that DOJ will be launching “Justice AI,” a new initiative that will convene stakeholders from industry, law enforcement, academia and other groups to address the impact of AI, including on corporate compliance.

Key Takeaways

DOJ will be implementing a new whistleblower reward program that will significantly expand the number of companies that may be the subject of whistleblower complaints and subsequent investigation. Once the reward program launches, whistleblowers will be incentivized to report misconduct for any publicly or privately held U.S. company or any foreign company with U.S.-based business activities that bring it within DOJ’s jurisdiction.

DOJ is continuing to pursue a mix of carrots and sticks to encourage individuals and companies to comply with the law and to self-report misconduct, including prosecuting individual wrongdoers and stiffening penalties for repeat corporate offenders.

DOJ is also developing principles and initiatives to address the continually emerging risks of criminal misuse of AI.