The Department of Justice Introduces a New Corporate Crime Whistleblower Program

April 26, 2024
The Department of Justice Introduces a New Corporate Crime Whistleblower Program

Corporate insiders with knowledge of misconduct not handled by preexisting whistleblower programs will soon be able to potentially serve as whistleblowers and receive compensation for their cooperation. Deputy Attorney General Lisa Monaco announced a new Department of Justice (DOJ) whistleblower program that may reward those who provide information about corporate fraud and other white-collar crimes in addition to existing whistleblower programs, such as those of the SEC and CFTC, among others, that permit whistleblowers to receive up to 30% of the monetary sanctions as a whistleblower award.

“The premise is simple: If an individual helps The DOJ discover significant corporate or financial misconduct—otherwise unknown to us—then the individual could qualify to receive a portion of the resulting forfeiture,” Monaco said.

She also added, “Ever since Dodd-Frank created whistleblower programs at the SEC and the CFTC, those agencies have received thousands of tips, paid out many hundreds of millions of dollars, and disgorged billions in ill-gotten gains from corporate bad actors.”

This move communicates a strong focus on the part of the DOJ to close the gaps in fraud reporting by incentivizing whistleblowers to report widespread corporate malfeasance that was not actionable under other whistleblower programs. Historically, if the information provided by a whistleblower didn’t fit squarely into the existing programs, the respective individual may have had the downside of becoming discovered, but not the upside for providing the information. This paradigm fails to incentivize high placed individuals from coming forward, contrast to the SEC and CFTC whistleblower programs that have led to successful cases because of well-placed insiders providing indispensable information.

According to noted whistleblower attorney Jason T. Brown a former DOJ alumnus himself, “This could be the secret sauce that stops corporate implosions like Enron, Celsius and FTX, and stops widespread fraudulent schemes that programs like the SEC whistleblower program stop short at addressing unless there’s investor harm. For example, if someone knows that a company is deliberately overbilling its clients but is restrained by an arbitration clause preventing widespread accountability, this tool may be the one we’ve been waiting for to hold the company accountable, while rewarding the courageous individual who is willing to risk it all to do what’s right.” Brown went on to further note that he hopes the program will have elements of the SEC program in which the whistleblower could potentially be anonymous from start to finish with whistleblower counsel.

This is a major development that will dramatically increase the opportunity for both corporate and other white-collar whistleblowers to report fraud, and potentially collect whistleblower awards.

The DOJ will develop a pilot program over the next 90 days, with plans to implement it later this year. The new program formalizes an approach that’s occasionally been used in the past to reward people for providing information resulting in criminal or civil forfeitures, and will launch later this year, Monaco added. Jason T. Brown, former FBI Special Agent and head of the whistleblower law firm Brown, LLC cautioned though, “While I’m extremely bullish that conceptually this is a terrific idea, expect challenges from defense counsel regarding private individuals receiving a portion of the government forfeiture and with the Chevron deference doctrine awaiting a decision in the Supreme Court, anything can happen, but this is a missing piece of the puzzle.”

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What Will the Corporate Crime Whistleblower Program Cover?

Some of the basic guardrails for the new program will include offering rewards (i) only to those who submit truthful information not already known to the government and who are not involved in the criminal activity itself; (ii) after all victims have been properly compensated; and (iii) only in cases where there is no existing financial disclosure incentive (including qui tam or another federal whistleblower program).

DAG Monaco also sent a message directly to whistleblowers, encouraging them to come forward with information about violations of any federal law, and particularly:

  • Criminal abuses of the U.S. financial system;
  • Foreign 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[3].

Recent Examples of Corporate Fraud

In recent months, Justice Department agents and prosecutors have secured convictions for the CEOs of the world’s two largest cryptocurrency platforms, FTX and Binance. That’s on top of other executives from a variety of industries. Now, it wants to continue its efforts to combat fraud even outside of SEC and CFTC violations, and there is certainly an unfortunate rich history of such fraud.

In 2019, Ericsson signed a deferred prosecution agreement (DPA) for using third-party agents to make bribe payments and manage off-the-books funds in several countries, violating the Foreign Corrupt Practices Act (FCPA). Following the 2019 resolution, Ericsson breached the DPA by not fully disclosing information about schemes in Djibouti, China, and other potential FCPA violations. In 2023, Ericsson pleaded guilty to conspiracy charges related to FCPA violations, extending its probation until June 2024 and facing an additional criminal penalty of $206,728,848, eliminating previous cooperation credit[1].

In 2016, Teva Pharmaceuticals resolved an FCPA violation through a Deferred Prosecution Agreement (DPA). In 2023, during an investigation into price fixing, a more significant penalty was demanded. For the first time, specific performance became part of the remedy, mandating the sale of an entire product line—a novel approach tailored to Teva Pharmaceuticals’ unique circumstances[2].

Since Dodd-Frank established whistleblower programs at the SEC and CFTC, the agencies have received thousands of tips, paid out hundreds of millions of dollars, and recovered billions of dollars in ill-gotten gains from corporate wrongdoers. This new program is poised for the same success.

What It Means for the Whistleblowers

It has never been a better time to be a corporate or financial whistleblower. With this new Corporate Crime Whistleblower Program, the DOJ continues to assert their dedication to fraud fighting. Corporate whistleblowers have more resources available to them, more government interest in their potential disclosures, and a potential for lucrative rewards should their information prove valuable. Moreover, with the comprehensive set of protections and confidentiality provisions available, corporate whistleblowers, via a whistleblower attorney, can conceivably file a report, expose wrongdoing, and receive a recovery without every disclosing their identity if the new program is patterned after successful existing ones.

In short, the Corporate Crime Whistleblower Program is a positive development for whistleblowers, as it provides expanded opportunities for well-placed insiders to provide information in areas in which corporations eluded accountability. To learn more about the new potential program, particularly if you have information of widespread corporate wrongdoing, you should consult with a whistleblower law firm to learn your rights.