What Companies Need To Know About New Whistleblower Reward Programs

The U.S. Department of Justice (DOJ) has announced plans to offer financial incentives to whistleblowers who report allegations of wrongdoing. It’s an effort to fill gaps left open by existing whistleblower and bounty provisions offered by the SEC, CFTC, IRS and FinCEN.

The DOJ envisions a pilot program within 90 days, with a formal start date for the full program later this year.

U.S. Attorney’s Offices in New York and California announced plans for similar whistleblower reward programs this year.

What kinds of information is the DOJ looking for?

The DOJ has made clear that it will accept information about alleged violations of any federal law, but it has a keen interest in:

• 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.
• Domestic corruption cases, especially involving illegal corporate payments to government officials.

There is no reason to think new whistleblower investigations will be limited to these three categories. Given the breadth of the DOJ’s enforcement mandates, DOJ attorneys across many departments will have access to a new source of information related to potential violations of antitrust, environmental and civil rights laws and other statutes.

U.S. Attorneys in New York and California have announced similar programs.

In January, the U.S. Attorney’s Office for the Southern District of New York said it would launch its own Whistleblower Pilot Program.

The SDNY’s program applies broadly to so-called white collar and public corruption offenses, is not limited in its breadth and offers the prospect of receiving a non-prosecution agreement as the reward for coming forward if certain conditions are met.

Those conditions include that the information is not already public or known to the government, that the disclosure is voluntary (as opposed to being compelled by a subpoena), that the whistleblower is able to provide substantial assistance in the investigation and prosecution of someone who is equally or more culpable, that the whistleblower truthfully discloses all criminal conduct in which the whistleblower has been involved (which cannot include certain offenses) and that the whistleblower is not a public official, a law enforcement agent or a CEO or CFO of a public or private company.

The U.S. Attorney’s Office in the Northern District of California said it also plans to launch a similar program.

What can companies do to prepare?

These new programs provide substantial incentives for low to mid-level employees to provide information to prosecutors, substantially increasing the risk to companies that they will become embroiled in a federal criminal investigation. To help companies minimize that risk, companies should consider:

• Reviewing whistleblower policies to ensure they broadly capture any concerns of corporate wrongdoing, rather than focusing on narrowly defined categories of wrongdoing.
• Providing multiple avenues for internal reporting, including anonymous reporting.
• Reinforcing a culture of reporting and the company’s commitment to addressing all issues that are being reported.
• Conducting timely and thorough internal investigations of issues that arise, and creating a culture in which employees who report issues believe their concerns are being taken seriously, and that, when appropriate, are being investigated by outside independent counsel.
• Educating managers and other potential recipients of employee complaints (like HR, employee relations and compliance professionals) on these expanded whistleblower programs to ensure internal reports of potential misconduct are identified and addressed at the earliest opportunity.

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Want to know more or have questions? Contact Amy Walsh or Lisa Lupion.