by Max Rodriguez

Not even three months into the new year, the Department of Justice has announced three new pilot whistleblower programs that meaningfully incentivize whistleblowers to come forward and bring new information to the government’s attention. These programs have the potential to help supercharge DOJ’s already-substantial enforcement capabilities and fill a much-needed gap for whistleblowers, who were limited to reporting information to subject matter-specific agency programs or only pursuant to individual enforcement authorities under DOJ’s purview like the False Claims Act.

Still, details matter, and implementation is everything. Many questions remain about how these programs will work in practice, and how they will interact with other overlapping or abutting whistleblower programs. These overlaps and details will present challenges for the government and for attorneys representing whistleblowers to minimize the risk and maximize the reward for their clients.

New DOJ Pilot Programs

SDNY: On January 10, U.S. Attorney for the Southern District of New York Damian Williams announced the creation of a Whistleblower Pilot Program to incentivize individuals to come forward with information about certain criminal conduct.[1] The Office then released a formal policy explaining that the Office would commit to entering into a non-prosecution” related, in essence, to white-collar or public corruption offenses.[2] Obtaining an NPA under the policy will require satisfaction of six requirements:

1. “The misconduct has not previously been made public and is not already known to SDNY or to any component of the Department of Justice (“DOJ”);”
2. “The individual discloses the criminal conduct voluntarily to SDNY and not in response to a government inquiry or obligation to report misconduct to SDNY or any component of DOJ, and prior to imminent threat of disclosure or government investigation;”
3. “The individual is able to provide substantial assistance in the investigation and prosecution of one or more equally or more culpable persons, and is prepared to cooperate fully with this Office in its investigation and prosecution of the disclosed conduct;”
4. “The individual truthfully and completely discloses all criminal conduct in which the individual has participated and of which the individual is aware;”
5. “The individual is not (a) a federal, state, or local elected or appointed and confirmed official; (b) an official or agent of a federal investigative or federal law enforcement agency; or (c) the chief executive officer or equivalent or chief financial officer or equivalent of a public or private company; and”
6. “The individual has not engaged in any criminal conduct that involves the use of force or violence, any sex offense involving fraud, force, or coercion, or a minor, any offense involving terrorism or implicating national security or foreign affairs, and does not have a previous felony conviction or a conviction of any kind involving fraud or dishonesty.”

Northern District of California: Earlier in March, the U.S. Attorney’s Office for the Northern District of California announced that they would be issuing a similar policy to SDNY for their office.[3] Other offices with high-volume white-collar practices may follow suit.

DOJ Whistleblower Reward Program: On March 7, during a keynote speech at the American Bar Association’s National Institute on White Collar Crime, Deputy Attorney General Lisa Monaco announced that DOJ would be “launching a 90-day sprint to develop and implement a pilot program, with a formal start date later this year” for a “DOJ-run whistleblower rewards program.”[4] The announcement was high-level, but made clear that some essential guard rails would guide the program. Rewards to whistleblowers would be paid:

• “Only after all victims have been properly compensated;”
• “Only to those who submit truthful information not already known to the government;”
• “Only to those not involved in the criminal activity itself;”
• “And only in cases where there isn’t an existing financial disclosure incentive – including qui tam or another federal whistleblower program.”

DAG Monaco also noted that DOJ would “always accept information about violations of any federal law” but that the Department was “especially interested in information about:”

• “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.”

However, there is no public indication that DOJ’s program will be so limited. This could potentially mean the program could encompass the ability to submit information across the Department’s diverse enforcement authorities, including antitrust, civil rights, environmental violations, and more.

Whistleblower Reward Programs Are Essential, And They Work

The wisdom of this aggressive new expansion of procedures for incentivizing whistleblowers is borne out by the success of its predecessors. The data tells one clear story: programs that not only protect but also meaningfully reward whistleblowers work.

The oldest and most unique of these programs is the qui tam provisions of the False Claims Act. The FCA allows individuals or entities to file actions under seal on behalf of the United States to, among other particulars, report information about fraud related to the submission of claims for government monies.[5] Qui tam actions have returned a staggering amount of wrongfully-obtained money to the government’s coffers. As Principal Deputy Assistant Attorney General Brian Boynton announced at the Federal Bar Association’s Qui Tam Conference last month, DOJ has recovered over $75 billion under the False Claims Act since 1986, and has recovered over $2 billion per year each of the last fifteen years.[6] DOJ reported that last year, of the $2.7 billion the government recovered under the FCA, $2.3 billion was recovered from cases initiated or litigated by whistleblowers on the government’s behalf.[7]

Newer programs at other agencies have grown rapidly and made similarly valuable impacts. Created as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission’s program is administered by a specialized Whistleblower Office that assesses submissions, refers them for consideration by enforcement staff, and determines award eligibility.[8] Since the SEC’s program began in 2011, the agency has awarded more than $1.9 billion — $279 million alone in 2023 — to 397 whistleblowers.[9] Estimating conservatively, this means enforcement recoveries by the SEC based on whistleblowers’ submissions and participation in investigations total at least $19 billion since 2011.

The Commodity Futures Trading Commission’s Whistleblower Program — also created as a part of Dodd-Frank — operates similarly to the SEC’s program and allows whistleblowers to report violations of the Commodities Exchange Act. The CFTC’s program also shows the success of the program. In its most recent annual report, the CFTC’s Whistleblower Office announced that it had awarded $16 million to seven whistleblowers in 2023, and that since 2011 it had awarded almost $350 million to only forty-one whistleblowers.[10] The report also noted that whistleblowers have helped the agency to recover over $3 billion during that time.

There is no fighting these figures. Rewarding whistleblowers helps to grow and drive recoveries for the government. DOJ’s announcement of an agency-wide gap-filler whistleblower reward program is a further investment in this approach to government investigation and enforcement.

Challenges for Practitioners

These new pilot programs at DOJ offer enormous promise, but they also present unique challenges. The government has to consider these challenges in its implementation of its new initiatives and practitioners have to bear them in mind in advising their clients how to weigh their options.

Law and Culture of Alternate Remedies: As mentioned above, DAG Monaco’s remarks noted that the reward program would apply “only in cases where there isn’t an existing financial disclosure incentive,” mentioning the FCA and other programs specifically. If a whistleblower reports information to the SEC, but DOJ recovers based on the information, where does that leave the whistleblower? Some overlaps comfortably preserve the whistleblower’s right to a reward, but some questions remain.

The SEC and CFTC whistleblower reward programs have comfortably addressed whistleblower concerns about so-called “alternate remedies.” The agencies’ implementing regulations explicitly and broadly entitle a whistleblower to receive “an award based on amounts collected in certain related actions” including “judicial or administrative action[s]” brought by the “Attorney General of the United States.”[11]

However, other program overlaps are murkier and will require careful consideration by DOJ. Under the FCA, a whistleblower retains their right to an award if the government “elect[s] to pursue its claim through any alternate remedy available to the Government, including any administrative proceeding to determine a civil money penalty.”[12] But depending on “the nature of the legal claim” the government asserts, whistleblowers with valuable information have still been shut out of their share in overlapping enforcement actions, like civil actions under the Food Drug and Cosmetic Act[13] or criminal restitution.[14] Whatever the merits of the judicial decisions interpreting the “alternate remedy” provision of the FCA, as a policy matter this leaves valuable whistleblowers out in the cold, even if the government obtains an enormous recovery based on their information.

The newly-announced whistleblower reward program at DOJ could solve this problem, though DAG Monaco’s comments raise questions that hopefully the Department’s policy process will address.

Culturally, agency attitudes also warrant consideration. Whistleblowers’ awards will depend on the discretion of supervisors and line prosecutors. For some of them, authorizing rewards to private parties for assisting their investigations will be new, unnatural, or unusual. DOJ’s creation and rollout of the whistleblower reward program will need to include cultural buy-in to show all Department stakeholders the value of whistleblower rewards.

Harmonious Tension: Will these new whistleblower programs violate the maxim that “crime doesn’t pay”? In some rare circumstances, they can. Despite the seeming tension, whistleblower programs contemplate providing awards to whistleblowers who are not pure bystanders. Even in circumstances where a whistleblower is found to have “planned and initiated the violation” of the FCA, they are still entitled to a reduced award.[15] The SEC and CFTC’s programs similarly consider the whistleblower’s culpability, but do not categorically preclude awards for those with culpability.[16] The only exception to this, in the context of both the FCA and Dodd-Frank, is if a person is convicted of a crime arising from their role in the underlying conduct.[17] In this respect, there is the potential for some handful of cases that satisfy the criteria for both the SDNY pilot program and a reward program, despite their seeming incongruence.

Know Your Lane: White collar investigation and criminal defense attorneys are experienced in helping clients navigate interactions with prosecutors and regulators when they are the subject or target of an investigation, with many tactics directed towards minimizing exposure and carefully calibrating how clients interact with the government, if at all. Whistleblower attorneys are experienced in helping clients to bring information to the government’s attention to present as comprehensive a picture as they can to maximize the chance of enforcement and recovery. Some are experienced in both, but many are not.

There is a tension between a client’s interests that are informed by each of these skillsets. It is important for practitioners to recognize the full panoply of their clients’ rights and interests, which they can help with, and which they can’t. Whistleblowers simultaneously seeking to avail themselves of a reward program and the SDNY pilot program may benefit from multiple perspectives, or specifically seek out someone comfortable walking the tightrope.

Conclusion

As whistleblower programs grow in scope and number, in addition to their benefits they will also present challenges in application, overlap, and strategic divergence. However, the benefits — to would-be whistleblowers and to the government — far outweigh the challenges. The newly-announced whistleblower pilot programs at DOJ represent the latest recognition that whistleblowers can offer the government enormous value in achieving its enforcement objectives.

Footnotes

[1] https://www.justice.gov/usao-sdny/pr/us-attorney-williams-announces-enforcement-priorities-and-sdny-whistleblower-pilot

[2] https://www.justice.gov/d9/2024-02/sdny_wb_policy_effective_2-13-24.pdf

[3] https://www.lw.com/admin/upload/SiteAttachments/DOJ-announces-new-whistleblower-program.pdf

[4] https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-monaco-delivers-keynote-remarks-american-bar-associations

[5] https://www.law.cornell.edu/uscode/text/31/3730

[6] https://www.justice.gov/opa/speech/principal-deputy-assistant-attorney-general-brian-m-boynton-delivers-remarks-2024

[7] https://www.justice.gov/opa/pr/false-claims-act-settlements-and-judgments-exceed-268-billion-fiscal-year-2023

[8] https://www.sec.gov/whistleblower

[9] https://www.sec.gov/files/fy23-annual-report.pdf

[10] https://www.whistleblower.gov/sites/whistleblower/files/2023-10/FY23%20Customer%20Protection%20Fund%20Annual%20Report%20to%20Congress.pdf

[11] 17 C.F.R. § 240.21F-3(b), (b)(1)(i); see also 17 C.F.R. 165.11(a)(1)(i).

[12] 31 U.S.C. § 3730(c)(5).

[13] United States v. Novo A/S, No. 20-7062, 2021 WL 3043297 (D.C. Cir. July 20, 2021).

[14] See, e.g., United States v. Wegeler, 941 F.3d 665 (3d Cir. 2019).

[15] 31 U.S.C. § 3730(d)(3).

[16] 17 C.F.R. § 240.21F-6(b)(1).

[17] See 31 U.S.C. § 3730(d)(3); 15 U.S.C. § 78u-6(c)(2)(B).

Max Rodriguez is the Principal and Founder of Law Office of Max Rodriguez PLLC. Max represents whistleblowers and others seeking justice and accountability.

The views, opinions and positions expressed within all posts are those of the author(s) alone and do not represent those of the Program on Corporate Compliance and Enforcement (PCCE) or of the New York University School of Law. PCCE makes no representations as to the accuracy, completeness and validity or any statements made on this site and will not be liable any errors, omissions or representations. The copyright of this content belongs to the author(s) and any liability with regards to infringement of intellectual property rights remains with the author(s).