Category Archives: Whistleblowers

Empirical Data Supports Efforts to Reform Internal Corporate Whistleblower Protections

by Stephen M. Kohn, Alyce Petit, Kate Reeves, and Geoff Schweller

Left to Right: Stephen M. Kohn, Alyce Petit, Kate Reeves and Geoff Schweller (photos courtesy of authors)

Corporate whistleblowers who report through internal compliance channels face higher rates of retaliation than those who report externally to the government, according to research published in a working paper on the Social Science Research Network (SSRN).

An analysis of 8-years worth of Dodd-Frank Act and Sarbanes-Oxley Act (SOX) whistleblower retaliation cases found that over 90% of the cases involved internal whistleblowers.

These findings are of particular importance in light of Congressional efforts to amend the Dodd-Frank Act to extend anti-retaliation protections for internal whistleblowers. They also validate the importance of regulations by the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) that explicitly do not require whistleblowers to make internal reports prior to qualifying for a reward under the Dodd-Frank.

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A Thousand Pilot Programs Bloom: DOJ Pushes Forward to Further Welcome Whistleblowers

by Max Rodriguez

Max Rodriguez (photo courtesy of author)

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.

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DOJ Continues to Modernize its Criminal Antitrust Enforcement Strategy

by Richard A. Powers

(Photo courtesy of the author)

Over the past few years, the Justice Department has been hard at work on a comprehensive update to the way it detects, investigates, and prosecutes price-fixing cartels. Several recent announcements, including at last week’s ABA White Collar Conference, preview the DOJ Antitrust Division’s next steps in this generational shift—the goals of which are to refine disclosure incentives, promote individual accountability, and obtain trial convictions.

First, on March 7, 2024, Deputy Attorney General Lisa Monaco announced the DOJ is kicking off a 90-day whistleblower “policy sprint”; the finish line is a new program to complement existing regulators’ programs, rewarding qualifying whistleblowers for bringing non-public, previously unknown misconduct to the DOJ’s attention. The Antitrust Division has long sought to encourage individual self-reporting as a complement to its corporate VSD policy, so expect that this initiative will aim to improve that incentive structure. Next, the DOJ updated the Justice Manual to incorporate the M&A safe harbor policy that it announced last fall. Notably for antitrust practitioners, the JM updates included changes to the Antitrust Division’s leniency policy that provide much-needed clarification on how companies that detect potential collusion at an M&A target can avoid inheriting those liabilities by promptly reporting to DOJ. Third, senior Antitrust Division officials continue to emphasize that they are focused on developing investigations through affirmative investigative techniques, such as wiretaps and whistleblowers.

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Paying Criminal Whistleblowers: DOJ Announces A Program to Pay For Tips, and the SFO Is Considering Doing So Too

by Joshua A. Naftalis, Matt Getz, and Tracey Dovaston

From left to right: Joshua A. Naftalis, Matt Getz, and Tracey Dovaston. (Photos courtesy of Pallas Partners LLP).

In the past two weeks, the U.S. Department of Justice (DOJ) and the U.K. Serious Fraud Office (SFO) each made announcements about paying financial bounties to whistleblowers. On March 7, 2024, U.S. Deputy Attorney General Lisa Monaco announced a new DOJ whistleblower program that will compensate individual whistleblowers for reporting corporate or financial misconduct previously unknown to DOJ. This announcement followed a February 13, 2024 speech by SFO Director Nick Ephgrave, who said that he supported the idea of paying whistleblowers.

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SEC Continues to Elevate its Enforcement of Rule 21F-17(a)

by Benjamin Calitri

Benjamin Calitri (photo courtesy of Kohn, Kohn, and Colapinto LLP)

In January 2024, the SEC announced an $18 million settlement with J.P Morgan Securities for violations of Rule 21F-17(a), demonstrating its increased enforcement of the whistleblower rule, which prohibits any person from “tak[ing] any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement.” This follows a $10 million enforcement against D.E. Shaw, showing the SEC’s new stance of Rule 21F-17(a): sanctions that are actually large enough to deter illegal NDAs.

The SEC Enforcement Order found that J.P. Morgan Securities (JPMS) typically requested certain clients sign a Release if they received a credit or settlement of over $1,000, regardless of whether JPMS admitted or denied any error or wrongdoing in connection with the credit or settlement.

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White-Collar and Regulatory Enforcement: What Mattered in 2023 and What to Expect in 2024

by John F. Savarese, Ralph M. Levene, Wayne M. Carlin, David B. Anders, Sarah K. Eddy, Randall W. Jackson, and Kevin S. Schwartz

Top left to right: John F. Savarese, Ralph M. Levene, Wayne M. Carlin, and David B. Anders.
Bottom left to right: Sarah K. Eddy, Randall W. Jackson, and Kevin S. Schwartz. (Photos courtesy of Wachtell, Lipton, Rosen & Katz)

This past year was yet another notable and intensely active one across the entire range of white-collar criminal and regulatory enforcement areas. We heard continued tough talk from law enforcement authorities, especially concerning the government’s desire to bring more enforcement actions against individuals and on the need to keep ramping up corporate fines and penalties. The government largely lived up to its talking points about increasing the numbers of individual prosecutions and proceedings, particularly with respect to senior executives in the cryptoasset industry. But there were some notable stumbles. The most striking example of this was DOJ’s failure to secure convictions in cases where it attempted to extend criminal antitrust enforcement in unprecedented areas, such as no-poach employment agreements and against certain vertical arrangements—neither of which has historically been viewed as involving per se violations of the federal antitrust laws. And, as in years past, many state attorneys general remained active throughout 2023, using broad state consumer-protection statutes to bring blockbuster cases across a wide array of industries, from ridesharing and vaping to opioids and consumer technology offerings.

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Export Controls Experts Comment on Enhancements to Voluntary Self-Disclosure Policies for Export Control Violations

Panelists John D. Sonderman, Director, Office of Export Enforcement, BIS; Jana del-Cerro, Partner, Crowell & Moring LLP; Michael H. Huneke, Partner, Hughes Hubbard & Reed LLP; Sharon Cohen Levin, Partner, Sullivan & Cromwell LLP; and Joseph Facciponti, Executive Director, PCCE (Moderator) (©Hollenshead: Courtesy of NYU Photo Bureau)

On January 16, 2024, the NYU Law Program on Corporate Compliance and Enforcement hosted Matthew Axelrod, Assistant Secretary for Export Enforcement at the Bureau of Industry and Security (BIS), U.S. Department of Commerce, to deliver remarks on enhancements to BIS’s corporate enforcement policy for voluntary self-disclosures of export control violations. Assistant Secretary Axelrod’s speech was accompanied by the release of an enforcement policy memo, available here. After Secretary Axelrod’s remarks, he participated in a fireside chat and took questions from the audience. The event also featured a panel of experts on export control enforcement policy. A full agenda of the event is available here. In this post, participants from the panel share further thoughts on the issues.

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How to Avoid Risk of SEC Whistleblower Rule Violations in Connection with Settlement Agreement Confidentiality Provisions

by Tami Stark and Joel M. Cohen

Tami Stark and Joel M. Cohen (Photos courtesy of White & Case LLP)

The SEC levied charges against a registered broker-dealer and investment adviser that expand the enforcement of the whistleblower protection rule to encompass settlement agreements with clients.[1] This article should be instructive for other registered entities seeking to avoid rule violations when drafting such agreements.

As of the end of the 2023 fiscal year, the SEC has brought twenty-one enforcement actions involving violations of Rule 21F-17 since the Dodd-Frank Act empowered the SEC with the ability to bring actions against persons, including companies, for impeding reports to the SEC.[2] Last year, these actions arose primarily from employment-related agreements that violated the Rule.[3] For example, in September of 2023, the SEC levied a $10 million civil penalty against an investment adviser for using employee agreements that prohibited the disclosure of “confidential information” unless authorized by the company or required by law or an order of a court or other regulatory or governmental body.[4]

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SDNY Whistleblower Pilot Program Incentivizes Self-Disclosure and Cooperation

by Helen V. Cantwell, Andrew J. Ceresney, Andrew M. Levine, David A. O’Neil, Winston M. Paes, Jane Shvets, Bruce E. Yannett, Douglas S. Zolkind, Erich O. Grosz, and Rebecca Maria Urquiola

Top left to right: Helen V. Cantwell, Andrew J. Ceresney, Andrew M. Levine, David A. O’Neil, and Winston M. Paes.
Bottom left to right: Jane Shvets, Bruce E. Yannett, Douglas S. Zolkind, Erich O. Grosz, and Rebecca Maria Urquiola. (Photos courtesy of Debevoise & Plimpton LLP)

On Wednesday, January 10, 2024, the U.S. Attorney’s Office for the Southern District of New York (“SDNY”) launched the SDNY Whistleblower Pilot Program (the “Program”).[1] The Program seeks to incentivize individuals to report criminal wrongdoing—including corporate control failures, state and local bribery, and fraudulent dealings involving public funds—before SDNY learns of the conduct and to fully cooperate with any resulting investigations and prosecutions. U.S. Attorney Damian Williams encouraged individuals “to come clean, cooperate, and get on the right side of the law,” cautioning “[c]all us before we call you.”[2]

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Possible Unintended Consequences of the SDNY’s New Whistleblower Program

by Brian A. Jacobs and A. Dennis Dillon

From left to right: Brian Jacobs and A. Dennis Dillon (photos courtesy of authors)

Cooperating witness Gary Wang provided crucial testimony in the prosecution of Sam Bankman-Fried, by describing (among other things) how at Bankman-Fried’s direction he had coded a means for Alameda Research—the FTX-affiliated hedge fund—to withdraw unlimited funds from FTX. Mr. Wang’s credibility was enhanced by the fact he already had pled guilty to four felony counts, including conspiracy to commit wire fraud and securities fraud, and had accepted a theoretical maximum sentence of decades in prison. It is possible, but by no means certain, given Mr. Wang’s cooperation, that he will receive little or no prison time. Even so, he will carry the burden of a felony conviction forever. Had the FTX case (and his confession) come just a year later, however, might the outcome have been different?

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