Understanding the DOJ's new corporate whistleblower program

On Aug. 1, 2024, the U.S. Department of Justice launched their corporate whistleblower awards pilot program. While other agencies have offered whistleblower incentive programs for some time, the DOJ has indicated this pilot program was established to fill in missing gaps and facilitate their criminal prosecution of white-collar misconduct.

In the DOJ program, whistleblowers may be eligible for an award when they provide original, truthful information about criminal misconduct relating to one or more designated program areas that leads to forfeiture exceeding $1,000,000 in net proceeds forfeited in connection with a successful prosecution, corporate criminal resolution or civil forfeiture action related to corporate criminal conduct.

The corporate whistleblower awards pilot program is a three-year initiative managed by the money laundering and asset recovery section of the criminal division at the DOJ. At the end of the three-year pilot period, the DOJ will determine whether the program will be extended in duration or modified in any respect.

This program serves as another reminder to companies operating within U.S. jurisdiction, and their counsel, of the myriad whistleblower incentives and the thriving industry behind whistleblower representation. Such companies would be well advised to consider their approach to handling whistleblower complaints, and the subsequent action plan for investigation and, where appropriate, self-disclosure.

Key takeaways of the DOJ’s whistleblower program

• The DOJ’s corporate whistleblower awards pilot program increases the incentives for whistleblowers to report potential violations both internally to companies and externally to the DOJ. The program aligns with similar programs run by the SEC, Commodity Futures Trading Commission and other agencies in providing monetary awards for reports that lead to successful enforcement action.

• As with other U.S. government programs, the awards can be substantial: up to 30% of the first $100 million of penalties and up to 5% of subsequent penalties up to $500 million.

• As a result, the whistleblower program:

  • May increase the number of whistleblower complaints via internal reporting channels (a factor in the program in deciding the size of any subsequent financial award to the whistleblower)
  • Increases the risk that previously undisclosed compliance issues or potential violations will be reported to the DOJ by whistleblowers

• Companies that voluntarily self-report issues identified from internal whistleblower complaints within 120 days of receiving an internal whistleblower report may still be eligible for a presumption of declination, even if that whistleblower has separately reported the issue directly to the DOJ.

Establishing and enhancing your whistleblower program

As stipulated by the DOJ as well as leading corporate compliance program guidance, a well-designed whistleblower program includes a mechanism where employees can anonymously or confidentially report allegations of a breach of the company’s code of conduct, company policies and procedures, or suspected or actual misconduct. A company’s complaint-handling process should include measures to create a workplace atmosphere without fear of retaliation, appropriate processes for the submission of complaints, processes to protect whistleblowers and processes for handling investigations of such complaints.¹

DOJ guidance outlines the four major components of a confidential reporting structure and investigation process, including:

• Effectiveness of the reporting mechanism
• Properly scoped investigations by qualified personnel
• Investigation response
• Resources and tracking of results

When establishing or reviewing a whistleblower program, companies and entities should consider the administration of a whistleblower hotline and reporting mechanisms which can be provided internally or by a third party. Further, a clear policy that communicates the company’s position on whistleblowing, including protections against retaliation, should be established, distributed and understood by internal and external stakeholders and supported by the organization’s culture. As part of the handling of complaints, companies and entities should determine who will be responsible for receiving and handling reports, investigating, escalating, and involving the audit committee and the board.

When enhancing a whistleblower program, companies and entities should consider mechanisms to evaluate and measure the program, support training, and encourage cultural acceptance over time.

Per the DOJ guidance, companies and entities need to consider conducting a root cause analysis and taking lessons learned from completed investigations. They should then assess their internal controls and overall compliance program.

^{[1] (https://www.justice.gov/criminal/criminal-fraud/page/file/937501/dl)}