The Justice Department kicked off an initiative to offer financial incentives to corporate tipsters, dangling potentially million-dollar payouts to people with information on financial fraud, bribery, and healthcare schemes.
DOJ leaders rolled out the three-year pilot program Thursday, singling out the recent guilty pleas and billions in forfeitures from both Binance and Danske Bank as the type of misconduct they hope to uncover from non-culpable whistleblowers.
Starting Aug. 1, the whistleblower rewards pilot program will accept tips of previously-unknown evidence of misconduct not already covered by other agency whistleblowing policies. If the information leads to criminal or civil asset forfeitures of at least $1 million, the individual may receive up to 30% of the first $100 million in net proceeds and up to 5% of additional recoveries between $100 million and $500 million, the department said in policy documents.
It marks the latest attempt by Biden-era DOJ officials to bolster white-collar crime enforcement by soliciting corporations and individuals to voluntarily step forward.
Deputy Attorney General Lisa Monaco said the policy complements the department’s prior offers of expanded leniency for companies that self-disclose wrongdoing.
“You have to tell us something we didn’t already know,” Monaco said on a call with reporters. “When everybody needs to be first in the door, no one wants to be second.” Consequently, “these tips from whistleblowers won’t just help us build the strongest criminal cases” but “also help us impose the most significant penalties.”
Stephen Kohn, the founding partner of whistleblower firm Kohn, Kohn & Colapinto, said the Justice Department should have adopted a mandatory payment structure rather than letting prosecutors decide whether whistleblowers will be paid on a case-by-case basis.
“Without that guarantee the program will fail and whistleblower advocates will urge informants not to use it,” said Kohn, who is chairman of the National Whistleblower Center’s board of directors.
DOJ sought to address a key concern defense lawyers and companies have raised since the Monaco first said in March she was directing the Criminal Division to stand up the pilot. That complaint is that the appeal of financial rewards when reporting wrongdoing to DOJ could undermine corporate compliance programs that promote employees coming forward internally first.
The department said employees who initially flag misconduct through their company’s internal process will still be eligible for financial incentives, provided they then report the information to DOJ within 120 days. Plus, the company can also remain eligible for a declination if it, too, shares that information with DOJ within 120 days—even if the employee came forward first.
Prosecutors could still deem the whistleblower’s tip “so juicy” that they want to immediately investigate it and send subpoenas, said Rebekah Donaleski, a partner with Cooley.
“I’m concerned that even though they’re trying to solve for the problem of permitting companies to have some internal process to investigate claims on their own, the way that this is worded it could create the same race to the door that renders internal compliance functions less relevant,” added Donaleski, a former federal prosecutor in Manhattan.
The policy launch also signaled areas where DOJ is hoping to scale up corporate enforcement, said Nicole Argentieri, the head of the Criminal Division.
“Corrupt conduct here in the United States, such as where a company bribes a government official to win a contract, and healthcare fraud involving private insurers” are two focal points where DOJ is targeting information from whistleblowers, Argentieri said on the call.
Domestic bribes to secure government contracts would be a particularly fruitful target, said Donaleski. Bribes are rarely discussed over text message, Donaleski said, something she observed as public corruption chief at the US Attorney’s Office for the Southern District of New York.
“You really do need insiders to tell a jury what happened, to tell prosecutors what happened,” she said. “For any company that’s doing business with the government, the takeaway from this policy should be that your employees are going to be incentivized in a way that they weren’t before to report any unusual or suspicious activity related to government contracting fraud.”
Continue ReadingTo contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com
To contact the editors responsible for this story: Seth Stern at sstern@bloomberglaw.com
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