DOJ Implements New Corporate Whistleblower Plan to Accelerate Corporate Criminal Enforcement (Part I of II)
DOJ is feeling the heat. Corporate criminal enforcement numbers are down. in fairness, DOJ has been pushing individual criminal enforcement as an effective deterrent to corporate misconduct. Criminal prosecutions, when done properly, take time. Every federal prosecutors know that you “win” your case at the investigation phase — cutting corners means greater risk of failure.
in recognition of the “success” of federal whistleblower programs, DOJ has joined the ranks of many federal agencies. But remember DOJ has vast experience with whistleblowers in the civil fraud area — the False Claims Act. DOJ is extending this expertise into corporate criminal enforcement. This is a significant sea change that could have real, tangible results. Once you put money on the table and the potential for financial recoveries, the government is likely to secure more information and launch more investigations. It is a simple fact of life — incentives often translate into results.
The WRPP will run for three years. The Money Laundering and Asset Recovery Section (“MLARS”) is administering the WRPP. The WRPP will reward individuals who provide “original information” in writing that results in criminal or civil forfeiture exceeding $1 million in net proceeds from a successful prosecution, corporate criminal resolution or civil forfeiture action involving foreign corruption, domestic bribery, crimes involving financial institutions and healthcare fraud related to private insurance.
DOJ’s decisions to award or reject a reward application is not appealable; DOJ’s program mirrors the SEC’s established Whistleblower Program. DOJ provides some incentives to encourage whistleblowers to report any concerns internally — a potential award may increase if they report within 120 days of making an internal report.
Defined Offenses
DOJ’s WRPP applies to crimes involving:
Certain crimes relating to financial institutions including money laundering and fraud;
FCPA, the Foreign Extortion Prevention Act and AML laws involving privately -held companies and non-issuers of U.S. securities;
Domestic corruption relating to bribery and kickbacks to fedeal, state and local officials; and
Healthcare fraud schemes targeting private insurers not subject to False Claims Act cases (i.e., non qui tam relators).
Only individuals are eligible to submit WRPPs. Companies and law firms are not eligible to report allegations, although a law firm may submit a concern on behalf of a whistleblower before requiring direct engagement. Individuals may be disqualified if the person receives an award from another whistleblower program, if the person is affiliated with DOJ or other law enforcement organization, if the person is a foreign officials or if the person makes false statements or witholds information.
Additionally. an individual may be disqualified under the WRPP if the person “meaningfully participated in the criminal activity” that is the subject of the report. If the person played only a “minimal role” in the criminal misconduct, applying the U.S. Sentencing Guidelines definition of a “minimal participant,” the individual could still be eligible for a recovery. Company personnel and consultants who are employed by a company (e.g. accountant, compliance professional) and receive information due to their roles as directors, officers or other fiduciaries are not eligible, with one significant exception, the audit committee or Chief Legal Officers or Chief Compliance Officers may be eligible if the company has the information for 120 days and has not acted on it, or there is imminent danger of criminal conduct that may harm national security, result in a crime of violence or result in immediate harm, to a patient or cause imminent financial or physical harm to others.
Monetary Rewards
WRPP rewards will be paid for “successful forfeiture exceeding $1 million in net proceeds forfeited” by DOJ from a prosecution, corporate criminal resolution or civil forfeiture action.” The whistleblower’s submission must be voluntary, and truthful and complete. Further, the whistleblower must cooperate with the relevant investigation by giving truthful testimony, and if requested, must engage in proactive investigations (e.g. wearing a wire or assisting in undercover operations). Prosecutors will shield the whistleblower’s identity, to the extent practicable, and whistleblowers may engage counsel to represent them as needed.
DOJ applies a “sliding scale” to any rewards under the WRPP. Criminal fines are excluded from any reward. Whistleblowers may receive up to 30 percent of the first $100 million in net proceeds forfeited, and up to 5 percent of any net proceeds forfeited between $100 million and $500 million. A presumption of a 30 percent award is applied to the first $10 million recovered in net proceeds.
DOJ will consider the following factors when applying a reward:
The significance or usefulness of the information provided;
Assistance of the whistleblower in the investigation;
Culpability of the whistleblower in the relevant issues;
Unreasonable delay in reporting; and
Management role in the company.
Again, DOJ noted that a whistleblower who reports the issue first internally to a company and waits 120 days before reporting to DOJ may receive an increased reward.
Original Information
To be eligible under the WRPP, the information must be “derived from the individual’s independent knowledge or independent analysis;” “Non=public and previously not known to the DOJ, even if an open DOJ investigation exists; and “materially adds to the information DOJ already possesses.” Such information cannot be derived from “attorney-client communications” or activities related to legal representation of the company, or from various illegal methods.
