While Monty Hall (or for the current generation, Wayne Brady) was nowhere in sight, it was difficult not to think about the show “Let’s Make a Deal” while sitting in the audience at the American Bar Association’s 39th National Institute on White Collar Crime. During the Institute, one of the featured speakers, Deputy Attorney General Lisa Monaco, announced a new DOJ-led whistleblower rewards program.
[1] The newly announced program is intended to serve as another incentive to encourage more reports of wrongdoing to the DOJ, but it may leave compliance officers concerned about which of the many available “doors” an individual might choose.
Originating in 1963, contestants on “Let’s Make a Deal” were faced with a choice between multiple doors. The stakes were high, prizes could range from “zonks” (undesired rewards, duds, or junk prizes) to brand new cars. People in the “Marketplace of America” were forced to take risks, trading in prizes for uncertainty: either a large potential gain or a devastating (and to the audience, often humorous) loss. In a significantly less entertaining way, an individual with a compliance concern may be faced with a daunting choice of deciding to report a suspected wrongdoing at their workplace, considered one of the available doors, or to take their concern to another door (the DOJ) with the hopes of a big payout. Naturally, the consequences in the DOJ’s new “game” are much more serious than winding up with a “zonk” on national television.
In explaining the new DOJ-led program, Monaco stated, “if an individual helps the DOJ discover significant corporate or financial misconduct—otherwise unknown to us—then the individual could qualify to receive a portion of the resulting forfeiture.”[2] “The throughline for our enforcement framework is rooted in the time-honored understanding that people—and corporations—respond to incentives. It’s human nature, and it’s what makes the business world spin.” According to Monaco, the DOJ’s message is clear: “knock on our door before we knock on yours.” And don’t wait too long to knock, as an individual must “be the first in the door” to be eligible for a reward.[3] “When everyone needs to be first in the door, no one wants to be second—regardless of whether they’re an innocent whistleblower, a potential defendant looking to minimize criminal exposure, or the audit committee of a company where the misconduct took place.”[4] Considering Monaco’s description of this new incentive for whistleblowers, one may visualize a nervous individual with a compliance concern stopping in front of “door number one” leading to the company’s compliance office and pausing to consider the remaining doors leading straight to the DOJ or other law enforcement agency and potentially a pot of money or new car.
What makes the DOJ’s new game even more perplexing for companies is that there has been a door available for whistleblowers since 1863 with the enactment of the False Claims Act[5] (“FCA”). The FCA was enacted during the Civil War to target fraud by suppliers providing substandard goods and services. In general, any person who (1) knowingly submits a false claim to the government; (2) causes another to submit a false claim to the government; or (3) knowingly makes a false record or statement to get a false claim paid by the government, may be found liable under the FCA.[6] The damages and penalties can be significant – one who is liable must pay a civil penalty of between $5,500 and $11,000 for each false claim and those penalties are trebled. Under the qui tam or whistleblower provisions of the FCA, anyone who has evidence of fraud, known as a “relator,” can bring a lawsuit on the government’s behalf (through an attorney) and seek to recover the money that federally funded health care programs overpaid.[7] The DOJ has an obligation to investigate any allegations and has the option to join (intervene in) the lawsuit. Depending on several factors, if the case is successful, the relator is entitled to receive between 15 and 30 percent of the amount recovered by the government along with legal fees and other expenses of the action by the defendant. For 2023, the government recovered over $2.68 billion in overpaid federal funds, and since 1986, the government has recovered more than $75 billion.[8] For more information about the FCA, check out Husch Blackwell’s podcast, False Claims Act Insights.[9]
The government has recently shown growing interest in “whistleblower programs,” involving both self-disclosure and traditional whistleblowing. For example, in February 2024, the Southern District of New York instituted the “SDNY Whistleblower Pilot Program,” in which an individual participant in a non-violent offense could self-disclose their criminal conduct, in exchange for a non-prosecution agreement.[10] As of 2024, all DOJ offices that prosecute corporate crimes have voluntary self-disclosure policies for corporations. If a corporation reports its own wrongdoing, they may receive certain benefits, such as a presumption in favor of non-prosecution.[11]
Another example is the SEC’s Whistleblower Program which allows individuals to report possible securities law violations.[12] Under the program, a whistleblower can receive between 10-30% of the money collected as a result of the litigation. The program is successful—it has awarded more than $1.9 billion to 397 whistleblowers since its inception in 2011. In 2023, the SEC received more than 18,000 whistleblower tips.[13]
What Is Different About the DOJ’s New “Initiative”?
While the FCA and other initiatives paved the way for whistleblower actions, the government recognized holes in the current disclosure regime. Qui tam actions under the FCA are only available for fraud against the government. Other programs, such as the IRS Whistleblower Program, are limited in scope by the nature of the regulatory framework. The DOJ’s new program fills some pre-existing gaps and creates new risks (and opportunities) for companies and individuals. According to Monaco, the new program will accept information about “violations of any federal law,” with particular interest in criminal abuses of the U.S. financial system.[14] Also, under the new initiative, and distinct from the FCA, a whistleblower does not need to file suit themselves or hire an attorney (although an attorney is still highly recommended), in hopes that the government will intervene. This means that a whistleblower does not need to exert a large amount of effort—so long as they have truthful information, have not been involved in the criminal activities themselves, and provide information the government did not already know, the whistleblower will be compensated for their assistance if the government recovers money based on their information.
There is a lot of uncertainty about this new pilot program that will be rolled out fully over the next few months, but the message from DOJ is clear knock on our door, provide useful and novel information, and the prize will be well worth your time. With promises of significant monetary rewards to whistleblowers, the government’s bargain may be a tough one to turn down.
What Can Compliance Officers Do to Minimize Risks?
To avoid getting “zonked” by an unexpected claim, corporate compliance officers should take a close look at their current policies and current corporate culture and should continue to do so on an ongoing basis. Consistent and ongoing vigilance is an important component to maintaining compliance and decreasing the likelihood of unanticipated and unintended violations.
Corporate compliance officers should encourage an open line of communication so that employees feel comfortable and, importantly, heard, bringing concerns to the compliance department. For example, companies might consider offering their own incentives to employees who internally report concerns to discourage employees from resorting to the DOJ’s new program. And it goes without saying that companies should encourage lawful actions and institute checkpoints where possible.
A company’s willingness to emphasize compliance, enforce checkpoints, create a “tone at the top” of open communications, provide lawful incentives to employees, and make the reporting process easy and accessible to all employees may help keep the DOJ’s new program from making an unexpected appearance on the company’s next meeting agenda. In other words, companies should look to create a revolving door that fosters a workplace culture of openness and effective communication—and one where no knocking is necessary.
Conclusion
The DOJ’s new whistleblower initiative could be a game-changer for corporate compliance officers and employees who have information about potential violations of federal law. The program seems to offer generous rewards and reduced risks for whistleblowers, while increasing the pressure on companies to maintain high ethical standards and prevent wrongdoing. For compliance officers, this means that they need to be even more proactive and vigilant in creating a culture of openness and communication within their organizations. They need to ensure that employees are aware of the policies and procedures for reporting misconduct internally, and that they feel comfortable and safe doing so. They also need to respond promptly and effectively to any concerns or complaints that arise and take appropriate corrective actions when necessary. By taking these steps, employees are more likely to keep their concerns internal, rather than knocking on the door of the DOJ.
[1] Deputy Attorney General Lisa Monaco Delivers Keynote Remarks at the American Bar Association’s 39th National Institute on White Collar Crime, Office of Public Affairs U.S. Department of Justice (March 7, 2024) https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-monaco-delivers-keynote-remarks-american-bar-associations
[2] Id.
[3] Id.
[4] Id.
[5] 31 U.S.C. §§ 3729 – 3733.
[6] §§ 3729(a)(1)(A) and (B).
[7] The False Claims Act, Civil Division, U.S. Department of Justice (updated Feb. 23, 2024) https://www.justice.gov/civil/false-claims-act.
[8] False Claims Act Settlements and Judgments Exceed $2.68 Billion in Fiscal Year 2023, Office of Public Affairs U.S. Department of Justice (Feb. 22, 2024) https://www.justice.gov/opa/pr/false-claims-act-settlements-and-judgments-exceed-268-billion-fiscal-year-2023.
[9] False Claims Act Insights, Husch Blackwell, https://www.huschblackwell.com/false-claims-act-insights-podcast#page_1.
[10] SDNY Whistleblower Pilot Program, United States Attorney’s Office Southern District of New York (updated Feb. 13, 2024) https://www.justice.gov/usao-sdny/sdny-whistleblower-pilot-program#:~:text=The%20Office%20has%20launched%20an,in%20certain%20non%2Dviolent%20offenses
[11] Voluntary Self Disclosure and Monitor Selection Policies, U.S. Department of Justice (updated March 8, 2024) https://www.justice.gov/corporate-crime/voluntary-self-disclosure-and-monitor-selection-policies.
[12] Office of the Whistleblower, U.S. Securities and Exchange Commission (updated Nov. 14, 2023) https://www.sec.gov/whistleblower.
[13] Securities and Exchange Commission Office of the Whistleblower Annual Report to Congress for Fiscal Year 2023, U.S. Securities and Exchange Commission (Nov. 14, 2023) https://www.sec.gov/files/fy23-annual-report.pdf.
[14] See Office of Public Affairs U.S. Department of Justice, supra note 1.
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