“Call us before we call you.”1 With this message, on January 10, 2024, the Southern District of New York announced the SDNY Whistleblower Pilot Program (Pilot Program), which seeks to encourage individual participants in certain types of criminal conduct to voluntarily self-disclose and cooperate with prosecutors.2 The announcement echoed a nearly identical message delivered by the Department of Justice’s (DOJ) Criminal Division in November 2023,3 further emphasizing the growing importance of voluntary self-disclosure in the face of potential criminal violations. Although the Pilot Program is oriented toward individuals, it will certainly impact companies as they conduct internal investigations and weigh a decision to self-disclose. This is the first instance in which an individual US Attorney’s Office has reiterated the DOJ’s November 2023 pronouncement.
The Pilot Program broadly applies to criminal conduct undertaken by or through companies, exchanges, financial institutions, investment advisers, or investment funds involving fraud, corporate control failures, conduct that affects market integrity, and certain state or local bribery offenses. Of note, the Pilot Program does not apply to individuals who provide information related to violations of the Foreign Corrupt Practices Act (FCPA), certain election and campaign finance laws, or bribery of federal officials.
The Pilot Program provides that the SDNY will enter into a non-prosecution agreement (NPA) in exchange for an individual’s cooperation if six criteria are met:
1. The misconduct was not previously made public or known to the United States Attorney’s Office;
2. The individual disclosed the criminal conduct voluntarily and not in response to a government inquiry or other obligation to report misconduct;
3. The individual can provide substantial assistance to the investigation and prosecution of one or more equally culpable persons, and will cooperate fully in the investigation and prosecution of the conduct;
4. The individual truthfully and fully disclosed all criminal conduct in which the individual has participated and of which the individual is aware;
5. The individual is not a federal, state, or local official; a federal law enforcement officer; a figure of major public interest; or the chief executive officer or chief financial officer of a public or private company; and
6. The individual has not engaged in certain violent criminal conduct and other specified offenses.
The Pilot Program explicitly states that it does not supersede “any provision” of the Justice Manual (which, among other things, outlines the principles guiding federal prosecutorial decisions). The Pilot Program also notes that if a person does not meet the factors described above, prosecutors may nonetheless exercise discretion to extend an NPA in exchange for the person’s cooperation. The Pilot Program lists various additional factors for prosecutors to consider in evaluating whether an NPA would be appropriate in such a circumstance, including whether the individual disclosed the conduct voluntarily and the extent of the substantial assistance the individual is able to provide.
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The Pilot Program follows a string of announcements in 2023 aimed at incentivizing corporate entities to timely and voluntarily self-disclose. Early that year, the DOJ revised the FCPA Corporate Enforcement Policy (which applies to all Criminal Division matters) to encourage companies to voluntarily self-disclose in exchange for a potential declination or negotiated resolution and penalty reductions.4 Shortly thereafter, the DOJ issued a nationwide Voluntary Self-Disclosure (VSD) policy for all US Attorney’s Offices outlining the circumstances in which a company may receive credit for a VSD.5 Deputy Attorney General Lisa Monaco later announced that the DOJ would adopt a Mergers & Acquisitions Safe Harbor Policy, incentivizing companies to voluntarily disclose misconduct identified during mergers and acquisitions.6 Other executive agencies have also implemented their VSD policies. Also in 2023, the Department of Commerce, Department of the Treasury, and DOJ issued the Tri-Seal Compliance Note, which described effective compliance programs for sanctions and export controls in the private sector, including the VSD policies of the Department of Commerce’s Bureau of Industry and Security and the Department of the Treasury’s Office of Foreign Assets Control.7
The Pilot Program clearly reflects DOJ’s view that “corporate criminal enforcement and individual accountability are two sides of the same coin.”8 Yet the Pilot Program creates the potential for tension between corporate and individual self-disclosures: Both companies and individuals are now clearly incentivized to “race to the courthouse” because the first to disclose to the DOJ will receive the cooperation credit. Should the individual self-disclose prior to the company, the company may not be able to receive self-disclosure credit itself. As a result, companies subject to SDNY jurisdiction may face additional pressure to self-disclose quickly. Companies will need to consider this risk at the outset of any investigation and take additional care in conducting the investigation itself to mitigate this problem.
Notably, the Pilot Program expressly excludes CEOs, CFOs, and other persons in “C Suite” positions. This suggests that the Pilot Program is designed to flush out lower-level participants in corporate criminal activity in the interest of netting senior executives. Although the DOJ has always prioritized individual accountability, this feature is unique among the VSD policies published thus far.
Finally, the Pilot Program is another example of the DOJ’s focus on recidivism. A person with prior convictions for specific criminal offenses will not satisfy the baseline criteria to receive an NPA under the Pilot Program, echoing the FCPA Corporate Enforcement Policy’s provisions to the same effect. Frequent fliers will accordingly need to go above and beyond and satisfy the other discretionary factors in order to have a chance at a similar favorable outcome.
The Pilot Program establishes that the trend in favor of voluntary self-disclosure is here to stay. Federal law enforcement’s message is clear: self-disclosure is the expectation. Individuals and corporate defendants alike should carefully consider the risks and benefits of self-disclosure.
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1 Press Release, United States Attorney’s Office for the Southern District of New York, US Attorney Williams Announces Enforcement Priorities And SDNY Whistleblower Pilot Program (Jan. 10, 2024), available at https://www.justice.gov/usao-sdny/pr/us-attorney-williams-announces-enforcement-priorities-and-sdny-whistleblower-pilot
2 SDNY Whistleblower Pilot Program, available at https://www.justice.gov/d9/2024-01/sdny_wbp_1.9.24.pdf.
3 “[C]all us before we, or our foreign partners, call you.” Nicole M. Argentieri, Acting Assistant Attorney General, Criminal Division, Department of Justice, Keynote Address at the 40th International Conference on the Foreign Corrupt Practices Act (Nov. 29, 2023), available at https://www.justice.gov/opa/speech/acting-assistant-attorney-general-nicole-m-argentieri-delivers-keynote-address-40th.
4 9-47.120 - Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy, Justice Manual, US Dept. of Justice (updated Jan. 2023), available at https://www.justice.gov/criminal-fraud/file/1562831/download. See also Eversheds Sutherland, DOJ sweetens the deal for companies that “come forward, cooperate, and remediate” (Jan. 23, 2023), https://www.eversheds-sutherland.com/en/united-states/insights/doj-sweetens-the-deal-for-companies-that-come-forward-cooperate-and-remediate
5 United States Attorney’s Offices Voluntary Self-Disclosure Policy, available at https://www.justice.gov/d9/2023-07/usao_voluntary_self-disclosure_policy_0.pdf. See also Eversheds Sutherland, New nationwide policy marks latest DOJ effort to incentivize voluntary self-disclosure (Feb. 27, 2023), https://www.eversheds-sutherland.com/en/united-states/insights/new-nationwide-policy-marks-latest-doj-effort-to-incentivize-voluntary-self-disclosure
6 Lisa O. Monaco, Deputy Attorney General, Department of Justice, Policy Designed to Encourage Disclosure of Misconduct and Hold Individual Wrongdoers Accountable (Oct. 4, 2023), available at https://www.justice.gov/opa/speech/deputy-attorney-general-lisa-o-monaco-announces-new-safe-harbor-policy-voluntary-self. See also Eversheds Sutherland, DOJ incentivizes self-reporting with new M&A Safe Harbor Policy (Oct. 8, 2023), https://www.eversheds-sutherland.com/en/united-states/insights/doj-incentivizes-self-reporting-with-new-ma-safe-harbor-policy
7 Department of Commerce, Department of the Treasury, and Department of Justice Tri-Seal Compliance Note (March 2, 2023), available at https://www.bis.doc.gov/index.php/documents/enforcement/3240-tri-seal-compliance-note/file
8 Argentieri Remarks, supra note 3.
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