Thomson Reuters Expert Analysis
Prior to Monaco ’ s announcement , the United States Attorney ’ s Office for the Southern District of New York launched its own pilot “ whistleblower ” program , 1 which became effective February 13 , 2024 . 2
Both the Department-wide pilot and the SDNY policy require that the government have been previously unaware of the misconduct , but they are different in a critical way : the Department-wide policy under development will explicitly apply only to reports by individuals who did not participate in the misconduct , while SDNY ’ s program offers incentives to “ individual participants in certain nonviolent offenses .” Thus , it appears that SDNY ’ s program is actually more akin to a VSD program , while DOJ ’ s Department-wide pilot program will target a new audience of potential whistleblowers .
DOJ ’ s program will fill in the gaps and address the full range of corporate and financial misconduct that the Department prosecutes .
Companies with an international footprint should also pay attention to non-US prosecutors . The new Director of the UK Serious Fraud Office recently announced that he would like to set up a similar program , no doubt noticing the effectiveness of current US programs .
Corporate considerations
Though directed at whistleblowers , the pilot program is equally about incentivizing companies to voluntarily self-disclose misconduct in a timely manner . Absent aggravating factors , a qualifying VSD will result in a much more favorable resolution , including possibly avoiding a guilty plea and receiving a reduced financial penalty .
But because the benefits under both programs only go to those who provide DOJ with new information , every day that a company sits on knowledge about misconduct is another day that a whistleblower might beat them to reporting that misconduct , and reaping the reward for doing so .
” When everyone needs to be first in the door , no one wants to be second ,” Monaco said . “ With these announcements , our message to whistleblowers is clear : the Department of Justice wants to hear from you . And to those considering a voluntary self-disclosure , our message is equally clear : knock on our door before we knock on yours .”
Companies must ensure that internal compliance and whistleblower systems are clear , easy to use , and effective .
By providing a cash reward for whistleblowing to DOJ , this program may present challenges for companies ’ efforts 3 to operate and maintain and effective compliance program . Such rewards may encourage employees to report misconduct to DOJ instead of via internal channels , such as a compliance hotline , which can lead to compliance issues going undiagnosed or untreated — such as in circumstances where the DOJ is the only entity to receive the report but does not take any further action .
Companies must therefore ensure that internal compliance and whistleblower systems are clear , easy to use , and effective — actually addressing the employee ’ s concerns and , to the extent possible , following up with the whistleblower to make sure they understand the company ’ s response .
If an employee does elect to provide information to DOJ , companies must ensure that they do not take any action that could be construed as interfering with the disclosure . Companies already face potential regulatory sanctions for restricting employees from reporting misconduct to the SEC . Though it is too early to know , it seems likely that DOJ will adopt a similar position , and a company ’ s interference with a whistleblower ’ s communications potentially could be deemed obstruction of justice .
Notes
1 https :// tinyurl . com / 3w6xt29k
2 https :// tinyurl . com / 5exs8vxk
3 https :// tinyurl . com / mpa9n666
2 | March 20 , 2024 Thomson Reuters