DOJ’s Brand New, Whistleblower Pilot Program: Fatally Executed, Doomed to Fail.
What were they thinking?
The Department of Justice just announced a new program designed to encourage whistleblowers to come forward with evidence related to specific federal offenses that have resulted in the greatest losses to the government and the financial markets and identify companies engaged in money laundering and bribery in the U.S. and elsewhere.
If a whistleblower brings evidence to the government’s attention that the government was not aware of and no investigation was already underway, they would receive a non-prosecution agreement (NPA) for their participation in the illegal conduct. However, they would not be eligible for a monetary award as with the whistleblower programs offered by other agencies (SEC, CFTC, IRS) or a portion of the recovery of monies unlawfully obtained as occurs in a successful lawsuit or settlement under the Federal False Claims Act. The government believes that an NPA alone is “strong incentive” to motivate culpable individuals to come forward.
This sounds like a great idea,
But look at what DOJ did with it.
The DOJ created a program with various conditions for eligibility.[1]
Under “Criteria” you will find:
2. The reporting individual must disclose original information, meaning non-public information not previously known to the Criminal Division or to any component of the Department of Justice, and the information provided must relate to at least one of the following...
3. The disclosure must be voluntary, meaning…. in the absence of any government investigation or threat of imminent disclosure to the government or the public.
Seems reasonable, right?
What value is information that is already public?
Why would the government give up prosecuting someone they will eventually identify in an existing investigation?
The problem is that there is no way for counsel to know: (1) what non-public information is not known to the Criminal Division and (2) whether there is already a government investigation. Without that information, approaching the government could be disastrous (next time maybe DOJ should consider bringing defense counsel into the loop).
This is a big problem because prosecutors are not going to be willing to share information with a lawyer who contacts them on behalf of an anonymous client for fear of tipping off the targets. Without that information, a lawyer can't give any meaningful advice to their client.
Compounding the Titanic size hole in the government's policy is the requirement
5. The reporting individual must agree to fully cooperate with and be willing and able to provide substantial assistance to the Department in its investigation of related conduct and prosecution of equally or more culpable individuals or entities including, but not limited to, providing truthful and complete testimony and evidence, whether in interviews, before a grand jury, or at any trial or other court proceeding; producing documents, records, and other evidence when called upon by the Criminal Division; and, if requested, working in a proactive manner under the supervision of, and in compliance with United States law enforcement officers and agents.
Who in their right mind is going to agree to be a government witness when the government doesn’t even know they exist? What person is going to risk their career trying to avoid the very small chance that prosecutors will uncover a company’s crime? What DOJ doesn’t get is that they need these whistleblowers more than these whistleblowers need DOJ. Prosecutors don’t have the leverage they have when someone is already under indictment.
Adding insult to injury is the requirement that:
6. The reporting individual must agree to forfeit or disgorge any profit from the criminal wrongdoing and pay restitution or victim compensation.
(in the introduction, before the criteria are set out, the program statement says that the whistleblower must agree to “pay any applicable victim compensation, restitution, forfeiture, or disgorgement, including returning any ill-gotten gains.” This is more onerous, but may not make much difference: bankrupt is bankrupt)
Who is going to want to reveal their identity to the government if the result is going to be that they impoverish their family? The government is engaged in magical thinking if they believe anyone is going to agree to that condition.
The icing on the cake is the notice on the intake form whistleblowers are instructed to use to contact the government, that the whistleblower doesn’t need the assistance of a lawyer. Just fill out this simple form, tell us who you are, what you know, and we'll get back to you.
Plainly, DOJ understands the peril this program presents whistleblowers and wants to ensure that they have no idea that they have wandered into a Stephen King novel. Of the various whistleblowers who come forward to report the same crime, the government can pick out the most promising one, give them an NPA, and send the rest target letters.
With an understanding of these flaws, the changes necessary to make the program viable are obvious, with one exception. There must be a monetary incentive. Without it, the target audience will never learn of the program. What did the drafters of the policy statement think, that corporate executives and employees read DOJ press releases, subscribe to Law 360 or Lexology, that they were just waiting for DOJ to launch such a program to come forward and do the right thing?
A financial incentive is also necessary for an even more important reason. The irony of the government’s policy is that the government only uncovers a very small percentage of white-collar crime. And DOJ has no idea how much corporate crime costs the economy or how many companies today are breaking the law. So the government needs whistleblowers to do what it has been unable to do over the last 50+ years. But for the same reason—the very low probability of getting caught—the government’s target audience is not going to be motivated by a mere offer of an NPA. But paying wrongdoers is too unpalatable for prosecutors. They can’t stomach such a moral hazard, even if other agencies have no problem doing so.
Moreover, even knowing the flaws in their policy, DOJ officials would never admit that they had erred so monumentally. They can’t afford to lose that much Face. Unfortunately, a policy that had the potential to make a meaningful dent in corporate crime is going to fail, not because it wasn’t a worthwhile policy to pursue, but because the officials who drafted requirements to participate in the program did not stop to consider the impact their criteria would have on the people whose help they need most.
Of course, the reason why this is a pilot program is that the idea might not work even if it were executed properly. In that case, the Department has another whistleblower program that is designed to reward whistleblowers who were not involved in the criminal activity. But that program is fatally flawed as well; a tale for a different time.
[1] The Criminal Division’s Pilot Program on Voluntary Self-Disclosures for Individuals, April 15, 2024. https://www.justice.gov/criminal/criminal-division-pilot-program-voluntary-self-disclosures-individuals.
I don’t think so. As you know, really smart people have a great capacity to do really dumb things. They overestimate their knowledge and are easily blinded by their prejudices.
Prosecutors are accustomed to having all the power in dealing with cooperating witnesses. Defendants desperate to get a deal to avoid going to jail or to get a significant reduction in sentence are highly motivated to do anything prosecutors insist on: agree to testify against others; liquidate all their assets to pay fines, forfeiture, restitution.
The DOJ officials who drafted this statement failed to appreciate how different the dynamics are when prosecutors try to convince people to come forward who aren’t worried about getting caught. They didn’t understand the sacrifices they were asking people to make. They forgot that wrongdoers are in the position they are in because they weren’t too worried about getting caught in the first place.
They also have political concerns. They can’t be seen as soft on crime.
So I believe that this program may have been a reaction to those who have said “look at how successful the SEC has been with their whistleblower program, why don’t you do something like that,” to which they responded, “ok we’ll try an experiment, but only on our terms.”
Do they want the program to fail? No, but they are only willing to go so far to make it work. Indeed, they may be well aware of everything I said in my essay and anticipate that it will fail. But this way they have answered their critics without looking soft on criminals.
But who knows what they were thinking or their true intent. I’ve been married 45 years and I regularly misunderstand what my wife is thinking. So there you go.
That does seem like a self-evidently terrible set of ideas. Is it possible they WANTED the pilot to fail?