The U.S. Department of Justice (DOJ) recently announced plans to roll out a new whistleblower program later this year following a 90-day development plan aimed at uncovering criminal conduct related to corporate wrongdoing.

Under this program, whistleblowers who disclose information that the DOJ was otherwise unaware of will be offered potential financial rewards, provided the information produced meets certain criteria.

Intended to address the "full range of corporate and financial misconduct," the DOJ-run program will cover several areas such as fraud, public corruption, and theft of trade secrets, U.S. Deputy Attorney General Lisa Monaco announced during the American Bar Association’s National Institute on White Collar Crime conference in San Francisco earlier this month. According to Monaco, it is designed to fill a gap in the "patchwork" of other federal statutes and whistleblower reward programs.

The DOJ is particularly interested in criminal abuses of the U.S. financial system, according to Monaco. The department is also interested in foreign corruption cases, including Foreign Corrupt Practices Act violations by non-issuers as well as domestic cases that involve illegal corporate payments to government officials.

For companies, the whistleblower program is yet another reminder to develop and expand robust internal compliance programs and policies. It also speaks toward the importance of promoting a culture of cooperation and transparency within the company and incentivizing employees to report fraud, waste, and abuse internally before contacting regulatory authorities.

Here is a look at the details of the new program and steps companies should consider to strengthen their internal reporting programs.

First To File Is Emphasis of DOJ Program

Since 2011, the U.S. Securities and Exchange Commission (SEC) has implemented a corporate whistleblowing policy, which has led to a number of investigations and generated significant revenue for the agency.

Companies should view Monaco’s announcement as a parallel program for the DOJ. In addition to civil fines, however, the DOJ program has the potential of generating large scale — and costly — internal investigations as well as exposing corporations to criminal charges and individuals to incarceration.

The DOJ is emphasizing that a key part of its program is a "first in the door" component. The department is only interested in information of which it was unaware.

This may have the effect of pressuring employees to race against the clock to report wrongdoing. In turn, this element of time pressure, when combined with the potential for financial compensation, could create situations where employees report an issue that appears criminal in nature to the government rather than to a supervisor or the company’s governing board.

A robust internal whistleblower policy can help companies build a culture of reporting issues internally. An actively-monitored hotline, for example, can be an effective tool to offer employees in cases where they believe they have information regarding violations of federal statutes.

How Companies Can Shore Up Internal Programs and Culture

Company compliance and reporting programs are critical. If the company culture deviates, however, from its written policies, the consequences could be costly. There are a few key steps companies can take to build a culture of employees reporting criminal misconduct:

• Hold annual or semi-annual trainings related to corporate and financial misconduct. Employees should be made aware of cases that end up in the public eye, so companies can train their workers on what to look out for. In many cases, using an outside consultant can be an effective tool in delivering the gravity of these trainings.
   
• Implement a tiered reporting system. A low-level employee should have the ability to report wrongdoing about an immediate supervisor to a higher-level manager just as easily as reporting wrongdoing about a C-Suite executive to the board of directors. This reporting structure should be simple and easily accessible, not burdensome.
   
• Employees should have the ability to report issues anonymously. Companies that have started internal investigations prior to an employee reporting to the DOJ can mitigate the risk of costly government penalties.

To further develop this culture, and avoid further exposure, companies should avoid retaliating against employees who report wrongdoing. Instead, companies can find ways to benefit and support those employees. Government investigations can be lengthy and costly, so it is critical to signal to employees that reporting an issue internally will not lead to personal repercussions and instead will be received with genuine appreciation and action.

Final Takeaway

Potential whistleblowers should note a key difference between the DOJ and SEC whistleblower programs. Under the SEC program, whistleblowers receive a percentage of the disgorgement, fines, and/or penalties collected by the agency. Under the forthcoming DOJ program, whistleblowers "could qualify to receive a portion of the resulting forfeiture," Monaco said during her announcement. Given the inherent challenges of collecting restitution from federal defendants, even in instances where the information provided is valuable and leads to the prosecution of individuals and companies, there is no guarantee the whistleblowers will receive a financial reward.

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