DOJ Announces Whistleblower Pilot Program in SDNY

January 12, 2024 Advisory

As noted in prior AT advisories, in 2023, the United States Department of Justice (DOJ) announced a new corporate voluntary self-disclosure (VSD) policy and a three-year pilot program that incentivized corporate VSDs by offering fine reductions for companies that seek to claw back compensation. On Jan. 10, 2024, the United States Attorney’s Office for the Southern District of New York (SDNY USAO) announced a Whistleblower Pilot Program (WBPP) designed to encourage VSDs by individuals. Specifically, the WBPP targets criminal conduct that involves fraud or control failures, affects market integrity or concerns state or local bribery or fraud involving government funds, subject to certain exceptions.

Under the WBPP, an individual will be offered a non-prosecution agreement in exchange for full cooperation if the individual: (1) discloses conduct that is not public or otherwise known to SDNY USAO; (2) acts voluntarily and not in response to a government inquiry or reporting obligation; (3) provides substantial assistance in investigating and prosecuting one or more equally or more culpable persons; (4) provides a complete and truthful disclosure of all criminal conduct the individual participated in or is aware of; (5) has not engaged in criminal conduct involving force or violence, any sex offense involving fraud, force or coercion of a minor, or any terrorism or national security offense; and (6) does not have a prior felony conviction for fraud or dishonesty. 

Individuals are also ineligible for the WBPP if they are elected or appointed federal, state or local officials, federal investigative or law enforcement officials or agents, the CEO or CFO (or equivalent) of a public or private company, or currently are or expected to become “of major public interest.”

Even if an individual is not eligible for the WBPP, the SDNY USAO has discretion to offer a non-prosecution agreement to an individual if it would be in the public interest, based on consideration of the factors relevant to participation in the WBPP and the extent to which the individual occupies a position of leadership or public or private trust and the adequacy of non-criminal sanctions.

The extent to which the WBPP will actually encourage VSDs is difficult to predict, and its requirements raise some concerns. The exclusion of CEOs, CFOs and their equivalents could, in some situations, significantly limit its impact, because such individuals are often among those most likely to have the requisite knowledge of corporate misconduct. As in any situation when one is grappling with the initial decision of whether to make a voluntary disclosure, it is impossible to know from the outside when the DOJ will determine that individual’s assistance is “substantial.” However, the WBPP’s promise of a concrete benefit (i.e., a non-prosecution agreement) has the potential to significantly encourage individuals to make VSDs, and the announcement of the policy reinforces the DOJ’s positive focus on cooperating with individuals and corporations to remediate misconduct rather than simply punishing it.

Our White-Collar Criminal Defense and Government Investigations team will continue to monitor developments regarding the WBPP and its implementation. Please contact your regular AT lawyer or the authors of this advisory with any questions.

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