DOJs Criminal Division Creates a Pilot Program Incentivizing Individuals Involved in Corporate Criminal Misconduct to Come Forward

DOJ's Criminal Division Creates a Pilot Program Incentivizing Individuals Involved in Corporate Criminal Misconduct to Come Forward

June 10, 2024, Covington Alert

I. What You Need to Know

• On April 15, DOJ’s Criminal Division announced its Pilot Program on Voluntary Self-Disclosures for Individuals (the “Pilot Program”) outlining the circumstances in which individuals who provide the Division with original information about corporate misconduct will qualify for a non-prosecution agreement (“NPA”).
• The Pilot Program is the latest initiative in the Division’s effort to learn of corporate misconduct, and comes on the heels of similar programs announced by U.S. Attorneys’ Offices for the Southern District of New York (“SDNY”) and the Northern District of California (“NDCA”), as well as the Deputy Attorney General’s (“DAG”) announcement of a DOJ whistleblower pilot program (the “DOJ Whistleblower Program”) (covered here), which provides financial benefits to whistleblowers not involved in the reported conduct. A chart comparing key factors of each of these programs can be found here.
• To be eligible for an NPA under the Pilot Program, a reporting individual must:
  • Disclose “original information,” i.e., non-public information not previously known to the Criminal Division or to any other component of the Department;
  • Provide information related to conduct for which the Criminal Division has charging approval authority. The announcement identifies six categories of covered violations, including: (i) violations by financial institutions involving money laundering and related fraud or compliance offenses; (ii) violations related to the integrity of financial markets; (iii) foreign corruption and bribery; (iv) healthcare fraud and related illegal kickbacks; (v) fraud in connection with federally funded contracting; and (vi) domestic bribery;
  • Voluntarily provide information that is truthful and complete;
  • Agree to fully cooperate with, and be willing and able to provide substantial assistance to, the Department in its investigation and prosecution of equally or more culpable individuals or entities; and
  • Agree to forfeit or disgorge any profit from the criminal wrongdoing and pay any restitution or victim compensation.
• In addition to the above criteria, individuals who hold certain positions within a private or public company (i.e., CEO or CFO, or their equivalents) or within the government (i.e., an “elected or appointed foreign government official,” or “domestic government official at any level, including any employee of a law enforcement agency”) are ineligible under the Pilot Program. Additionally, an individual who was the organizer or leader of the relevant scheme is ineligible for an NPA. By contrast, an individual who merely was involved in the scheme would be eligible for an NPA.
• Notably, the Pilot Program states that the reporting individual will receive an NPA rather than leaving that decision to Criminal Division discretion. Although similarly situated individuals very well could have received the same outcome before the Pilot Program as a matter of Criminal Division practice, the Pilot Program will provide greater certainty to various putative defendants that they can avoid a criminal conviction.
• The incentives created by the Pilot Program may be particularly appealing to would-be whistleblowers at the SEC or other civil regulatory agencies, for whom a criminal conviction would otherwise render them ineligible to receive a monetary award.
• The Pilot Program is to be distinguished from the DOJ Whistleblower Program, which by default will not provide benefits to those who were involved in corporate criminal wrongdoing. Thus, the two programs work together to provide two separate paths for individuals, depending on whether they were or were not involved in the underlying conduct, to disclose corporate wrongdoing to the Department in exchange for potential benefits.
• For companies, the Criminal Division’s announcement of yet another channel for the government to learn about corporate misconduct continues to highlight the importance of investment in compliance and investigation programs.  

II. The Department Continues to Encourage Voluntary Disclosures—This Time By Individuals Involved in Corporate Wrongdoing—But the Path To a Safe Landing Has Never Been More Complex

The Pilot Program provides yet another incentive for individuals to report corporate misconduct, but with so many other programs sharing this goal, what gap in incentives did the Criminal Division perceive? One answer could be simply that the Criminal Division wants more tips coming to the Division in the first instance, particularly if individuals come forward with information that ultimately leads to large corporate dispositions. Another answer is that the Pilot Program may offer greater assurances to, for example, would-be Dodd-Frank whistleblowers at the SEC that a criminal conviction is off the table, thus ensuring their continued eligibility for an award under the SEC’s program.  

Leaving aside the Department’s rationale, individuals involved in corporate misconduct may welcome the transparency and relative certainty of the Pilot Program. At the same time, the multiple programs encouraging individuals to come forward—each with overlapping but distinct eligibility and exclusionary criteria—may create confusion that could frustrate the Department-wide goal of receiving more information from cooperators. For example, without additional clarity, some lines between the Pilot Program and the DOJ Whistleblower Program, or the Pilot Program and the SDNY and NDCA programs, may appear fuzzy for would-be cooperators. An individual who has played an exceedingly minor role in corporate misconduct may not know whether the Department would view them as uninvolved, and thus eligible for the DOJ Whistleblower Program (and having no need for the Pilot Program, because DOJ will think the person committed no crime at all), or culpable, and thus eligible for the Pilot Program (but not the DOJ Whistleblower Program). If the individual first reports via the DOJ Whistleblower Program and learns that they do not qualify because they are viewed as culpable, has the individual forfeited the opportunity for an NPA because the information is now known to DOJ? The same question could apply to the would-be cooperator who was involved in the relevant scheme but does not know whether the Department would view them as a leader of it, and thus ineligible for the Pilot Program but potentially still eligible for the SDNY or NDCA programs. The potential for this type of “foot fault” as prospective cooperators consider the right or best place to report could cause them to decide that it is better not to come forward.  

III. Looking Ahead