The new initiative will begin later this year
A newly created whistleblower program run by the Department of Justice offers an additional opportunity for whistleblowers to report corporate misconduct by “fill[ing] gaps” in coverage left by other agency-led programs from the SEC and CFTC.
At the American Bar Association’s 39th National Institute on White Collar Crime, Deputy Attorney General Lisa Monaco announced the launch of a Department of Justice-run whistleblower program that incentivizes whistleblowers to bring tips about corporate fraud and other white-collar crime.
Keep reading for more from our whistleblower retaliation and protection lawyers. If you have questions about the new program or believe you may have something to report, give us a call at (770) 988-5035.
The need for a new program
Agency-led programs at the SEC and CFTC “paid out many hundreds of millions of dollars and disgorged billions in ill-gotten gains from corporate bad actors” due to tips from whistleblowers. However, because the agencies with whistleblower programs are limited to investigating misconduct within their jurisdiction, DAG Monaco compared agency whistleblower programs to “a patchwork quilt that doesn’t cover the whole bed.”
Similarly, although the False Claims Act allows qui tam relators to file cases reporting financial fraud, relators may only file cases and recover under the FCA when the financial fraud is perpetrated against the government – leaving corporate and financial fraud without redress.
The new DOJ-run whistleblower rewards program seeks to remedy these gaps in enforcement.
Other Corporate and Financial Fraud Whistleblower Programs
Financial fraud whistleblower programs have allowed whistleblowers to recover rewards for reporting financial fraud to government agencies such as the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Internal Revenue Service (IRS).
SEC Whistleblower Program
Individuals with knowledge of securities law violations may report this financial fraud directly to the SEC. The types of fraud whistleblowers may report to the SEC include circumstances where a publicly traded company deceives the investing public. This may occur where companies misrepresent financial information on financial statements, engage in insider trading or Ponzi schemes, or violate the Foreign Corrupt Practices Act (FCPA) violations. SEC whistleblowers may receive rewards between 10% and 30% of the amount recovered in enforcement actions that result in over $1 million in sanctions.
CFTC Whistleblower Program
The CFTC Whistleblower Program allows individuals to report fraud, manipulation, and abusive practices related to selling commodity and financial futures and options directly to the CFTC. CFTC whistleblowers may receive rewards between 10% and 30% of the amount recovered in enforcement actions that result in over $1 million in sanctions.
IRS Whistleblower Program
Whistleblowers may report tax fraud, such as failure to pay taxes, claiming false tax exemptions or deductions, failing to withhold proper tax amounts, or submitting fake tax documents directly to the IRS. IRS whistleblowers may receive rewards of 15% to 30% of the recovery when the proceeds in dispute exceed $2,000,000. When the claim is related to an individual, the individual’s gross income must exceed $200,000.
The New DOJ Whistleblower Program
Touted as modern-day “‘Wanted’ posters across the Old West,” the new DOJ whistleblower program encourages individuals to report corporate bad actors with potential rewards. An individual reporting corporate or financial fraud under the program could receive a share of any forfeiture.
Like requirements for a relator under the False Claims Act and other agency-run whistleblower programs, the whistleblower is eligible for an award only where the information is otherwise unknown to the government. Additionally, rewards are only available to whistleblowers after all victims receive compensation. Whistleblowers involved in the criminal conduct they report will not be entitled to a reward.
Although the program will formally start later this year, the program announcement began a “90-day sprint to develop and implement a pilot program.”
The DOJ outlined areas of concern in which it is specifically interested in receiving tips:
- Criminal abuses of the U.S. financial system;
- Foreign corruption cases falling outside of the SEC’s jurisdiction (FCPA violations by non-issuers and the Foreign Extortion Prevention Act) and
- Domestic corruption cases (involving unlawful corporate payments to government officials)
The announcement of the new DOJ-led whistleblower rewards program demonstrates the DOJ’s recognition of the valuable role whistleblowers have played in uncovering financial fraud for other agency-led whistleblower programs and as qui tam relators, and it offers an additional opportunity for whistleblowers to be rewarded for their efforts to stop corporate and financial fraud.
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