Introduction
In March 2024, the United States Department of Justice (“DOJ”) released details of its comprehensive whistleblower reward program intended to encourage third parties to report corporate and financial bribery and misconduct.
Under the Foreign Corrupt Practices Act (“FCPA”), the US Securities Exchange Commission (“SEC”) and the DOJ have joint authority to investigate and prosecute publicly traded US companies that have engaged in bribery of foreign officials abroad. The SEC’s jurisdiction, however, is limited to civil prosecution of publicly traded companies through the US Securities and Exchange Act. The SEC does not typically have jurisdiction over private individuals or privately held corporations unless their actions affect the securities of the publicly traded company.
The DOJ has exclusive jurisdiction to enforce the FCPA over US individuals and US private corporations, and joint jurisdiction with the SEC over publicly traded companies. The DOJ also has exclusive jurisdiction to bring criminal charges against all US individuals and US companies for FCPA violations. With the recent passage of the Foreign Extortion Prevention Act (“FEPA”), the DOJ now, also has exclusive jurisdiction to prosecute foreign officials for soliciting and accepting bribes from US entities.
The DOJ’s whistleblower reward program, therefore, was established not to replace or compete with the SEC’s whistleblower reward program but rather to fill a gap where the SEC whistleblower program does not cover. This article briefly describes the DOJ whistleblower program and shows how it is different and more robust than the SEC whistleblower reward program.
SEC Whistleblower Reward Program
The SEC reward program has been in existence since 2007-2008. It was created by Section 922 of the Dodd-Frank Act, which was passed in response to the 2007-2008 financial crisis. The SEC whistleblower reward program rewards employees who report violations of the securities law, money-laundering law, and the FCPA. Under the SEC’s program, whistleblowers can report corporate wrongdoing anonymously, either by themselves or through counsel, on the SEC’s website. Whistleblowers are protected from employer retaliation, and very importantly are entitled to financial rewards. Rewards are based on fines, penalties, and disgorgement of profits the SEC receives from corporations found to be in violation. Since its inception, the SEC whistleblower program has collected over US$6 billion in fines. In 2023 alone, the SEC received 18,000 tips from whistleblowers, received US$4.9 billion in financial remedies, and awarded whistleblowers nearly US$600 million.
The SEC program provides whistleblowers with 10%-30% of any fines collected from a public company that violates the FCPA where the fines are equal to or exceed US$1 million dollars. In determining whether to reward a whistleblower for reporting corporate violations of securities laws, money-laundering laws, or the FCPA, the SEC looks at the following factors: (1) the original information. That is, the information cannot be found from public sources or may already be known by the SEC but came from the whistleblower’s independent knowledge or analysis; (2) the significance of the information provided; (3) the actual assistance provided by the whistleblower and the whistleblower’s attorney; and (4) the SEC’s interest to deter violations of the securities law, anti-money laundering law, and the FCPA. Despite its tremendous success, the SEC whistleblower reward program does not reward whistleblowers for reporting FCPA violations committed by a private company or a private individual unless those acts were done on behalf of the publicly traded company or affected a publicly traded company.
DOJ Whistleblower Reward Program
In March of 2024, the DOJ announced its new program to reward whistleblowers who report corporate financial crimes, including violations of the FCPA. The DOJ’s standards for award are more stringent than those of the SEC. For a whistleblower to receive a monetary award under the DOJ’s new program, the whistleblower’s report must: (a) be voluntary; (b) not be public information or information already known to the DOJ; (c) be truthful information; (d) involve “significant corporate or financial misconduct” that leads to successful prosecution and fines equal to or that exceed US $1 million; (e) provided by an individual who is not an officer or financial officer of a public or private company, nor a foreign government official, nor an individual who is involved in the criminal activity itself; (f) and the whistleblower must fully cooperate with the DOJ in its investigation of the company; and (g) involve cases where there isn’t any other federal whistleblower program. The main difference between the DOJ whistleblower reward program and the SEC whistleblower reward program is the last requirement, that is, there are no other federal whistleblower programs under which the whistleblower would qualify for an award. Like the SEC whistleblower reward program, the whistleblower can report corporate wrongdoing anonymously, either by himself or through counsel, or on the DOJ website and be protected from employer retaliation.
Last year, the US passed the Foreign Extortion Prevention Act. The FEPA gives the DOJ the sole authority to enforce the FEPA against a foreign official if the foreign official engaged in acts of bribery while physically present in the territories of the United States. Under FEPA, any foreign government official who is prosecuted, and found to be in violation of FEPA is subject to imprisonment up to 15 years, and fines up to the greater of US$250,000 or three times the value of the bribe. Since financial awards under FEPA are based on fines and penalties recovered from the foreign government official by the DOJ, a whistleblower who wants to collect from the DOJ reward program can only report the foreign official’s acts of bribery to the DOJ.
Conclusion
The DOJ now has its own DOJ whistleblower reward program. The DOJ program, however, does not replace the existing SEC whistleblower program nor does it interfere with the SEC’s enforcement of the securities law, money-laundering law, and FCPA. Individual whistleblowers still can report corporate wrongdoing to both the SEC and the DOJ, and can request both agencies/departments to conduct their own investigation into the alleged corporate violation of the FCPA. The DOJ whistleblower reward program, however, will provide a forum where whistleblowers can report corporate misconduct of private individuals, privately held companies, and foreign government officials who engaged in bribery even if outside of the SEC’s jurisdiction. Like the SEC program, the DOJ whistleblower program also rewards whistleblowers with 10%-30% of any fines, penalties, and disgorgement of profits received from private individuals or US corporations. Standards for rewards established by the DOJ are much more stringent than the standards for rewards established by the SEC. Furthermore, because the DOJ whistleblower reward program limits rewards only to cases where there aren’t any other applicable federal whistleblower programs, a whistleblower cannot “double dip” and receive a reward from both the SEC program and the DOJ program for reporting the same violation.
By Nguyen Hong Thai
