Dive Brief:

• The pilot program the Department of Justice launched August 1 to fill the gaps left by other federal whistleblower programs doesn’t guarantee an award to those who come forward in a successful action or unequivocally protect their anonymity. Nor does it do a good job of carving out a place for insiders who played a role in the misconduct who now want to turn on their colleagues.
• Those weaknesses are likely to keep the program from accomplishing what DOJ hopes, critics say.
• “The DOJ missed the target,” Stephen Kohn of Kohn, Kohn & Colapinto said in a statement emailed to Legal Dive. Among other things, “They failed to follow the proven best practices of [other programs] by not making awards mandatory to qualified whistleblowers who risk their jobs, careers and even lives in the public interest.”

Dive Insight:

The agency announced in March it was creating the program to build on the success that the Securities and Exchange Commission and other agencies have had with their whistleblower programs. By itself, the SEC program since 2010 has resulted in 80,000 whistleblower tips, more than $1.9 billion in awards and more than $6.3 billion in restitution, according to a 2023 agency report. But the reach of these programs is limited. The SEC program, for example, applies only to publicly traded companies accused of civil violations. 

Under its pilot, DOJ is targeting areas that are outside the scope of these other programs by focusing on crimes involving financial institutions, foreign corruption, domestic bribery and healthcare fraud.

“Each [of these areas] is a priority for Criminal Division prosecutors, and none is covered by an existing whistleblower program,” Principal Deputy Assistant Attorney General Nicole Argentieri said in announcing the launch of the pilot. 

Identity protection

DOJ says its goal is to protect the identity of people who come forward but it can’t promise that. 

“Many whistleblowers fear retaliation for coming forward, and DOJ is committed to protecting the confidentiality of those who submit information through the pilot program,” the agency says in its fact sheet on the program. 

But in its program rules, it says it retains discretion to reveal the person’s identity if it determines it’s necessary as part of its enforcement effort.

“If, in its sole discretion, the Department determines that it is necessary to accomplish a valid law enforcement purpose or to protect the public, the Department may provide [the person’s] information to another federal, state, local, tribal, or international enforcement agency,” DOJ says.  

The agency could also be forced to reveal the whistleblower to defense attorneys as part of settlement talks or trial discovery, Ephraim (“Fry”) Wernick, a partner with Vinson & Elkins, told Legal Dive in March when DOJ announced it was writing rules for the pilot.  

Because the program is focused on criminal cases, prosecutors have what’s called a Giglio obligation to disclose to the defense information that could undermine the credibility of a witness. That means the agency could see its effort to negotiate a settlement or pursue a case in court fall apart if it refuses to disclose the person’s identity, Wernick said. 

“When you’re dealing with somebody who stands to make millions of dollars [from a whistleblower award] it’s significantly undermining the value of the case, or at least the value of the witness, if they stand to benefit in the way DOJ is suggesting,” Wernick said. That gives the defense an argument that they’re entitled to know who has come forward. 

“You trigger obvious discovery obligations and I can see cases getting blown up for this very reason,” he said.   

This risk is one of the main reasons DOJ hasn’t tried before now to create a whistleblower program, he said. “There’s a reason you don’t really see whistleblowing in a criminal context,” he said.  

Award guarantee

The absence of a guaranteed award is also a deal-breaker because few insiders will be willing to risk coming forward only to receive nothing in return if DOJ successfully brings an enforcement action.  

“History has demonstrated, time and again, that without guaranteed incentives, whistleblowers are far less likely to come forward,” Allison Herren Lee, a partner at Kohn, Kohn & Colapinto and a former SEC commissioner, said in an article she wrote for the Harvard Law Forum. “The SEC [before its current program] had a fully discretionary whistleblower award law. In 2010, the SEC’s Inspector General released an audit of the law which found that in its 20-year history the law resulted in payments to only five whistleblowers, who collectively obtained only $159,537 in awards. The contrast between the results of this discretionary law and [the current] mandatory award program could not be more stark.”

“Whistleblower rights must be enforceable,” Kohn said. “All prior discretionary programs have failed due to inherent prejudices against whistleblowers. Given the failure of the DOJ program to require awarding compensation to fully qualified and courageous whistleblowers, this program will likewise fail.”

Participating insiders

Kohn also criticized the program for creating hurdles for people who participated in the wrongdoing but want to come forward. 

Most people who are in a position to know what’s going on played a role in the misconduct, so making it hard for them to collect an award risks cutting off the agency’s main source of knowledgeable insiders, Kohn said. 

“It fails to follow the wisdom of the False Claims Act, signed into law by President Abraham Lincoln in 1863,” he said. “The drafters of the False Claims Act understood that awards were necessary to induce insiders, who may have participated in the frauds, to turn on their fellow fraudsters.” 

DOJ’s rules are intended mainly to weed out executives and managers who played a leadership role in the misconduct. For these people, if they come forward, they can’t expect to be awarded money, but they can seek relief through a non-prosecution agreement. That’s the best they can hope for. But lower-level employees who were caught up in the misconduct have a path to an award.

“An individual remains eligible for an award … if the Department determines, in its discretion, that the individual’s minimal role in the reported scheme was sufficiently limited that the individual could be described as “plainly among the least culpable of those involved in the conduct of a group,” the rules say.  

Kohn says people who are thinking of coming forward should do so under one of the other programs, to the extent they can.  “Whistleblowers should not solely rely on this new program because of its significant defects,” he said. 

The pilot is in effect for three years, after which the agency will look at changes or whether to continue it. An agency spokesperson didn't immediately respond to a request for comment.