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On January 10, 2024, the United States Attorney for the Southern District of New York (SDNY) announced the creation of a Whistleblower Pilot Program (SDNY Whistleblower Program).1 While SDNY has long incentivized individuals to provide information through the offer of a potential agreement with the Government, historically that agreement could range from a cooperation agreement—which requires a guilty plea to criminal charges—to a non-prosecution agreement (NPA)—which does not—with no stated guidance on what factors the Government considers when determining the appropriate offer. For individuals with criminal exposure, an NPA is an extremely desirable outcome because it guarantees that the Government will not file charges as long as the individual complies with its demands, which usually entail full cooperation with the Government’s investigation and prosecution of other culpable individuals and/or companies.
By clarifying the path to an NPA through specific requirements, the SDNY Whistleblower Program seeks to further incentivize individuals to voluntarily self-disclose information. In so doing, it offers individuals who have information of misconduct an incentive to disclose that is similar to incentives provided to companies by the DOJ Criminal Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy (CEP) and the recent United States Attorneys’ Offices’ Voluntary Self-Disclosure Policy (USAO VSD).
Though the interplay among the SDNY Whistleblower Program and its corporate counterparts—the CEP and USAO VSD—remains to be seen, companies should prepare for the predictable tensions likely to arise as a result of increased incentives for individuals to report corporate misconduct. Particularly, companies should beware of yet another avenue, in addition to the U.S. Securities and Exchange Commission’s whistleblower program (which offers monetary awards in exchange for information if various criteria are satisfied), for the Government to compete with companies’ compliance programs, and in particular confidential reporting structures. This memo summarizes the Program’s key aspects and breaks down potential risks and pressure points for companies to consider as the realm of voluntary self-disclosure evolves.
The SDNY Whistleblower Program seeks to incentivize disclosure of information regarding conduct that involves fraud, control failures, and market integrity by companies, exchanges, financial institutions and investment funds, as well as state or local bribery. Notably, it does not apply to information regarding violations of the Foreign Corrupt Practices Act, campaign finance laws, federal patronage crimes, corruption of the electoral process, or bribery of federal officials. An NPA is available to any individual who is not a public official, federal agent, of major public interest, or the CEO or CFO of a company, and is conditioned on the following:
An NPA is not off the table for an individual who discloses information but does not meet all of the above-listed requirements. The new guidance allows prosecutors to exercise discretion in accordance with principles articulated in the Justice Manual and assess compliance with the Program’s requirements on a sliding scale. This empowers prosecutors to offer an NPA if they determine that such an offer would be in the public interest and upon consideration of the extent of the individual’s fulfillment of the SDNY Whistleblower Program’s enumerated conditions.
Though the Program is limited to the SDNY, it is possible that other U.S. Attorney’s offices will follow suit if the Program is successful.
1 SDNY Whistleblower Pilot Program (Jan. 10, 2024), https://www.justice.gov/d9/2024-01/sdny_wbp_1.9.24.pdf.