Calling all tipsters: The DOJ’s Pilot Program on Voluntary Self-Disclosures for Individuals

On April 15, 2024, the Criminal Division of the Department of Justice (DOJ) launched its Pilot Program on Voluntary Self-Disclosure for Individuals (VSD or Pilot Program), which grants immunity and non-prosecution agreements (NPAs) to individuals who voluntarily disclose certain types of corporate criminal conduct. While immunity and NPAs have long been tools used by prosecutors, the VSD seeks to incentivize individuals to disclose alleged misconduct by offering greater assurance that it will not prosecute and providing more transparency into who is eligible for relief. 

According to the DOJ, the Pilot Program is also intended to prompt companies to ensure that their compliance programs promote comprehensive internal reporting of known, suspected or attempted misconduct. Doing so will enhance the chances that companies will identify and address misconduct.

Individuals may submit information online via the VSD Intake Form. In order to qualify under the VSD, individuals must: (1) voluntarily disclose original and actionable information about certain types of corporate criminal conduct, (2) provide truthful and complete information, (3) fully cooperate and provide substantial assistance and (4) pay any applicable victim compensation, restitution, forfeiture or disgorgement, including returning any ill-gotten gains.

The DOJ defines “original information” as non-public information it did not previously know. Relatedly, “voluntary” means disclosure that occurs before there is an imminent threat of disclosure from another source, before a government inquiry or in the absence of a pre-existing obligation to disclose.

The DOJ’s memorandum on the VSD explains that the reported misconduct must pertain to the following types of financial, healthcare and white collar crimes:

• Violations by financial institutions, their insiders or agents, including schemes involving money laundering, anti-money laundering, registration of money transmitting businesses and fraud statutes, and fraud against or compliance with financial institution regulators;
• Violations related to integrity of financial markets undertaken (1) by financial institutions, investment advisors or investment funds, (2) by or through public companies or private companies with 50 or more employees or (3) by any insiders or agents of any such entities;
• Violations related to foreign corruption and bribery by, through or related to public or private companies, including violations of the Foreign Corrupt Practices Act, violations of the Foreign Extortion Prevention Act and violations of the money laundering statutes;
• Violations related to health care fraud or illegal health care kickbacks committed by or through public companies or private companies with 50 or more employees;
• Violations by or through public or private companies with 50 or more employees related to fraud against, or the deception of, the United States in connection with federally funded contracting, where such fraud does not involve health care or illegal health care kickbacks; and
• Violations committed by or through public or private companies related to the payment of bribes or kickbacks to domestic public officials.

The Pilot Program applies only if the individual (1) has not engaged in criminal conduct involving violence, use of force, threats, substantial patient harm, any sex offense involving fraud, force or coercion, or relating to a minor or any offense involving terrorism; (2) is not the Chief Executive Officer (or equivalent) or Chief Financial Officer (or equivalent) of a public or private company or is not the organizer/leader of the scheme; (3) is not an elected or appointed foreign government official; (4) is not a domestic government official at any level, including any employee of a law enforcement agency; and (5) does not have a previous felony conviction or a conviction of any kind for conduct involving fraud or dishonesty. The Criminal Division also cannot offer an NPA under this Pilot Program for offenses for which other components of the Department of Justice have charging approval authority, such as tax or sanctions offenses, without coordinating with and receiving required approval from the responsible component on the relevant charges.

The Pilot Program comes on the heels of the January 10, 2024 announcement by the Southern District of New York of its Whistleblower Pilot Program, which also seeks to encourage voluntary self-disclosure by individuals in exchange for NPAs, and Deputy Attorney General Lisa Monaco’s March 7, 2024 speech at the ABA’s National Institute on White Collar Crime announcing a separate pilot program that will provide financial incentives to whistleblowers who assist the DOJ in investigating corporate misconduct, particularly criminal abuses of the US financial system and foreign and domestic corruption. Norton Rose Fulbright discusses the DOJ’s whistleblower pilot program in recent legal update, "DOJ’s new whistleblower pilot program focused on corporate misconduct." 

Observations

Providing explicit incentives to individuals to report corporate crime, even if those individuals were involved, demonstrates the emphasis the DOJ is placing on targeting corporate misconduct. But individuals will still need to exercise appropriate caution and consider the Pilot Program’s criteria and exclusions before deciding whether they should participate in the VSD. 

The Pilot Program excludes various types of conduct and individuals. For example, the Pilot Program excludes a wide range of conduct that involves “substantial patient harm” (which implicates health care offenses), CEOs and CFOs and their “equivalents” (which seems designed to exclude the leaders of corporate entities) and potentially tax offenses and sanctions matters for which the Criminal Division is not the sole prosecuting component. It also excludes schemes in which the individual was the alleged “leader/organizer” of the scheme, which will necessarily require considerable fact development by counsel before any individual can decide whether to participate in the Pilot Program. 

The Pilot Program states that a “reporting individual will receive an NPA,” but nonetheless affords prosecutors a great deal of discretion about whether they meet the Pilot Program’s criteria. At a minimum, the Pilot Program allows prosecutors to decide whether reported information is “actionable,” complete and voluntarily provided, and whether an individual has cooperated, which is a notoriously fact-intensive concept. Prosecutors may also have to decide whether the reported information concerns misconduct by the covered entities or just selected individuals acting alone, and so classic issues of corporate imputation and attribution are likely to be implicated.

For their part, companies should heed the warning implicit in the VSD and ensure their compliance programs, including whistleblower procedures, are designed to maximize the chances that misconduct will be prevented and/or reported internally before the problem grows.