Earlier this month, Deputy Attorney General Lisa Monaco announced that the Department of Justice will launch a whistleblower awards program.
Monaco said that other U.S. whistleblower award programs, such as those at the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) “have proven indispensable” and that the Department of Justice plans to offer awards for tips not covered under these programs.
“We hope that the Department will follow the lead of the SEC and CFTC and establish a central whistleblower office that can accept anonymous and confidential complaints. Such a program has been required under the anti-money laundering whistleblower law for over three years, but the Justice Department has simply failed to follow the law,” said whistleblower lawyer Stephen Kohn, who also serves as Chairman of the Board of the National Whistleblower Center.
Monaco said that “under current law, the Attorney General is authorized to pay awards for information or assistance leading to civil or criminal forfeitures” but this authority has never been used “as part of a targeted program.”
The Department is “launching a 90-day sprint to develop and implement a pilot program, with a formal start date later this year,” Monaco said.
While the specifics of the program have yet to be announced, Monaco did state that the Department will only offer awards to individuals who were not involved in the criminal activity itself.
Kohn said this will undermine the program.
“The Justice Department’s decision to exclude persons who may have had some involvement in the criminal activity is a step backwards and demonstrates a fundamental misunderstanding as to why the Dodd-Frank and False Claims Acts work so well,” Kohn said.
“When the False Claims Act was signed into law by President Abraham Lincoln in 1863 it was widely understood that the award laws worked best when they induced persons who were part of the conspiracy to turn in their former associates in crime. Justice needs to understand that by failing to follow the basic tenants of the most successful whistleblower laws ever enacted, their program is starting off on the wrong foot.”
When you first saw this announcement from Lisa Monaco, your thought was?
“When she said – we are going to exclude participants, we came out and criticized it,” Kohn told Corporate Crime Reporter in an interview last month. “All of your good sources are participants. A participant exclusion does not exist in any other whistleblower award law. It is specifically rejected. They know that the people who have information about these crimes are almost always participants.”
“I did a case recently that was successful where the whistleblower handed the cash bribe to a foreign official. This guy was a participant. And he got the full award not because they liked him handing out the cash, but he was just the go between. He wasn’t the guy who negotiated the bribe. But did he participate in the crime? Absolutely.”
“If you are a secretary for some CEO and the CEO says – put a stamp on this envelope, you are technically a participant. When Lisa Monaco said – we don’t want to pay participants, they have cut off 95 percent of all of your really good sources. The higher up the source, the more likely they are a participant.”
“If you go back to 1863 when they passed the False Claims Act, which was signed by Abe Lincoln – the author of the amendment came right out and said – the purpose of the award is to have one of the conspirators turn on the other conspirators. The exact quote is – it takes a rogue to catch a rogue.”
“They draw a distinction between those who plan and initiate the crime – the kingpins – and those who just work for the kingpin.”
“Some of the laws will exclude you automatically if you are convicted of a crime. The government will charge you with a crime and you will get nothing. Others will reduce the award to almost nothing. All of them have safeguards so that the criminal mastermind will never get a penny. And I know of no case where the person who planned or initiated the fraud under any of the reward laws ever got a dime.”
“We have three serious concerns with Lisa Monaco’s statement. The first was the exclusion of participants or those who were involved in the crime. That kills it right there.”
“Second, she was looking at this forfeiture fund. But it’s a terrible law. It has a mandatory cap. It has what I call a discretionary cap. And it’s completely discretionary with no judicial review. She is looking at a program that has not worked – ever. The statutory basis of the program is flawed. And that is what she wants to build the whistleblower program off of.”
“But the bigger issue is what she didn’t say. On January 1, 2021, the Department of Justice was required by law to accept anonymous and confidential whistleblower claims covered for all violations of the Bank Secrecy Act and the money laundering laws. That law was amended in December 2022 to cover all violations of sanctions laws. The Department of Justice never implemented that mandatory law. And this is a disaster.”
“We have brought forward cases. None of the agents, none of the investigators are trained or even know that the whistleblowers have a right to anonymity. That right is identical to the one in the Dodd-Frank law. They took the Dodd-Frank law’s good confidentiality provisions, copied them, stuck them in the money laundering law and mandated that the Justice Department accept these anonymous confidential claims.”
“This is a gigantic problem. The Drug Enforcement Agency has major activity on money laundering worldwide. Every single major embassy has an FBI legal attache. When international whistleblowers go to the embassy, they are forwarded to the legal attaches. They are required to accept anonymous and confidential claims.”
“The Justice Department has this massive international network. And nobody there knows that these rights exist.”
Are there any cases filed under this new law?
“Yes. We have been filing regularly. The starting point should be implementation of the existing whistleblower laws where the Department of Justice has mandatory duties. Once they implement an anonymous and confidential reporting program, they have to set up a real whistleblower office, similar to the ones at the SEC and CFTC. Those offices have been super successful.”
“If you look at the SEC, almost 90,000 confidential claims have been filed, with 18,000 in 2023.”
But only a handful of awards last year.
“Yes, because it’s a tiny office compared to the Justice Department which has all those U.S. Attorneys offices around the country.”
If there were sufficient prosecutorial resources at the SEC, how many of the 18,000 whistleblower complaints filed by the SEC could be settled?
“I would estimate 20 percent. I base this on the following. The Department of Justice has reported that under the False Claims Act, about 20 percent of their cases are resolved in a way that the whistleblower wins. They are looking at 20 percent.”
“I did a study way back when, when we were doing environmental whistleblower cases, of every Department of Labor case in which there was a whistleblower under the nuclear and environmental law. I read every one and analyzed them. And I came to the conclusion that the whistleblowers prevailed in 20 percent of the cases.”
“I found that remarkable that under this retaliation law – 20 percent. The Department of Justice is reporting 20 percent. So my rule of thumb is 20 percent. If you look at the intake coming into our office, it’s hard to get a read for it. But I will tell you that 80 percent of the cases that we think should win don’t get investigated or pursued. You get about a 20 percent hit rate, even when you are doing a careful intake process.”
We had a high profile public interest lawyer ask me – why are there whistleblower laws just for select agencies? Why doesn’t it apply across the board? Why shouldn’t it be cut and paste for all corporate crime cases?
“It took us two years – my office and the whistleblower center – working almost alone, to get the AML program from a discretionary program to a mandatory payment program. When it was originally passed, it was a garbage law. They had no funds and it wasn’t mandatory. No one would ever get a penny, even though on paper they could.”
Who made it mandatory – Congress or the executive?
“Congress. We first went to Senator Charles Grassley (R-Iowa), and explained the issue. He agreed. We then went to Senator Raphael Warnock (D-Georgia), who is on the Senate Banking Committee. We briefed his office. He agreed to be the co-sponsor. We then went to the House Financial Services Committee, briefed them. We got Democratic and Republican support. It then went to the Senate with full unanimous consent and passed. It then went to the House Financial Services Committee. Unanimous support. It was then blocked by the House Appropriations Committee. There was concern that you couldn’t put this substantive money laundering bill on the federal budget.”
“We activated all of our people and at the last minute it was attached to the budget and went through without opposition.”
If Lisa Monaco was serious, she would do the same thing. She would go before Congress and say – we want a mandatory whistleblower award bill.
“Yes, but the whistleblower community, the lawyers, the public interest groups, need to stand up.”
And why aren’t they?
“I wish I knew. But the Whistleblower Center on this AML law was literally out there alone. Groups did endorse it. One of the reasons is that it’s hard to fundraise for it because it’s lobbying. There are a million reasons.”
“But the whistleblower community needs to push harder. Right now, they need to push on this Lisa Monaco proposal. If she is going to use this discretionary authority at the Justice Department, the community should demand that through regulation and policy positions, she uses her authority to the maximum extent possible, to enact a Department wide whistleblower program as consistent with the Dodd-Frank law as possible.”
Has there ever been a proposal in Congress that would apply a Dodd-Frank whistleblower law across the board for the federal government?
“No. I used to support this uniform whistleblower law covering everybody. My take on it now is that it should be nuanced. The related action provision should capture everything. We have seen that it is important to give the whistleblower authority to the agency that conducts the investigation. It’s really good that the IRS has control over the IRS whistleblower program, the SEC over the SEC program. This has been a successful way to go.”
“We know that the driving force behind the success of these laws are the career prosecutors who use the whistleblower information and file affidavits and statements saying the whistleblower should get paid.”
“When the career investigators back up the whistleblowers, they always win. I know of no case where the career prosecutors said – we relied on the whistleblower’s information and then they were denied an award. It might happen on a technicality.”
“But for the most part, by marrying the whistleblower with the agent, that depoliticizes and strengthens the case.”
“The Chamber of Commerce is constantly attacking these laws. And what you see is that the enforcement rank and file end up coming in to defend the laws. When we said the AML law must be mandatory, the banking industry supported the discretionary law. But the rank and file prosecutors at Treasury supported our amendment. They can’t issue press releases. But when they are asked by Congress – should we make this mandatory? They say yes. It strengthens our hand.”
“When the SEC sought to cap the awards in Dodd-Frank, there was a big fight over that. I knew we were going to win that fight when the head of SEC enforcement came out publicly and strongly praised the current program. If you look at the False Claims Act, it’s the same story.”
“By marrying the whistleblower to the prosecutor on an agency by agency basis, it protects the whistleblower in the long run.”
[For the complete q/a ormat Interview with Stephen Kohn, see 38 Corporate Crime Reporter 13, March 25, 2024, print edition only.]