SDNY Launches Whistleblower Pilot Program to Encourage Self-Disclosure of Criminal Conduct

On January 10, 2024, the U.S. Attorney's Office for the Southern District of New York ("SDNY") announced a Whistleblower Pilot Program that encourages individuals to voluntarily disclose information concerning certain fraud, corruption, and other criminal conduct, and offers individuals non-prosecution agreements ("NPAs") in exchange for cooperation in a resulting investigation and prosecution.

The SDNY Whistleblower Pilot Program applies to individuals who provide information to the SDNY about criminal conduct involving: (i) fraud, corporate control failures, or other acts affecting market integrity undertaken by or through public or private companies, exchanges, financial institutions, investment advisors, or investment funds; or (ii) state or local bribery or fraud involving federal, state, or local funds. The policy excludes violations of the Foreign Corrupt Practices Act, federal/state campaign financing laws, federal patronage crimes, corruption of the electoral process, or bribery of federal officials, many of which are covered by other similar Department of Justice ("DOJ") policies.

The policy provides that the SDNY would enter into an NPA with a whistleblower who provides such information if:

• The SDNY does not already know the information and the criminal conduct is not already public;
• The individual voluntarily discloses the criminal conduct (rather than in response to a government inquiry or reporting obligation);
• The individual can provide substantial assistance in the investigation and prosecution of one or more culpable persons, and is prepared to cooperate fully with the SDNY;
• The individual truthfully and completely discloses all criminal conduct in which they participated or of which they are aware;
• The individual is not an elected/appointed government official; an agent/official of a federal law enforcement or investigative agency; a person of "major public interest" (or expected to become one); a CEO or CFO (or equivalent) of a company; and
• The individual has not engaged in certain forms of criminal conduct (specified in the policy) and does not have a previous felony conviction or any conviction involving fraud or dishonesty.

The policy provides that SDNY exclusively retains the right to determine whether an individual has met the above requirements and whether to enter into an NPA in exchange for their cooperation. The policy further provides guidance on the factors the SDNY will consider when determining whether to enter into an NPA when these requirements are not met.

The SDNY Whistleblower Pilot Program follows on the heels of recent DOJ policies (read our previous Alert, Commentary, and White Paper) encouraging companies to self-disclose corporate misconduct. Companies should be aware of the potential incentives offered by the program to individuals who have engaged in and/or are aware of corporate misconduct. Companies should ensure that they have strong internal monitoring and controls in place to timely identify, evaluate, and respond to such misconduct, and effective internal reporting channels encouraging employees to report issues internally before they are raised externally. As discussed previously, however, companies should not engage in efforts to deter employees from reporting information to the government and seeking whistleblower protection.