White Collar Crime

Targeting white-collar crime, DOJ seeks more whistleblowers

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Deputy Attorney General Lisa Monaco speaks in April 2023 in the Great Hall at the Justice Department. (Photo by Jabin Botsford/The Washington Post)

Howard Wilkinson was a mid-level manager at a Danish bank branch in Estonia when he alerted his superiors about the suspected illicit transfer of Russian funds through the bank and then into the United States.

Danske Bank last year pleaded guilty to criminal charges of laundering $230 billion and agreed to forfeit $2 billion to settle the case with the U.S. Department of Justice.

Justice officials say the case is a prime example of the kind of global financial corruption that can be exposed with the help of an insider—and they are developing plans to recruit more whistleblowers to generate new leads.

Under a Biden administration program the Justice Department plans to unveil within weeks, authorities will offer whistleblowers who provide tips that lead to successful prosecutions a percentage of the resulting penalties and fees—an amount that could total millions of dollars.

Under a Biden administration program the Justice Department plans to unveil within weeks, authorities will offer whistleblowers who provide tips that lead to successful prosecutions a percentage of the resulting forfeitures—an amount that could total millions of dollars.

Deputy Attorney General Lisa Monaco described the effort as a modern-day version of the rewards that law enforcement once offered in “the days of ‘Wanted’ posters across the Old West,” and authorities say it could lead to asset forfeitures worth hundreds of millions or billions of dollars annually.

The expansion of whistleblower programs across the U.S. government since 2011—when Congress granted some federal agencies new powers to pay for tips under the Dodd-Frank Act—has received bipartisan support.

Yet some white-collar defense lawyers cautioned that the Justice Department’s efforts could undermine the ability of corporations to conduct their own investigations, creating an incentive for tipsters to bypass internal compliance in hopes of a payday.

And whistleblower advocates voiced concerns that prosecutors could become inundated with tips, making it difficult to determine which are most likely to lead to successful cases.

Justice has for many years paid whistleblowers under the False Claims Act, which is limited to civil cases involving abuse of the U.S. government’s vast federal contracting system. Prosecutors and their tipsters last fiscal year were party to a record 543 settlements and judgments totaling $2.68 billion.

Officials said they are modeling the new program after similar ones in two other federal agencies, the Securities and Exchange Commission and the Commodity Futures Trading Commission. The SEC received 18,000 tips in fiscal 2023, up nearly 50 percent from a year earlier, and paid a record $600 million to 68 whistleblowers. The CFTC received 1,530 tips and paid seven whistleblowers a total of $16 million last year.

The SEC’s awards in 2023 included a record $279 million payout to a tipster in a bribery case involving the Swedish telecommunications company Ericsson that was settled for $1.1 billion. In 2021, the CFTC awarded nearly $200 million to a former Deutsche Bank employee who provided information in an interest rates manipulation case that resulted in the German bank being fined $2.5 billion.

Authorities did not offer details of what kind of information the whistleblowers in those cases provided, citing laws aimed at maintaining anonymity for tipsters who could face retribution from their employers or others.

The Treasury Department, under its Financial Crimes Enforcement Network, is also establishing new whistleblower regulations, mandated by Congress, that will implement mandatory payments to tipsters.

Federal whistleblowers in all of these programs are eligible to collect payments ranging from 10 percent to 30 percent of the penalties and fees assessed in the case, depending on how much value their information had in the prosecution, officials said.

“The biggest untold story in whistleblowing are these new award laws and the revolution they are causing,” said attorney Stephen Kohn, who represented Wilkinson, a British national whose identity was leaked when the Danske Bank scandal became public in 2018. “Whistleblowers are being compensated for turning in some of the largest corporations in the world.”

Wilkinson, who first came forward with his allegations in the Danske Bank case in 2014, has not been paid a whistleblower award. Federal authorities said he probably will not be eligible to apply for payment under the new Justice Department program, which will be limited to cases within the department that originate after the program is launched.

Justice officials said the initiative aims to fill enforcement gaps in areas where the other federal agencies lack legal jurisdiction. They cited foreign money-laundering operations that entangle American institutions, bribery of government employees and abuses of the U.S. financial system by non-publicly traded companies out of the SEC’s reach.

Under the guidelines, officials said, whistleblowers will be eligible for cash rewards provided they have not been involved in the alleged misconduct and their information helps lead to a conviction involving a forfeiture above a certain threshold. That figure has yet to be announced. A similar requirement at the SEC puts the bar at cases that result in settlements of $1 million or greater.

“The goal here is accountability,” said a senior Justice official, who spoke on the condition of anonymity because details of the program have not been finalized. “Whether it’s criminal prosecutions and holding individuals accountable, or recovering criminal proceeds, it all takes the form of general deterrence.”

In addition to the Danske Bank case, authorities pointed to several other examples of the kind of criminal misconduct that the new whistleblower program is aiming to uncover.

In December 2020, the U.S. affiliate of Vitol, an energy trading firm, agreed to pay $135 million to settle charges that it engaged in a scheme to bribe government officials in Brazil, Ecuador and Mexico for insider information to help win fuel oil contracts.

In May 2022, Glencore, a Swiss-based commodities trading and mining corporation, pleaded guilty to bribing officials in the United States, United Kingdom and Brazil, and to seeking to manipulate fuel oil prices. The company agreed to pay $1.1 billion to resolve the case.

Last March, Trafigura, a Swiss-based commodities multinational, pleaded guilty to charges of bribing Brazilian officials to do business with a state-controlled oil company and agreed to settle the case for $126 million.

The Justice Department’s willingness to pay for tips “does make their life easier, and it does help them bring cases, including some cases they would not discover otherwise,” said Robert Anello, a New York corporate defense lawyer. “It’s very helpful to the government, and they’ve reached out to do it in every realm of criminal and what you might call quasi-criminal civil actions, such as sanctions and sexual harassment.”

In April, the Justice Department began testing a separate program to offer non-prosecution agreements to corporate insiders who are willing to provide information about misconduct and cooperate in investigations against others. U.S. attorneys offices in New York and California are testing similar versions of that program.

“Our message to whistleblowers is clear: The Department of Justice wants to hear from you,” Monaco said at an American Bar Association conference in March. “And to those considering a voluntary self-disclosure, our message is equally clear: Knock on our door before we knock on yours.”

Some lawyers cautioned, however, that the government’s willingness to reward tipsters could work against its push for corporations to more effectively investigate themselves. For example, they said, employees might choose to forgo bringing allegations to their company’s internal compliance department in favor of pursuing a whistleblower payout from federal authorities.

Whistleblowers do not always have a complete picture of what is happening inside a company, and in some cases the misconduct they allege to investigators “is not what the whistleblower thought it was,” said Mike Piazza, a Dallas attorney who has defended companies in whistleblower cases.

Once federal prosecutors open an investigation, he said, “there can be a great deal of reputational harm” for a company even if the allegations are unfounded and criminal charges are not filed.

Federal officials, however, said that whistleblowers who first raise their concerns internally will remain eligible for reward payments even if company officials then self-report the misconduct to the Justice Department.

Whistleblower advocates have flagged concerns that the sheer volume of tips have threatened to overwhelm authorities in other federal agencies that have reward programs. In some cases, that has resulted in administrative delays on investigations and paying out reward money.

The Internal Revenue Service’s whistleblower program has faltered in recent years amid staffing reductions. The amount of revenue the IRS collected in tax fraud enforcement cases involving tips from whistleblowers plunged from $1.4 billion in 2018 to $172 million in 2022, according to that agency.

In a 2019 report, that agency found that payouts to whistleblowers took as long as a decade to be processed and 23 whistleblowers died in 2018 while still awaiting payments that were never made.

Siri Nelson, executive director of the National Whistleblower Center, said her organization has lobbied Justice officials to establish a dedicated whistleblower office with enough staff to determine which tips are worth pursuing and to expedite award payments.

“A lot of times, we hear concerns about, ‘How do we deal with all the tips? How do we differentiate between what is legitimate and what is not supported or is misleading and results in the waste of the agency’s time?’” Nelson said.

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