The U.S. attorney for the Southern District of New York recently announced the creation of a Whistleblower Pilot Program (the SDNY program) designed to encourage individuals to disclose potential criminal conduct to federal prosecutors in New York.1 The SDNY program offers non-prosecution agreements to individuals who voluntarily disclose criminal conduct involving fraud or bribery by companies and financial institutions so long as certain conditions are met. As described in more detail below, this program complements existing federal whistleblower programs and underscores the importance of companies' establishing and maintaining effective compliance programs designed to detect and deter unlawful corporate conduct, including internal processes for individuals to report such conduct. 

Background on Federal Whistleblower Programs

The announcement of the SDNY program builds on the success that other federal agencies have had with whistleblower programs. After the 2008 financial crisis, the Dodd-Frank Act established whistleblower programs for the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) that offer significant monetary awards to individuals who provide original information that leads to successful civil enforcement actions yielding monetary sanctions of over $1 million.2 Both agencies have touted the success of their programs—the SEC has awarded more than $1 billion to whistleblowers since its inception and brought enforcement actions resulting in more than $6 billion in financial remedies based on whistleblower tips.3 

Federal criminal prosecutors have also established policies that encourage the reporting of potential criminal violations, but these programs to-date have been focused on a corporation's self-disclosure. The DOJ's Corporate Enforcement Policy (CEP) generally provides that a company that voluntarily self-discloses potential criminal conduct, fully cooperates with prosecutors, and timely and appropriately remediates will presumptively not be criminally prosecuted absent certain aggravating factors.4 The DOJ recently supplemented this policy by allowing prosecutors to credit companies that, among other things, maintain effective compliance programs and internal accounting controls that enable the identification of misconduct and that lead to a company's self-disclosure.5 Again, this program focuses on incentivizing corporate counsel to decide to self-report potential criminal conduct by corporate employees, but it has not previously focused on encouraging whistleblowing by individuals who may have participated in the criminal conduct. 

SDNY Program Offers Amnesty to Individuals With Information About Certain Crimes

The SDNY program is a new policy that offers non-prosecution agreements to individuals with information about certain categories of corporate crime. The SDNY program is specifically focused on encouraging reporting of information regarding criminal conduct undertaken by public or private companies and financial institutions involving fraud, corporate control failures, and impacts to market integrity as well as bribery or fraud involving public funds.6 In exchange for early and voluntary disclosure of such information, along with continued cooperation with prosecutors, the SDNY program offers a non-prosecution agreement to a whistleblower so long as certain conditions are met. These conditions include: that the misconduct was not previously made public or known to criminal prosecutors; that the whistleblower discloses the information voluntarily and not in response to a government inquiry; that the whistleblower “truthfully and completely discloses all criminal conduct in which the individual has participated and of which the individual is aware;” and that the individual did not engage in criminal conduct involving the use of force or violence, or a sex offense or any offense involving terrorist or implicating national security. This program is unique to the SDNY, and it may incentivize individuals to provide information to SDNY prosecutors, as opposed to prosecutors in other U.S. attorney's offices or the DOJ. 


As the first-of-its-kind formal federal program offering non-prosecution agreements to individuals under specified circumstances, the SDNY program is likely to lead to an uptick in the reporting of potential criminal violations involving corporate crime, including financial fraud. Although the SDNY program does not offer financial incentives to whistleblowers, it gives potentially culpable individuals a reason to report misconduct to prosecutors rather than through a corporate whistleblowing chain.

While individuals cannot have certainty about avoiding their own criminal liability by sharing information with prosecutors, the codification of factors that will lead to a non-prosecution agreement will aid individuals in assessing the risks and benefits of blowing the whistle. 

And most importantly for corporate counsel, the SDNY program again underscores the importance of establishing and maintaining effective corporate compliance and whistleblower programs that encourage employees to speak up internally and enable companies to address potential problems sooner rather than later.







6. By its own terms, the SDNY Program does not apply to individuals providing information regarding violations of the Foreign Corrupt Practices Act, or violations of federal or state campaign financing laws, federal patronage crimes, or corruption of the electoral process, or bribery of federal officials."

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