Southern District of Florida’s Whistleblower Non-Prosecution Pilot Program: How It Will Impact Companies Doing Business in Florida

Introduction

In the last year, the Department of Justice (DOJ) has announced a number of whistle-blower policies as part of its efforts to double down on combating corporate white-collar crimes, some of which will specifically impact Florida. Most recently, on 13 September 2024, the US Attorney’s Office for the Southern District of Florida announced its Whistleblower Non-Prosecution Pilot Program (“SDFL Whistleblower Program”). This programme provides leniency in criminal liability to whistle-blowers who have engaged in wrongdoing in exchange for information about certain criminal activity. The SDFL Whistleblower Program is likely to lead to increased reporting of unlawful conduct and has a significant impact on companies of all types doing business in Florida, including those in the financial and healthcare industries. In short, a company’s internal policies and practices are much more likely to be scrutinised by federal authorities in light of these new policies. Companies operating in Florida should evaluate and update their whistle-blowing policies, compliance programmes and internal investigation practices as needed to avoid pitfalls. Companies should also carefully consider reporting to the DOJ and weigh relevant factors.

SDFL Whistleblower Program

In Florida, the DOJ, along with other federal and state government authorities, have long relied on whistle-blowers to identify individuals who are committing white-collar crimes. A person who provides evidence of wrongdoing to government authorities (ie, a whistle-blower) receives certain protections and benefits in return. At the federal level, the DOJ’s False Claims Act qui tam programme, which “incentivizes whistleblowers to report fraud in government programs”, the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Financial Crimes Enforcement Network all have successful federal whistle-blower programmes.

The United States Attorney’s Office for the Southern District of Florida (USAO-SDFL) has now added another mechanism for reporting wrongdoing to federal authorities in Florida. The USAO-SDFL announced that it has implemented the SDFL Whistleblower Program to encourage early voluntary self-disclosure of criminal conduct and to promote effective enforcement of federal criminal laws. US Attorney’s Offices, which are subagencies of the DOJ that enforce federal laws throughout the USA, are divided into federal districts. To date, the USAO-SDFL is one of nine districts with their own district whistle-blower programmes, including the Northern District of California, District of Columbia, Northern District of Illinois, District of New Jersey, Eastern District of New York, Southern District of New York, Southern District of Texas and Eastern District of Virigina.

The SDFL Whistleblower Program is applicable when an individual discloses to the SDFL-USAO information regarding criminal conduct undertaken by or through:

• public or private companies, exchanges, indexes, financial institutions, investment advisers, investment firms or investment funds involving fraud or corporate control failures, or affecting market integrity; or
• criminal conduct involving state or local bribery or fraud relating to federal, state or local funds.

The policy states that the programme “does not apply to individuals who provide information regarding violations of the Foreign Corrupt Practices Act (FCPA), or violations of federal or state campaign financing laws, federal patronage crimes, corruption of the electoral process, or bribery of federal officials”.

According to the policy, the USAO-SDFL will enter into a non-prosecution agreement in exchange for the individual’s co-operation where the following requirements are met.

• The misconduct has not previously been made public and is not already known by any DOJ component.
• The disclosure is voluntary, which means:
1. the disclosure is not in response to a government inquiry by any federal law enforcement or regulatory agency on the subject matter of disclosure;
2. the disclosure is not in response to an obligation to report misconduct to the USAO-SDFL, federal law enforcement, a regulatory agency or any component of the DOJ; and
3. the disclosure must be made prior to an imminent threat of disclosure or government investigation.
• The individual is able and willing to provide “substantial assistance in the investigation and prosecution of one or more equally or more culpable persons, and is prepared to cooperate fully with the USAO-SDFL in its investigation and prosecution of the disclosed conduct and the recovery of any related criminal proceeds”.
• The individual truthfully discloses all criminal conduct in which the individual has participated and of which is known.
• The individual is not:
1. a foreign, federal, state or local elected or appointed and confirmed official;
2. an official or agent of a federal investigative or federal law enforcement agency; or
3. the chief executive officer or equivalent, or chief financial officer or equivalent, of a public or private company, or – regardless of title – a person who exercises primary control over the operations of the organisation where misconduct occurred.
• “The individual has not engaged in any criminal conduct that involves the use or threat of force or violence, any sex offense involving fraud, force, or coercion of a minor, or any criminal conduct that involves terrorism or implicates national security or foreign affairs. The individual cannot have a previous felony conviction or a conviction of any kind for conduct involving fraud or dishonesty, or a felony conviction involving violence or threat of violence, a sex offense involving fraud, force, or coercion of a minor, or have engaged in an offense where another DOJ component would need to authorize charges or non-prosecution agreements”.

Importantly, the policy for the SDFL Whistleblower Program provides that where a disclosure involving the subject matter covered by the policy does not meet the six conditions above, federal prosecutors may still exercise their discretion in extending a non-prosecution agreement. In such circumstances, prosecutors must obtain supervisory approval, act in accordance with all DOJ policies and consider certain factors related to the six requirements above, as outlined in the policy.

Commonality and interplay of the SDFL Whistleblower Program and the DOJ’s other whistle-blower programmes

The SDFL’s Whistleblower Program cannot be considered alone in evaluating whistle-blowing in Florida and the liability risks associated with reporting. For example, the fact that the SDFL Whistleblower Program does not apply to whistle-blowers who provide information regarding violations of the FCPA, federal or state campaign financing laws, federal patronage crimes, corruption of the electoral process or bribery of federal officials does not mean that such misconduct is not reportable to the DOJ. Instead, violations related to foreign corruption and bribery related to public or private companies, including violations of the FCPA and violations of the Foreign Extortion Prevention Act, are covered by the Criminal Division’s Pilot Program on Voluntary Self-Disclosures for Individuals, which went into effect in April 2024. Under this pilot programme, the Criminal Division of the DOJ in Washington, DC can also enter into a non-prosecution with individuals in Florida, and elsewhere, who report misconduct to law enforcement in the context of corporate and white-collar criminal offences. Of course, DOJ personnel in DC often work in conjunction with Assistant United States Attorneys throughout the country to prosecute cases in the local districts, whether the whistle-blower reports to the DOJ in DC or in the local district. This is just one example of separate DOJ programmes working together to ensure that the DOJ policies are in alignment and not duplicating efforts unnecessarily.

The SDFL Whistleblower Program is different, and separate, from the DOJ’s Criminal Division Corporate Whistleblower Awards Pilot Program but these two programmes also complement each other. The SDFL Whistleblower Program was announced on the heels of the DOJ Criminal Division launching a new and separate whistle-blower policy on 1 August 2024, named the DOJ Corporate Whistleblower Awards Pilot Program. The SDFL Whistleblower Program is designed to encourage early and voluntary self-disclosures of criminal conduct committed and/or known by individual participants in certain non-violent offences. Specifically, the SDFL Whistleblower Program incentivises individuals who participated in criminal activity to report wrongdoing to the SDFL-USAO by offering leniency in criminal liability. On the other hand, the DOJ’s Criminal Division Corporate Whistleblower Awards Program incentivises those who did not meaningfully participate in criminal activity to provide information in exchange for a monetary reward. The Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) is tasked with overseeing the Corporate Whistleblower Awards Program. Together, the programmes cover whistle-blowers who are situated differently to increase the odds of the DOJ receiving information about wrongdoing.

The commonality among all the new DOJ whistle-blower programmes is incentivising whistle-blowers to report criminal conduct to the DOJ, either in DC or at a local district level. The expansion of programmes launched by the DOJ in Washington, DC, as well as some US Attorney’s Offices, simply means that whistle-blowers have more reporting options. For example, if whistle-blowers are in a district that has its own whistle-blower programme, like the SDFL, they can choose to report to the DOJ through the US Attorney’s Office and law enforcement in their local district or through the Criminal Division’s MLARS in Washington, DC.

In sum, these new whistle-blower policies share common goals, and taken together with the resources dedicated to these programmes, are a force multiplier for enforcement efforts by the DOJ. Those businesses with operations in the SDFL must be aware that, in addition to being subject to whistle-blower reporting to the DOJ Criminal Division in DC, they are operating in a geographical area that aggressively investigates and prosecutes corporate crimes that now has reporting protocols for whistle-blowers to report directly to the SDFL-USAO.

Practical impact on companies doing business in Florida and key considerations in reporting

       The SDFL Whistleblower Program and other new whistle-blower policies build on the DOJ’s efforts to not only hold individuals accountable for wrongdoing by providing more avenues for reporting, but also to put pressure on companies to report misconduct promptly. How will these new whistle-blower policies impact companies not only doing business in South Florida, but in the entire state of Florida? The practical implications listed below come with an array of challenges that companies and their counsel must be prepared to overcome.

Whistle-blower reporting likely to increase

With so many incentives and pathways for reporting misconduct involving new subject areas, it is likely that whistle-blowing will increase, both to the DOJ and internally at companies. Historically, whistle-blower programmes have been fairly successful (hence the DOJ’s interest in creating the new pilot whistle-blowing programmes). There is no reason to expect that the DOJ’s efforts to expand the scope of whistle-blower reporting, both by subject matter and geographic location, will yield less successful results. Notably, the Northern and Middle Districts of Florida have not yet implemented their own policies. Nonetheless, any reports to the SDFL-USAO of criminal activity occurring in other parts of the state are likely to be referred to those federal prosecutors and/or law enforcement agencies in the appropriate district. Therefore, the SDFL Whistleblower Program may increase reporting for the entire state of Florida.

A collateral consequence of more whistle-blowing is that company internal reporting and compliance processes are more likely to be examined later by the DOJ. This year, representatives of the DOJ have repeatedly emphasised the need for companies to invest in internal compliance programmes to report crimes when they learn about them. Thus, it is essential to ensure that companies quickly receive complaints and adequately address them. To assist in these efforts, companies operating in Florida and their counsel should consider the following:

• reviewing existing policies and processes regarding internal reporting mechanisms;
• ensuring appropriate whistle-blower protections and anti-retaliation policies are in effect and enforced;
• updating such policies and processes as needed;
• conducting compliance training on existing policies and processes; and
• testing employee awareness of these policies and processes.

Effective and prompt internal investigations are essential

Given the new DOJ whistle-blower programmes and related enforcement efforts, efficiency and speed in reliable internal investigations has never been more important in such high-stake investigations. At the same time, the quality of an investigation is critical not only in trustworthy fact-finding and doing the right thing, but also to protect the company. Those conducting investigations must work swiftly without compromising thoroughness and good practices. Adequate communication with the whistle-blower, documentation and credible follow-up in a prompt manner are important to a reliable internal investigation.

Additionally, companies now face the risk that whistle-blowers will report privileged or work product information to the DOJ. The DOJ policy does not address the protection of privileged or work product information. This means that companies and their counsel must be careful in communicating with whistle-blowers and in unnecessarily sharing privileged and confidential information that could risk potential waiver of these legal protections.

Some considerations for companies and their counsel include:

• revamping processes and training for internal investigations;
• establishing reasonable timeframes for internal status reporting on internal investigations to assist in pacing (not completion, which of course generally varies on a case-by-case basis);
• limiting the distribution of privileged and confidential information to key personnel; and
• taking additional steps to protect privileged information.

Need for careful consideration of reporting to the DOJ in the SDFL and elsewhere

Given the increased likelihood of whistle-blowing, companies and their counsel must now carefully consider whether to report information quickly after receiving an internal complaint. This creates a heavy burden on those advising and deciding whether to report to the SDFL-USAO or any component of the DOJ, especially when the allegations are somewhat substantiated but the investigation is incomplete. Stakeholders and advisors must consider whether to report and, if so, what information to report while the internal investigation continues.

Reporting to the DOJ is often only the beginning of an ongoing process involving the company. Typically, the DOJ requires regular status reports and co-ordination of investigative efforts from the company after reporting. Subpoenas and other information requests from the DOJ are likely if they choose to investigate the matter. This interaction can be time-consuming and costly.

On the other hand, the DOJ, including the USAO-SDFL, is likely to question decisions not to report swiftly if a whistle-blower reports to the DOJ after reporting internally. Depending on the circumstances, a failure to report promptly may be held against the company in determining company liability. Seeking outside counsel to help decide – and to consider all risks and benefits – is prudent, especially if the allegations involve high-level executives or long-term employees, or if a pattern of activity has been established.

For companies, preliminary considerations in determining whether to report to the DOJ should include:

• whether the subject matter falls within the whistle-blower policies;
• repeated allegations involving similar conduct and/or the same alleged offenders;
• high-profile matters and the individuals involved; and
• retaining outside counsel.

Conclusion

By implementing the SDFL Whistleblower Program and further incentivising whistle-blowers through leniency for wrongdoers, the DOJ is undeniably placing pressure on companies doing business in Florida to report misconduct, and to do so quickly. The practical implications that the DOJ whistle-blower policies have for companies operating in Florida, especially South Florida, are significant and raise a number of challenges. Companies and their counsel should be familiar with new DOJ guidelines and proactively evaluate their current compliance practices for improvement. Improving policies and practices, conducting robust and thorough investigations swiftly, and carefully considering reporting to the DOJ on a case-by-case basis will help to avoid pitfalls and a higher risk of liability for the company.