DOJ outlines white-collar focus, whistleblower results

In a pair of speeches last week, Acting Assistant US Attorney General Matthew Galeotti provided a glimpse into the US DOJ’s priorities for white-collar enforcement and the early results of some of its ambitious enforcement initiatives.

Together, AAG Galeotti’s remarks sent a clear message that the DOJ intends to aggressively investigate and prosecute white-collar offenses in line with the administration’s “America First” objectives—including health care fraud, procurement fraud, trade fraud, fraud on US financial markets and foreign corruption—and that the DOJ is serious about incentivizing whistleblowing and corporate self-disclosure.

First, in remarks at the Association of Certified Anti-Money Laundering Specialists Conference, AAG Galeotti identified “the key threats to the United States” that are “most relevant to the financial services industry”: cartels and transnational criminal organizations, particularly those operating in Mexico and the Western Hemisphere; Chinese money laundering organizations ("CMLOs"); and “rogue nation-states like North Korea and Iran.” AAG Galeotti described the DOJ’s efforts to combat those threats, including charging leaders of cartels and CMLOs and prosecuting money laundering and sanctions evasion, then moved on to the private sector’s role. “First and foremost,” AAG Galeotti said, “we want you to work cooperatively with us.” That means “encourag[ing] your institutions to contact us” upon spotting suspicious transactions or other red flags. AAG Galeotti tied this cooperation directly to the DOJ’s revised Corporate Enforcement Policy ("CEP") and its expanded whistleblower program, underscoring the DOJ’s interest in aligning incentives to disclose potential wrongdoing:

• “In May, I revised the Criminal Division’s Corporate Enforcement Policy to provide a clear path to companies and institutions that timely self-report potential misconduct, cooperate and remediate. When companies self-report, they will receive the most favorable resolution we can offer." 

• “And, if you work at a company that is not interested in cooperating with the government to counter these threats, we still want to hear from you. We have expanded our whistleblower program and are focused on reports relating to our priorities, many of which I covered here today. . . . Our hope is that this is another incentive for companies to address the problems identified by their compliance personnel. Make no mistake, though. Where companies do not come forward, do not cooperate or do not remediate, they will face consequences. White-collar enforcement remains a priority for the Criminal Division, and I have directed our prosecutors to aggressively investigate and prosecute bad actors.”

AAG Galeotti also presented some noteworthy statistics about the whistleblower program, touting more than 300 tips over the course of just four months:

• “Since I announced the expansion of the program in May, we have received credible whistleblower tips across the spectrum of white-collar violations. In those four months, we have received 313 whistleblower tips and found 120 of them to warrant further investigation, including a number of tips relating to our priority areas – procurement fraud, trade fraud and sanctions evasion.”

Second, in remarks at the Global Investigations Review Annual Meeting, AAG Galeotti emphasized that “white-collar enforcement remains a priority for the Criminal Division,” citing as “key priority areas” health care fraud, procurement fraud, trade and customs fraud, market integrity (including crimes associated with Chinese variable interest entities) and foreign corruption. Consistent with earlier pronouncements (New DOJ FCPA guidance focused on vindicating US interests abroad, US DOJ announces new white-collar enforcement plan and New SEC task force prioritizes combatting cross-border fraud), the unifying thread was protection of US taxpayers, US investors and US competitive interests. AAG Galeotti observed that he expects public enforcement actions directed at trade and customs fraud (with a focus on “long-running efforts to evade hundreds of millions in tariffs, including tariffs on Chinese products,” and “trade fraud schemes carried out by or with the knowledge of corporate executives”) and foreign bribery. Lastly, AAG Galeotti described “the hallmarks of our enforcement approach” as “pragmatism, even-handed justice and putting the right incentive structures in place,” which he characterized as “reflected in our revisions to the CEP”:

• “Our revisions to the CEP set forth: (1) a clear path towards resolving corporate investigations without ongoing obligations, (2) the available fine reductions for cooperation and remediation and (3) the factors that determine the form of a final corporate resolution. Put simply, the CEP crystallizes the benefits to companies that voluntarily self-report, cooperate and remediate — they will receive a declination, not just a ‘presumption.’”

• “Let’s be clear about these Part I resolutions. They are resolutions in which the Division follows through on its promise that, where a company voluntarily self-discloses, fully cooperates with our investigation and timely and appropriately remediates, we will not bring charges against the company if it disgorges any illicit profits and makes any victim compensation payments. We are focused on incentivizing and rewarding good corporate citizenship and holding others accountable.”

Takeaways

White-collar enforcement in certain areas will be more aggressive under this administration than in years past. As predicted, health care fraud, tariff evasion and financial crimes committed by nationals of certain high-priority countries received special attention in AAG Galeotti’s remarks, signaling that companies exposed to those risks have a particularly strong incentive to review their compliance and reporting systems.

The DOJ’s emphasis on its revised CEP and its whistleblower statistics together underscore the urgency of that message, which extends to all participants in US markets: The US Government wants to encourage cooperation when corporate crimes are detected—whether by the corporation itself or, failing that, by whistleblowers—and it will use all of the levers at its disposal to further that objective.

AAG Galeotti’s statistics about whistleblowers are staggering, particularly the 120 tips that apparently merited further investigation.

Now is an ideal time for companies to examine their internal controls anew and ensure that they are prepared to detect and remediate any compliance failures, evaluate self-disclosure imperatives and respond appropriately to any whistleblower reports before whistleblowers attempt to monetize that information with the DOJ.