When you consider that over 90 percent of the Justice Department's prosecutions of corporations originate from voluntary disclosures, as opposed to proactive investigative steps, you know there is something wrong with this picture. For the foreseeable future, the Justice Department is happy just to sit and take confessions from companies who believe that voluntary disclosure is the best course to follow.
The equation is about to change -- with the new whistleblower rules going into effect, and the SEC standing up the new office to receive complaints, the mix of originating sources may change. Proactive enforcement against suspected companies may become more frequent as the government initiates its own investigations without a voluntary disclosure.
What are the implications of this new development?
First, with the assistance of confidential information provided by a whistleblower (assuming it is reliable and corroborated), the Department of Justice will be able to launch proactive investigations using a variety of tools -- wiretaps, undercover officers, informants, search warrants and other aggressive tools. While the Justice Department used these kids of tools in the Shot Show sting case, it may be able to use these same tools against larger companies with much more to lose through collection of surveillance information.
Second, the punishment and size of funds will grow even larger. The voluntary disclosure process allows companies time to conduct its own internal investigation, identify compliance weaknesses, remedy the compliance program, and then present a completed package of reform to the Justice Department. The only issue left to resolve is the punishment -- how large a fine? use of a DPA or a NPA? use of a monitor?
Third, the Justice Department is likely to increase the number of corporate executives and agents who are prosecuted under the FCPA. They will be able to gather stronger evidence against individual executives (e.g. wiretaps, audio recordings, videotapes) and able to target even greater numbers for prosecution.
The business community is right to be concerned about the new whistleblower rules. Businesses should be concerned not only about the fact that the number of whistleblowers will increase but by what the government can do with the new whistleblowers and the information they provide.