US Prosecutors’ Message for Whistleblowers: Let’s Make a Deal

Ava Benny-Morrison, Bloomberg News

Damian Williams, U.S. attorney for the Southern District of New York, speaks during a news conference in New York, U.S., on Wednesday, April 27, 2022. U.S. prosecutors charged Archegos Capital Management founder Bill Hwang and Chief Financial Officer Patrick Halligan with fraud, in the latest fallout from the spectacular collapse of the family office. , Bloomberg

(Bloomberg) -- Federal prosecutors in Manhattan have a reputation for taking a tough stance on co-conspirators. Plead guilty, cooperate and the judge may give you a shorter sentence.

But they have a new message for would-be whistleblowers — get through the door first and you could avoid criminal charges entirely.

The US Attorney’s Office for the Southern District of New York announced a new pilot program, aimed at enticing tips from employees at private companies, financial institutions and investment funds that expose corruption and white collar crime.

“It’s consistent with the message we have been sending for a while now, which is to call us before we call you,” US Attorney Damian Williams said on Wednesday.

While the office has long used non-prosecution agreements to bolster cases, the pilot program may be the first of its kind rolled out at a US attorneys office. The Justice Department already has a voluntary self-disclosure program offering similar incentives for corporations that report misconduct.

According to the SDNY program, prosecutors can offer non-prosecution agreements in exchange for information that isn’t public, kick starts an investigation and leads to the prosecution of one or more people.

The whistleblower must also agree to cooperate with the government and can’t be a chief executive or chief financial officer. They can’t work in law enforcement or public office either.

Non-prosecution agreements are usually offered to people who may have some culpability but aren’t central figures in the investigation. In the prosecution of FTX co-founder Sam Bankman-Fried, his former colleague Can Sun signed such an agreement with SDNY in exchange for testifying against Bankman-Fried. The multibillion dollar fraud orchestrated at FTX was already public by the time Sun and Yedidia were on board.

The deals are generally considered when a person can cooperate up, offering information against more senior figures.

The Manhattan attorney’s office has a long history of prosecuting high-profile and complex white collar and corruption cases from financier Bernie Madoff to former state assembly speaker Sheldon Silver.

But whistleblowers shouldn’t expect the kind of awards handed out by the Securities and Exchange Commission, which can pay out millions of dollars in exchange for information leading to enforcement action. The SEC last year paid out nearly $279 million to a single whistleblower.

The Justice Department can’t offer the same incentive, but hopes the possibility of a get-out-of-jail-free card will be reason enough to come forward.

“We think by providing clarity and the benefits of self disclosure, we are going to incentivize individuals and their counsel to provide actionable and timely information to us,” Williams said.

--With assistance from Chris Dolmetsch and Bob Van Voris.