The DOJ's Fraud Whistleblower Incentive Program: More Money, More (Discovery) Problems

Background

The DOJ's WHIP offers tipsters cash awards for tips that result in criminal charges alleging fraud in connection with federal health care programs, as well as programs administered by the Departments of Agriculture, Labor, Health and Human Services, Housing and Urban Development, Education, Veterans Affairs, or Defense, or the Small Business Administration. To qualify for an award, the tipster must make a voluntary written disclosure relating to fraud in one or more of the enumerated programs and cooperate with the government's investigation. WHIP guidelines specify that "[i]nformation must lead to criminal charges in the programmatic areas outlined." WHIP applicants who participated in the fraud are ineligible to recover.

Cash-for-information programs are nothing new. The Dodd-Frank Act created mechanisms to pay whistleblowers who alert market regulators to violations of SEC and CFTC rules, and the False Claims Act has facilitated payments to qui tam relators since the Civil War. Whistleblowers who receive a WHIP award are permitted to participate in these programs as well; indeed, it should be expected that some whistleblowers will avail themselves of multiple programs at once, leading to more coordinated civil and criminal proceedings against parties alleged to have engaged in federal program fraud. There are important differences, however, among cash-for-information programs. One thing that makes WHIP different is how much a whistleblower can recover from a tip and when. While recovery under the FCA is between 15% and 30% of the amount recovered by the government, a WHIP bounty is a set payment of between $10,000 and $30,000. Importantly, while whistleblower awards under the FCA are contingent on the government's own monetary recovery in a resulting civil case (through a settlement or trial), WHIP pays out "at the charging stage of a criminal case."

Where a criminal case arises from a whistleblower's tip under WHIP, defense counsel should consider the related strategic and discovery implications.

Discovery Implications

The Jencks Act governs the production of witness statements in criminal prosecutions. Among other things, the Jencks Act provides that "[a]fter a witness called by the United States has testified on direct examination, the court shall, on motion of the defendant, order the United States to produce any statement (as hereinafter defined) of the witness in the possession of the United States which relates to the subject matter as to which the witness has testified." See 18 U.S.C. § 3500(b). A "statement" covered by the Jencks Act includes "a written statement made by said witness and signed or otherwise adopted or approved by him." Id. § 3500(e)(1).

WHIP requires that "[t]ruthful and complete original information must be provided in writing." A written tip that a testifying WHIP whistleblower submitted to the DOJ would necessarily "relate to the subject matter" of the whistleblower's testimony and, as such, would clearly qualify as Jencks Act material. In addition to soliciting tips, WHIP guidelines invite tipsters to submit written statements documenting their eligibility for payment. Because these statements would, at a minimum, describe the tipster's contributions to the underlying investigation, they are likely discoverable by the defense under the Jencks Act. WHIP may also generate Jencks Act statements by testifying agents because many whistleblower programs solicit declarations from investigators as part of the award adjudication process.

Moreover, the potential for witness payments upon the filing of criminal charges should impact how prosecutors draft affidavits supporting search warrant applications and criminal complaints based on information provided by WHIP tipsters. To the extent that an affiant relies on information from a witness who stands to receive compensation if a charge is brought, that impeachment information may support an application for a hearing to challenge the sufficiency of the affidavit. See United States v. Clark, 935 F.3d 558, 564 (7th Cir. 2019) (reversing the district court's denial of a Franks hearing where the affiant did not disclose payments made to an informant, among other omissions). Accordingly, defense counsel could potentially rely on an affiant's failure to apprise the court that a source stands to receive a WHIP payment to support an application for a Franks hearing challenging the sufficiency of a government affidavit. Defense counsel would do well to determine whether a government affiant relied on the statements of any prospective WHIP recipients in an affidavit submitted to a magistrate judge.  

Impeachment

With WHIP, unlike traditional cooperators hoping to receive a sentencing reduction under U.S.S.G. § 5K1.1, defense counsel can establish that a whistleblower had a personal interest in charges being filed. Witnesses seeking a sentencing reduction under Section 5K1.1 are typically prepared to testify that they believe the government's sentencing recommendation will not be influenced by the outcome of the case or whether charges are brought against additional defendants. That rehabilitation is unavailable under WHIP, which makes a criminal charge a condition of award payment. Relatedly, a witness who received a WHIP payment may be vulnerable to cross-examination suggesting that a sense of gratitude for the receipt of a cash award makes him or her biased toward the government. Counsel could bolster this impeachment by seeking a jury instruction that jurors should exercise "special caution" when evaluating the testimony of a witness who received compensation. 

WHIP's rules can be used to impeach the government's case agent as well. DOJ policy implicitly recognizes that rewards contingent on litigation outcomes create perverse incentives: the Attorney General's Guidelines Regarding the Use of FBI Confidential Human Sources instruct that "[u]nder no circumstances shall payments to a Confidential Human Source be contingent upon the conviction or punishment of any individual." By conditioning payment on a criminal charge, WHIP enables defense counsel to impeach the government's investigation for using techniques that the DOJ previously believed were likely to yield unreliable information.