Kenneth Polite, Assistant Attorney General of the Department of Justice’s Criminal Division, was the subject of a well-deserved spotlight article in the WSJ this week – one that described his tenure at the helm of the criminal division, leading investigations into gang activity, cybercrime, and white-collar crimes such as foreign bribery, money laundering, market manipulation, and insider trading.

The news outlet reported that Polite is preparing to step down from his position by the end of July, and after a short break, he plans to join a law firm.

Data analytics and fraud

Polite talked about the DOJ’s data-analytics efforts, comparing those efforts to the department’s national task force on cryptocurrency investigations, in which expertise and coordination was centralized to help make a growing area of concern to the DOJ more streamlined and efficient following the collapse of crypto exchange FTX.

The Justice Department has preferred to conduct its data-analytics work away from the spotlight, but it has been referenced in remarks made at compliance-industry events and in speeches by department officials at legal conferences and even within enforcement decisions.

The DOJ has been using data-analytics tools for years to combat healthcare fraud, and the White House has used such tools to combat Covid-19-related fraud. The SEC has also touted its application of the tools in bringing enforcement cases for some time.

“What that data allows us to do is identify those aberrant trends which are indicative of criminal activity. We can’t look at everyone … but we can use that data to identify where we should be looking.”

Kenneth A Polite, Assistant Attorney General, DOJ Criminal Division

The DOJ’s criminal division’s fraud section began applying them to financial services fraud, citing their use in bringing insider-trading charges (with the SEC bringing civil charges) against the former chief executive of telehealth provider Ontrak, Terren Peizer. 

The DOJ noted in its press release about the case that its investigation had been a part of a data-driven initiative led by the fraud section to identify executive abuses of Section 10b5-1 trading plans, and the SEC said the same about the use of such tools in its investigation of the case. (The case is ongoing, and Peizer has denied the agencies’ allegations.)

Employee misconduct

Polite told the WSJ how DOJ hired Matt Galvin last year to serve in a newly created position of resident compliance and big data expert in the fraud section of DOJ. Galvin was a former compliance officer for Anheuser-Busch InBev who pioneered the use of data analytics by companies to prevent and detect employee misconduct. 

Where data was applied in the past to build a case once it had already been identified, the goal of the department’s more recent efforts has been to find cases where patterns in the data warrant further investigation, Polite told the WSJ.

“What that data allows us to do is identify those aberrant trends which are indicative of criminal activity,” he said. “We can’t look at everyone … but we can use that data to identify where we should be looking.”

DOJ policy changes

Data analytics aside, most of us will remember Polite as a point person in articulating his agency’s policy changes on cooperation credit, encouraging companies to come forward when internal wrongdoing is discovered rather than try to deal with it alone.

Speaking of those policy updates, Polite said earlier this year that such revisions “make clear that there will be very different outcomes for companies that do not self-disclose [when they] have identified potential wrongdoing.”

As part of the criminal division’s effort to get companies to step up self-disclosure, Polite encouraged executives to come forward – even if the potential wrongdoing is egregious or the company is a recidivist. 

Prior to the policy changes, such companies with “aggravating factors” would have had a hard time getting cooperation credit, but now they have a path to get reduced fines, escape a finding of guilt or benefit from a declination of prosecution, Polite told an audience at Georgetown Law Center earlier this year. 

He has also served as the vice president and chief compliance officer for a Fortune 500 company headquartered in New Orleans, where he led the Ethics and Compliance Department.

“The policy [has] an undeniable message,” Polite said. “Come forward, cooperate, and remediate. We are going to be closely examining how companies discipline bad actors and reward the good ones.”

Polite was named head of the criminal division in mid-2021. Prior to his current role, he served as a partner in the Philadelphia office of a large international law firm, as a prosecutor for three years in the Southern District of New York, then returned to DOJ in 2013 as US Attorney for the Eastern District of Louisiana in New Orleans, the city where he grew up.

As he likes to remind audiences of compliance and risk professionals, he has also served as the Vice President and Chief Compliance Officer for a Fortune 500 company headquartered in New Orleans, where he led the Ethics and Compliance Department.

CCO certifications

He referenced this CCO experience to announce an initiative that worried some compliance professionals in May 2022 in announcing the need for CCO certifications for criminal division corporate resolutions.

Specifically, Polite said that guilty pleas, deferred prosecution agreements, and non-prosecution agreements now require both the CEO and CCO to sign a certification at the end of the term of the agreement.

“This document certifies that the company’s compliance program is reasonably designed, implemented to detect and prevent violations of the law, and is functioning effectively. These certifications are designed to give compliance officers an additional tool that enables them to raise and address compliance issues within a company or directly with the department early and clearly,” Polite said in his announcement of the new requirement.

Some compliance officers and others in the field have expressed worry that these certifications would put CCOs at greater risk of being held personally liable if anything later is discovered about the remediated compliance program that is still problematic – a risk CEOs are well-compensated for and might be more prepared to take as the chief officers of their businesses.

Compliance program remediation

Since then, DOJ officials have reassured CCOs that this requirement is not part of a “gotcha game” to hold executives liable for compliance failures – it is truly to make sure CCOs are involved in the process of signing off on compliance program remediation in corporate resolutions with the agency.

Polite’s focus on timely and fulsome corporate cooperation, advocacy for a proactive and powerful place for CCOs within corporate executive leadership, and his emphasis on preventing crime through appropriate investments in corporate compliance programs (the policies, procedures, people, and technology to help you spot misconduct in the first place), will be huge components of his legacy at the DOJ.

“Under his leadership, the division has accelerated its efforts to keep the American people safe and tackle some of the most complex and urgent challenges our nation faces,” Attorney General Merrick Garland said in a statement.