The Department of Justice (DOJ) has seen an uptick in self-reported potential misconduct by corporations since it increased incentives for voluntary disclosure, according to Assistant Attorney General Kenneth Polite Jr.
In a fireside chat at a conference held by the New York City Bar Association on Wednesday, Polite said corporations have shown more willingness to come forward since February, when the department set a “nationwide standard” for all U.S. attorney’s offices regarding the voluntary self-disclosure of potential corporate misconduct.
Polite, head of the DOJ’s Criminal Division, said the agency made the decision to enhance and expand its policy on voluntary self-disclosure because it noticed a downward trend in self-reporting of potential violations.
“We saw a need for the voluntary self-reporting program that was started in the Criminal Division to be replicated across the entire department,” he said. “… It’s early, but we are seeing the policy shifts have an impact.”
Jenna Dabbs, partner at law firm Kaplan Hecker & Fink and chair of the NYC Bar Association’s white-collar crime committee, asked Polite to explain another trend within the agency: how the DOJ is using data analytics to identify misconduct.
Polite said the agency is building on years of analytics making a difference in its oversight of the healthcare industry, utilizing similar methods to spot misconduct in other areas.
In March, the DOJ charged the chief executive officer and board chairman of Ontrak, a publicly traded healthcare company, with fraudulently using Rule 10b5-1 trading plans to trade the company’s stock. The agency alleged Terren Peizer avoided more than $12.5 million in losses by entering into two Rule 10b5-1 trading plans “while in possession of material, nonpublic information concerning the serious risk that Ontrak’s then-largest customer would terminate its contract.”
Polite pointed to the case as the DOJ’s first use of data analytics to “identify aberrant behavior” by an individual using a Rule 10b5-1 trading plan, which requires corporate insiders to engage in a “cooling off” period between the time they entered a plan and when they sold the stock.
Dabbs asked Polite if the legal community should expect more of these types of investigations into Rule 10b5-1 trading plans using data analytics. He answered, “Yes.”
Polite also said the DOJ has placed a greater emphasis on sanctions enforcement, in cooperation with other federal agencies.
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