Executives could face virtually unbeatable government criminal prosecutions and prison sentences more frequently if FDA follows recently announced enforcement plans, industry attorneys warn.

Commissioner Margaret Hamburg, informed Sen. Chuck Grassley, R-Iowa, in a March 4 ¹ letter that FDA plans to "increase the appropriate use of misdemeanor prosecutions ... to hold responsible corporate officers accountable" and has developed criteria for selecting cases (² Also see "FDA Agrees With GAO Recommendations To Give Prosecutions Higher Priority" - Pink Sheet, 8 March, 2010.).

The agency already is putting the strategy in action (see ³ Also see "FDA Plays Misdemeanor Card In Adulterated Supplement Prosecution" - Pink Sheet, 26 April, 2010.).

Hamburg cited the Park Doctrine, or "responsible corporate officer doctrine," under which executives can be found guilty of a misdemeanor, separate from litigation targeting a corporation, by virtue of having authority to prevent, detect or correct company violations of the Food, Drug and Cosmetic Act.

Under the doctrine, prosecutors bringing misdemeanor charges need not prove intent to adulterate or misbrand food or drug products, said attorney and former federal prosecutor Robert Nicholson.

"Your quantum of proof is much reduced, you don't have to prove that the person knew that they were violating the law, you only have to prove that they did," said Nicholson, of Fort Lauderdale, Fla.-based Nicholson Law Group.

"It's a very easy case for the government to prove."

With regard to FDCA, the doctrine withstood Supreme Court challenges in the 1940s and 1970s, and remains a powerful legal weapon for the government.

"The Supreme Court has been clear that they put an onerous burden on executives who voluntarily put themselves in the line of fire to ensure that these kinds of violations do not happen," explained Kirsten Mayer, an attorney with Ropes & Gray, during an April 13 online discussion conducted by the Washington Legal Foundation.

The tool has been used sporadically, according to Gregory Levine, a partner with Ropes & Gray.

In the early days, Levine explained, it was employed relatively frequently to extract small fines of up to several hundred dollars from executives. But application of the doctrine dropped off substantially in the 1980s, with government attorneys preferring to target individual executives only when they had evidence to support a felony count, which requires proof of intent.

This strategy persisted until recently, but, even prior to Hamburg's letter to Grassley, recent cases signal a reemergence of the responsible corporate officer doctrine - this time with much more significant penalties on the table, Levine said.

In 2007, three former executives - the CEO, chief medical officer and general counsel - of the Purdue Fredrick Co. pled guilty to a misdemeanor in conjunction with a felony guilty plea by the company for misbranding the pain medicine Oxycontin .

They were sentenced to probation and ordered to disgorge millions of dollars in income, but they have challenged the Department of Health and Human Services' subsequent order excluding them from participating in federal health programs for 12 years (⁴ Also see "Former Purdue Execs Fight Exclusion From Gov't Programs After OxyContin Case" - Pink Sheet, 4 January, 2010.).

Some legal analysts viewed the successful use of the doctrine in this case as a shock to the industry.

In 2009, the legal strategy moved to the device industry. Four executives from orthopedic firm Synthes pled guilty to a misdemeanor last summer as part of an investigation into the company's alleged illegal promotion and unauthorized clinical trials of bone cement products (⁵ Also see "Synthes Charged With Unauthorized Spine Repair Trial, Faces $34 Mil. Fine" - Medtech Insight, 22 June, 2009.).

They face maximum possible sentences of one year in prison and a $100,000 fine. However, precisely which charges the executives have pled guilty to - only so-called "strict liability" as responsible corporate officers, or also more knowing involvement in the alleged company crimes - are in dispute. A court hearing is scheduled for May 26.

Mission "Impossibility" For the Defense

Company officials should do everything possible to ensure their compliance programs are foolproof to avoid landing in the crosshairs on the responsible officer offense, Levine stressed. "Once they bring criminal charges against you, the defenses are so limited that you wind up not being able to defend yourself in court very often."

The two basic defenses are rarely successful. One option is for defendants to claim they did not have the authority or responsibility to enact the steps needed to avoid or fix the violation, Mayer and Levine explained. The strategy becomes more difficult, however, further up the corporate chain.

"It is hard for someone who is president of an organization to argue that he or she does not at least at some level have ultimate authority over operations of the various plants within the organization," Mayer said.

The second option is the "impossibility" defense. This requires an executive to meet the high bar of proving "it was objectively impossible for you to prevent or detect the misconduct," Mayer said.

Case law from executives trying and often failing with the impossibility defense points to three basic lessons, she noted: "You can't delay - you can't be too slow in responding to problems; you can't be too trusting - you have to be diligent with folks you delegate authority to; ... and you can't be too reactive - you have to be actively looking at your business and the risk your business faces. You can't wait for the government to tell you where your problems are."

Even if it is proved that subordinate employees were actively concealing misconduct from company leadership, it is not a slam dunk defense for an executive charged as a responsible corporate officer. "That is a valid argument but ... I am not sure there is a legal principle you can point to that insulates you there," Levine said.

"I have no doubt in a case like that what the government would say ... is that you did not create a culture of compliance. You allowed this type of activity to go on. That is what you would have to rebut," he explained. "You would have to show that, 'No, no, no, we have a very robust program. The culture infused throughout our company is a culture of compliance and this person really is a rogue.' That is always a difficult point to establish."

Unknown Factors: DOJ's Take, FDA Criteria

Precisely how aggressively the government will pursue responsible officer misdemeanor prosecutions will be determined largely by a couple of now unknown factors, Levine points out.

One important factor is the extent to which the Department of Justice may agree with FDA's renewed focus on the strategy. This is crucial because FDA's Office of Criminal Investigations cannot pursue a criminal prosecution without participation from DOJ attorneys.

FDA spokesman Tom Gasparoli suggests the agency, at least for now, is not working with DOJ on the prosecution initiative.

Referring to Hamburg's letter, which outlined five agency initiatives to improve FDA's criminal oversight, Gasparoli said while FDA "has to bring criminal cases in conjunction with DOJ, this process aimed at improving the effectiveness and timeliness of the agency's regulatory and enforcement system."

Another major unknown factor in determining how vulnerable an executive may be to misdemeanor prosecution is the criteria the government will use to decide when a case warrants such a tack. While the Supreme Court gave FDA very broad leeway, the agency likely will exercise some discretion.

In fact, FDA has developed specific criteria to guide selection of corporate officer misdemeanor cases, which "will be incorporated into the revised policies and procedures," Hamburg wrote in the letter to Grassley.

But the criteria details are not public, with the guidelines still under internal review. Once finalized, FDA will discuss them publicly, Gasparoli said.

Levine thinks it is likely FDA will, by and large, focus on cases "where they have at least some indication that this individual defendant had a role, or was negligent in some way." But that may not be the exclusive approach.

"In cases where there have been deaths or some serious injuries, the tendency is to find someone to hold responsible," he said, even if there is not clear evidence of "knowledge or culpability."

Levine suggests the best companies can hope for from FDA's renewed focus is transparency. "This is a major shift in agency policy," he said. "We have 20 years of really not using this doctrine in the way they seem to be going now. I would submit that fairness requires that the public be able to comment on these policies, and on the criteria themselves, as far as what kinds of cases are going to be brought."

- David Filmore ( ⁶ d.filmore@elsevier.com )

FDA Targets Executives With Powerful Misdemeanor Strategy

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