Following a recent Florida case allowing an FCA suit to proceed against an individual pharmacy owner (on which we reported here), last week a judge in the District of Massachusetts ruled on a motion to dismiss an FCA action pending against nine individual defendants relating to allegations of off-label marketing of the Aegerion drug Juxtapid, which was approved to treat Homozygous Familial Hypercholesterolemia (“HoFH”). See United States ex rel. Clarke v. Aegerion Pharms., Inc., Case No. 1:13-cv-11785. The individuals filed a joint motion to dismiss, making arguments that applied to the complaint as a whole – such as causation and materiality – and also attacking the claims specific to the individuals. The court denied the motion as to the broadly applicable arguments. Most notable, however, is the Court’s discussion of whether the relators could pursue claims against individual defendants, including board members and executives of the manufacturer.
On March 14, 2018, the Third Circuit affirmed in part and vacated in part a district court ruling granting the United States’ motion for summary judgment. The case raised three issues: (1) whether an individual without any ownership interests in a company can face FCA liability for the company’s failure to perform a required act to qualify for Medicare reimbursement; (2) whether an unsworn statement is sufficient to create a material issue of fact when weighed against facts admitted during a plea colloquy; and (3) whether a defendant corporation is collaterally estopped from contesting FCA liability or damages based on an individual’s plea colloquy.
In a speech delivered yesterday, Deputy AG Rod Rosenstein announced important limitations to the policies regarding individual accountability for corporate wrongdoing set forth in the 2015 Yates Memo. Under the policy announced in that Memo, summarized here, DOJ limited the ability of its lawyers to offer any cooperation credit in civil or criminal matters to those corporations that provided “all relevant facts” regarding all of the individuals involved in the alleged corporate misconduct. Companies and counsel that have been engaged in DOJ investigations have experienced the challenges in complying with this standard and it was far from clear that DOJ itself did or even could adhere to the standard. In his speech, Rosenstein acknowledged the challenges and that “the policy was not strictly enforced in some cases because it would have impeded resolutions and wasted resources.” In light of those realities and a recognition that the Department’s “policies need to work in the real world of limited investigative resources,” Rosenstein announced a revised policy that “return[s] discretion to Department attorneys.” (more…)
In the wake of the Yates memo eighteen months ago, DOJ offered an early signal that its commitment to focus more on individual accountability would have bite: alongside a $125 million settlement with Warner Chilcott, DOJ also indicted the former president of the company’s pharmaceutical division for conspiring to violate the Anti-Kickback Statute (discussed here). Since then, the government suffered a speedy loss at his trial, and DOJ’s focus on individuals has not always been so overt. However, two recent settlements highlight the imprint of the Yates memo, and in particular, a new trend of DOJ holding owners of closely held companies personally liable for FCA settlements.
In a speech on Tuesday, September 27, 2016, Principal Deputy Associate Attorney General Bill Baer said that in the post-Yates world companies must provide early and material assistance to DOJ’s efforts to hold companies and individuals accountable for corporate wrongdoing – including by voluntarily disclosing information before they receive a subpoena – if they hope to receive cooperation credit. In doing so, Baer called out those banks caught up in DOJ’s enforcement focus on mortgage-backed securities. Baer claims those companies did not cooperate early enough and that DOJ thus rejected their requests for substantial cooperation credit, ultimately extracting billions of dollars in settlements. Baer thus made clear the importance of early cooperation: “little or no cooperation credit will be afforded in situations where the supposed cooperation occurs after the department has completed the bulk of its investigation.” In addition to cooperating early, companies also must provide specific information about any and all employees involved in wrongdoing and information that is unknown to DOJ and materially assists its investigation in order to obtain meaningful cooperation credit. At the same time, Baer described conduct that will not qualify a company for cooperation credit; specifically, simply producing information in response to a subpoena or CID and making a presentation to DOJ that seeks to limit or eliminate liability will not be viewed as cooperation. Indeed, Baer’s speech raises questions as to whether legitimate efforts to defend conduct under investigation may even disqualify a company that otherwise has been cooperative from receiving cooperation credit.
Baer’s speech can be accessed here.
In the wake of Warner Chilcott’s civil settlement and guilty plea last fall, DOJ made headlines with the indictment of former Warner Chilcott executive Carl Reichel for his alleged role in the company’s violations of the Anti-Kickback Statute (“AKS”) (as discussed here). The indictment closely followed the announcement by Deputy Attorney General Sally Yates that the government was implementing a new commitment to prosecute individuals where appropriate (as discussed here). Today the government’s highest-profile test case fell short, with a jury acquitting Reichel after less than one day of deliberations.
The principles in the Yates Memo expressly extend to both criminal and civil enforcement matters (as discussed further here), but when it comes to cooperation credit, the application of these principles in the civil and criminal contexts is not on equal footing. Criminal matters are resolved in the context of the federal sentencing guidelines, which incorporate a clear framework for applying credit for cooperation. Credit for cooperation in the civil context is far more nebulous, which can create the perception that the benefits will not outweigh the costs. Last week, DOJ’s newly appointed acting Associate Attorney General, Bill Baer, addressed these concerns and offered insight into DOJ’s application of the Yates Memo principles to civil enforcement matters.
We recently discussed the settlement Warner Chilcott reached with the Department of Justice, which also announced criminal charges against the former president of the company’s pharmaceutical division. This former executive, however, is not the only individual swept into the criminal charges, as three lower level Warner Chilcott sales force members and a physician who served as a speaker for the company have previously been charged or pled guilty. The details in the charging materials may provide insight into the government’s post-Yates memo approach to targeting and using individuals to build a criminal case against corporations.
Yesterday, the DOJ announced a settlement with the U.S. sales subsidiary of Warner Chilcott PLC. The company has agreed to plead guilty to criminal charges and to pay $125 million to resolve both criminal and civil liability. At the same time, the DOJ announced that it had indicted a former president of Warner Chilcott’s pharmaceutical division with conspiracy to violate the Anti-Kickback Statute. As the DOJ emphasized in its press release, the individual criminal charges in this matter represent an effort to hold “responsible individuals accountable” in enforcement actions. The DOJ’s pursuit of individual criminal liability in this case represents a high profile application of the DOJ’s intent to focus on the liability of individual corporate employees, recently set forth in the Yates memo (as further discussed here). The parallel civil settlement also provides insight into potential future enforcement activities around manufacturer support of prior authorization programs.