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This past week, students in the Boston University School of Law Health Care Fraud and Abuse seminar learned about the Food, Drug, and Cosmetic Act (FDCA) and the creative ways in which prosecutors and whistleblower attorneys have paired misbranding, adulteration, and manufacturing irregularities with liability under the False Claims Act. The now infamous Cidra case in Puerto Rico, in which GlaxoSmithKlein paid $750 million in fines, damages, and penalties, served as the case study.
This week, the focus turns to “Remedies,” by which we mean some of the legal tools at the government’s disposal as it evaluates the seriousness of corporate misconduct in particular settings. How and when are companies and/or officers “excluded” from future participation in government health insurance programs such as Medicare and Medicaid? How do these different exclusion remedies impact settlement and plea negotiations between the government and companies?
Students were given the following assignment for next week:
You work at a law firm as a young partner and a client in the health industry emails you a question: “Hey sorry to bother you with this, but I need some help understanding something I just read. I was following the Purdue case (oxycontin) and saw some reference to the ‘responsible corporate officer’ doctrine. They said something about ‘strict liability’ which sounds pretty scary to me. I thought that in order to get in serious legal trouble, someone had to intend to do something bad. Unless I’m mis-reading this, it seems to suggest that you can get in trouble for something that you didn’t even know about or weren’t directly involved in. And it’s a criminal case!”
“How on earth can the government try to send someone to jail for something that he didn’t know about? I don’t get it; is this really the law? Is there no limitation on this?”
“Related question is to what extent does/would this apply to corporate boards of directors? It seems to me that if this doctrine means that you can go to jail for being generally responsible for but not directly involved in a bad course of conduct, then corporate directors would theoretically have some risk. Do we need to advise our boards of this?”
“Thanks for whatever guidance you can provide.”
The application of the Responsible Corporate Officer doctrine remains an area of fascination, although high-level corporate managers might find other ways of describing it. While this theory of criminal liability–which exposes individuals for “strict” liability for criminal misdemeanors under the FDCA–stands as a powerful symbol of law enforcement’s reach, the reality is that the government is quite sparing in its use of this tool.
Wary of slaying the goose that laid the golden egg, the government has been (some would say thankfully) judicious in choosing when to hold corporate officers criminally liable for conduct that they were “responsible for” even without direct participation. With the judiciary standing as a clear check on prosecutorial over-reach, aggressive use of the theory could trigger a judicial backlash, with judges finding ways to limit the doctrine in cases where it would “shock the judicial conscience.”
One can imagine the poisoned-pen of Justice Scalia, for example, slicing this doctrine down to size if given the right opportunity. So the government’s answer has been to use the doctrine selectively, usually in cases involving very bad facts, so as to leave little room for judicial outrage.
So the quizzical inquiries from alarmed corporate officials are mostly overwrought. In fact, the government leaves this option off the table most of the time.