may 9, 2014 · 5/5/2014 1 anthony r. petruzzi [email protected]...

5/5/2014

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Anthony R. Petruzzi

[email protected]

216-696-5478

-and-

Victoria L. Vance

victoria.vance @tuckerellis.com

216-696-3360

May 9, 2014

Anthony R. Petruzzi

[email protected]

5/5/2014

2

Corporate Criminal Liability

• Individual Officers, Employees and Agents– Prosecuted for Individual Conduct

• Responsible Corporate Officer– Corporate Officer may be held personally

liable for the actions of the corporation based upon officer’s position

– Form of strict vicarious liability

– Public Welfare Statutes


Park Doctrine (FDA)“The Park Doctrine, as established by Supreme Court case law, provides that a responsible corporate official can be held liable for a first time misdemeanor (and possible subsequent felony) under the

Federal Food, Drug, and Cosmetic Act (“the Act”) without proof that the corporate official acted with intent or even negligence, and even if such corporate official did not have any actual knowledge of, or participation in, the specific offense. A Park Doctrine prosecution, for the purposes of this section, refers to a recommended prosecution of a responsible corporate official for a misdemeanor violation of the Act.” (FDA RPM 6-5 (emphasis added)).

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RCO Factors:– Individual’s position in the company and relationship to the

violation.

– Whether the official had the authority to correct or prevent the violation.

– Knowledge of and actual participation in the violation are not a prerequisite, but may be considered.

Exclusion from Participation in Federal Health Care Programs for Individuals and the Entities that Employ Them.

Defense:Only One - Powerless to Prevent or Correct Violation


• FDA Non-Binding Criteria for RCO Prosecutions*– Whether the violation involves actual or potential harm to the public;

– Whether the violation is obvious;

– Whether the violation reflects a pattern of illegal behavior and/or failure to heed prior warnings;

– Whether the violation is widespread;

– Whether the violation is serious;

– The quality of the legal and factual support for the proposed prosecution; and

– Whether the proposed prosecution is a prudent use of agency resources.

*FDA Regulatory Procedures Manual, §6-5-3, “Special Procedures and Considerations for Park Doctrine Prosecutions” (revised Jan. 26, 2011).

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Increase in RCO Prosecutions?• FDA Commissioner Margaret Hamburg

– March 4, 2010 letter to Senator Charles Grassley recommended

“increase[ing] the appropriate use of misdemeanor prosecutions, a

valuable enforcement tool, to hold responsible corporate officers

accountable.”

• FDA Deputy Chief for Litigation Eric Blumberg¹

– Monetary settlements “not getting the job done,” urging DOJ to

“show[] more resolve to criminally charge individuals at all levels in

the company.”

¹Anna Edney, Drugmaker CEO’s May Be Targets for U.S. FDA in Off. Label Cases, Lawyer Says,

Bloomberg News (Oct. 14. 2010).


Increase in RCO Prosecutions? (cont’d)

• Inspector General Daniel R. Levinson²

– OIG is focused on holding responsible corporate officials accountable for health care fraud.

• FDA Warning Letters April/May 2013³

– Extend Park Doctrine to actions of contractors

²Highlights of Key Note Address delivered by Daniel Levinson at the Healthcare Compliance Association Annual Compliance Institute (April 19, 2010).

³See, Systems Inc., Glucorell, Inc./Anafit, Inc., Pristine Bay LLC and Entremet Nutritionals, Inc. at www.fda.gov/ICECI/Enforcement Actions/WarningLetter/2013.

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Notable RCO Enforcement

• Purdue Frederick

• KV Pharmaceutical/Ethex Corp.

• Synthes, Inc./Norian


OIG Expanding RCO Doctrine

• OIG Non-Binding Permissive Exclusion Factors –

Officers/Managing Employees

– Absence of evidence that person knew or should have

known of misconduct:

1. Circumstances of the misconduct and seriousness of the

offense;

2. Individual’s role in sanctioned entity;

3. Individual’s actions in response to the misconduct;

4. Information about the entity.

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Letter Requests

• A serious, but informal way for agency to

gather information

• Not obligated to respond; but risk the agency

will escalate its demands

• Third-party interests: may necessitate a

subpoena before disclosing information

Letter Requests

Do’s

• Contact counsel

• Initiate document hold

• Consider interests of 3rd

parties, may need to notify

Don'ts

• Ignore or delay a response

• Destroy/delete documents

• Put anything in writing

about request; talk to

counsel

• “certify” completeness of

response; check with

counsel

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Subpoenas

• Civil — request for documents; must

respond, though counsel may negotiate

scope/time

• Grand Jury — Request for testimony; signals

criminal investigation underway

• May be served at home or work

Subpoenas

Do’s

• Contact counsel


• Assess time, effort to

respond

• Locate responsive

documents (including ESI)

• Prep witness for testimony

Don'ts• Ignore or delay a response

• Talk to agent without

prep/counsel

• Lie, cover-up, misrepresent

• Produce privileged

documents

• Obstruct investigation

• Delete/destroy documents

• Forget about ESI

• Forget interests of 3rd parties

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Civil Investigative Demands

• Similar to a civil subpoena, but broader in

scope

• Agency can demand production of

documents, answers to interrogatories, and

testimony

• Required to respond, though counsel may be

able to negotiate reduced scope/more time

Civil Investigative Demands

Do’s

• Contact counsel


• Identify witness(es) with

knowledge

• Locate responsive

documents

Don'ts

• Destroy documents

• Produce privileged

documents

• Give incomplete or

misleading responses or

testimony

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Interviews

• Voluntary

• Individual can agree to talk, not talk, terminate

the interview

• Statements are legal admissions; can and will be

used against you, organization or both

• Must tell truth; false statements may be a crime

• May also be asked to sign a written statement

• Right to counsel throughout the process

Interviews

Do’s

• Know your rights

• Consult with counsel

• Train “first responders”

• Educate employees on their

rights

• Prep witnesses to respond

Don'ts• Misrepresent or give false

statements

• Forget to ask agent for ID,

purpose of interview

• Be nervous or volunteer

• Waive privilege or breach

privacy rights

• Provide documents without a

subpoena

• Forget to debrief with counsel

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Search Warrant

• Invasive, disruptive, stressful

• Warrant will have been approved by a

Judge/Magistrate upon showing of “probable

cause,” based upon detailed Affidavit

• Precisely describes where to search and what

agents expect to find

• Does not mandate interview

Search Warrant

Do’s• Be calm, polite,

cooperative

• Contact counsel

• Identify lead agent

• Ask to read the Warrant and Affidavit prior to search

• Send unnecessary personnel home

• Monitor and take notes

Don'ts• Obstruct/interfere

• Destroy or remove evidence

• Make voluntary statements or give interviews

• Prevent employees from talking

• Consent to expand search

• Sign inventory or consent documents without counsel’s review

• Overlook privileged or business-critical information that is seized

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Internal Investigations:

Plan of Action

• Preserve relevant documents and electronic

media

• Interview employees

• Determine whether employees need

separate counsel

• Obtain counsel/provide legal advice to

corporation

Upjohn v. United States

• Upjohn v. United States, 449 U.S. 383 (1981)

– Corporate counsel represents the corporation

– Communications with employees are privileged

– Privilege is held by corporation, not the employee

– Supreme Court ruled employee communications

with counsel are privileged

– Expanded privilege beyond the corporation’s

“Control Group”

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Upjohn Warning

• ABA suggested Upjohn Warning– I am a lawyer for Corporation A. I represent only Corporation A, and I

do not represent you personally.

– I am conducting this interview to gather facts in order to provide legal advice for Corporation A. This interview is part of an investigation to determine the facts and circumstances of X in order to advise Corporation A on how best to proceed.

– Your communications with me are protected by the attorney-client privilege. But the attorney-client privilege belongs solely to Corporation A, not you. That means that Corporation A alone may elect to waive the attorney-client privilege and reveal our discussion to third parties. Corporation A alone may decide to waive the privilege and disclose this discussion to such third parties as federal or state agencies, at its sole discretion, and without notifying you.

Upjohn Warning

• ABA suggested Upjohn Warning (cont’d)– In order for this discussion to be subject to the privilege, it

must be kept in confidence. In other words, with the

exception of your own attorney, you may not disclose the

substance of this interview to any third party, including

other employees or anyone outside of the company. You

may discuss the facts of what happened but you may not

discuss this discussion.

– Do you have any questions?

– Are you willing to proceed?

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Watered Down Upjohn

In re Grand Jury Subpoena, No. 04-4410

(4th Cir. July 18, 2005)

• Counsel interview certain employees, and provided an Upjohn warning, adding:– “could” represent the employee “as long as no conflict

appear[ed].”

– “We can represent [you] until such time as there appears to be a conflict of interest, [but] . . . The attorney-client privilege belongs to” the company and the company “can decide whether to keep it or waive it.”

– Counsel tells employee when asked that he does not recommend retention of personal counsel

• “Ethical Mine Field”

Why is Upjohn Important?

• Maintain ability to waive attorney-client

privilege

• Do not create individual representation

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Upjohn Warning

Ability to Waive Attorney-Client Privilege

Benefit of Retaining Ability to Waive Privilege

– Criminal Investigation

• Reduce likelihood of indictment

– Federal Sentencing Guidelines

• Reduce penalties

– Other Statutes

• Reduce monetary penalties

– Defense of Civil Matter

• Case decided on facts, not on adverse inference

Benefits of Upjohn Warning and

Proper Internal Investigation

1. Non-Prosecution

2. Reduce Penalty through Cooperation

3. Deferred Prosecution Agreement

4. Non-Prosecution Agreement

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Deferred Prosecution Agreements

– Criminal Information Filed With Court

– Admission of Wrongdoing

– Agreement to Cooperate

– Payment of Fine and Restitution

– Corporate Reforms

– Independent Monitor

– Waive Charges Upon Completing Terms of DPA


Non-Prosecution Agreements

– Agreement to Cooperate with Government

– Agreement for Corporate Reform

– No Criminal Information Filed

– No Admission of Wrongdoing

– No Independent Monitor

– Charges Filed if Corporation Breaches the

Agreement

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Fifth Amendment Concerns in

Healthcare Fraud Matters

Parallel Proceedings

• A civil and criminal, administrative or judicial

proceedings arising out of the same set of

facts.

– Civil Lawsuit v. Criminal Investigation/Indictment

– Regulatory Agencies v. Criminal Investigation


Fifth Amendment Concerns

Risks• Potential Waiver of Fifth Amendment Privilege

in Civil Litigation– Answering Complaint

– Civil Discovery

• Use of Evidence from Civil/Regulatory Investigation in Criminal Prosecution

• Expose Defense Strategy against Criminal Prosecution

• Adverse Inference in Civil Case

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Fifth Amendment Concerns

Individual v. Corporate Defendant

• Individual has a Fifth Amendment right against self-incrimination.

• Corporation does not have a Fifth Amendment right

– Corporate Representative Depositions

– What if no one can testify?

• Appoint Representative

• Stay of Civil Proceedings/Protective Order

Thank You!

Anthony R. Petruzzi

[email protected]

216-696-5478

5/5/2014

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Victoria L. Vance

[email protected]

Wake Me When It’s Over . . .

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If We Had To Do It Over . . .

To Avoid an Investigation - Bosses:

• Delegate Responsibly & Understand What

Subordinates Do

• Slow Down – Evaluate & Understand the

Compliance Risk of New Ideas

• Careful Hiring/Screening of New Employees

and Temp Agency Staff

• Exit Interviews with Departing Employees

To Avoid Investigation

Everyone:

• Training & Education – Understanding and

awareness of compliance rules and risks:

– Billing

– Coding

– Documentation

– EMR

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To Avoid Investigation

• Compliance Line – for advice,

clarification, understanding,

reporting

– (link to Legal, Compliance

Officer or Board)

• Self-Audits – Check your

work; self-improvement


During the Investigation:

• Anticipate & Prepare for Interviews – AVOID

unscripted comments

• Don’t send documents without review &

back-up

• Managers – not knowing, not understanding

• Don’t ASSUME anything

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After the Investigation:

• Heed Clues from Investigation

• Implement Fixes

• Educate, Train & Learn

• Do Not Let PROFIT$ Drive Decision-making

Thank You!

Victoria L. Vance

[email protected]

216-696-3360

may 9, 2014 · 5/5/2014 1 anthony r. petruzzi [email protected]...

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