- Criminal Case Against Healthcare Executive Dismissed; Government Likely to Continue Aggressive Enforcement Efforts
- May 18, 2011
- Law Firm: Haynes and Boone, LLP - Dallas Office
A former GlaxoSmithKline attorney, Lauren Stevens, was acquitted on May 10 of all criminal charges stemming from her response to an FDA investigation. The acquittal, ordered by U.S. District Judge Roger W. Titus, is a stunning defeat for the government’s anti-fraud enforcement measures. The judge also severely rebuked the government’s efforts in the matter, stating the case should never have been prosecuted. Had she been convicted, Stevens would have faced a prison term of up to 60 years. Stevens was indicted in November 2010 on charges of making false statements and obstructing an FDA investigation into GSK’s off-label marketing of Wellbutrin, a drug approved for use as an anti-depressant. The judge’s decision, coming after 10 days of prosecution testimony, and before the defense presented any evidence, is a striking blow to the federal government’s recent attempts to hold healthcare executives personally and criminally liable for alleged fraud and abuse. Nonetheless, the federal government is likely to continue its efforts to personally target individuals when investigating healthcare organizations.
Attorney Criminally Indicted for Response to FDA Investigation
Stevens was the Vice President and Assistant General Counsel of GSK when it received a request in October 2002 from the FDA asking for materials related to GSK’s promotional programs involving Wellbutrin. Stevens was in charge of GSK’s response to the FDA inquiry and indentified more than 2,700 speakers who had given promotional talks on behalf of GSK about Wellbutrin. She also contacted approximately 550 of the speakers to obtain copies of their promotional material. Some of the material contained references to off-label use of Wellbutrin. However, Stevens, after consulting with GSK’s outside law firm, decided not to produce the materials to the FDA. She also sent various letters to the FDA stating that GSK did not develop or maintain promotional plans or activities to directly or indirectly promote Wellbutrin for off-label purposes.
The judge had earlier dismissed a prior indictment of Stevens, citing prosecutorial error in instructing the grand jury. At that stage, prosecutors failed to properly instruct the grand jury on a key element - namely that Steven’s good faith reliance upon advice of the outside law firm retained by GSK in responding to a government investigation served as a defense to the criminal charges. Despite the dismissal, prosecutors obtained another indictment against Stevens and the criminal case proceeded.
At trial, prosecutors alleged that Stevens was not entitled to rely upon advice of counsel because of the “Crime Fraud Exception.” Normally, attorney-client and attorney work product communications are privileged from disclosure to third parties (including the government). However, the Crime Fraud Exception overcomes that privilege when a client intends to perpetrate a crime or fraud and the communications between attorney and client were made in furtherance of such crime or fraud. Prosecutors had obtained internal GSK documents, including privileged attorney-client and attorney work product memoranda, when a federal magistrate judge in Massachusetts ordered them produced.
Judge Critical of Government’s Actions
The federal judge in the Steven’s criminal case criticized the federal magistrate for releasing the privileged documents, calling the magistrate’s decision “unfortunate.” The release of the documents allowed government prosecutors to “forage through confidential files” and “parade” them in front of a jury. That should have never happened, according to the federal judge, because there was no evidence that Stevens was engaged by GSK to assist it in perpetrating a crime or fraud. Instead, the judge noted, the privileged documents demonstrated a studied and thoughtful analysis of an extremely broad request from the FDA and an enormous effort by Stevens to assemble information and respond on behalf of GSK.
Criticizing the government’s decision to seek an indictment in this matter, the judge referred to past complaints lodged with the U.S. House Subcommittee on Criminal Justice against overzealous prosecutors. “Vigorously and zealously representing a client is no basis for charging an offense” of obstruction of justice, said the judge in protesting the government’s actions. The judge saw serious implications for the practice of law generated by the prosecution, stating that a lawyer should never fear prosecution because of advice he or she has given to a client, and the client should never fear that its confidences will be divulged unless its purpose in consulting the lawyer was for the purpose of committing a crime or fraud.
Government Unlikely to Cease Aggressive Enforcement Efforts
The government’s defeat in the Stevens case is unlikely to deter it from targeting individuals working in the healthcare industry. Even if the government cannot obtain criminal convictions against healthcare executives, they will use their discretionary power to exclude them from participating in federal healthcare programs. Evidence of this can be seen in the government’s attempts to exclude the CEO of Forest Laboratories from doing business with the federal government, even though no criminal conviction was obtained and he was never accused of any misconduct. According to the Chief Counsel to the Inspector General of the U.S. Department of Health & Human Services, this is a deliberate measure in an attempt to alter the “cost-benefit calculus” of corporate executives.1 The OIG asserts that healthcare providers consider themselves too important and “too big to fire” and thus immune from the consequences of healthcare fraud. The OIG further asserts that healthcare executives consider civil penalties and fines as a cost of doing business. By targeting individuals, the government believes it can influence corporate behavior in ways other mechanisms cannot.
However, the Stevens case shows these aggressive enforcement efforts can land innocent individuals in criminal court due to overzealous government investigators and prosecutors. For healthcare executives, this is an important lesson.
1 Testimony of Lewis Morris, Chief Counsel to the Inspector General, U.S. Department of Health & Human Services, March 2, 2011, to the House Committee on Ways and Means, Subcommittee on Oversight. Available at http://www.oig.hhs.gov/testimony/docs/2011/morris&under;testimony&under;03022011.pdf.