Saturday, December 10, 2011

"Enforcing Integrity"

Enforcing Integrity is a new article by Professor Katrice Bridges Copeland in 87 Indiana Law Journal (2011)  

Abstract:
Over the past several years, the marketing practices of large pharmaceutical companies have come under intense scrutiny. The government spends years investigating and building cases against pharmaceutical manufacturers that engage in illegal promotional activities to promote their drugs but does not prosecute them. Instead, the government enters into Corporate Integrity Agreements (CIAs) with the pharmaceutical giants. As a result, the pharmaceutical manufacturers are able to avoid the collateral consequences of conviction, such as exclusion from Medicare and Medicaid. Participation in Medicare and Medicaid is crucial for a pharmaceutical manufacturer because the government spends over $60 Billion per year through those programs on reimbursements for prescription drugs. In return for remaining eligible for Medicare and Medicaid reimbursements for their drugs, the manufacturer pays the government a huge fine and agrees to structural changes to the company designed to prevent future marketing violations.

The CIA seems like a reasonable response to the marketing violations until the pharmaceutical company engages in illegal marketing practices while still under the CIA for the previous marketing violation. In those situations, the government remains unwilling to pursue the pharmaceutical manufacturers in court and seek exclusion from Medicare and Medicaid. Rather than pursue exclusion, the government has entered into successive CIAs with pharmaceutical manufacturers and collected additional fines. The government enters into these agreements because exclusion of the manufacturer from participating in Medicare and Medicaid has devastating consequences that spill over to innocent patients, employees, and stockholders. Not only does the impact of the exclusion hit innocent third parties, but its imposition on the manufacturer substantially outweighs the harm the manufacturer inflicts through its improper marketing practices. The penalty for improperly marketing one drug is exclusion of all drugs produced by that manufacturer from Medicare and Medicaid. It is the government’s unwillingness to harm innocent third parties and its reluctance to impose a disproportionate penalty on drug manufacturers that leads them to CIAs. Thus, the problem is not that the government uses CIAs to combat health care fraud; it is that the government lacks penalties of increasing severity to impose when a manufacturer violates an existing CIA.

This Article argues that neither the exclusion of manufacturers from Medicare and Medicaid nor the use of Corporate Integrity Agreements coupled with large fines is an effective deterrent for pharmaceutical manufacturers that repeatedly engage in illegal marketing activities to promote their drugs. In particular, it argues that CIAs fail to deter drug manufacturers from engaging in illegal promotional practices because the penalty imposed and the cost of compliance with the CIA are significantly lower than the profits that a pharmaceutical company can obtain by illegally marketing its drugs. Further, the government’s willingness to enter into multiple CIAs with repeat offenders of the marketing rules rather than exclude them from Medicare and Medicaid substantially diminishes the ability of CIAs to deter illegal promotional activities. Finally, this Article argues that there are viable alternatives to be used in place of or in conjunction with CIAs, such as funding clinical trials, compulsory licensing, corporate officer liability, and targeted exclusion, that would be more effective deterrents for repeat offenders. Each of these remedies could be used to increase the severity of punishment when a one-time offender becomes a repeat offender. This Article concludes that these proposed measures would be more successful than CIAs at increasing compliance and enforcing integrity in drug promotion.

(esp)

December 10, 2011 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Upcoming Conferences

Danny Sokol, Antitrust & Competition Policy Blog, Beyond Leniency: Empirical Methods of Cartel Detection

ABA White Collar Conference, Miami Beach, Feb. 29 - March 2 here

NACDL White Collar Criminal Defense College at Stetson, Gulfport, Florida, March 15-20 here

(esp)

December 10, 2011 | Permalink | Comments (0) | TrackBack (0)

Friday, December 9, 2011

Corzine Surprises and Testifies

Former MF Global chief executive Jon Corzine chose not to invoke his constitutional right to silence and yesterday testified before a House committee.  While Corzine's decision to testify surprised me (see here), his testimony was what I would have expected of a corporate officer in his position -- he saw no evil, heard no evil and did no evil.  Indeed, Corzine was "stunned" when he was told that MF Global could not account for a reported $1.2 billion missing from customer funds.

Perhaps previewing a defense he may later present in a courtroom, Corzine said it was possible, although improbable, that his employees might have moved customer funds at what they believed was a direction from him.  If so, however, he testified they must have misunderstood or misinterpreted what he said.

(goldman)

December 9, 2011 in Congress, Privileges | Permalink | Comments (0) | TrackBack (0)

In the News & Around the Blogosphere

Thursday, December 8, 2011

Congress Considers New Limits on Its Members

The New York Times yesterday wrote that in the wake of a CBS 60 Minutes report which said that members of Congress bought stock in companies while considering legislation that might affect those companies, Congress is considering laws banning such trading.  The CBS report said none of the trading was illegal at the time.  See here.

The 60 Minutes report said that the current chairman of the House Financial Services Committee, Spencer Bachus (R-Ala.), then the ranking Republican on the committee, bet stock prices would fall at the time he was being briefed privately that a global financial crisis might be imminent.  According to the Times, at that time Congressman Bachus' office denied he had used nonpublic information as a basis for trading.

I do not venture to assess whether any Congressperson traded on inside information.  I am also generally opposed to "new laws" since most are unnecessary and duplicative.  Nonetheless, I see no reason that Congress should not be held to the same standard as private businesses or citizens.  I also suggest consideration that a new statute, a mirror image to 18 U.S.C. 1001, which criminalizes a false statement to a government official, be enacted prohibiting false statements by a government official to the public.

(goldman)

December 8, 2011 in Congress, Insider Trading, News, Securities | Permalink | Comments (0) | TrackBack (0)

Wednesday, December 7, 2011

Blago - Commentary on Sentencing

As noted by co-blogger Solomon Wisenberg here, former Illinois Governor Rod Blagojevich received a sentence of 14 years.(see also FBI Press Release here). He is not the first governor from Illinois to be convicted and sentenced.  History includes Otto Kerner (sentenced to three years), Dan Walker (sentenced to seven years - crimes unrelated to his office), and George Ryan (sentenced to 6 1/2 years). (see here)  Two questions to ask here: 1) Are white collar sentences really getting lower? 2) Would his sentence be so high if he had quietly plead?

(esp)

December 7, 2011 in Celebrities, Sentencing | Permalink | Comments (1) | TrackBack (0)

Blago Gets 14 Years

The Washington Post, via AP, has the story here.

(wisenberg)

December 7, 2011 in Fraud, Judicial Opinions, Media, Prosecutions | Permalink | Comments (0) | TrackBack (0)

Tuesday, December 6, 2011

Will Corzine Take the Fifth?

Former MF Global chief executive and former Senator and Governor Jon Corzine has reportedly been subpoenaed to testify this Thursday, December 8 before the House Agricultural Committee concerning MF Global.

The ostensible primary purpose of Congressional committee hearings is to gain information so that the Congresspersons can enact appropriate legislation.  Cynics, however, might contend that a major purpose is to let the folks back home know that their Congressperson is tough on Wall Street.

In any case Corzine, on advice of his low-key high-quality counsel, Andrew Levander, will most likely assert his Fifth Amendment privilege against self-incrimination and decline to answer questions.  MF Global reportedly "borrowed" customer funds to support its precarious positions in foreign sovereign debt, commingling these funds with its own funds.  Although I do not venture to state whether any crime was committed, or whether Corzine was involved in or knowledgeable of any wrongful activity, most criminal defense lawyers representing a hands-on head of a less-than-giant entity against which such accusations have been bruited at this stage would take a conservative approach and advise their client to remain silent.  On the other hand, public figures, concerned with their political and public futures (although Corzine's future political career does not look rosy) and often with high estimations of their own powers of persuasion, sometimes feel that they must present their side of the story or else look like "criminals," and that they can do so effectively.

The obvious dangers of testifying are that the witness, whatever his culpability or lack of culpability, may make statements that may later be used as admissions in a criminal or other proceeding or, as in Roger Clemens' case, as the basis for a perjury charge.  Of course, although the Supreme Court has pronounced that the protection of the Fifth Amendment applies to the innocent as well as the guilty, a refusal to answer questions is viewed by most people as an indication of guilt.  Thus, the decision whether to testify is a "damned if you do, damned if you don't" situation.

Corzine, if he does not wish to testify, through his lawyers will likely seek, or has sought already, to eliminate the necessity of his physical appearance by submitting a letter explaining his intention to invoke his constitutional privilege.  That request almost certainly has been or will be refused.  Letters do not make good TV.  Alternatively, Corzine likely will seek, or has already sought, to limit his appearance to a short statement stating his assertion of his constitutional right against self-incrimination.  That request might also be refused.  The Congresspersons may want Corzine to undergo a public flogging by "Q&R" -- question and refusal.  That does make good TV.

Corzine could conceivably be granted use immunity and, since his resulting testimony could not then be used against him, be deprived of his Fifth Amendment protection and required to testify.  However, since Oliver North's conviction was overturned based on the taint from his immunized Congressional hearing testimony, Congress has been extremely wary of using its immunity power.

(goldman)

December 6, 2011 in Congress, Privileges | Permalink | Comments (0) | TrackBack (0)

FCPA

Sunday, December 4, 2011

Cultural Issues

Yes, even in white collar cases.  Check out - Linda Friedman Ramirez's website here.

(esp)

December 4, 2011 in Scholarship | Permalink | Comments (0) | TrackBack (0)

Irving R. Kaufman Memorial Securities Law Moot Court Competition

Each spring, Fordham University School of Law hosts the Irving R. Kaufman Memorial Securities Law Moot Court Competition.  Held in honor of Chief Judge Kaufman, a Fordham Alumnus who served on the United States Court of Appeals for the Second Circuit, the Kaufman Competition has a rich tradition of bringing together complex securities law issues, talented student advocates, and top legal minds.     

The year’s Kaufman Competition will take place on March 23, 2012 to March 25, 2012.

Our esteemed final round panel includes Judge Paul J. Kelly, Jr., of the Tenth Circuit; Chief Judge Alex Kozinski, of the Ninth Circuit; Judge Boyce F. Martin, Jr., of the Sixth Circuit; Judge Richard A. Posner, of the Seventh Circuit; Judge Jane Richards Roth, of the Third Circuit; and Commissioner Troy A. Paredes, of the United States Securities and Exchange Commission. 

We are currently soliciting practitioners and academics to judge oral argument rounds and grade competition briefs.  No securities law experience is required to participate and CLE credit is available.

Information about the Kaufman Competition and an online Judge Registration Form is available on our website, www.law.fordham.edu/kaufman.  Please contact Michael A. Kitson, Kaufman Editor, at KaufmanMC@law.fordham.edu or (212) 636-6882 with any questions.

(esp)

December 4, 2011 | Permalink | Comments (0) | TrackBack (0)