Former Pharma Company Attorney Indicted for Her Role in FDA Investigation of Her Employer

November 9, 2010

By John R. Fleder, Douglas B. Farquhar & Peter M. Jaensch

The U.S. Department of Justice announced on November 9, 2010, the government version of a six-count indictment filed in the District of Maryland against Lauren Stevens, a former Vice President and Associate General Counsel for a brand pharmaceutical company that the government mysteriously refers to as "K-Corp," but which we have identified (it wasn't that hard) as GlaxoSmithKline.

The government alleges that in connection with an FDA investigation of alleged off-label promotion of a prescription drug product, Ms. Stevens committed one count of obstruction of an FDA proceeding (18 U.S.C. § 1512), one count of falsification of documents (18 U.S.C. § 1519), and four counts of making false statements (18 U.S.C. § 1001).  It is curious that the government does not allege that Ms. Stevens violated the FDC Act.

According to the indictment, in 2002, FDA made inquiries to the company about its alleged unlawful promotion of one of its products for off-label use as a weight loss drug.  FDA requested that the company provide its marketing and promotional materials to FDA. The indictment alleges that Ms. Stevens was the attorney and corporate officer responsible for, and who signed and sent in, the company's response letters.

The indictment alleges that Ms. Stevens made false statements to FDA, including, among other things, that:

1.      She denied that her employer engaged in any activity promoting off-label use, when at the times of her denials, she purportedly knew that many of the company's promotional speakers did promote off-label use of the product;

2.      She stated that no compensation or reimbursement was provided to attendees at company promotional speaker events, apart from parking fees, when she allegedly knew that entertainment and gifts had been provided to attendees; the government also alleges that evidence of these gifts etc. were removed from documents provided by the company to FDA; and

3.     She informed FDA that any off-label promotion was a result of “isolated deficiencies” and “the objective evidence clearly demonstrates" that the company had "not developed, maintained, or encouraged promotional plans or activities to promote" weight loss; the government also alleges that she actively withheld contrary documentary evidence from FDA.

The indictment also alleges that Ms. Stevens requested slides from approximately 550 of her employer's promotional speakers, and that at least twenty-eight responded with evidence of off-label promotion. The indictment alleges that Ms. Stevens directed withholding from FDA the allegedly damaging slides, while representing to FDA that K-Corp's production of responsive documents was complete.

DOJ's press release notes that “[e]ach of the obstruction charges carries a maximum penalty of 20 years in prison. Each of the false statement counts carries a maximum of five years in prison.”

It is certainly a rare, but not unheard of, event to see an in-house corporate counsel criminally prosecuted.  The case is instructive for the clear warning that the government has given to corporate attorneys that they are not immune from the government's scrutiny. Ms. Stevens has been indicted for allegedly actively deceiving federal officials about corporate violations.  The indictment does not allege that she acted out of a desire to obtain some personal gain. 

In-house counsel are generally not the final decision-makers in most large companies.  So, the indictment against Ms. Stevens raises questions about who was the person or persons who made the ultimate decisions about submissions to FDA that the government now believes were false and misleading.  Also, it is possible that the government is using this indictment as a stick to try to get Ms. Stevens to "roll over" against some other current or former high-ranking officials from her company.  The fact that the indictment and press release do not name her former employer suggests that the government may have some other targets in this investigation.  Finally, the timing of the Indictment is quite curious.  The last allegedly unlawful act took place almost seven years before the indictment.  The indictment does not allege a conspiracy.  Thus, to avoid a statute of limitations defense, the government almost surely obtained a waiver from Ms. Stevens that effectively tolled the statute of limitations.  Why indict her now, but not the company?  One can only guess, but 1) the government may have had settlement discussions with Ms. Stevens that did not pan out, where the government sought her cooperation; 2) Ms. Stevens may have refused to sign an agreement further tolling the statute of limitations, whereas other targets (if there are any) did sign such agreements; and/or 3) the government may have decided that Ms. Stevens bore responsibility for the offenses, and decided not to pursue the company because the company volunteered information from an internal investigation that led to the investigation and indictment.  We may never know the answers to any of these questions.

Our purpose here is only to summarize the indictment and some of its broader implications, so we did not try to contact Ms. Stevens or her attorneys for their comments.  However, we have been informed by a reporter for the mainstream media that Ms. Stevens denies the charges and expects to be exonerated.

UPDATE:

  • HP&M Director Doug Farquhar is quoted in a November 9th New York Times article about the case – see "Ex-Glaxo Executive Is Charged in Drug Fraud"
Categories: Enforcement