Sentencing Hearings for Synthes Executives Suggest that Government May Try to Prove Fraud In Connection with Park CasesDecember 22, 2011
By JP Ellison –
We have previously posted both on FDA’s renewed focus on misdemeanor prosecutions of “responsible corporate officers” under the Park doctrine generally, and on the use of that doctrine against four Synthes executives (see here, here, here, here, and here). Two recent opinions (here and here)
imposing nine (9) month terms of imprisonment for those executives, warrant renewed attention to these cases because they suggest a government approach to misdemeanor prosecutions that may change the risk analysis of a defendant charged solely with an FDC Act misdemeanor.
As readers may recall, Synthes and the four executives all pled guilty in 2009. The four executives each pled guilty to a single misdemeanor count, the only charge against them in the indictment. The corporate defendants entered into so called “C” pleas, pleas in which the parties agree to a particular sentence that the judge can accept or reject, but not revise. In contrast, the plea agreements for the individual defendants did not agree on a sentence. Instead, there was a contested sentencing, during which each side presented its arguments for the appropriate sentence, subject to the statutory limitation that the sentence could not exceed one year. At the conclusion of the contested sentencing proceeding, the court imposed the sentence it considered appropriate. In the case of these two executives, that sentence was 9 months in prison.
Notwithstanding the fact that the government charged each executive only with a single misdemeanor and accepted a plea to that charge; during the sentencing, it presented evidence that the executives personally participated in “false,” “fraudulent,” “deceptive,” and “intentionally deceiving” conduct. This evidence convinced the judge that there was an “unparalleled” “pattern of deception," which in turn affected the sentence he imposed. Indeed, while acknowledging that the pleas before him were based upon Park and the responsible corporate officer doctrine, the judge declared in one case that “[n]o similar set of facts can be located in the universe of Park doctrine cases,” and in the other that although the “Court well understands and respects historical sentencing practices for responsible corporate officers under the Park doctrine . . . This case stands alone.”
This scenario was not necessarily what the regulated industry expected when discussions of a revitalized Park doctrine first surfaced several years ago. Much of the renewed interest in the Supreme Court’s 36 year old Park decision had focused on the prospect of the government prosecuting a responsible corporate officer who was unaware of an FDC Act violation, but allegedly had the authority and responsibility to detect and remedy the violation. Such attention on the unaware executive has been understandable because when a person commits an FDC Act violation with the intent to defraud or mislead, he can be prosecuted for a felony violation of the FDC Act. Accordingly, there was some expectation that the government’s new wave of Park prosecutions would be those where the government did not believe that the defendant engaged in fraudulent conduct or was even aware of the alleged criminal conduct. Thus, it followed that such prosecutions would not involve allegations that there was evidence of the defendant’s intent to defraud and mislead.
If the cases against the Synthes executives are a sign of things to come, the government’s use of misdemeanor remedy may not be so limited, however. Instead, Park may be used by the government to charge defendants with misdemeanors, but nevertheless, the government may plan to present evidence of fraud regardless of whether the defendant pleads guilty.
For a responsible corporate officer threatened with a felony violation of the FDC Act and offered an opportunity to plead guilty to a misdemeanor, the prospect of a contested sentencing at which the government presents its “fraud” evidence may or may not affect that officer’s decision. For a responsible corporate officer facing only a misdemeanor charge, the calculus post –Synthes may be different. Certainly the 2 level downward adjustment for acceptance of responsibility under the Sentencing Guidelines, which was applied in the cases against the Synthes executives, must be considered, but if months of jail time is a realistic possibility based on a misdemeanor plea, a rational responsible corporate officer may elect to take his chances at trial realizing that his upside risk is statutorily capped at a 12 month prison term.