First Amendment Argument Fails in Appeal of Wire Fraud Conviction

By Anne K. Walsh –

On March 4, 2013, less than three months after oral argument, the Ninth Circuit issued its ruling in United States v. Harkonen, a closely watched case implicating First Amendment issues in the off-label promotion context.  As we previously reported (here and here), in 2009, a jury had convicted Harkonen of wire fraud for issuing a press release fraudulently describing clinical trial results about the drug Actimmune.  The District Court in the Northern District of California sentenced Harkonen to 3 years probation, 6 months home detention, community service, and a $20,000 fine.  Both parties appealed to the Ninth Circuit.

Harkonen challenged the conviction, arguing that the First Amendment barred his prosecution.  The Ninth Circuit applied a two-part analysis: (1) whether sufficient evidence supports the verdict; and (2) if so, whether the facts as found by the jury establish the core constitutional facts.  The Ninth Circuit emphasized that the First Amendment does not protect fraudulent speech.  Therefore, the court identified the core constitutional issue in Harkonen’s case as whether there was sufficient evidence to support the jury’s finding that the press release was fraudulent.  Deferring to the jury’s findings on the elements of the wire fraud charge, the Ninth Circuit affirmed the wire fraud conviction. 

Interestingly, the Ninth Circuit footnoted that “Harkonen presented the evidence that most firmly supported his case for the first time at sentencing.”  This is likely a reference to expert declarations Harkonen sought to introduce purporting to show a plausible scientific (and thus truthful) basis for the statements contained in the allegedly fraudulent press release.  The Ninth Circuit noted that it was limited to considering evidence that was before the jury, and therefore could not consider the expert declarations first raised at Harkonen’s sentencing.

The Court also rejected Harkonen’s other arguments, one of which relied on a 1902 U.S. Supreme Court case for the proposition that “genuine debates over whether a given treatment caused a particular effect” could not be considered fraudulent.  American School of Magnetic Healing v. McAnnulty, 187 U.S. 94 (1902).  “Harkonen’s request that we reverse his conviction because he was engaging in a genuine scientific debate is hardly different than arguing that he is innocent; genuine debates of any sort are, by definition, not fraudulent.”

On its cross-appeal, the Government argued that the district court had erroneously ruled on the “intended loss” and “vulnerable victim” enhancements in the U.S. Sentencing Guidelines.  Originally the Government had asked for a 10-year prison sentence and a $1 million fine.  The Ninth Circuit did not provide much explanation, but simply stated that the district court made clear its conclusions in imposing a shorter sentence with no imprisonment.

On the heels of the Second Circuit’s decision in United States v. Caronia, some had thought that the Ninth Circuit would provide the requisite circuit split to allow the Supreme Court to take on the First Amendment issue raised in Caronia.  The Harkonen case is distinguishable, however, because the jury convicted Harkonen of wire fraud, which required a finding that the statements Harkonen made were fraudulent.  Therefore, unlike Caronia, the Harkonen case did not present a potential First Amendment defense based on truthful and non-misleading statements about an unapproved use.  For more information about the potential ramifications of Caronia, see the HP&M Webinar.

As for Harkonen, the saga continues.  Not only did he lose this appeal and recently have his state medical license revoked, he now faces potential exclusion from federal health care programs, which would effectively preclude him from working in the pharmaceutical industry during the period of exclusion.