We all know that under the so-called “Park Doctrine”, corporate executives can be criminally prosecuted under the FDC Act for violations of that Act even absent any showing that the executives acted with any wrongful intent. A prosecution is possible when violations are committed by an employer even though the executive did not directly participate in the alleged unlawful conduct and did not even know the conduct was occurring. At least since United States v. Park was decided by the United States Supreme Court in 1975, there has been substantial debate about the level of responsibility at a corporation that should subject an individual to a criminal prosecution. The government’s position has been understated but basically consistent since this writer was in the government between 1973 and 1992: Any person, no matter what his/her level of responsibility, is theoretically subject to criminal prosecution under 21 U.S.C. 333(a)(1) because: (1) that person directly committed a prohibited act under 21 U.S.C. 331; (2) the person “caused” a prohibited act to have occurred or aided and abetted in such an act by his/her employer; or (3) the person was in a position of authority to prevent Section 331 violations from occurring.
On January 14, 2016, the United States Court of Appeals for the Eighth Circuit affirmed the convictions of three individuals convicted of selling misbranded synthetic drugs. Charges had been brought under the FDC Act, the Controlled Substances Act and its Analogue Act. The Court affirmed the FDC Act felony convictions of two of the defendants, ruling that the jury instructions given by the District Court were correct in terms of the “knowledge” element required for a conviction under 21 U.S.C. 333(a)(2). Slip Op. at 12-13.
Two other paragraphs of the Court’s Opinion make this ruling particularly noteworthy. The Court of Appeals affirmed the FDC Act misdemeanor convictions of Joseph Gellerman, who worked as a store clerk for the business run by one of the other two defendants. Gellerman was sentenced to three years of probation, a $1000 fine, and 90 days of home electronic monitoring.
Mr. Gellerman did not own the business or run it, although he was the son of the owner. Nor was he a high level executive. Instead, he was what the Court referred to as a “store clerk.” See Slip Op. at 13-14. The Court ruled that the government could hold Gellerman criminally liable as a store clerk under the FDC Act because he sold misbranded drugs. “[T]he government only had to prove beyond a reasonable doubt that Gellerman was responsible for, or aided and abetted in the commission of, delivering misbranded drugs after they had been received in interstate commerce.” The Court further ruled that “[m]isdemeanor liability stems not from ‘corporate hierarchy,’ but from an individual’s role in the sale of misbranded drugs” [citing United States v. Park. 421 U.S. 658 (1975)]. The Court upheld his conviction because government agents had purchased misbranded drugs from him even though “Gellerman had limited responsibilities as a store clerk.”
As precedent, the government’s appellate brief cited only to a 1986 case where a low-level employee, a store clerk, was prosecuted under the FDC Act. The brief also asserted that the language in Park holding what the government calls “responsible parties” to be liable under the FDC Act did not apply in this case because Gellerman personally sold misbranded drugs to customers. In contrast, Gellerman’s brief argued that he lacked responsibility and authority as a clerk, he believed the products he sold were legal, and he received no prior notice that the drugs he sold were misbranded or otherwise illegal.
This case perhaps answers the question regarding who can be criminally prosecuted for personal involvement in FDC Act violations. The answer, according to this Court, appears to be anyone! Although the Supreme Court in Park and an earlier Supreme Court decision had noted that relying on the “good sense of prosecutors” provides some protection to defendants being unfairly targeted, that is hardly a comfort to lower level employees in an FDA-regulated world.
We do not know the reasons why Gellerman was charged and we are not opining about whether this was an appropriate use of prosecutorial discretion. Rather, the notable (and potentially troubling) aspect of the Eighth Circuit’s Opinion is that the legal principle announced in the case appears to be that there is no legal limit on who can be prosecuted. That is an extremely powerful tool to place in the hands of government prosecutors.
This decision presents a number of very sticky issues for corporations, outside corporate counsel, and employees of a corporation. For instance, when the government investigates a corporation for alleged FDC Act violations, government investigators will frequently ask to speak with “lower-level” employees such as the sales force. Can anyone now assure such an employee that he/she will not be prosecuted absent a grant of immunity? Should company counsel represent both the corporation and lower-level company employees in a corporate criminal investigation when it is at least possible that the government may decide to prosecute low level employees for their actions?
Moreover, we have read numerous articles about the “Responsible Corporate Officer” Doctrine in the context of FDC Act prosecutions. It appears that this Court may have misunderstood Park. The Eighth Circuit said that misdemeanor liability does not stem from “corporate hierarchy” under Park, but instead turns on an individual’s role in the violations charged. In fact, Mr. Park’s conviction was based on his position at his company and his legal duty to prevent violations (as opposed to participating in them). In any event, here Gellerman was prosecuted for what he did, rather than any duty imposed on him to prevent others from violating the FDC Act.
As Congress and others debate the propriety of strict liability “no mens rea” prosecutions, the Gellerman prosecution is likely to be used (perhaps improperly) as Exhibit A by people who believe that strict liability prosecutions give the government too much power.